<PAGE>
<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO__________________
COMMISSION FILE NUMBER 1-11202
------------------------
AUTHENTIC FITNESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
DELAWARE 95-4268251
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
6040 BANDINI BLVD.
COMMERCE, CALIFORNIA 90040
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(323) 726-1262
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
COPIES OF ALL COMMUNICATIONS TO:
AUTHENTIC FITNESS CORPORATION
90 PARK AVENUE
NEW YORK, NEW YORK 10016
ATTENTION: GENERAL COUNSEL
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [x] Yes [ ] No
The number of shares of the registrant's Common Stock outstanding as of
February 8, 1999 was: 22,996,686.
________________________________________________________________________________
<PAGE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUTHENTIC FITNESS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 2, 1999 JULY 4, 1998
--------------- ------------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 1,230 $ 638
Accounts receivable, net...................................................... 93,089 114,710
Accounts receivable from affiliates........................................... 3,666 7,250
Inventories:
Finished goods........................................................... 71,533 46,156
Raw material and work in process......................................... 28,828 17,754
--------------- ------------
Total inventories................................................... 100,361 63,910
Other current assets.......................................................... 13,028 8,080
--------------- ------------
Total current assets................................................ 211,374 194,588
Property, plant and equipment, (net of accumulated depreciation of $27,465 and
$23,289, respectively)........................................................... 50,872 50,417
Other assets, net.................................................................. 64,810 71,157
--------------- ------------
$ 327,056 $316,162
--------------- ------------
--------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowing under revolving credit facility..................................... $ 115,683 $ 61,963
Current maturities of long-term debt.......................................... 10,390 9,324
Accounts payable and accrued liabilities...................................... 40,347 30,065
Payable to affiliates......................................................... 22,208 16,604
Accrued (prepaid) income taxes................................................ (2,641) 4,386
Deferred income taxes......................................................... 3,149 3,149
--------------- ------------
Total current liabilities........................................... 189,136 125,491
Long-term debt..................................................................... 28,073 33,178
Deferred income taxes.............................................................. 6,634 6,651
Stockholders' equity:
Preferred Stock; $.01 par value............................................... -- --
Common Stock; $.001 par value................................................. 23 23
Additional paid-in capital.................................................... 163,164 163,164
Cumulative translation adjustment............................................. (1,453) (1,173)
Accumulated deficit........................................................... (8,796) (2,286)
Treasury stock, at cost....................................................... (49,725) (8,886)
--------------- ------------
Total stockholders' equity.......................................... 103,213 150,842
--------------- ------------
$ 327,056 $316,162
--------------- ------------
--------------- ------------
</TABLE>
This statement should be read in conjunction with the accompanying
Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
SECOND QUARTER ENDED ENDED
---------------------------------- ---------------
JANUARY 2, JANUARY 3, JANUARY 2,
1999 1998 1999
--------------- --------------- ---------------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<S> <C> <C> <C>
Net revenues............................................... $78,037 $72,652 $ 117,656
Cost of goods sold......................................... 44,700 40,211 70,128
--------------- --------------- ---------------
Gross profit............................................... 33,337 32,441 47,528
Selling, general and administrative expenses (See
Note 5)................................................... 23,150 22,909 47,295
--------------- --------------- ---------------
Income before interest and income taxes.................... 10,187 9,532 233
Interest expense........................................... 3,471 3,532 5,940
--------------- --------------- ---------------
Income (loss) before provision for income taxes............ 6,716 6,000 (5,707)
Provision (benefit) for income taxes....................... 2,619 2,340 (2,226)
--------------- --------------- ---------------
Income (loss) before cumulative effect of change in
accounting principle..................................... 4,097 3,660 (3,481)
Cumulative effect of change in accounting principle, net of
tax benefit (See Note 3)................................. -- -- (2,518)
--------------- --------------- ---------------
Net income (loss).......................................... $ 4,097 $ 3,660 $ (5,999)
--------------- --------------- ---------------
--------------- --------------- ---------------
Basic earnings (loss) per share:
Income (loss) before cumulative effect of change in
accounting principle................................ $ 0.21 $ 0.17 $ (0.17)
Cumulative effect of change in accounting principle... -- -- (0.12)
--------------- --------------- ---------------
Basic earnings (loss) per share............................ $ 0.21 $ 0.17 $ (0.29)
--------------- --------------- ---------------
--------------- --------------- ---------------
Diluted earnings (loss) per share:
Income (loss) before cumulative effect of change in
accounting principle................................ $ 0.20 $ 0.16 $ (0.17)
Cumulative effect of change in accounting principle... -- -- (0.12)
--------------- --------------- ---------------
Diluted earnings (loss) per share.......................... $ 0.20 $ 0.16 $ (0.29)
--------------- --------------- ---------------
--------------- --------------- ---------------
Cash dividends per share of common stock................... $ 0.01 $ 0.01 $ 0.03
--------------- --------------- ---------------
--------------- --------------- ---------------
Weighted average number of shares of common stock
outstanding:
Basic................................................. 19,934,253 22,160,939 21,002,868
--------------- --------------- ---------------
--------------- --------------- ---------------
Diluted............................................... 20,234,322 22,808,151 21,002,868
--------------- --------------- ---------------
--------------- --------------- ---------------
<CAPTION>
SIX MONTHS ENDED
-----------------
JANUARY 3,
1998
---------------
<S> <C>
Net revenues............................................... $ 109,620
Cost of goods sold......................................... 64,110
---------------
Gross profit............................................... 45,510
Selling, general and administrative expenses (See Note
5)....................................................... 44,112
---------------
Income before interest and income taxes.................... 1,398
Interest expense........................................... 6,628
---------------
Income (loss) before provision for income taxes............ (5,230)
Provision (benefit) for income taxes....................... (2,039)
---------------
Income (loss) before cumulative effect of change in
accounting principle..................................... (3,191)
Cumulative effect of change in accounting principle, net of
tax benefit (See Note 3)................................. --
---------------
Net income (loss).......................................... $ (3,191)
---------------
---------------
Basic earnings (loss) per share:
Income (loss) before cumulative effect of change in
accounting principle................................ $ (0.14)
Cumulative effect of change in accounting principle... --
---------------
Basic earnings (loss) per share............................ $ (0.14)
---------------
---------------
Diluted earnings (loss) per share:
Income (loss) before cumulative effect of change in
accounting principle................................ $ (0.14)
Cumulative effect of change in accounting principle... --
---------------
Diluted earnings (loss) per share.......................... $ (0.14)
---------------
---------------
Cash dividends per share of common stock................... $ 0.03
---------------
---------------
Weighted average number of shares of common stock
outstanding:
Basic................................................. 22,201,971
---------------
---------------
Diluted............................................... 22,201,971
---------------
---------------
</TABLE>
------------------------
Related party transactions included in the Consolidated Condensed Statements of
Operations:
<TABLE>
<S> <C> <C> <C> <C>
Product sales......................................... $4,302 $1,316 $6,542 $1,598
Purchases of goods and services....................... 5,630 1,636 7,851 2,461
Royalties paid or accrued............................. 1,792 1,867 2,847 2,826
Interest expense...................................... 1,139 1,334 1,978 2,419
Rent.................................................. 138 144 277 289
</TABLE>
This statement should be read in conjunction with the accompanying
Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------
JANUARY 2, 1999 JANUARY 3, 1998
--------------- ---------------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................................... $ (5,999) $ (3,191)
Non-cash items included in net income (loss):
Depreciation and amortization......................................... 5,267 5,159
Other................................................................. 1,657 575
Non-recurring item.................................................... 3,074 1,408
Cumulative effect of change in accounting principle................... 4,128 --
Income taxes............................................................... (7,027) (3,527)
Other changes in operating accounts........................................ (1,963) (28,832)
--------------- ---------------
Net cash used in operating activities................................. (863) (28,408)
--------------- ---------------
Cash flows from investing activities:
Purchase of equipment and other long-term assets........................... (5,233) (2,910)
Other, net................................................................. (1,150) 604
--------------- ---------------
Net cash used in investing activities................................. (6,383) (2,306)
--------------- ---------------
Cash flows from financing activities:
Net borrowing under revolving credit facility.............................. 53,720 38,096
Net proceeds from the sale of common stock and exercise of stock options... 2 336
Repayments of debt......................................................... (4,039) (2,823)
Purchase of treasury stock................................................. (40,839) (3,075)
Dividends paid............................................................. (551) (560)
Payment of deferred financing fees......................................... (455) (521)
--------------- ---------------
Net cash provided by financing activities............................. 7,838 31,453
--------------- ---------------
Increase in cash................................................................ 592 739
Cash at beginning of period..................................................... 638 1,246
--------------- ---------------
Cash at end of period........................................................... $ 1,230 $ 1,985
--------------- ---------------
--------------- ---------------
Other changes in operating accounts:
Accounts receivable........................................................ $ 25,205 $ 8,489
Inventories................................................................ (37,148) (41,636)
Other current assets....................................................... (4,948) (4,714)
Accounts payable and accrued liabilities................................... 14,928 9,029
--------------- ---------------
$ (1,963) $ (28,832)
--------------- ---------------
--------------- ---------------
</TABLE>
This statement should be read in conjunction with the accompanying
Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1 -- BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles and
Securities and Exchange Commission rules and regulations for interim financial
information. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company, the accompanying
consolidated condensed financial statements contain all of the adjustments (all
of which were of a normal recurring nature) necessary to present fairly the
financial position of the Company as of January 2, 1999 as well as its results
of operations and cash flows for the periods ended January 2, 1999 and January
3, 1998. Operating results for interim periods may not be indicative of results
for the full fiscal year. The consolidated condensed balance sheet as of July 4,
1998 is derived from the audited consolidated balance sheet included in the
Company's Annual Report on Form 10-K for the year then ended. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended July 4, 1998. Certain amounts for prior periods have been reclassified to
be comparable with the current period presentation.
2 -- CAPITAL STOCK
On November 20, 1998, the Company's Board of Directors declared a quarterly
cash dividend of $0.0125 per share to be paid on January 5, 1999 to shareholders
of record as of December 4, 1998. In 1997, the Company's Board of Directors
authorized a stock repurchase program which currently allows the Company to buy
up to $50.0 million of its outstanding Common Stock. As of January 2, 1999, the
Company had purchased approximately 3.3 million shares of its Common Stock for
an aggregate purchase price of approximately $49.7 million including 593,500
shares under equity option arrangements at a cost of approximately $11.6 million
in the first six months of fiscal 1999.
3 -- NEW ACCOUNTING STANDARDS
In April 1998, the Financial Accounting Standards Board ('FASB') approved
the Statement of Position ('SOP') 98-5 'Reporting on the Costs of Start-Up
Activities'. The Company adopted SOP 98-5 effective with the beginning of fiscal
1999. The SOP requires that start-up costs, as defined, be expensed as incurred.
It had been the Company's consistent accounting policy to capitalize such costs
for amortization over appropriate periods from 12 to 36 months. The Company
recorded a cumulative charge of approximately $2.5 million, net of income tax
benefits (or $0.12 per diluted share). The effect of adopting SOP 98-5 had an
immaterial effect on income (loss) before the cumulative effect of change in
accounting principle in the first six months of fiscal 1999.
The Company adopted Statement of Accounting Standards No. 130, 'Reporting
Comprehensive Income' ('SFAS 130') effective with the beginning of fiscal 1999.
SFAS 130 establishes standards for reporting and display of changes in equity
from nonowner sources in the financial statements, however, the adoption of SFAS
130 has no impact on the Company's net earnings or stockholder's equity. SFAS
130 requires, among other things, foreign currency translation adjustments,
which prior to adoption were reported separately in stockholders' equity, to be
included in other comprehensive income. Total comprehensive income (loss) was
approximately $(6.3) million and $(3.4) million for the six month periods ended
January 2, 1999 and January 3, 1998, respectively.
4 -- DEBT
In March 1998, the Company entered into a restated credit agreement
(increasing the facility by $15 million) with GE Capital, The Bank of Nova
Scotia, Societe Generale, Union Bank of California and such other lenders as
identified in the agreement (the 'Restated Credit Agreement'). In September
1998, the Company amended the Restated Credit Agreement (the 'Credit Agreement')
5
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
such that the Company's ability to purchase its own Common Stock was increased
to $50 million. The terms of the Company's Credit Agreement are the same as
those of the Restated Credit Agreement. Borrowings under the Company's Restated
Credit Agreement bear interest at LIBOR plus 1.00%. The rate of interest payable
on outstanding borrowings will be automatically reduced, to as low as LIBOR plus
0.75%, as the Company's EBITDA to debt ratio improves to 2.5 to 1. The Restated
Credit Agreement matures on September 1, 2001.
On December 23, 1998, the Company entered into a $50 million credit
agreement ('Trade Credit Facility') with certain lenders under the Company's
Credit Agreement for the issuance of letters of credit and trade financing. The
trade financing portion of the Trade Credit Facility has a $40 million limit and
accrues interest at the lender's base rate plus 0.50% or at LIBOR plus 1.50% on
the unpaid principal. The Trade Credit Facility expires on December 21, 1999. In
conjunction with entering into the Trade Credit Facility, the Company also
amended certain portions of its Credit Agreement to facilitate such Trade Credit
Facility.
In June 1998, the Company entered into an interest rate swap agreement (the
'Swap Agreement') with a bank that is a lender in the Restated Credit Agreement.
The Swap Agreement allows the Company to convert variable rate borrowings with a
notional amount of $75 million to a fixed rate interest rate. Borrowings under
the Swap Agreement are currently fixed at 6.66% until maturity in September
2003. The variable rate under the Swap Agreement of LIBOR is approximately 5.4%
as of January 2, 1999. Differences between the fixed interest rate and the
variable interest rate are settled quarterly and resulted in increased interest
expense of approximately $0.1 million for the six months ended January 2, 1999.
5 -- NON-RECURRING EXPENSES
On October 2, 1998, the Company announced plans to discontinue sourcing
from KT West, Inc. from the Company's owned Checotah, Oklahoma facility and to
consolidate sourcing from the Company's leased Montebello, California facility
into the Company's Commerce, California facility. This decision was part of the
Company's continued strategy to secure the most efficient sourcing of its
products. The Company recorded a charge of approximately $2.0 million, net of
income tax benefits (or $0.09 per diluted share) in the first six months of
fiscal 1999 primarily related to the above, including pre-tax charges of $2.2
million in non-cash asset write-offs, $0.6 million in connection with
contractual obligations to KT West, Inc. and $0.5 million in other costs.
The first six months of fiscal 1998 includes a non-recurring expense of
approximately $0.9 million, net of income tax benefits (or $0.04 per diluted
share) related to the write-off of certain assets and other costs associated
with closing the Company's Bally's Fitness Centers stores, as well as a
consolidation of the Company's manufacturing facilities.
6
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
6 -- EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
------------------------ ------------------------
JANUARY 2, JANUARY 3, JANUARY 2, JANUARY 3,
1999 1998 1999 1998
---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share --
Income (loss) before cumulative effect of change
in accounting principle......................... $ 4,097 $ 3,660 $ (3,481) $ (3,191)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Denominator for basic earnings per share --
Weighted average shares........................... 19,934 22,161 21,033 22,202
Effect of dilutive securities:
Employee stock options............................ 300 647 -- --
---------- ---------- ---------- ----------
Denominator for diluted earnings per share --
Weighted average adjusted shares.................. 20,234 22,808 21,033 22,202
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic earnings (loss) per share before cumulative
effect of change in accounting principle............. $0.21 $0.17 $(0.17) $(0.14)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted earnings (loss) per share before cumulative
effect of change in accounting principle............. $0.20 $0.16 $(0.17) $(0.14)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Options to purchase approximately 4.6 million shares of common stock were
not included in the computation of diluted earnings per share for the six months
ended January 2, 1999 as the impact would be antidilutive.
7
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
STATEMENT OF OPERATIONS (SELECTED DATA)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
------------------------ ------------------------
JANUARY 2, JANUARY 3, JANUARY 2, JANUARY 3,
1999 1998 1999 1998
---------- ---------- ---------- ----------
(AMOUNTS IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Net revenues..................................................... $ 78.0 $ 72.7 $117.7 $109.6
Cost of goods sold............................................... 44.7 40.2 70.1 64.1
---------- ---------- ---------- ----------
Gross profit..................................................... 33.3 32.4 47.5 45.5
% of net revenues.............................................. 42.7% 44.7% 40.4% 41.6%
Selling, general and administrative expenses..................... 23.1 22.9 44.0 42.7
Non-recurring item............................................... -- -- 3.3 1.4
---------- ---------- ---------- ----------
Income before interest and income taxes.......................... 10.2 9.5 0.2 1.4
Interest expense................................................. 3.5 3.5 5.9 6.6
Provision (benefit) for income taxes............................. 2.6 2.3 (2.2) (2.0)
---------- ---------- ---------- ----------
Income (loss) before cumulative effect of change in accounting
principle...................................................... 4.1 3.7 (3.5) (3.2)
Cumulative effect of change in accounting principle.............. -- -- (2.5) --
---------- ---------- ---------- ----------
Net income (loss)................................................ $ 4.1 $ 3.7 $ (6.0) $ (3.2)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Net revenue for the second quarter of fiscal 1999 increased 7.4% to $78.0
million compared to $72.7 million in the second quarter of fiscal 1998.
Speedo'r' Division net revenues for the second quarter of fiscal 1999 increased
16.9% to $40.6 million from $34.8 million in the second quarter of fiscal 1998.
The Speedo'r' division sales mix improved dramatically as regular price
shipments increased 23.0% compared to last year and off-price shipments
decreased 4.8%. Accessories increased 55% over last year, while fitness swimwear
increased 42% and kids were up 21%. Speedo'r' Authentic Fitness'r' Retail
Division net revenue increased 4.8% to $16.0 million in the second quarter of
fiscal 1999 from $15.3 million in the second quarter of fiscal 1998. At
February 8, 1999 the Company had 141 stores open. Same store sales for the
second quarter of fiscal 1999 increased 6.2% over the year earlier period. The
Designer Swimwear Division's net revenue decreased 5.4% to $21.4 million in the
second quarter of fiscal 1999 from $22.6 million last year, due primarily to the
timing of Catalina shipments into the third quarter. Net revenue for the first
six months of fiscal 1999 increased 7.3% to $117.7 million compared to $109.6
million in the first six months of fiscal 1998. Speedo'r' Division net revenues
increased 12.4% compared to last year as regular price sales increased 17.7% and
off-price sales decreased 6.2%. Speedo'r' Authentic Fitness'r' Retail Division
net revenues increased 6.0% while Designer swimwear net revenues decreased 2.7%.
Gross profit for the second quarter of fiscal 1999 increased to $33.3
million from $32.4 million in the second quarter of fiscal 1998. The increase in
gross profit reflects increased Speedo'r' division and Speedo'r' Authentic
Fitness'r' Retail Division sales. Gross profit as a percentage of net revenue
was 42.7% in the second quarter of fiscal 1999 compared to 44.7% in the second
quarter of fiscal 1998. Gross profit for the first six months of fiscal 1999
increased to $47.5 million, an increase of 4.4% compared to $45.5 million in the
first six months of fiscal 1998. The increase in gross profit for the first six
months of fiscal 1999 reflects improved Speedo'r' sales mix and higher Speedo'r'
division and Speedo'r' Authentic Fitness'r' Retail Division sales, as noted
above. Gross profit as a percentage of net revenues was 40.4% in the first six
months of fiscal 1999 versus 41.6% recorded in the first half of fiscal 1998.
The decrease in gross profit as a percentage of net revenues for both the second
quarter and first six months of fiscal 1999 is due to the costs incurred in
conjunction with the Company's decision to consolidate manufacturing
8
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
facilities, partially offset by improved regular price sales mix in the
Speedo'r' Division and the higher level of Speedo'r' Authentic Fitness'r' Retail
Division sales, which generate a higher gross profit margin than the wholesale
divisions.
Selling, general and administrative expenses were $23.1 million in the
second quarter of fiscal 1999 compared to $22.9 million in the second quarter of
fiscal 1998. The increase in selling, general and administrative expenses
results primarily from higher variable selling expense related to the higher net
revenues. S,G&A as a percentage of net revenues decreased to 29.6% in the second
quarter of fiscal 1999 compared to 31.6% in the second quarter of fiscal 1998.
Selling, general and administrative expenses for the first six months of fiscal
1999 were $44.0 million compared to $42.7 million in the first six months of
fiscal 1998. The increase in S,G&A expenses reflects increased marketing and
depreciation and amortization expenses. S,G&A as a percentage of net revenues
decreased to 37.4% in the first half of fiscal 1999 compared to 38.9% in the
first half of fiscal 1998. The decrease in S,G&A as a percentage of net revenues
in both the second quarter and first half of fiscal 1999 resulted from leverage
on the higher sales volume.
The Company recorded a non-recurring expense of $2.0 million, net of income
tax benefits (or $0.09 per diluted share) in the first six months of fiscal 1999
related to the Company's decision to discontinue sourcing from KT West, Inc.
from the Company's owned Checotah, Oklahoma facility and to consolidate sourcing
from the Company's leased Montebello, California facility into the Company's
Commerce, California facility.
Interest expense was $3.5 million in the second quarter of fiscal 1999,
equal to the second quarter of fiscal 1998. Interest expense for the first six
months of fiscal 1999 was $5.9 million compared to $6.6 million in the first six
months of fiscal 1998. The decrease in interest expense is primarily a result of
lowered borrowing due to a $27.7 million inventory reduction versus prior year,
the result of improved inventory controls, as well as a significant increase in
accounts receivable collections, partially offset by the Company's completion of
its $50 million stock buyback program.
The Company's effective income tax rate for the second quarter and first
six months of fiscal 1999 and fiscal 1998 was 39%.
The Company recorded a cumulative charge of approximately $2.5 million, net
of income tax benefits (or $0.12 per diluted share) in the first six months of
fiscal 1999 to reflect the adoption of SOP 98-5 'Reporting on the Costs of
Start-Up Activities'. The Company adopted SOP 98-5 effective with the beginning
of fiscal 1999. The SOP requires that start-up costs, as defined, be expensed as
incurred. It had been the Company's consistent accounting policy to capitalize
such costs for amortization over appropriate periods from 12 to 36 months. The
effect of adopting SOP 98-5 had an immaterial effect on income (loss) before the
cumulative effect of change in accounting principle in the first six months of
fiscal 1999.
Net income for the second quarter of fiscal 1999 was $4.1 million compared
to $3.7 million in the second quarter of fiscal 1998. The increase in net income
for the second quarter reflects the higher operating income, noted above. Net
loss for the first six months of fiscal 1999 was $(6.0) million compared to a
net loss of $(3.2) million recorded in the first six months of fiscal 1998. The
increased net loss in the first six months of fiscal 1999 compared to the first
six months of fiscal 1998 reflects the impact of the Company's decision to
consolidate manufacturing facilities and the adoption of the SOP regarding the
costs of start-up activities, partially offset by the higher operating income
and decreased interest expense, as noted above.
CAPITAL RESOURCES AND LIQUIDITY
On March 18, 1998, the Company entered into a restated credit agreement
(increasing the facility by $15 million) with GE Capital, The Bank of Nova
Scotia, Societe Generale, Union Bank of California and such other lenders as
identified in the agreement (the 'Restated Credit Agreement'). On
9
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
September 14, 1998, the Company amended the Restated Credit Agreement (the
'Credit Agreement') such that the Company's ability to purchase its own Common
Stock was increased to $50 million. The terms of the Company's Credit Agreement
are the same as those of the Restated Credit Agreement. The Restated Credit
Agreement expires in September 2001 and provides for a term loan ('Term Loan')
in the amount of $45 million and a revolving loan facility ('Revolving Loan') in
the amount of $165 million. Borrowings under the Restated Credit Agreement
accrue interest at the lenders' base rate or at LIBOR plus 1.00%. The rate of
interest payable on outstanding borrowing will be automatically reduced to as
low as LIBOR plus 0.75%, as the Company's EBITDA to debt ratio improves to 2.5
to 1.
On December 23, 1998, the Company entered into a $50 million credit
agreement ('Trade Credit Facility') with certain lenders under the Company's
Credit Agreement for the issuance of letters of credit and trade financing. The
trade financing portion of the Trade Credit Facility has a $40 million limit and
accrues interest at the lender's base rate plus 0.50% or at LIBOR plus 1.50% on
the unpaid principal. The Trade Credit Facility expires on December 21, 1999. In
conjunction with entering into the Trade Credit Facility, the Company also
amended certain portions of its Credit Agreement to facilitate such Trade Credit
Facility.
In 1997, the Company's Board of Directors authorized a stock repurchase
program which currently allows the Company to buy up to $50.0 million of its
outstanding Common Stock. As of February 8, 1999, the Company had purchased
approximately 3.3 million shares of its Common Stock at an aggregate cost of
approximately $49.7 million.
On November 20, 1998, consistent with the Company's goal of providing
increased shareholder value, the Company declared its fourteenth successive
quarterly cash dividend of 1.25[c] per share, equivalent to an annual rate of
5[c] per share. The Company believes that its stock repurchase program as well
as the regular quarterly cash dividend demonstrates the Company's ongoing
commitment to increase stockholder value.
The Company plans to expand its channels of distribution and provide growth
in its operations by opening additional Speedo'r' Authentic Fitness'r' retail
stores. The Company currently has 141 stores open. The cost of leasehold
improvements, fixtures and the additional working capital associated with the
opening of an average new store is expected to be approximately $250,000.
The Company's liquidity requirements have historically arisen primarily
from its debt service requirements and the funding of the Company's working
capital needs, primarily inventory and accounts receivable. The Company's
borrowing requirements are seasonal, with peak working capital needs arising at
the end of the third quarter and beginning of the fourth quarter of the fiscal
year. The Company typically generates nearly all of its operating cash flow in
the fourth quarter of the fiscal year reflecting third and fourth quarter
shipments and the sale of inventory built during the first half of the fiscal
year. The Company meets its seasonal working capital needs by utilizing amounts
available under its revolving line of credit.
Cash used in operating activities in the first six months of fiscal 1999
was $(0.9) million compared to $(28.4) million in the first six months of fiscal
1998. The significant improvement in cash used in operating activities in the
first six months of fiscal 1999 is primarily due to a decrease in accounts
receivable of $25.2 million.
Cash used in investing activities increased to $(6.4) million in the first
six months of fiscal 1999 compared to $(2.3) million in the first six months of
fiscal 1998 primarily reflecting increased capital expenditures. Fiscal 1999
capital expenditures primarily relate to new information systems, the
establishment of the Company's new Internet website -- Speedo.com and the
opening of new Speedo'r' Authentic Fitness'r' retail stores.
Cash provided by financing activities was $7.8 million in the first six
months of fiscal 1999 compared to $31.5 million in the first six months of
fiscal 1998. The decrease in cash provided by financing activities primarily
reflects the repurchase of $40.8 million of the Company's Common Stock partially
10
<PAGE>
<PAGE>
AUTHENTIC FITNESS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
offset by seasonal borrowing under the Company's revolving line of credit. The
Company's revolving loan balance was $115.7 million at the end of the second
quarter of fiscal 1999. At February 8, 1999, the Company had approximately $35
million of additional credit available under its Revolving Loan.
The Company believes that funds available under its Credit Agreement, as
noted above, combined with cash flow to be generated from future operations will
be sufficient for the operations of the Company, including debt service,
dividend payments and costs associated with the expansion of its Speedo'r'
Authentic Fitness'r' Retail Division for at least the next twelve months.
Although the Company believes that its current credit agreement and cash flow to
be generated from future operations will also be sufficient for its long-term
operations (periods beyond the next twelve months) circumstances may arise that
would require the Company to seek additional financing. In those circumstances
the Company expects to evaluate additional sources of funds, for example, sales
of additional common stock and expanded or additional bank credit facilities.
YEAR 2000 COMPLIANCE
Comprehensive plans for achieving Year 2000 compliance were finalized
during fiscal 1998 and implementation work is well underway as of the end of the
second quarter of fiscal 1999. The Company is currently implementing the Year
2000 critical business processes and application systems. All required systems
modifications are expected to be completed by the end of fiscal 1999. Also
during fiscal 1999, attention has been and will continue to be focused on
compliance attainment efforts of vendors and other third parties, including key
system interfaces with customers and suppliers. Notwithstanding the efforts
described above, the Company could potentially experience disruptions to some
aspects of its various activities and operations as a result of non-compliant
systems utilized by unrelated business entities. Contingency plans are therefore
under development to mitigate the extent of such potential disruption to
business operations. The total estimated cost to the Company for enhanced
hardware and software applications and to achieve Year 2000 compliant systems is
expected to require expenditures, primarily capital, of approximately $6.0
million.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
This Report includes 'forward-looking statements' within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended which represent the Company's
expectations or beliefs concerning future events that involve risks and
uncertainties, including those associated with the effect of national and
regional economic conditions, the overall level of consumer spending, the
performance of the Company's products within the prevailing retail environment,
customer acceptance of both new designs and newly-introduced product lines,
possible Year 2000 disruption and financial difficulties encountered by
customers. All statements other than statements of historical facts included in
this quarterly report, including, without limitation, the statements under
'Management's Discussion and Analysis of Financial Condition', are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable; it can give no
assurance that such expectations will prove to have been correct.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest rates
and foreign currency exchange rates and selectively uses financial instruments
to manage these risks. The Company does not enter into financial instruments for
speculation or trading purposes. The Company has an interest rate swap agreement
with a financial institution to limit exposure to interest rate volatility. The
value of market risk sensitive instruments is subject to change as a result of
movements in market rates and prices. Based on a hypothetical (one-percentage
point) increase in interest rates, the potential losses in future earnings, fair
value and cash flows are immaterial.
11
<PAGE>
<PAGE>
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's annual meeting of stockholders was held on November 19, 1998.
The following matters were voted upon by the shareholders:
(1) Election of Directors
(a) Mrs. Linda J. Wachner was re-elected to the Board of Directors
to serve a three-year term expiring at the 2001 Annual Meeting of
Stockholders. 12,950,006 votes were cast for the election of Mrs.
Wachner and 319,275 votes were withheld, abstained or were broker non
votes.
(b) Mr. Robert D. Walter was re-elected to the Board of Directors
to serve a three-year term expiring at the 2001 Annual Meeting of
Stockholders. 12,951,086 votes were cast for the election of Mr. Walter
and 318,195 votes were withheld, abstained or were broker non votes.
ITEM 6. EXHIBITS AND REPORTS ON FORMS 8-K.
(a) Exhibits
<TABLE>
<S> <C>
10.2 -- Second Amendment, dated as of December 23, 1998, to the Restated Credit Agreement dated as of
March 18, 1998, among Authentic Fitness Products, Inc. as Borrower, Authentic Fitness Corporation
as Parent, The Financial Institutions named as Lenders, The Bank of Nova Scotia and General
Electric Capital Corporation as Agents, The Bank of Nova Scotia as Administrative Agent, Paying
Agent, Swing Line Bank and Fronting Bank, General Electric Credit Corporation as Documentation
Agent and Collateral Agent and Societe Generale as Co-Agent.
10.3 -- Trade Credit Facility, dated as of December 23, 1998, among Authentic Fitness Products, Inc. as
Borrower, Authentic Fitness Corporation as Parent, The Financial Institutions named as Lenders and
The Bank of Nova Scotia as Lead Arranger and Administrative Agent.
27.1 -- Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
12
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AUTHENTIC FITNESS CORPORATION
Date: February 16, 1999 By: /S/ CHRISTOPHER G. STAFF
...................................
CHRISTOPHER G. STAFF
PRESIDENT AND CHIEF OPERATING
OFFICER
Date: February 16, 1999 By: /S/ MICHAEL P. MC HUGH
...................................
MICHAEL P. MC HUGH
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER
13
<PAGE>
<PAGE>
EXECUTION COPY
SECOND AMENDMENT TO THE CREDIT AGREEMENT
SECOND AMENDMENT, dated as of December 23, 1998, among AUTHENTIC
FITNESS PRODUCTS INC. (the "Borrower"), AUTHENTIC FITNESS CORPORATION
("Parent"), the Lenders party to the Credit Agreement referred to below, THE
BANK OF NOVA SCOTIA ("Scotiabank") and GENERAL ELECTRIC CAPITAL CORPORATION ("GE
Capital"), as Agents (the "Agents") for the Lenders thereunder, SCOTIABANK, as
Administrative Agent and Paying Agent for the Lenders thereunder and as Swing
Line Bank and the Fronting Bank thereunder, GE CAPITAL, as Documentation Agent
and Collateral Agent for the Lenders thereunder, and SOCIETE GENERALE, as
Co-Agent for the Lenders thereunder.
W I T N E S S E T H :
WHEREAS, the parties hereto have entered into that certain
Restated Credit Agreement, dated as of March 18, 1998, as amended by Amendment
No. 1, dated as of September 14, 1998 (such Agreement, as amended, supplemented
or otherwise modified from time to time, being hereinafter referred to as the
"Credit Agreement," and capitalized terms defined therein and not otherwise
defined herein being used herein as therein defined); and
WHEREAS, the Borrower desires to have the Lenders amend certain
provisions of the Credit Agreement; and
WHEREAS, the Lenders have agreed to such amendment upon the terms
and subject to the conditions provided herein;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. Amendments. The Lenders, the Agents, the Borrower and
Parent hereby agree to the following amendments to the Credit Agreement:
(a) The definition of "Applicable Margin" contained in Section
1.01 of the Credit Agreement is hereby amended by adding the phrase "the sum of
(a)" immediately prior to the term "Average Debt" contained therein, adding the
following immediately prior to the word "to" contained in subsection (i)
thereof:
"plus (b) the daily arithmetic average of principal obligations
outstanding under the Trade Refinancing Facility for the four
Fiscal Quarters
<PAGE>
<PAGE>
most recently ended on or prior to such date ("Average
Debt plus Trade Credit")"
and adding the phrase "plus Trade Credit" immediately after the term "Average
Debt" in the chart contained therein.
(b) The definition of "Loan Documents" contained in Section 1.01
of the Credit Agreement is hereby amended by deleting the word "and" at the end
of subsection (vii) thereof, inserting "," in lieu thereof and then adding the
following immediately following the term "Trade Refinancing Facility" contained
in subsection (viii) thereof:
"and (ix) in the case of the Guaranties only, the Trade L/C
Facility"
(c) The definition of "Secured Parties" contained in Section 1.01
of the Credit Agreement is hereby amended to read as follows:
""Secured Parties" means the Facility Agents, the Lenders, the
Hedge Banks, any administrative agent for the Trade Refinancing
Lenders under the Trade Refinancing Facility and the Trade
Refinancing Lenders."
(d) The definition of "Trade Credit Facility" contained in
Section 1.01 of the Credit Agreement is hereby amended by deleting the term
"Lenders" contained therein and substituting the term "lenders" therefor.
(e) The definition of "Trade L/C Facility" contained in Section
1.01 of the Credit Agreement is hereby amended to read as follows:
""Trade L/C Facility" means a letter of credit facility on terms
and conditions reasonably acceptable to the Collateral Agent and
Paying Agent between the Borrower and its wholly owned, direct
and indirect, Subsidiaries and one or more lenders pursuant to
which one or more issuing banks thereunder shall issue trade
letters of credit for the account of the Borrower or such
Subsidiaries for a period not to exceed 180 days."
(f) The definition of "Trade Refinancing Facility" contained in
Section 1.01 of the Credit Agreement is hereby amended to read as follows:
""Trade Refinancing Facility" means a revolving credit facility
on terms and conditions reasonably acceptable to the Collateral
Agent and
2
<PAGE>
<PAGE>
Paying Agent between the Borrower and one or more lenders
pursuant to which such lenders shall make advances with
a maturity for any such advance not to exceed six months from
time to time to finance outstanding reimbursement obligations
arising under the Trade L/C Facility and to refinance, from time
to time, outstanding ASCO Debt."
(g) Section 2.07(a) of the Credit Agreement is hereby amended by
adding "the sum of (a)" immediately prior to the term "Average Debt" contained
therein, adding the following immediately prior to the word "to" contained in
subsection (i) thereof:
"plus (b) the daily arithmetic average of principal obligations
outstanding under the Trade Refinancing Facility for the four
Fiscal Quarters most recently ended on or prior to such date
("Average Debt plus Trade Credit")"
and adding the phrase "plus Trade Credit" immediately after the term "Average
Debt" in the chart contained therein.
(h) Section 2.13(e)(i)(A) of the Credit Agreement is hereby
amended by adding the phrase "the sum of (a)" immediately prior to the term
"Average Debt" contained therein and adding the following immediately prior to
the word "to" contained in subsection (i) thereof:
"plus (b) the daily arithmetic average of principal obligations
outstanding under the Trade Refinancing Facility for four the
Fiscal Quarters most recently ended on or prior to such date
("Average Debt plus Trade Credit")"
(i) Section 2.13(e)(i)(B) of the Credit Agreement is hereby
amended by deleting the phrase "Average Debt as of such date", substituting the
term "Average Debt plus Trade Credit" therefor and adding the phrase "plus Trade
Credit" immediately after the term "Average Debt" in the chart contained
therein.
(j) Section 5.02(a) of the Credit Agreement is hereby amended by
deleting the word "and" at the end of subsection (vi) thereof, deleting the "."
at the end of subsection (vii) thereof and substituting "; and" therefor and
adding the following subsection (viii) immediately after the last full sentence
of subsection (vii) thereof:
"(viii) Liens securing Obligations of the Borrower under the
Trade Refinancing Facility."
3
<PAGE>
<PAGE>
(k) Section 5.02(b)(xiv) of the Credit Agreement is hereby
amended to read as follows:
(xiv) Debt of the Borrower and the Guarantee Obligations of
Parent and the Domestic Subsidiaries with respect to such Debt
(A) under the Trade L/C Facility in an aggregate principal
amount not to exceed at any time outstanding (i) from the
Effective Date until September 30, 1997, $20,000,000 and (ii)
thereafter, $50,000,000 and (B) under the Trade Refinancing
Facility in an aggregate amount not to exceed (i) from the
Effective Date until September 30, 1997, $20,000,000 and (ii)
thereafter, $40,000,000; provided, however, that the aggregate
principal amount of such Debt, together with the aggregate
amount of Debt of the Borrower pursuant to Section 5.02(b)(viii)
shall not exceed at any time outstanding (i) from the Effective
Date until September 30, 1997, $70,000,000 and (ii) thereafter,
$80,000,000; provided further, that the Trade Credit
Intercreditor Agreement shall have been duly executed and
delivered by the Trade Refinancing Lenders or their authorized
representatives and by the Collateral Agent prior to the
creation, assumption or incurrence of such Debt.
(l) Section 5.02(k) of the Credit Agreement is hereby amended by
deleting the word "or" immediately preceding subsection (ii) thereof,
substituting "," therefor and adding the following immediately prior to the end
thereof:
"or (iii) in connection with any Debt under the Trade Credit
Facility permitted under Section 5.02(b)(xiv)"
(m) Section 8.01 of the Credit Agreement is hereby amended by
deleting the word "and" immediately preceding subsection (d) thereof and
substituting "," therefor and adding the following immediately after the word
"Lenders" at the end of subsection (d) thereof:
", and (e) no amendment, waiver or modification shall, unless in
writing and signed by the Collateral Agent, the Paying Agent and
the Required Lenders, increase the amount of Debt permitted
under the Trade Refinancing Facility"
(n) Section 8.01(a)(iii) of the Credit Agreement is hereby
amended to insert the phrase "subject to the last
4
<PAGE>
<PAGE>
sentence hereof," immediately prior to the beginning thereof.
(o) Section 8.01 of the Credit Agreement is hereby amended by
inserting the following at the end thereof:
"Notwithstanding anything contained in this Section 8.01 to the
contrary, (i) for purposes of Section 8.01(a)(iii) only, the
term "Lender" shall mean the Lenders hereunder and the Trade
Refinancing Lenders and (ii) after the acceleration of the
Obligations of the Borrower under this Agreement, the
liquidation of, or foreclosure on, any of the Collateral by the
Collateral Agent shall be at the request, or with the consent,
of the Secured Parties holding more than 51% of the aggregate
principal amount of Secured Obligations (as defined in the
Security Agreement), based upon the sum of (i) the Commitments
of each Lender under this Agreement and (ii) the commitments of
each Trade Refinancing Lender under the Trade Refinancing
Facility."
(p) Schedule 4.01(dd) is hereby replaced by Schedule 4.01(dd)
attached hereto.
SECTION 2. Amendment of the Security Documents. The Lenders, the
Agents, the Borrower and Parent hereby consent to the Amendment to the Parent
Guaranty, the Amendment to the Subsidiary Guaranty, the Second Amendment to the
Security Agreement and the Amendment to the Trademark, Patent and Copyright
Security Agreement, each of which is annexed hereto.
SECTION 3. Conditions to Effectiveness. This Amendment shall
become effective as of the date hereof when, and only when, (i) the Agents shall
have received (a) counterparts of this Amendment executed by Parent, the
Borrower and the Required Lenders or, as to the Lenders, advice satisfactory to
the Agents that such Lenders have executed this Amendment, (b) a copy of the
annexed Consent of Guarantors executed by the parties thereto and (c) the fee
referred to in the first sentence of Section 6 hereof, (ii) the Borrower shall
have entered into a Trade Refinancing Facility on terms and conditions
reasonably acceptable to the Collateral Agent and the Paying Agent and (iii) the
Trade Credit Intercreditor Agreement shall have been entered into between the
Collateral Agent and the agent under the Trade Credit Facility in form and
substance satisfactory to the Collateral Agent and the Paying Agent.
5
<PAGE>
<PAGE>
SECTION 4. Representations and Warranties. Parent and the
Borrower hereby jointly and severally represent and warrant to the Lenders and
the Agents as follows:
(a) After giving effect to this Amendment, each of the
representations and warranties in Article IV of the Credit Agreement and in the
other Loan Documents are correct on and as of the date hereof as though made on
and as of such date, except to the extent any such representation or warranty
expressly relates to an earlier date.
(b) After giving effect to this Amendment, no Default or Event of
Default has occurred and is continuing as of the date hereof.
(c) The execution, delivery and performance by Parent and the
Borrower of this Amendment have been duly authorized by all necessary or proper
corporate action and do not require the consent or approval of any Person which
has not been obtained.
(d) This Amendment has been duly executed and delivered by the
Borrower and Parent and each of this Amendment and the Credit Agreement as
amended hereby constitutes the legal, valid and binding obligation of the
Borrower and Parent, enforceable against them in accordance with its terms.
SECTION 5. New Subsidiary. Within forty-five (45) days after the
Effective Date, Borrower shall have taken all actions required by Section
5.01(o) of the Credit Agreement with respect to its new Subsidiary, Authentic
Fitness Online Inc.
SECTION 6. Reference to and Effect on the Loan Documents. (a)
Upon the effectiveness of this Amendment, on and after the date hereof, each
reference in the Credit Agreement and the other Loan Documents to "this
Agreement," "hereunder," "hereof," "herein," or words of like import, shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) Except to the extent waived or amended herein, the provisions
of the Credit Agreement and all of the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Lenders or the Agents under any of the Loan
Documents,
6
<PAGE>
<PAGE>
nor constitute a waiver of any provision of any of the Loan Documents.
SECTION 7. Fees, Costs and Expenses. Parent and the Borrower
agree to pay to the Administrative Agent for the ratable benefit of the Lenders,
based on their Pro Rata Shares, an amendment fee in the amount of $210,000.
Parent and the Borrower further agree to pay on demand all costs, fees and
expenses of the Agents in connection with the preparation, execution and
delivery of this Amendment and the other instruments and documents to be
delivered pursuant hereto, including the reasonable fees and out-of-pocket
expenses of counsel for the Agents with respect thereto.
SECTION 8. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
instrument.
SECTION 9. Governing Law. This Amendment shall be governed by and
construed and interpreted in accordance with the laws of the State of New York
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws.
7
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
AUTHENTIC FITNESS PRODUCTS INC.
By: ------------------------------
Name:
Title:
AUTHENTIC FITNESS CORPORATION
By: ------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By: ------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: ------------------------------
Name:
Title:
SOCIETE GENERALE
By: ------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By: ------------------------------
Name:
Title:
NATIONSBANK, N.A.
By: ------------------------------
Name:
Title:
8
<PAGE>
<PAGE>
FLEET BANK, N.A.
By: ------------------------------
Name:
Title:
COMMERCZBANK AG
By: ------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By: ------------------------------
Name:
Title:
THE BANK OF NEW YORK
By: ------------------------------
Name:
Title:
BANKBOSTON, N.A.
By: ------------------------------
Name:
Title:
CITICORP USA, INC.
By: ------------------------------
Name:
Title:
9
<PAGE>
<PAGE>
CONSENT OF GUARANTORS
Each of the undersigned, parties to the Subsidiary Guaranty,
Security Agreement and Trademark, Patent and Copyright Security Agreement, each
dated as of September 6, 1996, as amended, hereby consents to the terms of the
foregoing Amendment dated as of December 23, 1998 (to which this consent is
annexed) and confirms that such Subsidiary Guaranty, Security Agreement and
Trademark, Patent and Copyright Security Agreement remain in full force and
effect and continue to secure the Obligations pursuant to the terms thereof.
Dated as of December 23, 1998
AUTHENTIC FITNESS RETAIL INC.
By: ------------------------------
Name:
Title:
CCC ACQUISITION CORP.
By: ------------------------------
Name:
Title:
CCC ACQUISITION REALTY CORP.
By: ------------------------------
Name:
Title:
CCC TEN. CORP.
By: ------------------------------
Name:
Title:
CCC CAL. CORP.
By: ------------------------------
Name:
Title:
10
<PAGE>
<PAGE>
[EXECUTION COPY]
CREDIT AGREEMENT,
dated as of December 23, 1998,
among
AUTHENTIC FITNESS PRODUCTS INC.,
as the Borrower,
AUTHENTIC FITNESS CORPORATION,
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders
and
THE BANK OF NOVA SCOTIA,
as the Lead Arranger and
as the Administrative Agent.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms..................................................................-2-
1.2. Use of Defined Terms..........................................................-12-
1.3. Cross-References..............................................................-12-
1.4. Accounting and Financial Determinations.......................................-12-
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
2.1. Commitments...................................................................-12-
2.1.1. Loan Commitment...............................................................-12-
2.1.2. Commitment to Issue Letters of Credit.........................................-13-
2.1.3. Lenders Not Permitted or Required to Make Loans and Fronting Bank Not
Permitted or Required to Issue Letters of Credit Under Certain
Circumstances.................................................................-14-
2.2. Reduction of the Commitment Amount............................................-14-
2.3. Borrowing Procedure...........................................................-14-
2.4. Continuation and Conversion Elections.........................................-16-
2.5. Funding.......................................................................-16-
2.6. Register; Notes...............................................................-17-
2.7. Extension of Commitment Termination Date......................................-18-
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments....................................................-19-
3.2. Interest Provisions...........................................................-20-
3.2.1. Rates.........................................................................-20-
3.2.2. Post-Maturity Rates...........................................................-20-
3.2.3. Payment Dates.................................................................-20-
3.2.4. Allocation of Interest Payments...............................................-21-
3.3. Fees..........................................................................-21-
3.3.1. Letter of Credit Fees.........................................................-21-
3.3.2. [Reserved]....................................................................-22-
3.3.3. Fee Letter....................................................................-22-
3.3.4. Commitment Fee................................................................-22-
</TABLE>
-i-
<PAGE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- -------- ----
<S> <C> <C>
ARTICLE IV
LETTERS OF CREDIT
4.1. Issuance of Letters of Credit.................................................-22-
4.1.1. Letters of Credit.............................................................-22-
4.2. Issuances, Extensions and Creations...........................................-23-
4.3. Destruction of Goods, etc.....................................................-24-
4.4. Other Lenders'Participation...................................................-24-
4.5. Disbursements and Maturities..................................................-25-
4.6. Reimbursement; Outstanding Letters of Credit, etc.............................-25-
4.7. Deemed Disbursements..........................................................-27-
4.8. Nature of Reimbursement Obligations...........................................-28-
ARTICLE V
CERTAIN LIBO RATE AND OTHER PROVISIONS
5.1. LIBO Rate Lending Unlawful....................................................-29-
5.2. Deposits Unavailable..........................................................-29-
5.3. Increased LIBO Rate Loan Costs, etc...........................................-29-
5.4. Funding Losses................................................................-29-
5.5. Increased Capital Costs, etc..................................................-30-
5.6. Taxes.........................................................................-31-
5.7. Payments, Computations, etc...................................................-32-
5.8. Sharing of Payments...........................................................-33-
5.9. Setoff........................................................................-33-
5.10. Use of Proceeds...............................................................-34-
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Initial Credit Extension......................................................-34-
6.1.1. Resolutions, etc..............................................................-34-
6.1.2. Delivery of Notes.............................................................-34-
6.1.3. Certificates as to No Default, etc............................................-34-
6.1.4. No Material Adverse Change....................................................-35-
6.1.5. Amendment of Restated Credit Agreement, Security, etc.........................-35-
6.1.6. Opinions of Counsel...........................................................-35-
6.1.7. Restated Credit Agreement, Security...........................................-35-
6.1.8. Closing Fees, Expenses, etc...................................................-35-
6.1.9. Approvals.....................................................................-35-
6.1.10. Litigation....................................................................-35-
6.1.11. Closing Date Certificate......................................................-35-
</TABLE>
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<PAGE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
6.1.12. Intercreditor Agreement.......................................................-36-
6.1.13. Tradexpress Agreement.........................................................-36-
6.2. All Credit Extensions.........................................................-36-
6.2.1. Compliance with Warranties, No Default, etc...................................-36-
6.2.2. Credit Extension Request......................................................-37-
6.2.3. Satisfactory Legal Form.......................................................-37-
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1. Organization, etc.............................................................-37-
7.2. Due Authorization, Non-Contravention, etc.....................................-37-
7.3. Government Approval, Regulation, etc..........................................-38-
7.4. Validity, etc.................................................................-38-
7.5. Financial Statements; No Material Adverse Change..............................-38-
7.6. Litigation, etc...............................................................-38-
7.7. Regulations U and X...........................................................-39-
7.8. Accuracy of Information.......................................................-39-
7.9. Year 2000.....................................................................-39-
7.10. Restated Credit Agreement Representations and Warranties......................-39-
7.11. ASCO Debt Outstanding, etc....................................................-40-
ARTICLE VIII
COVENANTS
8.1. Covenants.....................................................................-40-
8.1.1. Financial Information, Reports, Notices, etc..................................-40-
8.1.2. Future Subsidiaries...........................................................-40-
8.1.3. Restated Credit Agreement Covenants...........................................-40-
8.1.4. Default Notice................................................................-40-
ARTICLE IX
EVENTS OF DEFAULT
9.1. Listing of Events of Default..................................................-41-
9.1.1. Non-Payment of Obligations....................................................-41-
9.1.2. Breach of Warranty............................................................-41-
9.1.3. Non-Performance of Certain Covenants and Obligations..........................-41-
9.1.4. Non-Performance of Other Covenants and Obligations............................-41-
9.1.5. Default Under Restated Credit Agreement.......................................-41-
9.1.6. Bankruptcy, Insolvency, etc...................................................-41-
</TABLE>
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<PAGE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- -------- ----
<S> <C> <C>
9.1.7. Termination, etc., of Loan Documents..........................................-41-
9.2. Action Upon Bankruptcy........................................................-41-
9.3. Action Upon Other Event of Default............................................-42-
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Actions.......................................................................-42-
10.2. Copies, etc...................................................................-43-
10.3. Exculpation...................................................................-43-
10.4. Successor.....................................................................-43-
10.5. Loans Made, Letters of Credit Issued by Administrative Agent and
Loans Made by Administrative Agent............................................-44-
10.6. Credit Decisions..............................................................-44-
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc......................................................-44-
11.2. Notices.......................................................................-45-
11.3. Payment of Costs and Expenses.................................................-45-
11.4. Indemnification...............................................................-46-
11.5. Survival......................................................................-47-
11.6. Severability..................................................................-47-
11.7. Headings......................................................................-47-
11.8. Execution in Counterparts, Effectiveness, etc.................................-47-
11.9. Governing Law; Entire Agreement...............................................-47-
11.10. Successors and Assigns........................................................-47-
11.11. Sale and Transfer of Loans and Commitments; Participations in Loans
and Commitments...............................................................-47-
11.11.1. Assignments...................................................................-48-
11.11.2. Participations................................................................-49-
11.11.3. Fronting Bank Assignments.....................................................-50-
11.12. Other Transactions............................................................-50-
11.13. Forum Selection and Consent to Jurisdiction...................................-50-
11.14. Waiver of Jury Trial..........................................................-51-
11.15. UCP; etc......................................................................-51-
11.16. Usury Restraint...............................................................-52-
11.17. Judgment Currency.............................................................-52-
</TABLE>
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<PAGE>
<PAGE>
SCHEDULE I - Percentages and Administrative Information
SCHEDULE II - List of Subsidiaries
SCHEDULE III - ASCO Debt & ASCO Letters of Credit
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Issuance Request
EXHIBIT B-2 - Form of Notice of Borrowing
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Assignment and Acceptance
EXHIBIT E - Form of Intercreditor Agreement
EXHIBIT F - Form of Closing Date Certificate
EXHIBIT G - Form of Tradexpress Agreement
EXHIBIT H - Form of Notice of Extension
-v-
<PAGE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 23, 1998, is among AUTHENTIC
FITNESS PRODUCTS INC., a Delaware corporation (the "Borrower"), AUTHENTIC
FITNESS CORPORATION, a Delaware corporation (the "Parent"), the various
financial institutions as are or may become parties hereto (together with the
Fronting Bank, the "Lenders") and THE BANK OF NOVA SCOTIA ("Scotiabank"), as the
lead arranger and as the administrative agent (in such capacity, the
"Administrative Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent, certain financial institutions,
Scotiabank and General Electric Capital Corporation ("GE Capital"), as agents,
Scotiabank, as administrative agent, paying agent, swing line bank and fronting
bank, GE Capital, as documentation agent and collateral agent and Societe
Generale, as co-agent, are parties to the Restated Credit Agreement, dated as of
March 18, 1998;
WHEREAS, pursuant to this Agreement, the Borrower desires to obtain
Commitments from the Lenders and the Fronting Bank pursuant to which
(a) Letters of Credit will be issued by the Fronting Bank for the
account of the Borrower to support obligations of the Borrower and its
wholly-owned Subsidiaries and, under the several obligations hereunder,
each of the Lenders will, to the extent of such Lender's Percentage,
participate in Letters of Credit issued from time to time hereunder on
or prior to the Commitment Termination Date; and
(b) Loans will be made by the Fronting Bank to the Borrower and,
under the several obligations hereunder, each of the Lenders will, to
the extent of such Lender's Percentage, participate in or make the Loans
from time to time on or prior to the Commitment Termination Date;
WHEREAS, the Fronting Bank and the Lenders are willing, on the terms and
subject to the conditions hereinafter set forth (including Article VI), to
extend such Commitments hereunder, make and participate in such Loans, issue and
participate in such Letters of Credit; and
WHEREAS, on the Effective Date, the proceeds of Loans will be used to
refinance the ASCO Debt and, on and after the Effective Date, (i) the proceeds
of Loans will be used for the sole purpose of providing the Borrower with up to
a six-month (or 180-day, in the case of Base Rate Loans) trade credit in respect
of disbursements made to the beneficiaries of Letters of Credit and
reimbursement under the ASCO Letters of Credit; and (ii) Letters of Credit will
be issued solely to support the worldwide sourcing of merchandise by the
Borrower and its wholly-owned Subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION I.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
will, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Administrative Agent" is defined in the preamble and includes each other
Person as will have subsequently been appointed as the successor Administrative
Agent pursuant to Section 10.4.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently announced by Scotiabank at
its Domestic Lending Office as its base rate for Dollar loans; and
(b) the Federal Funds Rate most recently determined by the
Administrative Agent plus 1/2 of 1%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Scotiabank in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Borrower of
changes in the Alternate Base Rate.
"Applicable Margin" means (a) with respect to the unpaid principal amount
of each Loan maintained as a Base Rate Loan, 0.50% and (b) with respect to the
unpaid principal amount of each Loan maintained as a LIBO Rate Loan, 1.50%.
"ASCO" is defined in the Restated Credit Agreement.
"ASCO Debt" means the debt listed on Schedule III hereto.
"ASCO Letters of Credit" means, collectively, those existing letters of
credit issued by ASCO prior to the Effective Date, for the account of the
Borrower described on Schedule III hereto. Notwithstanding the foregoing, no
letter of credit shall be deemed to be an ASCO Letter of Credit hereunder unless
such letter of credit shall meet the requirements and qualifications necessary
for the issuance of a Letter of Credit hereunder pursuant to clauses (a) and (b)
of Section 4.1.1.
"ASCO L/C Reimbursement" means a payment by the Borrower to ASCO in
reimbursement of draws under any ASCO Letter of Credit.
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<PAGE>
"ASCO L/C Reimbursement Date" means the date of any ASCO L/C Reimbursement.
"Assignee Lender" is defined in Section 11.11.1.
"Assignment and Acceptance" means an Assignment and Acceptance
substantially in the form of Exhibit D hereto.
"Available Amount" of each Letter of Credit means the maximum amount of
such Letter of Credit that may then be drawn under such Letter of Credit whether
or not the conditions for drawing thereunder have been met.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrowing" means the making of Loans of the same type and, in the case of
LIBO Rate Loans, having the same Interest Period by the Fronting Bank following
a Disbursement or an ASCO L/C Reimbursement and the funding of a Lender's
Percentage of such Loans, in each case in accordance with the terms of this
Agreement.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York; and
(b) relative to the making, continuing, prepaying or repaying of
any LIBO Rate Loans, any day on which dealings in Dollars are carried on
in the London interbank market.
"Closing Date Certificate" means the closing date certificate executed and
delivered by the Borrower pursuant to the terms of this Agreement, substantially
in the form of Exhibit F hereto.
"Collateral" is defined in the Restated Credit Agreement.
"Collateral Documents" is defined in the Restated Credit Agreement.
"Commitment" means, as the context may require, a Lender's Loan Commitment
or the Fronting Bank's or a Lender's Letter of Credit Commitment.
"Commitment Amount" means $50,000,000, as such amount may be reduced
pursuant to Section 2.2.
"Commitment Fee" is defined in Section 3.3.4.
"Commitment Termination Date" means the earliest of
(a) December 21, 1999, as such date may be extended pursuant to
the terms of this Agreement;
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<PAGE>
(b) the date on which the Commitment Amount is terminated in full
or reduced to zero pursuant to Section 2.2; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (b) or (c), the Commitments
will terminate automatically and without any further action.
"Commitment Termination Event" means
(a) the occurrence of any event or condition described in clause
(f) of Section 6.01 of the Restated Credit Agreement;
(b) the occurrence and continuance of any other Event of Default
and either
(i) the declaration of the Loans to be due and payable
pursuant to Section 9.3, or
(ii) in the absence of such declaration, the giving of
notice by the Administrative Agent, acting at the direction of
the Required Lenders, to the Borrower that the Commitments have
been terminated; or
(c) the termination of, or any refinancing, refunding,
replacement, renewal or restatement of, the Restated Credit Agreement.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by a Designated Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Credit Extension" means and includes
(a) the advancing of any Loans by the Lenders in connection with
a Borrowing (including the making of a Loan by the Fronting Bank to the
Borrower on a Disbursement Date or an ASCO L/C Reimbursement Date and
the refunding and refinancing of such Loans by the Lenders); and
(b) any issuance or extension by the Fronting Bank of a Letter of
Credit.
"Declining Lender" is defined in clause (b) of Section 2.7.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Designated Officer" means, relative to the Borrower or any other Loan
Party, those of its officers whose signatures and incumbency will have been
certified to the Administrative Agent and the Lenders pursuant to Section 6.1.1.
"Disbursement" means any payment made under a Letter of Credit by the
Fronting Bank to the applicable Letter of Credit Beneficiary.
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<PAGE>
"Disbursement Date" is defined in Section 4.5.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Lending Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the
Assignment and Acceptance or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
"Draft" means and includes any draft, bill, cable or written demand for
payment or receipt drawn or issued under a Letter of Credit.
"Effective Date" means the date this Agreement becomes effective pursuant
to Section 11.8.
"Extending Lender" is defined in clause (a) of Section 2.7.
"Event of Default" is defined in Section 9.1.
"Excess" is defined in Section 11.16.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not
a Business Day, for the next preceding Business Day in New York) by the
Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day in New York, the average of the quotations for such day on
such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it.
If for any reason the Administrative Agent will have determined (which
determination will be conclusive, absent manifest error) that it is unable to
ascertain the Federal Funds Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient bids or publications in
accordance with the terms hereof, the rate announced by the Administrative Agent
at its New York Agency as its "Base Rate New York" will be the Alternate Base
Rate until the circumstances giving rise to such inability no longer exists.
"Fee Letter" means the confidential Fee Letter, dated November 25, 1998,
between the Borrower and the Administrative Agent as the same may have been
amended, supplemented or otherwise modified from time to time.
"Fiscal Quarter" means a fiscal quarter of the Parent and its consolidated
Subsidiaries ending on or about September 30, December 31, March 31 or June 30
of each year.
-5-
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<PAGE>
"Fiscal Year" means a fiscal year of the Parent and its consolidated
Subsidiaries ending on or about June 30 of each year.
"Fronting Bank" means Scotiabank, in its capacity as the issuer of Letters
of Credit (regardless of which office, branch or agency of Scotiabank issues a
Letter of Credit) and in its capacity as the Lender of Loans made prior to a
Funding Date pursuant to the terms of this Agreement and includes each other
Lender as will have subsequently been appointed as the successor Fronting Bank
by the Borrower.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"Funding Date" is defined in clause (c) of Section 2.3.
"GAAP" has the meaning set forth in the Restated Credit Agreement.
"GE Capital" is defined in the first recital.
"Goods" means, collectively, all goods (including all inventory), wares,
merchandise and other commodities purchased by or shipped to or to the order of
the Borrower (or any of its wholly-owned Subsidiaries) under or by virtue of or
in connection with the issuance of a Letter of Credit.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"including" means including without limiting the generality of any
description preceding such term.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which
have been or should be, in accordance with GAAP, recorded as capitalized
lease liabilities;
(d) all obligations of such Person to pay the deferred purchase
price of property or services (other than trade debt incurred in the
ordinary course of business), and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased
by such Person (including indebtedness arising under conditional sales
or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; and
-6-
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(e) all contingent liabilities of such Person in respect of any
of the foregoing.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Intercreditor Agreement" means the Trade Credit Intercreditor Agreement
(as defined in the Restated Credit Agreement) executed and delivered pursuant to
the terms of this Agreement and the Restated Credit Agreement by the
Administrative Agent and GE Capital, in its capacity as Collateral Agent (as
defined in the Restated Credit Agreement), substantially in the form of Exhibit
E hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Interest Period" means, relative to any LIBO Rate Loans, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and ending on (but excluding) the day which numerically corresponds to such
date, subject to the requirements set forth in Section 2.3, one, two, three,
four, five or six months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in each case as such
Loan may be made or as the Borrower may select in its relevant notice pursuant
to Sections 2.3 or 2.4; provided, however, that
(a) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing will be of the same duration;
(b) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period will end on the next following
Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period
will end on the Business Day next preceding such numerically
corresponding day); and
(c) no Interest Period may end later than the Stated Maturity
Date for such Loan.
"Issuance Request" means either (i) a request delivered by the Borrower to
the Fronting Bank in accordance with the provisions of the Tradexpress Agreement
or (ii) a request and certificate duly executed by a Designated Officer of a
Borrower, in substantially the form of Exhibit B-1 attached hereto (with such
changes thereto as may be agreed upon from time to time by the Administrative
Agent and the Borrower).
"Judgment Currency" is defined in Section 11.17.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 4.1.1.
"Letter of Credit Availability" means, at any time, the then existing
Letter of Credit Commitment Amount minus the sum of (x) the aggregate
outstanding principal amount of all Loans plus (y) the aggregate amount of all
Letter of Credit Outstandings.
-7-
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"Letter of Credit Beneficiary" means a beneficiary of a Letter of Credit.
"Letter of Credit Commitment" means, relative to the Fronting Bank, the
Fronting Bank's obligation to issue Letters of Credit pursuant to Section 2.1.2
and, with respect to each of the other Lenders, the obligations of each such
Lender to participate in such Letters of Credit pursuant to the terms of this
Agreement.
"Letter of Credit Commitment Amount" means, $50,000,000, as such amount may
be reduced pursuant to Section 2.2.
"Letter of Credit Outstandings" means, at any time, an amount equal to the
sum of
(a) the aggregate Available Amount at such time of all Letters of
Credit then outstanding and undrawn (as such aggregate Available Amount
will be adjusted, from time to time, as a result of drawings, the
issuance of Letters of Credit, or otherwise),
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the
rate of interest per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%) reported, on the first day of such Interest Period as of 11:00 a.m.
London time, on Telerate Access Service Page 3750 (British Bankers Association
Settlement Rate) as the London Interbank Offered Rate for Dollar deposits having
a term comparable to such Interest Period and in an amount of $1,000,000 or more
(or, if said page will cease to be publicly available, as reported by any
publicly available source of similar market data selected by the Administrative
Agent that, in the Administrative Agent's reasonable judgment, accurately
reflects such London Interbank Offered Rate).
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) ----------------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Administrative Agent on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Administrative Agent from Scotiabank, two Business Days before the first day
of such Interest Period.
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"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Assignment
and Acceptance or such other office of any Lender as designated from time to
time by notice from such Lender to the Borrower and the Administrative Agent,
whether or not outside the United States, which will be making or maintaining
LIBO Rate Loans hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO
Rate Loans, the reserve percentage, if any (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S.
Board, having a term approximately equal or comparable to such Interest Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan Commitment" means, relative to (i) the Fronting Bank (in such
capacity), its obligation to make Loans to the Borrower on a Disbursement Date
and on an ASCO L/C Reimbursement Date, and (ii) each Lender (other than the
Fronting Bank in such capacity), such Lender's obligation to participate in the
Loans made by the Fronting Bank to the Borrower and, as set forth in this
Agreement, to refund and reimburse the Fronting Bank for such Loans, in each
case pursuant to the terms of this Agreement.
"Loan Commitment Amount" means, $40,000,000, as such amount may be reduced
pursuant to Section 2.2.
"Loan Document" means this Agreement, the Letters of Credit, each Note, the
Fee Letter, each Guarantee (as defined in the Restated Credit Agreement), each
Collateral Document, the Intercreditor Agreement, the Tradexpress Agreement and
each other agreement, document or instrument delivered in connection with this
Agreement, whether or not specifically mentioned herein.
"Loan Party" means the Borrower and each other Person (other than the
Administrative Agent, the Fronting Bank and the Lenders) obligated under any
Loan Document.
"Loans" is defined in Section 2.1.1.
"Material Adverse Change" is defined in the Restated Credit Agreement.
"Material Adverse Effect" is defined in the Restated Credit Agreement.
"Maximum Rate" is defined in Section 11.16.
"Moody's" means Moody's Investors Service, Inc.
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"Note" means any promissory note of the Borrower payable to the order of
any Lender (including the Fronting Bank), in the form of Exhibit A (as any such
promissory note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Borrower to such Lender
resulting from outstanding Loans made by such Lender, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Notice of Borrowing" means a loan request and certificate duly executed by
a Designated Officer of the Borrower, substantially in the form of Exhibit B-2
hereto.
"Notice of Extension" is defined in clause (b) of Section 2.7,
substantially in the form of Exhibit H hereto.
"Obligations" means all obligations (monetary or otherwise) of the Borrower
and each other Loan Party arising under or in connection with this Agreement,
any Letter of Credit and each other Loan Document.
"Order" is defined in clause (b) of Section 4.6.
"Organic Document" means, relative to any Loan Party, as applicable, its
certificate of incorporation, by-laws, certificate of formation or limited
liability company agreement, and all shareholder agreements, voting trusts and
similar arrangements applicable to any of the authorized shares of capital stock
or other ownership interest of such Loan Party.
"Parent" is defined in the preamble.
"Participant" is defined in Section 11.11.2.
"Percentage" means, relative to any Lender, the percentage set forth on
Schedule I hereto or set forth in an Assignment and Acceptance, as such
percentage may be adjusted from time to time pursuant to the terms hereof or an
Assignment and Acceptance executed by such Lender and its Assignee Lender and
delivered pursuant to Section 11.11; provided, that the Percentage of each
Lender's Loan Commitment and Letter of Credit Commitment will be identical.
"Person" means any natural person, corporation, limited liability company,
partnership, firm, association, trust, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
"Quarterly Payment Date" means the last day of each March, June, September,
and December or, if any such day is not a Business Day in New York, the next
succeeding Business Day in New York.
"Received Amount" is defined in clause (c) of Section 4.6.
"Register" is defined in clause (b) of Section 2.6.
"Reimbursement Obligation" is defined in Section 4.6.
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"Replacement Lender" is defined in clause (c) of Section 2.7.
"Request Date" is defined in clause (a) of Section 2.7.
"Required Lenders" means, at any time, Lenders having Percentages that
equal at least 51% of the Commitments.
"Restated Credit Agreement" means the Restated Credit Agreement, dated as
of March 18, 1998, among the Borrower, the Parent, certain financial
institutions, Scotiabank and GE Capital, as Agents, Scotiabank, as
administrative agent, paying agent, swing line bank and fronting bank, GE
Capital, as documentation agent and collateral agent, and Societe Generale as
co-agent, as in effect on the Effective Date, and as further amended, restated
or waived from time to time with the consent of the Required Lenders hereunder
solely for purposes of this Agreement, and regardless of whether such Restated
Credit Agreement is terminated, unless in connection with such termination a
replacement credit facility satisfactory to the Required Lenders hereunder is
entered into, in which case the affirmative and negative covenants in such
facility will become the subject of this Agreement.
"S&P" means Standard & Poor's Ratings Group, currently a division of
McGraw-Hill, Inc., or any successor thereto.
"Scotiabank" is defined in the preamble.
"Security Agreements" is defined in the Restated Credit Agreement.
"Stated Expiry Date" is defined in clause (c) of Section 4.1.1.
"Stated Maturity Date" means, in the case of any Loan, the date which is,
subject to the requirements of Sections 2.3 and 2.4, no more than six months
following the date of the making of such Loan (in the case of a Loan initially
made as a LIBO Rate Loan) or (in the case of a Loan initially made as a Base
Rate Loan), the date that is, subject to the requirements of Sections 2.3 and
2.4, no more than 180 days after the making of such Loan.
"Stated Rate" is defined in Section 11.16.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation will or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries. The term
"wholly-owned Subsidiary" will exclude any directors' or officers' qualifying
shares which may be outstanding.
"Taxes" is defined in Section 5.6.
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"Terminated Commitments" is defined in clause (b) of Section 2.7.
"Tradexpress Agreement" means the Tradexpress Teletransmission Agreement,
dated as of December 23, 1998 (as amended, amended and restated, waived or
otherwise modified from time to time), duly executed and delivered by the
Borrower and the Fronting Bank substantially in the form of Exhibit G hereto.
"type" means relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCP" is defined in Section 11.15.
"Usury Restraint" is defined in Section 11.16.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Agreement will
have such meanings when used in each Note, Notice of Borrowing,
Continuation/Conversion Notice, Loan Document, notice and other communication
delivered from time to time in connection with this Agreement or any other Loan
Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein will be interpreted, all accounting
determinations and computations hereunder will be made, and all financial
statements required to be delivered hereunder or thereunder will be prepared in
accordance with GAAP.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Article VI), each Lender severally agrees as follows:
SECTION 2.1.1. Loan Commitment. From time to time on any Business Day
occurring on or prior to the then existing Commitment Termination Date, each
Lender severally agrees, subject to the terms of this Agreement (including
Article VI), that
(a) in the case of the Fronting Bank, it will make loans (the
"Loans") to the Borrower on any Disbursement Date or ASCO L/C
Reimbursement Date, in either case, for a period not to exceed the
Stated Maturity Date for such Loan in a principal amount equal to the
aggregate amount of (x) Disbursements made under one or more
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Letters of Credit on such Disbursement Date and (y) the ASCO L/C
Reimbursements made under one or more ASCO Letters of Credit on such
ASCO L/C Reimbursement Date, in either case, in an aggregate amount not
to exceed the Loan Commitment Amount; and
(b) in the case of each Lender (other than the Fronting Bank in
such capacity), such Lender will participate in the Loans made by the
Fronting Bank pursuant to this Agreement and, if required pursuant to
the terms of this Agreement, such Lender will refinance and reimburse
the Fronting Bank for the outstanding principal amount of Loans
previously made by the Fronting Bank in an amount equal to its
Percentage of the aggregate amount of all (or, if elected by the
Fronting Bank, less than all) Loans then outstanding and owing to the
Fronting Bank (in its capacity as the Fronting Bank), and upon the
receipt by the Fronting Bank of immediately available funds from a
Lender in respect of the reimbursement or refinancing of a Loan
previously made by and owing to the Fronting Bank, the amount so
received by the Fronting Bank will thereafter be a Loan to the Borrower
owing to such Lender (and no longer owing to the Fronting Bank). No
Lender's obligation to make any Loan will be affected by any other
Lender's failure to make any Loan. On the terms and subject to the
conditions hereof, the Borrower may from time to time borrow Loans and
continue or convert such Loans as Base Rate Loans or LIBO Rate Loans
pursuant to the terms hereof, but once a particular Loan is repaid or
prepaid by the Borrower, it cannot be reborrowed. Notwithstanding
anything contained herein to the contrary, so long as any Lender will be
in default in its obligation to fund its pro rata share of any Loans (as
notified to such Lender by the Administrative Agent, the Administrative
Agent agreeing to use good faith efforts to give such notification
promptly following the occurrence of such default) or will have rejected
its obligations under its Commitments, then such Lender will not be
entitled to receive any payments of principal of or interest on its pro
rata share of the Loans or its share of any commitment or other fees
payable hereunder (including fees payable pursuant to Section 3.3)
unless and until (i) the Loans of all the other Lenders and all interest
thereon have been paid in full, (ii) such failure to fulfill its
obligation to fund is cured or (iii) the Obligations under this
Agreement will have been declared or will have become immediately due
and payable, and for purposes of voting or consenting to matters with
respect to the Loan Documents, such Lender will be deemed not to be a
"Lender" hereunder and such Lender's Percentage will each be deemed to
be zero (0) (with each other Lender's Percentage being increased
proportionately for purposes of the definition of "Required Lenders" so
that all such non-defaulting Lenders' Percentages will collectively
equal 100%). No Commitment of any Lender will be increased or otherwise
affected by any such failure or rejections by any other Lender. Any
payments of principal of or interest on Obligations which would, but for
this Section, be paid to any Lender, will be paid to the Lenders who
will not be in default under their respective Commitments and who will
not have rejected any Commitment, for application to the Obligations or
cash collateral in respect of Letters of Credit in such manner and order
(pro rata among such Lenders) as will be determined by the
Administrative Agent. The parties hereto acknowledge and agree that a
Lender's failure to make a Loan based on the Borrower's failure to
satisfy one or more of the conditions precedent to the making of Loans
set forth in Article VI will not be construed as such Lender being in
default of its obligations to fund its pro rata share of Loans or a
rejection of such Lender's Commitments.
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SECTION 2.1.2. Commitment to Issue Letters of Credit. From time to time on
any Business Day on or prior to the Commitment Termination Date, the Fronting
Bank will issue and create, and each Lender will participate in, the Letters of
Credit, in accordance with Article IV.
SECTION 2.1.3. Lenders Not Permitted or Required to Make Loans and Fronting
Bank Not Permitted or Required to Issue Letters of Credit Under Certain
Circumstances. In addition to the other terms of this Agreement (including
Article VI):
(a) No Lender (other than, in the case of clause (a)(ii), the
Fronting Bank acting in such capacity) will be permitted or required to
make any Loan if, after giving effect thereto (and the payment of any
Reimbursement Obligations with the proceeds of such Loans or the
refunding and refinancing of Loans made by the Fronting Bank with the
proceeds of the Loans made by the Lenders hereunder), the aggregate
outstanding principal amount of all Loans
(i) together with the aggregate amount of all Letter of
Credit Outstandings would exceed the Commitment Amount, or
(ii) of such Lender, together with such Lender's Percentage
of the aggregate amount of all Letter of Credit Outstandings
would exceed the amount of such Lender's Percentage multiplied by
the Commitment Amount;
(b) The Fronting Bank will not be permitted or required to issue
any Letter of Credit or extend for an additional period of time the
Stated Expiry Date of a previously issued Letter of Credit if, after
giving effect thereto the aggregate amount of all Letter of Credit
Outstandings, and the aggregate outstanding principal amount of all
Loans would exceed the Commitment Amount; and
(c) The Fronting Bank will not be permitted or required to make
any Loan on any Disbursement Date or ASCO L/C Reimbursement Date if,
after giving effect thereto (and the payment of any Reimbursement
Obligations with the proceeds of such Loans), the aggregate outstanding
principal amount of all Loans, together with the aggregate amount of all
Letter of Credit Outstandings would exceed the Commitment Amount.
SECTION 2.2. Reduction of the Commitment Amount. The Borrower may, from
time to time on any Business Day, voluntarily reduce the amount of the
Commitment Amount; provided, however, that all such reductions will be binding
on the Borrower, will require at least three Business Days' prior notice to the
Administrative Agent and will be permanent.
SECTION 2.3. Borrowing Procedure. (a) Upon (i) any Disbursements being made
in respect of one or more Letters of Credit or (ii) the Borrower giving written
notice to the Administrative Agent of any ASCO L/C Reimbursement (in either
case, whether or not such Letters of Credit or ASCO Letters of Credit were
issued to support the obligations of the Borrower or any of its wholly-owned
Subsidiaries), the Borrower will (unless it will have given notice to the
Administrative Agent to the contrary prior to 3:00 p.m., New York time,
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at least three Business Days prior to the date of such Disbursement or such ASCO
L/C Reimbursement) be deemed to have delivered to the Administrative Agent a
Notice of Borrowing pursuant to which the Borrower will have been deemed to
irrevocably request that the Fronting Bank make a LIBO Rate Loan to the Borrower
with a six month Interest Period in a principal amount equal to the aggregate
amount of such Disbursements or ASCO L/C Reimbursements, as the case may be. The
Borrower hereby acknowledges and agrees that each Notice of Borrowing deemed to
be delivered hereunder or actually delivered hereunder, as the case may be, the
making of a Loan by the Fronting Bank to reimburse (x) the Fronting Bank for
Disbursements made under the Letters of Credit or (y) the Borrower in respect of
ASCO L/C Reimbursements made in connection with ASCO Letters of Credit, and the
acceptance by the Borrower of the proceeds of the Borrowing will constitute a
representation and warranty by the Borrower that on the date of such Borrowing
(both immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) the statements made in Section 6.2.1 are in
each case true and correct. Proceeds of such Loans will be used to fund (x) the
Reimbursement Obligations in respect of Letters of Credit under which one or
more Disbursements were made and (y) the ASCO L/C Reimbursements in respect of
ASCO Letters of Credit, in either case, on the date of the making of the
applicable Loan.
(b) In addition to the provisions of the making of Loans set forth in
clause (a), above, by delivering a Notice of Borrowing to the Administrative
Agent on or before 3:00 p.m., New York time, on a Business Day, the Borrower may
from time to time irrevocably request, on not less than three nor more than five
Business Days' notice (in the case of LIBO Rate Loans) and on the date of such
Borrowing (in the case of Base Rate Loans), that a Borrowing be made as other
than a LIBO Rate Loan having a six month Interest Period or in an amount other
than the full amount of the Disbursements or ASCO L/C Reimbursement with respect
to which such Loan is to be made. If the Borrower elects that a Borrowing be
made as a LIBO Rate Loan having a one, two, three, four or five month Interest
Period pursuant to this clause, then upon the expiration of such Interest
Period, the Borrower shall (unless it shall have given notice to the
Administrative Agent to the contrary prior to 3:00 p.m., New York time, at least
three Business Days prior to the date of such Disbursement) be deemed to have
delivered to the Administrative Agent a Continuation/Conversion Notice pursuant
to which the Borrower shall have been deemed to irrevocably request that the
Fronting Bank continue the outstanding LIBO Rate Loan as a LIBO Rate Loan with
an Interest Period of either five, four, three, two or one month(s), so that the
combined Interest Period for such Loan will equal six months, in each case in a
principal amount equal to the amount of the LIBO Rate Loan with an Interest
Period then expiring. On the terms and subject to the conditions of this
Agreement, each Borrowing shall be comprised of the type of Loans, and shall be
made on the Business Day, specified (or deemed to be specified) in such Notice
of Borrowing.
(c) The Fronting Bank may, at any time (whether or not a Default or Event
of Default has occurred and is then continuing), in its sole and absolute
discretion but subject to clause (a)(ii) of Section 2.1.3, demand that each
other Lender make a Loan in an amount equal to such Lender's Percentage of the
aggregate principal amount of all or a portion of the Loans outstanding on the
date such demand is made, and may (in its sole discretion) elect which Loans are
to be chosen as the Loans to be refunded by the Lenders. Each Lender (other than
the Fronting Bank) irrevocably agrees that it will (whether or not the
conditions to the making of a Credit Extension contained in Article VI have been
(or can be) satisfied) make such Loan by depositing the amount so demanded in
same day funds in an account
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specified by the Fronting Bank on or before 3:00 p.m. New York time on the first
Business Day following receipt of such a demand. The Fronting Bank agrees to
apply all such funds received by it under this clause to refund and refinance
the Loans previously made by it to the Borrower, as identified in the demand
that it delivers to the Lenders pursuant to this clause. On the date (a "Funding
Date") that the Lenders (other than the Fronting Bank) advance funds to the
Fronting Bank pursuant to this clause, the principal amount so refunded and
refinanced will become a Loan to the Borrower identified by the Fronting Bank
outstanding under such Lender's Commitment to the Borrower and will no longer be
a Loan owed to the Fronting Bank under the Fronting Bank's Commitment to the
Borrower.
All interest payable with respect to any Loans made pursuant to this clause
will be appropriately adjusted to reflect the period of time during which such
Loans were owing to the Fronting Bank and, on and subsequent to a Funding Date,
such Loans were owing to the Lenders.
The obligation of each Lender to make Loans by way of advancing immediately
available funds to the Fronting Bank on a Funding Date to be applied to refund
and refinance the Loans previously made by the Fronting Bank to the Borrower
under this clause will be absolute and unconditional and will not be affected by
any circumstance, including (i) any set-off, counterclaim, recoupment, defense
or other right which any Lender may have against the Fronting Bank, the Borrower
or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of any Default or the inability of the Borrower to otherwise satisfy
the conditions precedent set forth in Article VI; (iii) any adverse change in
the condition (financial or otherwise) of the Borrower or any other Loan Party;
(iv) the acceleration or maturity of any Loans or other Obligations or the
termination of any Commitment after the making of any Loan; (v) any breach of
this Agreement or any other Loan Document by the Borrower, any other Loan Party
or any Lender; or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 1:00
p.m., New York time, on a Business Day prior to the Stated Maturity Date of a
LIBO Rate Loan with an Interest Period of less than six months, the Borrower may
from time to time irrevocably request, on not less than three nor more than five
Business Days' notice (in the case of LIBO Rate Loans) and on not less than one
nor more than five Business Days' notice (in the case of Base Rate Loans), that
the Fronting Bank (a) continue the outstanding LIBO Rate Loan as a LIBO Rate
Loan with an Interest Period of one, two, three or four months, in each case in
a principal amount equal to the amount of the LIBO Rate Loan with respect to
which such Interest Period is then expiring or (b) convert all, or any portion
of any Loans made to it, in the case of Base Rate Loans, into LIBO Rate Loans
or, in the case of a LIBO Rate Loan, into a Base Rate Loan (in the absence of
delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan
at least three Business Days before the last day of the then current Interest
Period with respect thereto, such LIBO Rate Loan will, on such last day,
automatically convert to a LIBO Rate Loan pursuant to the provisions of clause
(b) of Section 2.3, unless such Loan is otherwise required to be paid pursuant
to the terms of this Agreement (including the first sentence of Section 3.1));
provided, however, that (i) no portion of the outstanding principal amount of
any Loans may be continued as, or be converted into, LIBO Rate Loans when any
Default has occurred and is continuing and (ii) the maximum length of
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any Interest Period or combination of Interest Periods for any particular Loan
will not exceed six months.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to participate in, and to make, continue or convert LIBO Rate Loans
hereunder by causing one of its foreign branches or affiliates (or an
international banking facility all of the capital stock or other ownership
interests of which are wholly-owned by such Lender) to make or maintain such
LIBO Rate Loan; provided, however, that such LIBO Rate Loan will nonetheless be
deemed to have been made and to be held by such Lender, and the obligation of
the Lender to refund and refinance such LIBO Rate Loan on the Funding Date and
the obligation of the Borrower to repay such LIBO Rate Loan will nevertheless be
of or to such Lender for the account of such foreign branch, affiliate or
international banking facility; provided, further that the Borrower will not be
required to pay any amount under this Section or Section 5.6 that is greater
than the amount which it would have been required to pay had such Lender not
caused such branch, affiliate or facility to make or maintain such LIBO Rate
Loan. In addition, the Borrower hereby consents and agrees that, for purposes of
any determination to be made for purposes of Section 5.1, 5.2, 5.3 or 5.4, it
will be conclusively assumed that such Lender elected to fund all LIBO Rate
Loans by purchasing Dollar deposits in its LIBOR Office's interbank LIBO market.
SECTION 2.6. Register; Notes. (a) Each Lender may maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder. In the case of a Lender that does not request,
pursuant to clause (b)(ii) below, execution and delivery of a Note evidencing
the Loans made by such Lender to the Borrower, such account or accounts will, to
the extent not inconsistent with the notations made by the Administrative Agent
in the Register, be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to maintain such
account or accounts will not limit or otherwise affect any Obligations of the
Borrower or any other Loan Party.
(b) (i) The Borrower hereby designates the Administrative Agent
to serve as the Borrower's agent, solely for the purpose of this clause
(b), to maintain a register (the "Register") on which the Administrative
Agent will record each Lender's Commitment, the Loans made by each
Lender and each repayment in respect of the principal amount of the
Loans of each Lender and annexed to which the Administrative Agent will
retain a copy of each Assignment and Acceptance delivered to the
Administrative Agent pursuant to Section 11.11.1. Failure to make any
recordation, or any error in such recordation, will not affect the
Borrower's obligation in respect of such Loans. The entries in the
Register will be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders will treat each
Person in whose name a Loan (and as provided in clause (ii) the Note
evidencing such Loan, if any) is registered as the owner thereof for all
purposes of this Agreement, notwithstanding notice or any provision
herein to the contrary. A Lender's Commitment and the Loans made
pursuant thereto may be assigned or otherwise transferred in whole or in
part only by registration of such assignment or transfer in the
Register. Any assignment or transfer of a Lender's Commitment or the
Loans made pursuant thereto will be registered in the Register only upon
delivery to the Administrative Agent of an Assignment and Acceptance
duly executed by the
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assignor thereof and the compliance by the parties thereto with the
other requirements of Section 11.11.1. No assignment or transfer of a
Lender's Commitment or the Loans made pursuant thereto will be effective
unless such assignment or transfer will have been recorded in the
Register by the Administrative Agent as provided in this Section.
(ii) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and
deliver to such Lender, as applicable, a Note evidencing the Loans made
by such Lender. The Borrower hereby irrevocably authorizes each Lender
to make (or cause to be made) appropriate notations on the grid attached
to such Lender's Notes (or on any continuation of such grid), which
notations, if made, will evidence, inter alia, the date of, the
outstanding principal amount of, and the interest rate and Interest
Period applicable to the Loans evidenced thereby and the principal
amount of Loans that have been repaid (including, in the case of the
Fronting Bank, Loans that have been refunded and refinanced by the
Lenders on a Funding Date). Such notations will, to the extent not
inconsistent with the notations made by the Administrative Agent in the
Register, be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to make any
such notations will not limit or otherwise affect any Obligations of the
Borrower or any other Loan Party.
SECTION 2.7. Extension of Commitment Termination Date. (a) The Commitment
Termination Date may be extended by the Lenders in their sole and absolute
discretion upon written request of the Administrative Agent by the Borrower, at
least 60 days but not more than 90 days (such date the "Request Date") prior to
the then effective Commitment Termination Date (as such date may have been
extended) for a period not to exceed 364 days from the then expiring Commitment
Termination Date. Within five days of the Request Date, the Administrative Agent
will forward the request to the Lenders. If a Lender agrees, in its individual
and sole discretion, to so extend all or a portion of its Commitment (an
"Extending Lender"), it will deliver to the Administrative Agent and the
Borrower a notice of its agreement to do so and may also set forth the amount,
if any, by which it would be willing to increase its Commitment pursuant to this
Section (a "Notice of Extension"), in substantially the form of Exhibit H
hereto, within 45 days of the Request Date; provided that such notice shall in
no event be given later than 30 days prior to the then effective Commitment
Termination Date (as such date may have been extended).
(b) The Commitment of any Lender that fails to accept or respond to the
Borrower's request for extension of the Commitment Termination Date (a
"Declining Lender") and the portion of the Commitment of any Extending Lender
which such Extending Lender has not elected to extend pursuant to clause (a)
(such Commitments of the Declining Lenders and such Extending Lenders being
collectively, the "Terminated Commitments") will be terminated on the Commitment
Termination Date then in effect (without regard to any extension by other
Lenders) and on such Commitment Termination Date the Borrower will pay (or cause
to be paid) in full the outstanding principal amount of all Loans with respect
to the Terminated Commitments owing to each such Declining Lender or Extending
Lender, as the case may be, together with accrued but unpaid interest thereon to
the date of payment of such principal amount, all accrued but unpaid commitment
fees, other fees and all other amounts payable to such Declining Lender and such
Extending Lender with respect to the Terminated Commitments
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under this Agreement (including any increased costs or other additional amounts
(computed in accordance with Section 5.3) and any Taxes incurred and
reimbursable hereunder by such Declining Lender and such Extending Lender prior
to such Commitment Termination Date and amounts payable under Section 11.3).
(c) The Extending Lenders, or any of them, or any Person that would be
an Assignee Lender permitted by Section 11.11.1 (a "Replacement Lender") may
offer in their sole discretion, to increase their respective Commitment by, or
to provide a commitment in, as the case may be, an aggregate amount that will
not exceed the aggregate amount of the Terminated Commitments. Should such
offers exceed the aggregate amount of the Terminated Commitments, the Terminated
Commitments shall be allocated among such Extending Lenders and/or Replacement
Lenders as determined by the Administrative Agent and the Borrower. Each such
Extending Lender or Replacement Lender will deliver to the Administrative Agent
a notice, in substantially the form of Exhibit H hereto, of its offer to so
increase its Commitment or to provide a commitment, as the case may be, no later
than 5 days prior to such Commitment Termination Date. The Borrower will, no
later than one day before the Commitment Termination Date, deliver to the
Administrative Agent a notice setting forth the Commitments of the Extending
Lenders and Replacement Lenders, if any, that are to become or be effective as
of the Commitment Termination Date. If the Extending Lenders and Replacement
Lenders provide Commitments in an aggregate amount equal to 75% of the aggregate
amount of the Commitments requested by the Borrower to be extended, then,
effective on the Commitment Termination Date in effect at the time of the
Borrower's request, (i) the Commitment Termination Date will be extended by 364
days for such Extending Lenders' and Replacement Lenders' Commitments, (ii) the
Commitment of each Extending Lender and each Replacement Lender will be the
amount specified in the notice provided by the Borrower to the Administrative
Agent (which amount will not exceed the amount specified by each such Extending
Lender and Replacement Lender in its most recent notice to the Administrative
Agent) and (iii) each Replacement Lender will become a party hereto and will be
a Lender hereunder.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower will repay in full
the entire unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto (and subject to Section 2.1.1), the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Loans; provided, however, that all such voluntary prepayments will require
at least one Business Day's prior written notice to the Administrative
Agent;
(b) will, on each date when any reduction in the Commitment Amount
will become effective (which reduction will be subject to Section 2.2),
make a mandatory prepayment (which will be applied (or held as cash
collateral for application to the aggregate amount of all Letter of Credit
Outstandings not consisting of unpaid and outstanding Reimbursement
Obligations) by the Administrative Agent to the payment of the Loans and
unpaid and outstanding Reimbursement Obligations of the then
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existing Letter of Credit Outstandings) equal to the excess, if any, of the
aggregate outstanding principal amount of all Loans, together with the
aggregate amount of all Letter of Credit Outstandings over the Commitment
Amount as so reduced; and
(c) will, immediately upon any acceleration of the Stated Maturity
Date of any Obligations pursuant to Section 9.2 or Section 9.3, repay all
Obligations, unless, pursuant to Section 9.3, only a portion of all
Obligations is so accelerated.
Each prepayment of any Loans made pursuant to this Section will be without
premium or penalty, except as may be required by Section 5.4. No voluntary
prepayment of principal of any Loans will cause a reduction in the Commitment
Amount.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans will accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Rates. Loans comprising a Borrowing will accrue interest at
a rate per annum:
(a) on that portion maintained from time to time as a Base Rate Loan,
equal to the sum of the Alternate Base Rate from time to time in effect
plus the Applicable Margin in effect from time to time; or
(b) on that portion maintained as a LIBO Rate Loan (whether made
pursuant to clause (a) or clause (b) of Section 2.3), during each Interest
Period applicable thereto, equal to the sum of the LIBO Rate (Reserve
Adjusted) for such Interest Period plus the Applicable Margin in effect
from time to time.
All LIBO Rate Loans will bear interest from and including the first day of
the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO Rate
Loan.
SECTION 3.2.2. Post-Maturity Rates. After and during the continuance of an
Event of Default (after giving effect to any grace periods in respect thereof in
the case of an Event of Default described in Section 9.1.1), the Borrower will
pay interest (after as well as before judgment) on (a) the unpaid principal
amount of each outstanding Loan at a rate per annum equal to 2% per annum above
the then applicable interest rate in respect of such Loan and (b) to the fullest
extent permitted by law, the amount of any interest, fee or other amount payable
hereunder at a rate per annum equal at all times to 2% per annum above the
Alternate Base Rate then in effect.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan will be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) with respect to Base Rate Loans, on each Quarterly Payment Date
occurring after the date of the initial Borrowing hereunder;
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(c) with respect to LIBO Rate Loans, on the last Business Day of each
applicable Interest Period (and, if such Interest Period will exceed three
months, at the end of each three month period occurring during such
Interest Period);
(d) on the date of any optional or required payment or prepayment, in
whole or in part, of principal outstanding on such Loan;
(e) with respect to any Base Rate Loans converted into LIBO Rate Loans
on a day when interest would not otherwise have been payable pursuant to
the terms hereof, on the date of such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of which is
accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such
acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
will be payable upon demand.
SECTION 3.2.4. Allocation of Interest Payments. Accrued and unpaid interest
on the outstanding principal amount of the Loans will be allocated and payable
to the Lenders as set forth in this Section:
(a) Interest will be payable by the Borrower to the Fronting Bank (for
its own account) on the outstanding principal amount of its Loans from the
date such Loans are made to (but excluding) the Funding Date in an amount
equal to the difference between (i) (A) in the case of LIBO Rate Loans, the
LIBO Rate (Reserve Adjusted) or, in the case of Base Rate Loans, the
Alternate Base Rate, plus the Applicable Margin then in effect for LIBO
Rate Loans or Base Rate Loans (as applicable) multiplied by (B) the
outstanding principal amount of the LIBO Rate Loans or Base Rate Loans, as
the case may be, minus (ii) the Interest Amount (as defined below). Prior
to the Funding Date each Lender (other than the Fronting Bank) will be paid
interest in an aggregate amount (referred to as the "Interest Amount")
equal to such Lender's Percentage of (A) the principal amount of the Loans
outstanding prior to a Funding Date multiplied by (B) the Applicable Margin
then in effect for LIBO Rate Loans (in the case of the outstanding
principal amount of LIBO Rate Loans) or Base Rate Loans (in the case of the
outstanding principal amount of Base Rate Loans).
(b) On and subsequent to a Funding Date, interest will be payable by
the Borrower for the account of each Lender (including the Fronting Bank,
in its capacity as a Lender) in accordance with its Percentage on the
principal amount of its Loans actually funded by such Lender in an amount
equal to (in the case of the outstanding principal amount of LIBO Rate
Loans) the LIBO Rate (Reserve Adjusted) plus the Applicable Margin for such
LIBO Rate Loans or, if applicable (in the case of the outstanding principal
amount of Base Rate Loans), the Alternate Base Rate plus the Applicable
Margin for Base Rate Loans.
SECTION 3.3. Fees. The Borrower agrees to pay the fees payable by it set
forth in this Section 3.3. All such fees will be non-refundable.
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SECTION 3.3.1. Letter of Credit Fees. The Borrower agrees to pay (a) to the
Administrative Agent, for the pro rata account of the Lenders determined in
accordance with each Lender's Percentage, a fee in the amount of 1.25% on the
average Available Amount of all outstanding Letters of Credit and (b) to the
Fronting Bank the fees relating to Letters of Credit in accordance with the Fee
Letter for each Letter of Credit issued, in each case, for the period from and
including the date of the issuance of such Letter of Credit to (but not
including) the earlier of (x) the date upon which such Letter of Credit expires
and (y) the date upon which the Available Amount of such Letter of Credit is
irrevocably reduced to zero (by the making of a Disbursement by the Fronting
Bank or otherwise).
Such fees will be payable by the Borrower in arrears on each Quarterly Payment
Date (commencing on the first such date after the issuance of such Letter of
Credit), on the Commitment Termination Date and in addition to the above payment
dates, in the case of Letters of Credit with expiry dates that extend beyond the
Commitment Termination Date, on the expiration of or, if earlier, on the date of
any disbursement made under, such Letter of Credit, for any period then ending
for which such fees will not theretofore have been paid; provided that,
notwithstanding the foregoing, from and after the Commitment Termination Date,
such fees will be payable not less often than every 90 days.
SECTION 3.3.2. [Reserved].
SECTION 3.3.3. Fee Letter. The Borrower agrees to pay to Scotiabank, for
its own account, such fees in the amounts and on the dates set forth in the Fee
Letter.
SECTION 3.3.4. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent, for the pro rata account of each Lender determined in
accordance with each Lender's Percentage, for the period commencing on the
Effective Date and continuing through the Commitment Termination Date, a
commitment fee (the "Commitment Fee") on the sum of the average daily unused
portion of the Commitment Amount multiplied by 0.375%.
The fees payable under this Section will be payable by the Borrower in
arrears on each Quarterly Payment Date, commencing on the first such date after
the Effective Date, and on the Commitment Termination Date for any period then
ending for which such fee will not theretofore have been paid.
The amount of any Loans made or Letters of Credit issued by the Fronting
Bank and not funded by the other Lenders will constitute usage of the Commitment
Amount for purposes of calculating the commitment fee payable to Lenders (other
than the Fronting Bank) pursuant to this Section.
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ARTICLE IV
LETTERS OF CREDIT
SECTION 4.1. Issuance of Letters of Credit. Letters of Credit will be
issued on the terms set forth below.
SECTION 4.1.1. Letters of Credit. The Borrower or any wholly-owned
Subsidiary of the Borrower may request, from time to time on or prior to the
Commitment Termination Date, by delivering to the Administrative Agent and the
Fronting Bank an Issuance Request on or before 3:00 p.m., New York time, on the
Business Day on which a Letter of Credit is to be issued that the Fronting Bank
issue an irrevocable sight documentary letter of credit in such form as may be
requested by the Borrower or such Subsidiary and approved by the Fronting Bank
(each a "Letter of Credit").
Letters of Credit shall be issued to facilitate the Borrower's (and its
Subsidiaries') worldwide sourcing of merchandise. Each Letter of Credit will by
its terms:
(a) be issued in an Available Amount which does not exceed (or would
not exceed) the then existing Letter of Credit Availability;
(b) be denominated in, and all payments in respect thereof will be
made in, Dollars;
(c) be stated to expire on a date (its "Stated Expiry Date") no later
than 180 days from its date of issuance (it being acknowledged and agreed
by the Borrower, the Fronting Bank and the Lenders that the Stated Expiry
Date for a Letter of Credit may be a date that is up to 179 days subsequent
to the Commitment Termination Date; and
(d) on or prior to its Stated Expiry Date:
(i) terminate immediately upon notice to the Fronting Bank
thereof from the applicable Letter of Credit Beneficiary that all
obligations covered thereby have been terminated, paid, or otherwise
satisfied in full, and
(ii) reduce in part immediately and to the extent the applicable
Letter of Credit Beneficiary has notified the Fronting Bank thereof
that the obligations covered thereby have been paid or otherwise
satisfied in part.
So long as no Default has occurred and is continuing, by delivery to the
Fronting Bank and the Administrative Agent of an Issuance Request on or before
3:00 p.m., New York time, on the Stated Expiry Date of any Letters of Credit,
the Borrower may on or prior to the then existing Commitment Termination Date
request the Fronting Bank to extend the Stated Expiry Date of such Letter of
Credit for an additional period not to exceed the earlier of (x) 180 days from
the date of extension of such Letter of Credit and (y) 179 days after the
Commitment Termination Date. Notwithstanding any other provision in this
Agreement to the contrary, the Fronting Bank may in its discretion refuse to
issue, or extend the Stated Expiry Date of, any Letter of Credit if such
issuance would, in the Fronting Bank's reasonable determination, contravene any
sanctions, laws or regulations of any State of the United States or any Federal
body or authority of the United States (including but not limited to the
regulations of the
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Federal Reserve Bank) or the laws, regulations or sanctions of any other
applicable jurisdiction or authority or if, in the Fronting Bank's reasonable
determination, any of the above-mentioned laws, regulations or sanctions would
affect the Fronting Bank's ability to perform its obligations with respect to
any such Letter of Credit if issued.
SECTION 4.2. Issuances, Extensions and Creations. On the terms and subject
to the conditions of this Agreement (including Section 4.1.1 and Article VI),
the Fronting Bank will issue Letters of Credit and extend the Stated Expiry
Dates of outstanding Letters of Credit, all in accordance with the terms of this
Agreement. The Fronting Bank will make available the original of each Letter of
Credit which it issues to the beneficiary thereof (and, at the request of a
Lender, will provide such Lender on a monthly basis with a schedule of the
outstanding Letters of Credit as of the last day of the prior month) and will
notify the applicable Letter of Credit Beneficiary of any extension of the
Stated Expiry Date thereof.
SECTION 4.3. Destruction of Goods, etc. Neither the Fronting Bank nor its
agents or correspondents will be responsible for the negligence or fraudulence
of any Letter of Credit Beneficiary, for the existence, nature, condition,
description, value, quality or quantity of the Goods, for the packing, shipment,
export, import, handling, storage or delivery thereof, or for the safety or
preservation thereof at any time, and neither the Fronting Bank nor its agents
or correspondents will be liable for any loss resulting from the total or
partial destruction of or damage to or deterioration or fall in value of the
Goods, or from the delay in arrival or failure to arrive of either the Goods or
of any of the documents relating thereto, or from the inadequacy or invalidity
of any document or insurance, or from the default or insolvency of any insurer,
carrier or other Person issuing any document with respect to the Goods, or from
failure to give or delay in giving notice of arrival of the Goods or any other
notice, or from any error in or misinterpretation of or default or delay in the
sending, transmission, arrival or delivery of any message, whether in writing or
not, by post, telegraph, cable, wireless or otherwise, and the obligations
hereunder of the Borrower to the Fronting Bank will not be in any way lessened
or affected if any Draft or document accepted, paid or acted upon by the
Fronting Bank or its agents or correspondents does not bear a reference or
sufficient reference to a Letter of Credit or if no note thereof is made on a
Letter of Credit.
SECTION 4.4. Other Lenders' Participation. Each Letter of Credit issued
pursuant to Section 4.2 will, effective upon its issuance and without further
action, be issued on behalf of all Lenders (including the Fronting Bank thereof)
according to their respective Percentages. Each Lender will, to the extent of
its Percentage, be deemed irrevocably to have participated in the issuance of
such Letter of Credit and will be responsible to reimburse promptly the Fronting
Bank thereof for Reimbursement Obligations which have not been converted into a
Loan on the Disbursement Date related thereto pursuant to the terms of this
Agreement or reimbursed by the Borrower in accordance with Section 4.5, or which
have been converted into a Loan on the Disbursement Date related thereto
pursuant to the terms of this Agreement or reimbursed by the Borrower but must
be returned, restored or disgorged by the Fronting Bank for any reason, and each
Lender will, to the extent of its Percentage, be entitled to receive from the
Administrative Agent a ratable portion of all fees and interest with respect to
such Letter of Credit (including the letter of credit fees received by the
Administrative Agent pursuant to Section 3.3.1, with respect to each Letter of
Credit, but excluding any fronting fees and other charges payable to the
Fronting Bank in its capacity as Fronting Bank). In the event that the Borrower
will fail to reimburse the Fronting Bank, or if for any reason Loans will not be
made to fund any Reimbursement Obligation, in each case as provided in this
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Agreement and in an amount equal to the Disbursement amount or in the event the
Fronting Bank must for any reason return or disgorge such reimbursement, the
Fronting Bank will promptly notify each Lender of the unreimbursed amount of
such drawing and of such Lender's respective participation therein. Each Lender
will make available to the Fronting Bank, whether or not any Default shall have
occurred and be continuing, an amount equal to its respective participation in
same day or immediately available funds at the office of the Fronting Bank
specified in such notice not later than 11:00 a.m., New York time, on the
Business Day after the date notified by the Fronting Bank. In the event that any
Lender fails to make available to the Fronting Bank the amount of such Lender's
participation in such Letter of Credit as provided herein, the Fronting Bank
will be entitled to recover such amount on demand from such Lender together with
interest at the Federal Funds Rate from the date such amount is due through (but
excluding) the date such payment is made (together with such other compensatory
amounts as may be required to be paid by such Lender to the Administrative Agent
pursuant to the Rules for Interbank Compensation of the council on International
Banking or the Clearinghouse Compensation Committee, as the case may be, as in
effect from time to time). Nothing in this Section or Section 4.6 will be deemed
to prejudice the right of any Lender to recover from the Fronting Bank any
amounts made available by such Lender to the Fronting Bank pursuant to this
Section in the event that it is determined by a court of competent jurisdiction
that the payment with respect to a Letter of Credit by the Fronting Bank in
respect of which payment was made by such Lender constituted gross negligence or
wilful misconduct on the part of the Fronting Bank. The Fronting Bank will
distribute to each other Lender which has paid all amounts payable by it under
this Section with respect to any Letter of Credit issued by the Fronting Bank,
such other Lender's Percentage of all payments received by the Fronting Bank
from the Borrower in reimbursement of the drawings honored by the Fronting Bank
under such Letter of Credit when such payments are received.
SECTION 4.5. Disbursements and Maturities. The Fronting Bank will notify
the Borrower and the Administrative Agent promptly of the presentment for
payment of any Letter of Credit, together with notice of the date (a
"Disbursement Date") such payment will be made. Subject to the terms and
provisions of such Letter of Credit, and the delivery to the Fronting Bank of
all drafts, certificates, documents and/or instruments required as a condition
to making a Disbursement under such Letter of Credit, the Fronting Bank will
make such payment to such Letter of Credit Beneficiary (or its designee). If
and to the extent that Loans are not made to fund a Reimbursement Obligation
pursuant to Section 2.3, then the Borrower will reimburse the Fronting Bank
within one Business Day following the Disbursement Date for all amounts which
the Fronting Bank has disbursed under the Letter of Credit.
SECTION 4.6. Reimbursement; Outstanding Letters of Credit, etc. (a) The
Borrower's obligation under Section 4.5 to reimburse the Fronting Bank with
respect to each Disbursement (a "Reimbursement Obligation") (including fees and
interest thereon payable pursuant to Section 3.2.2 and Section 3.3.1), and each
Lender's obligation to make participation payments pursuant to Section 4.4 in
respect of each Disbursement will be absolute, unconditional and irrevocable and
will not be reduced by any event or occurrence including
(i) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the
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application for and issuance of a Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged;
(ii) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or the proceeds thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(iii) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise;
(v) any loss or delay in the transmission or otherwise of any document
or draft required in order to make a Disbursement under a Letter of Credit;
(vi) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations in respect of any Letter of
Credit or any other amendment or waiver of or any consent to departure from
any Letter of Credit;
(vii) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any Persons for whom any such beneficiary or any
such transferee may be acting), the Fronting Bank or any other Person,
whether in connection with the transactions contemplated by the applicable
Letter of Credit or any unrelated transaction;
(viii) payment by the Fronting Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of such Letter of Credit;
(ix) any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations in respect of the
applicable Letter of Credit; or
(x) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrower or a guarantor.
The obligations of the Borrower and the Lenders hereunder will remain in full
force and effect and will apply to any alteration to or extension of the
expiration date of any Letter of Credit or any Letter of Credit issued to
replace, extend or alter any Letter of Credit during the term of this Agreement.
None of the foregoing will affect, impair or prevent the vesting of any of the
rights or powers granted to the Fronting Bank or any Lender hereunder. In
furtherance and extension and not in limitation or derogation of any of the
foregoing, any action taken or omitted to be taken by the Fronting Bank in good
faith (and not constituting gross negligence or willful misconduct) will be
binding upon the Borrower, each Loan Party
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and each such Lender, and will not put the Fronting Bank under any resulting
liability to the Borrower, any Loan Party or any such Lender, as the case may
be.
(b) The Borrower will either pay to the Fronting Bank or provide a back-up
letter of credit (which letter of credit shall be satisfactory to the
Administrative Agent in all respects), in either case, in an amount equal to (i)
the then Available Amount and (ii) all unpaid fees (including, without
limitation, fronting fees) in respect of (x) any Letter of Credit outstanding
under this Agreement upon any termination of this Agreement (other than the
occurrence of the Commitment Termination Date pursuant to clause (a) of the
definition thereof) and (y) any Letter of Credit which is affected by, or
becomes the subject matter of, any order, judgment, injunction or other such
determination (an "Order") or any petition or other application for any Order by
the Borrower or any other party, restricting payment by the Fronting Bank under
and in accordance with such Letter of Credit or extending the Fronting Bank's or
any Lender's liability under such Letter of Credit beyond the expiration date
stated therein, or if not stated therein, which would otherwise apply to such
Letter of Credit. Payment in respect of each such Letter of Credit described in
(x) and (y) in this clause will be due forthwith upon demand and in Dollars.
(c) The Fronting Bank hereby agrees that it will, with respect to each
Letter of Credit subjected to any such demand for payment under the preceding
clause (b), upon the later of:
(i) the date on which any final and non-appealable order, judgment or
other such determination has been rendered or issued either terminating any
applicable Order or permanently enjoining the Fronting Bank from paying
under such Letter of Credit; and
(ii) in the case of a Letter of Credit, the earlier of (A) the date on
which either the original counterpart of such Letter of Credit is returned
to the Fronting Bank for cancellation or the Fronting Bank is released by
the beneficiary thereof from any further obligations in respect of such
Letter of Credit, and (B) the expiry of such Letter of Credit;
pay to the Borrower an amount in Dollars equal to any excess of the amount
received by the Fronting Bank pursuant to clause (b) above in respect of such
Letter of Credit (the "Received Amount") over the equivalent in Dollars of the
total of amounts applied to reimburse the Fronting Bank for amounts paid by it
under such Letter of Credit, if any (the Fronting Bank having the right to so
appropriate such funds), together with an additional amount in Dollars computed
by applying to the amount of such excess from time to time a per annum rate
equal to 3% less than the Alternate Base Rate. Such additional amount will be
calculated daily on the basis of a 360 day year for the actual number of days
elapsed from and including the date of payment to the Fronting Bank of the
Received Amount to (but not including) the date of return to the Borrower of the
excess.
SECTION 4.7. Deemed Disbursements. Upon (a) the occurrence of any
Commitment Termination Event of the type described in clause (c) of the
definition of "Commitment Termination Event", (b) the occurrence and during
the continuation of any event or condition specified in clause (f) of Section
6.01 of the Restated Credit Agreement, or (c) the occurrence and during the
continuance of any other Event of Default, in the case of clause (c), upon the
request of the Required Lenders,
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(i) an amount equal to that portion of Letter of Credit Outstandings
attributable to outstanding and undrawn Letters of Credit will, without
demand upon or notice to the Borrower, be deemed to have been paid or
disbursed by the Fronting Bank under such Letters of Credit
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and
(ii) upon notification by the Fronting Bank to the Administrative
Agent and the Borrower of its obligations under this Section, the Borrower
will be immediately obligated to reimburse the Fronting Bank the amount
deemed to have been so paid or disbursed by the Fronting Bank.
Any amounts so received by the Fronting Bank from the Borrower pursuant to this
Section will be held as collateral security for the repayment of the Borrower's
Obligations in connection with the Letters of Credit issued by the Fronting
Bank. At any time when such Letters of Credit will terminate and are paid and
all Obligations of the Fronting Bank are either terminated or paid or reimbursed
to the Fronting Bank in full, the Obligations of the Borrower under this Section
will be reduced accordingly (subject, however, to reinstatement in the event any
payment in respect of such Letters of Credit is recovered in any manner from the
Fronting Bank), and the Fronting Bank will return to the Borrower the excess, if
any, of
(a) the aggregate amount deposited by the Borrower with the Fronting
Bank and not theretofore applied by the Fronting Bank to any Reimbursement
Obligation
over
(b) the aggregate amount of all Reimbursement Obligations to the
Fronting Bank pursuant to this Section, as so adjusted.
At such time when all Events of Default will have been cured or waived, the
Fronting Bank will return to the Borrower all amounts then on deposit with the
Fronting Bank pursuant to this Section together with an additional amount in
Dollars computed by applying to the amount so returned to the Borrower from time
to time a per annum rate equal to 3% less than the Alternate Base Rate. Such
additional amount will be calculated daily on the basis of a 360 day year for
the actual number of days elapsed from and including the date of payment to the
Fronting Bank by the Borrower to (but not including) the date of return to the
Borrower of such amounts.
SECTION 4.8. Nature of Reimbursement Obligations. The Borrower will assume
all risks of the acts, omissions, or misuse of any Letter of Credit by the
beneficiary thereof. Any action, inaction or omission taken or suffered by the
Fronting Bank or any of the Fronting Bank's correspondents under or in
connection with a Letter of Credit, any Draft made under any Letter of Credit or
any document relating thereto, if in good faith and in conformity with foreign
or domestic laws, regulations or customs applicable thereto will be binding upon
the Borrower and will not place the Fronting Bank or any of its correspondents
under any resulting liability to the Borrower. Without limiting the generality
of the foregoing, the Fronting Bank and its correspondents may receive, accept
or pay as complying with the terms of a Letter of Credit, any Draft under any
Letter of Credit otherwise in order which may be signed by, or issued to, the
administrator or any executor of, or the trustee in bankruptcy of, or the
receiver for any property of, or other Person or entity acting as the
representative or in
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the place of, such beneficiary or its successors and assigns. The Borrower
covenants that it will not take any steps, issue any instructions to the
Fronting Bank or any of its correspondents or institute any proceedings intended
to derogate from the right or ability of the Fronting Bank or its correspondents
to honor and pay any Draft or Drafts. Without in any way limiting the provisions
of Section 4.6, and notwithstanding anything to the contrary contained in this
Agreement or in any other Loan Document, the Borrower irrevocably acknowledges
and agrees that it is unconditionally liable for all Reimbursement Obligations
with respect to each Disbursement under each Letter of Credit issued or paid, as
the case may be, for its account (including fees and interest thereon), in each
case, regardless whether such Letter of Credit was issued or such Loan created
in respect of the sourcing or other corporate requirements or needs of the
Borrower or any wholly-owned Subsidiary of the Borrower, or otherwise.
ARTICLE V
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 5.1. LIBO Rate Lending Unlawful. If any Lender, including the
Fronting Lender, will determine (which determination will, upon notice thereof
to the Borrower, be conclusive and binding on the Borrower) that the
introduction of or any change in or in the interpretation of any law makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for such Lender, including the Fronting Lender, to make, continue or
maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the
obligations of the Lenders, including the Fronting Lender, to make, continue,
maintain or convert into any such Loans, will, upon such determination,
forthwith be suspended until such Lender, including the Fronting Lender, will
notify the Borrower that the circumstances causing such suspension no longer
exist, and all LIBO Rate Loans will automatically convert into Base Rate Loans
at the end of the then current Interest Periods with respect thereto or sooner,
if required by such law or assertion.
SECTION 5.2. Deposits Unavailable. If any Lender will have determined that
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to it in its relevant market; or
(b) by reason of circumstances affecting such Lender's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans,
then, upon notice from such Lender to the Borrower and the Administrative Agent,
the obligations of the Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans will
forthwith be suspended until such Lender will notify the Borrower and the
Administrative Agent that the circumstances causing such suspension no longer
exist.
SECTION 5.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making or continuing (or of its obligation to make or continue) any Loans as, or
of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans.
Each Lender will promptly notify the Borrower
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and the Administrative Agent in writing of the occurrence of any such event,
such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts will be payable by the Borrower
directly to such Lender within five Business Days of its receipt of such notice,
and such notice will, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 5.4. Funding Losses. In the event any Lender will incur any loss or
expense (including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a LIBO Rate Loan,
but excluding the loss of any anticipated or expected profits in respect of such
LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal amount
of any LIBO Rate Loans on a date other than the scheduled last day of the
Interest Period applicable thereto, whether pursuant to a refunding and
refinancing pursuant to clause (c) of Section 2.3, Section 3.1 or
otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance with the
Notice of Borrowing therefor; or
(c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/Conversion Notice therefor,
then, upon the written notice of such Lender to the Borrower and the
Administrative Agent, the Borrower will, within five Business Days of its
receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which will include calculations in reasonable
detail) will, in the absence of manifest error, be conclusive and binding on the
Borrower.
SECTION 5.5. Increased Capital Costs, etc. If the implementation of or,
after the date hereof, the introduction or any change in the interpretation of,
or any change in its application to the Borrower, the Fronting Bank and/or the
Lenders of, any law or any regulation or guideline issued by any central bank or
other governmental authority (whether or not having the force of law), including
any eurocurrency or other reserve or special deposit requirement or any tax
(other than tax which is on a Lender's general net or gross income or in respect
of a Lender's franchise taxes) or any capital requirement, has, due to a
Lender's or the Fronting Bank's compliance, the effect, directly or indirectly,
of (a) increasing the cost to such Lender or Fronting Bank of performing its
obligations hereunder or under any Letter of Credit or Loan; (b) reducing any
amount received or receivable by such Lender or Fronting Bank or its effective
return hereunder or in respect of any Letter of Credit or Loan or on its
capital; or (c) causing such Lender or Fronting Bank to make any payment or to
forgo any return based on any amount received or receivable by such Lender or
Fronting Bank hereunder or in respect of any Letter of Credit or Loan, then upon
demand from time to time the Borrower will pay such amount as will compensate
such Lender or Fronting Bank for any such cost, reduction, payment or foregone
return upon receipt of the certificate referred to in the last sentence of this
paragraph. The Borrower will further indemnify the Fronting Bank
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for all costs, losses and expenses incurred by the Fronting Bank in connection
with any Letter of Credit or Loan and agrees that the Fronting Bank will have no
liability to the Borrower for any reason in respect of any Letter of Credit
other than on account of the Fronting Bank's gross negligence or wilful
misconduct. Any certificate of the Fronting Bank or any Lender in respect of the
foregoing will be conclusive and binding upon the Borrower, except for manifest
error, and will set forth a determination of the amounts owing to the Fronting
Bank or such Lender in good faith using any reasonable averaging and attribution
methods. Anything in this Agreement or any Loan Document to the contrary
notwithstanding, no Lender or Fronting Bank will be indemnified for, exculpated
from, or relieved from liability, under this Agreement or any Loan Document, for
any act or omission constituting gross negligence or wilful misconduct.
SECTION 5.6. Taxes. (a) Each payment made by the Borrower under this
Agreement will be made free and clear of, and without deduction for, any present
or future withholding or other taxes imposed on such payments by or on behalf of
any government or any political subdivision or agency thereof or therein, except
for any income, franchise and other taxes imposed on the Lender (which for
purposes of this Section 5.6 will include any branch, affiliate or international
banking facility created by a Lender to make or maintain a LIBO Rate Loan
pursuant to Section 2.5) by the jurisdiction under the laws of which such Lender
is organized or any political subdivision or agency thereof or by the
jurisdiction of such Lender's branch or lending office or principal place of
business (all such non-excluded taxes being hereinafter referred to as "Taxes").
If the Administrative Agent or any Lender is required by law at any time to pay
any Taxes or to make any payment on account of Taxes on, in relation to or
calculated by reference to any sum received or receivable hereunder, or any
liability for Taxes in respect of any such sum is imposed, levied or assessed
against any Lender or the Administrative Agent, then the Borrower will indemnify
each such Lender and the Administrative Agent for the full amount of Taxes
(including Taxes attributable to any payment on account of such indemnification
and any interest, penalties and costs with respect to any such Taxes), whether
or not such Taxes were correctly or legally asserted. Such indemnification will
be made within 30 days of the written demand of the Lender or the Administrative
Agent therefor. Whenever any Taxes are payable by the Borrower with respect to
any payments hereunder, the Borrower will promptly furnish to the Administrative
Agent for the account of the applicable Lender official receipts (to the extent
that the relevant governmental authority delivers such receipts) evidencing
payment of any such Taxes so withheld or deducted.
(b) Each Lender that is not a "United States person" (as such term is
defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended)
will submit to the Borrower and the Administrative Agent on or before the
Effective Date (or, in the case of a Person that becomes a Lender after the
Effective Date by assignment or pursuant to Section 2.5 promptly upon such
assignment or funding) two duly completed and signed copies of either (i) Form
1001 of the United States Internal Revenue Service entitling such Lender to a
complete exemption from withholding on all amounts to be received by such Lender
pursuant to this Agreement or (ii) Form 4224 of the United States Internal
Revenue Service relating to all amounts to be received by such Lender pursuant
to this Agreement. Each such Lender will, from time to time after submitting
either such form, submit to the Borrower and the Administrative Agent such
additional duly completed and signed copies of one or the other such forms (or
such successor forms or other documents as will be adopted from time to time by
the relevant United States taxing authorities) as may be (i) reasonably
requested in
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writing by the Borrower or the Administrative Agent and (ii) appropriate under
then current United States law or regulations to avoid United States withholding
taxes on payments in respect of any amounts to be received by such Lender
pursuant to this Agreement. Upon the reasonable request of the Borrower or the
Administrative Agent, each Lender that has not provided the forms or other
documents, as provided above, on the basis of being a "United States person"
will submit to the Borrower and the Administrative Agent a certificate to the
effect that it is such a "United States person".
(c) If any Lender which is not a "United States person" determines that it
is unable to submit to the Borrower and the Administrative Agent any form or
certificate that such Lender is requested to submit pursuant to the preceding
paragraph, or that it is required to withdraw or cancel any such form or
certificate, or that any such form or certificate previously submitted has
otherwise become ineffective or inaccurate, such Lender will promptly notify the
Borrower and the Administrative Agent of such fact.
(d) The Borrower will not be required to pay any additional amount in
respect of United States federal withholding tax imposed with respect to any
Lender if and only to the extent that (i) such Lender is subject to such United
States federal withholding tax on the Effective Date (or in the case of a Person
that became a Lender after the Effective Date by assignment or pursuant to
Section 2.5 on the date of such assignment or funding) or would be subject to
United States federal withholding tax on such date if a payment under this
Agreement had been received by it on such date; (ii) such Lender becomes subject
to United States federal withholding tax subsequent to the date referred to in
clause (i) above (or in the case of a Lender which is not a "United States
person", the first date on which it delivers the appropriate form or certificate
to the Borrower as referred to in clause (b) of this Section) as a result of a
change in the circumstances of such Lender (other than a change in applicable
law), including a change in the residence, place of incorporation or principal
place of business of the Lender, a change in the branch or lending office of the
Lender participating in the transactions set forth herein or as a result of the
sale by the Lender of participating interests in such Lender's creditor
position(s) hereunder; or (iii) such United States federal withholding tax would
not have been incurred but for the failure of such Lender to file with the
appropriate tax authorities and/or provide to the Borrower any form or
certificate that it was required so to do pursuant to clause (b) of this
Section, unless the Lender is not entitled to provide such form or certificate
as a result of a change in applicable law after the Effective Date (or in the
case of a Person that became a Lender after the Effective Date by assignment or
pursuant to Section 2.5 the date of such assignment or funding).
(e) Within thirty (30) days after the written reasonable request of the
Borrower, each Lender will execute and deliver to the Borrower such
certificates, forms or other documents which can be furnished consistent with
the facts and which are reasonably necessary to assist the Borrower in applying
for refunds of Taxes imposed by the United States paid by the Borrower hereunder
or making payment of Taxes imposed by the United States hereunder; provided,
however, that no Lender will be required to furnish to the Borrower any
financial information with respect to itself or other information which it
considers confidential.
(f) The Borrower will have the right to require any Lender which is not a
"United States person" to which the Borrower is required to make additional
payments pursuant to Section 5.6 hereof on account of Taxes imposed by the
United States (or would, upon payment to such Lender of an amount hereunder, be
so required) to assign such Lender's total
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Loans and Commitments to one or more banks or financial institutions identified
by the Borrower and acceptable to the Administrative Agent at a purchase price
equal to the then outstanding amount of all principal, interest, fees and other
amounts then owed to such Lender if such assignment would reduce or eliminate
the Borrower's obligation to make such additional payments pursuant to Section
5.6 hereof.
SECTION 5.7. Payments, Computations, etc. Unless otherwise expressly
provided herein (including as set forth in Section 2.3 and Section 4.5), all
payments by the Borrower pursuant to this Agreement or any other Loan Document
will be made by the Borrower to the Administrative Agent for the account of the
Lenders entitled to receive such payment. All such payments required to be made
to the Administrative Agent will be made, without setoff, deduction or
counterclaim, not later than 12:00 noon, New York time, on the date due, in same
day or immediately available funds, to such account as the Administrative Agent
will specify from time to time by notice to the Borrower. To the extent the
Administrative Agent receives such funds prior to 2:00 p.m., New York time, the
Administrative Agent will promptly remit in same day funds to each Lender its
share, if any, of such payments received by the Administrative Agent for the
account of such Lender. All interest and fees will be computed on the basis of
the actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest or fee is payable over a
year comprised of 360 days. Whenever any payment to be made will otherwise be
due on a day which is not a Business Day in New York, such payment will (except
as otherwise required by clause (b) of the definition of the term "Interest
Period") be made on the next succeeding Business Day and such extension of time
will be included in computing interest and fees, if any, in connection with such
payment.
SECTION 5.8. Sharing of Payments. If any Lender will obtain any payment or
other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Letter of Credit or Loan in excess of its
Percentage of payments then or therewith obtained by all Lenders, such Lender
will purchase from the other Lenders such participations in Letters of Credit or
Loans, as the case may be, as will be necessary to cause such purchasing Lender
to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase will
be rescinded and each Lender which has sold a participation to the purchasing
Lender will repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 5.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the
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amount of such participation. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender will, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section to share in the benefits
of any recovery on such secured claim.
SECTION 5.9. Setoff. Each Lender will, upon the occurrence of any event or
condition described in clause (f) of Section 6.01 of the Restated Credit
Agreement or, with the consent of the Required Lenders, upon the occurrence of
any other Event of Default, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due) any and all
balances, credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with or otherwise held by such Lender; provided, however,
that any such appropriation and application will be subject to the provisions of
Section 5.8. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice will not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff under applicable law or otherwise) which such Lender may have.
SECTION 5.10. Use of Proceeds. The Borrower will apply the proceeds of each
Credit Extension in accordance with the fourth recital.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Initial Credit Extension. The obligations of the Lenders to
make any Credit Extension and the Fronting Bank to issue any Letters of Credit
under this Agreement will be subject to the delivery to the Administrative Agent
of this Agreement duly executed and delivered by each Lender, the Administrative
Agent, the Borrower and the Parent, and the prior or concurrent satisfaction of
each of the conditions precedent set forth below in this Section 6.1.
SECTION 6.1.1. Resolutions, etc. The Administrative Agent will have
received from the Borrower originally executed copies of a certificate, each
dated the Effective Date, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this
Agreement, the Notes and each other Loan Document to be executed by it; and
(b) the incumbency and signatures of those of its officers authorized
to act with respect to this Agreement, the Notes and each other Loan
Document executed by it,
upon which certificate each Lender may conclusively rely until it will have
received a further certificate of the Secretary of such Loan Party canceling or
amending such prior certificate.
SECTION 6.1.2. Delivery of Notes. Each Lender that has requested a Note
will have received its Notes duly executed and delivered by the Borrower.
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SECTION 6.1.3. Certificates as to No Default, etc. No default shall have
occurred and be continuing in the performance of any affirmative or negative
covenants contained in the Restated Credit Agreement, none of the events
described in clauses (a), (b), (e), (f), (g), (h), (i), (j), (k), (l), (m) or
(n) of Section 6.01 of the Restated Credit Agreement shall have occurred, and no
Event of Default shall have occurred or would occur under the Restated Credit
Agreement or would result from the execution and delivery of, or the performance
by the Borrower of its obligations under, this Agreement or the issuance of any
Letter of Credit or the making of any Loan, and the Administrative Agent will
have received originally executed certificates for each Lender dated the
Effective Date from a Designated Officer of the Borrower certifying as to the
above.
SECTION 6.1.4. No Material Adverse Change. Since July 4, 1998, there will
have been no Material Adverse Change.
SECTION 6.1.5. Amendment of Restated Credit Agreement, Security, etc. The
Administrative Agent will have received an executed and effective amendment to
each of (x) the Restated Credit Agreement which shall permit this Agreement and
the Credit Extensions to be provided hereunder, (y) the Security Agreements and
(z) the Guaranties (as defined in the Restated Credit Agreement) which
amendments, in each case, shall be satisfactory in all respects to the
Administrative Agent and its counsel.
SECTION 6.1.6. Opinions of Counsel. The Administrative Agent will have
received opinions dated the Effective Date and addressed to the Administrative
Agent and all Lenders, from (a) Skadden, Arps, Slate, Meagher & Flom LLP
("Skadden, Arps"), New York counsel to the Loan Parties, (b) Amster, Rothstein &
Ebenstein, special intellectual property counsel to the Loan Parties, and (c)
Stanley P. Silverstein, General Counsel for the Borrower, in each case, in form
and substance satisfactory to the Administrative Agent, as to such matters as
the Administrative Agent may reasonably request (including, without limitation,
as to the opinion to be furnished by Skadden, Arps that this Agreement is the
Trade Credit Facility (as defined in the Restated Credit Agreement)).
SECTION 6.1.7. Restated Credit Agreement, Security. The Administrative
Agent shall be satisfied that each of the Restated Credit Agreement, the
Collateral Documents and the Guaranties (as defined in the Restated Credit
Agreement) shall be in full force and effect and that (x) all Reimbursement
Obligations will be secured by a first priority perfected lien on the goods with
respect to which a Letter of Credit has been issued and (y) all Obligations
(other than Reimbursement Obligations) will be secured under the Security
Agreement by a first priority perfected lien, pari passu with the Obligations
(as defined in the Restated Credit Agreement) arising under the Restated Credit
Agreement.
SECTION 6.1.8. Closing Fees, Expenses, etc. The Administrative Agent will
have received for its own account, or for the account of each Lender, as the
case may be, all fees, costs and expenses due and payable pursuant to Sections
3.3 and 11.3, if then invoiced.
SECTION 6.1.9. Approvals. The Administrative Agent shall have received
evidence satisfactory to it that each Loan Party possesses all governmental
authorizations, consents and approvals (if any) necessary for the execution,
delivery and performance of this Agreement and each other Loan Document to be
executed by each Loan Party, and for the continued operation of its business.
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SECTION 6.1.10. Litigation. The Administrative Agent shall be satisfied in
all respects that there exists no pending or threatened material litigation,
proceedings or investigation contesting this Agreement, or which could
reasonably be expected to have a Material Adverse Effect.
SECTION 6.1.11. Closing Date Certificate. The Administrative Agent will
have received, with counterparts for each Lender, the Closing Date Certificate,
dated the Effective Date and duly executed and delivered by a Designated Officer
of the Borrower, in which certificate the Borrower will agree and acknowledge
that the statements made therein will be deemed to be true and correct
representations and warranties of the Borrower as of such date. All documents
and agreements required to be appended to the Closing Date Certificate will be
in form and substance satisfactory to the Administrative Agent.
SECTION 6.1.12. Intercreditor Agreement. The Administrative Agent will have
received executed counterparts of the Intercreditor Agreement, dated as of the
Effective Date, duly executed and delivered by all parties thereto, which
Intercreditor Agreement shall be satisfactory in all respects to the
Administrative Agent and its counsel.
SECTION 6.1.13. Tradexpress Agreement. The Administrative Agent will have
received executed counterparts of the Tradexpress Agreement, duly executed and
delivered by the Borrower and the Fronting Bank.
SECTION 6.2. All Credit Extensions. The obligation of each Lender or the
Fronting Bank to make any Credit Extension on any date other than a Funding Date
will be subject to the satisfaction of each of the conditions precedent set
forth in this Section 6.2.
SECTION 6.2.1. Compliance with Warranties, No Default, etc. Both before and
after giving effect to any Credit Extension the following statements will be
true and correct:
(a) no event or circumstances has occurred and is continuing, or would
result from the making of such Credit Extension, which constitutes a
Default, or which when considered by itself or together with other past or
then existing events or circumstances, constitutes or would constitute a
Material Adverse Change;
(b) no event of default or any condition, occurrence or event which,
after notice or lapse of time or both, would constitute an event of default
shall have occurred (unless otherwise waived by the Required Lenders) in
the performance of any affirmative or negative covenants contained in
Sections 5.01, 5.02, 5.03 or 5.04 of the Restated Credit Agreement and
regardless of whether such Restated Credit Agreement is terminated, unless
in connection with such termination a replacement credit facility which the
Required Lenders hereunder have approved is entered into in which case, the
affirmative and negative covenants in such facility shall become the
subject of this clause;
(c) none of the events described in clauses (a), (b), (e), (f), (g),
(h), (i), (k), (l), (m) or (n) of Section 6.01 of the Restated Credit
Agreement (without giving effect to any termination of the Restated Credit
Agreement, unless in connection with such termination a replacement credit
facility to which the Required Lenders hereunder have approved, in which
case the analogous provisions of such replacement credit facility
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shall become the subject of this clause), shall have occurred (unless, in
the case of other than such clause (f), otherwise waived by the Required
Lenders); and
(d) the representations and warranties set forth in Article VII, and
in each other Loan Document will, in each case, be true and correct with
the same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties will be
true and correct as of such earlier date).
SECTION 6.2.2. Credit Extension Request. To the extent that Loans are made
in accordance with Sections 2.3 or 2.4, or the Borrower requests that the
Fronting Bank issue a Letter of Credit other than by means of notification in
accordance with the terms of the Tradexpress Agreement, the Administrative Agent
will have received, or be deemed to have received, a Notice of Borrowing or
Issuance Request, as the case may be, for such Credit Extension, executed and
delivered by the Borrower. Each of the delivery (or deemed delivery pursuant to
the terms of this Agreement) of a Notice of Borrowing or an Issuance Request,
the acceptance by the Borrower of the proceeds of the Borrowing, the issuance of
the Letter of Credit, or the making of a Loan upon a Disbursement or an ASCO L/C
Reimbursement, will constitute a representation and warranty by the Borrower
that on the date of such Credit Extension (both immediately before and after
giving effect to such Credit Extension and the application of the proceeds
thereof) or the issuance of the Letter of Credit, as applicable, the statements
made in Section 6.2.1 are in each case true and correct.
SECTION 6.2.3. Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of any Loan Party will be satisfactory in form
and substance to the Administrative Agent; the Administrative Agent will have
received all information, approvals, opinions, documents or instruments as the
Administrative Agent or its counsel may reasonably request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Fronting Bank, the Lenders and the Administrative
Agent to enter into this Agreement and to make Loans and issue Letters of Credit
hereunder, the Borrower and the Parent each represents and warrants unto the
Administrative Agent, each Lender and the Fronting Bank, as set forth in this
Article VII.
SECTION 7.1. Organization, etc. The Parent and each of its Subsidiaries is
a corporation, limited liability company or trust, as the case may be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, is duly qualified to do
business and is in good standing as a foreign corporation or foreign entity, as
applicable, in each jurisdiction where the nature of its business requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect, and each Loan Party has full power and authority and holds all
requisite governmental licenses, permits and other approvals to enter into and
perform its Obligations under this Agreement and each other Loan Document to
which it is a party and to own and hold under lease its property and to conduct
its business substantially as currently conducted by it. Set forth on Schedule
II hereto is a complete and accurate list of all Subsidiaries of the Parent.
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SECTION 7.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance (a) by the Borrower and the Parent of this Agreement
and each other Loan Document executed or to be executed by it, and (b) by each
other Loan Party of each Loan Document executed and delivered by it, are, in
each case, within such Loan Party's corporate (or other, as applicable) powers,
have been duly authorized by all necessary corporate (or other, as applicable)
action, and do not
(i) contravene such Loan Party's Organic Documents;
(ii) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting such Loan
Party; or
(iii) result in, or require the creation or imposition of, any Lien on
any of such Loan Party's properties.
No Loan Party is in breach of any contractual restriction or in violation of any
law or governmental regulation or court decree or order binding on or affecting
such Loan Party, the breach or violation of which is or would be reasonably
likely to have a Material Adverse Effect.
SECTION 7.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Borrower, the Parent or any other Loan Party of
this Agreement or any other Loan Document to which it is a party. Neither the
Parent nor any of its Subsidiaries is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 7.4. Validity, etc. This Agreement constitutes, and the Notes and
each other Loan Document executed by the Borrower and each other Loan Party
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Borrower or such Loan Party enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors rights generally and by general equity
principles.
SECTION 7.5. Financial Statements; No Material Adverse Change. (a) The
consolidated balance sheets of the Parent and its Subsidiaries as at July 4,
1998, and the related consolidated statements of operations, stockholders'
equity and cash flow of the Parent and its Subsidiaries for the Fiscal Years
then ended, accompanied by an opinion of PriceWaterhouseCoopers LLP, independent
public accountants, and the consolidated balance sheet of the Parent and its
Subsidiaries as at October 3, 1998, and the related consolidated statements of
operations, stockholders' equity and cash flow of the Parent and its
Subsidiaries for the three months then ended, duly certified by the chief
financial officer of the Parent, copies of which have been furnished to each
Lender, fairly present, subject, in the case of said balance sheet as at October
3, 1998, and said statements of operations, stockholders' equity and cash flow
for the three months then ended, to year-end audit adjustments, the consolidated
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financial condition of the Parent and its Subsidiaries as at such dates and the
consolidated results of the operations of the Parent and its Subsidiaries for
the periods ended on such dates, all in accordance with generally accepted
accounting principles applied on a consistent basis, and (b) since July 4, 1998,
there has been no Material Adverse Change.
SECTION 7.6. Litigation, etc. There is no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its Subsidiaries,
pending or threatened before any court, governmental agency or arbitrator that
(a) purports to affect the legality, validity or enforceability of this
Agreement or any other Loan Document or the consummation of the transactions
contemplated hereby or (b) is or would be reasonably likely to have a Material
Adverse Effect.
SECTION 7.7. Regulations U and X. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined in F.R.S. Board Regulation U), and no proceeds of any Loans
will be used for a purpose which violates, or would be inconsistent with, F.R.S.
Board Regulation U or X. Terms for which meanings are provided in F.R.S. Board
Regulation U or X or any regulations substituted therefor, as from time to time
in effect, are used in this Section with such meanings.
SECTION 7.8. Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of the Borrower or the Parent in
writing to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf of the
Borrower to the Administrative Agent or any Lender will be, true and accurate in
every material respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this Agreement by the
Administrative Agent and such Lender, and such information is not, or will not
be, as the case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading. The parties acknowledge and
agree that nothing contained in this Section will constitute a representation or
warranty by the Borrower or the Parent as to the future financial performance or
the results of operations of the Borrower or the Parent; provided, however, that
any projections delivered pursuant to this Agreement have been (and will be)
prepared on the basis of the assumptions accompanying them, and such projections
and assumptions, as of the date of preparation thereof and as of the date
hereof, are reasonable and represent the Borrower's or the Parent's good faith
estimate of its future financial performance.
SECTION 7.9. Year 2000. Each Loan Party has reviewed the areas within its
business and operations which could be adversely affected by, and has developed
or is developing a program to address on a timely basis, the "Year 2000 Problem"
(which term will mean, the risk that such Loan Party's computer applications may
be unable to recognize and properly perform (within such Loan Party's own
systems and programs) date-sensitive functions involving certain dates prior to
and any date after December 31, 1999). Based on such review and program, the
Year 2000 Problem could not reasonably be expected to have a Material Adverse
Effect.
SECTION 7.10. Restated Credit Agreement Representations and Warranties. As
to all representations and warranties contained in Article IV of the Restated
Credit Agreement and each other Loan Document (as such term is defined by the
Restated Credit Agreement) insofar as applicable to the Borrower or any other
Loan Party, the properties of the Borrower or any
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other Loan Party or the obligations of the Borrower or any other Loan Party
under the documents executed and delivered in connection with the Restated
Credit Agreement, each such representation and warranty set forth in such
Article (insofar as so applicable) and all other terms of the Restated Credit
Agreement and each other Loan Document (as such term is defined by the Restated
Credit Agreement) to which reference is made therein, together with all related
definitions and ancillary provisions, are hereby incorporated into this
Agreement by reference with respect to the Borrower or any other Loan Party as
though specifically set forth in this Section; provided that all references in
such Article IV of the Restated Credit Agreement to the terms "Agreement",
"Notes", "Loan Document", "Lender", "Facility Agent", "Advance", "Commitments"
or "Obligations" shall, in each case, for purposes of this Agreement be deemed
to be a reference to the terms "Agreement, "Notes, "Loan Document", "Lender",
"Administrative Agent", "Loans", "Commitments" and "Obligations", respectively,
as defined herein.
SECTION 7.11. ASCO Debt Outstanding, etc. The aggregate amount of Debt
(as such term is defined by the Restated Credit Agreement) of the Borrower
constituting ASCO Debt (as such term is defined by the Restated Credit
Agreement) together with the Indebtedness of the Borrower under this Agreement
does not exceed $80,000,000.
ARTICLE VIII
COVENANTS
SECTION 8.1. Covenants. Each of the Borrower and the Parent agrees with the
Administrative Agent, each Lender and the Fronting Bank that, until all
Commitments have terminated and all Obligations have been paid and performed in
full, the Borrower and the Parent will perform, and will cause each of their
respective Subsidiaries to perform, the obligations set forth in this Section
8.1.
SECTION 8.1.1. Financial Information, Reports, Notices, etc. Unless the
information set forth below is otherwise delivered to a Lender under the terms
of the Restated Credit Agreement, the Borrower or the Parent, as applicable,
will furnish, or will cause to be furnished, to each Lender and the
Administrative Agent copies of the financial statements, reports, notices and
information required pursuant to Section 5.03 of the Restated Credit Agreement.
SECTION 8.1.2. Future Subsidiaries. Each of the Borrower and the Parent
covenants and agrees that, upon any Person becoming a Subsidiary after the
Effective Date, the Borrower or the Parent, as the case may be, will cause such
Person to become party to the Subsidiary Guaranty if such Person is required to
deliver a guaranty pursuant to clause (o) of Section 5.01 of the Restated Credit
Agreement (without giving effect to any waiver of such Section's requirements
unless consented to by the Required Lenders).
SECTION 8.1.3. Restated Credit Agreement Covenants. Each of the Borrower
and the Parent will comply with and be bound by, and will cause each of their
respective Subsidiaries to comply with and be bound by, all of the agreements,
covenants and obligations contained in Article V of the Restated Credit
Agreement and each other Loan Document (as
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such term is defined by the Restated Credit Agreement). Each such agreement,
covenant and obligation contained in such Sections and all other terms of the
Restated Credit Agreement and each other Loan Document (as such term is defined
by the Restated Credit Agreement) together with all related definitions and
ancillary provisions are hereby incorporated into this Agreement by reference as
though specifically set forth in this Section, and each such agreement, covenant
and obligation will, for purposes hereof, survive the termination of the
Restated Credit Agreement provided that all references in such Article V of the
Restated Credit Agreement to the terms "Agreement", "Notes", "Loan Document",
"Lender", "Facility Agent", "Advance", "Commitments" or "Obligations" shall, in
each case, for purposes of this Agreement be deemed to be a reference to the
terms "Agreement, "Notes, "Loan Document", "Lender", "Administrative Agent",
"Loans", "Commitments" and "Obligations", respectively, as defined herein.
SECTION 8.1.4. Default Notice. The Borrower will furnish, or will cause to
be furnished, to each Lender as soon as possible and in any event within two
Business Days after any officer of any Loan Party becomes aware of the existence
of any Default a statement of its chief financial officer setting forth details
of such Default and the action that the Borrower has taken and proposes to take
with respect thereto.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. Listing of Events of Default. Each of the following events or
occurrences described in this Section 9.1 will constitute an "Event of Default".
SECTION 9.1.1. Non-Payment of Obligations. The Borrower will default in the
payment or prepayment when due of (a) any principal of or interest on any Loan,
(b) any Reimbursement Obligation, or (c) any fee or of any other Obligation, and
in each case such default in payment or prepayment will continue unremedied for
more than three Business Days from the date such payment or prepayment was due.
SECTION 9.1.2. Breach of Warranty. Any representation or warranty of the
Borrower or any other Loan Party made or deemed to be made hereunder or in any
other Loan Document executed by it (including any certificates delivered
pursuant to Article VI) is or will be incorrect when made or deemed made in any
material respect.
SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations. The
Borrower or the Parent shall default in the due performance and observance of
any of their respective obligations under Sections 8.1.2 or 8.1.4, or any Loan
Party shall default in the due performance or observance of any of its
obligations under any other covenant in a Loan Document which is impossible to
remedy.
SECTION 9.1.4. Non-Performance of Other Covenants and Obligations. The
Borrower or any other Loan Party will default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default will continue unremedied for a period of 30
days (a) after notice thereof will have been given to the Borrower by the
Administrative Agent or any Lender or (b) after any officer of the Borrower
obtains knowledge thereof.
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SECTION 9.1.5. Default Under Restated Credit Agreement. Any Event of
Default under (and as defined in) the Restated Credit Agreement or any
replacement credit facility shall have occurred whether or not such Event of
Default is waived by the lenders under the Restated Credit Agreement, or an
amendment of the Restated Credit Agreement is entered into with the effect of
waiving or curing such Event of Default.
SECTION 9.1.6. Bankruptcy, Insolvency, etc. Any event or condition
described in clause (f) of Section 6.01 of the Restated Credit Agreement (or
similar provision of any replacement credit facility) shall have occurred and be
continuing.
SECTION 9.1.7. Termination, etc., of Loan Documents. Any Loan Document will
(except in accordance with its terms), in whole or in part, terminate, cease to
be effective or cease to be the legally valid, binding and enforceable
obligation of the Loan Party that is a party thereto; or the Borrower or any
other Loan Party will, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability (except as aforesaid).
SECTION 9.2. Action Upon Bankruptcy. If any Event of Default described in
Section 9.1.6 will occur, the Commitments (if not theretofore terminated) will
automatically terminate and the outstanding principal amount of all outstanding
Loans and all other Obligations will automatically be and become immediately due
and payable, without notice or demand.
SECTION 9.3. Action Upon Other Event of Default. If any Event of Default
(other than any Event of Default described in Section 9.1.6) will occur for any
reason, whether voluntary or involuntary, and be continuing, the Administrative
Agent, upon the direction of the Required Lenders, will by notice to the
Borrower declare an amount equal to the sum of the maximum aggregate amount that
is or at any time thereafter may become available for drawing under any
outstanding Letters of Credit (whether or not any beneficiary will have
presented, or will be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, the Borrower being obligated to cash collateralize all such
obligations immediately (in accordance with Section 4.7), and/or (b) declare all
or any portion of the outstanding principal amount of the Loans and other
Obligations in respect of the Loans or otherwise to be due and payable and/or
the Commitments (if not theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and other Obligations which will be so declared
due and payable will be and become immediately due and payable, without further
notice, demand or presentment, and/or, as the case may be, the Commitments will
terminate.
ARTICLE X
THE ADMINISTRATIVE AGENT
SECTION 10.1. Actions. Each Lender hereby appoints Scotiabank as its
Administrative Agent under and for purposes of this Agreement and each other
Loan Document. Each Lender authorizes the Administrative Agent to act on behalf
of such Lender under this Agreement and each other Loan Document and, in the
absence of other written instructions from the Required Lenders received from
time to time by the Administrative Agent (with respect to which the
Administrative Agent agrees that it will comply, except as otherwise provided in
this Section or as otherwise advised by counsel), to exercise such powers
hereunder and thereunder as are specifically delegated to or required of the
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Administrative Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. Each Lender hereby indemnifies (which
indemnity will survive any termination of this Agreement) the Administrative
Agent, pro rata according to such Lender's Percentage, from and against any and
all liabilities, obligations, losses, damages, claims, costs or expenses of any
kind or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, the Administrative Agent in any way relating to or arising out
of this Agreement and any other Loan Document, including reasonable attorneys'
fees, and as to which the Administrative Agent is not reimbursed by the
Borrower; provided, however, that no Lender will be liable for the payment of
any portion of such liabilities, obligations, losses, damages, claims, costs or
expenses which are determined by a court of competent jurisdiction in a final
proceeding to have resulted from the Administrative Agent's gross negligence or
wilful misconduct. The Administrative Agent will not be required to take any
action hereunder or under any other Loan Document, or to prosecute or defend any
suit in respect of this Agreement or any other Loan Document, unless it is
indemnified hereunder to its satisfaction. If any indemnity in favor of the
Administrative Agent will be or become, in the Administrative Agent's
determination, inadequate, the Administrative Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given.
SECTION 10.2. Copies, etc. The Administrative Agent will give prompt notice
to each Lender of each notice or request required or permitted to be given to
the Administrative Agent by the Borrower pursuant to the terms of this Agreement
(unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement.
SECTION 10.3. Exculpation. Neither the Administrative Agent nor any of its
affiliates, directors, officers, employees or agents will be liable to any
Lender for any action taken or omitted to be taken by it under this Agreement or
any other Loan Document, or in connection herewith or therewith, except for its
own wilful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor for
the creation, perfection or priority of any Liens (if any) purported to be
created by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of collateral security (if any),
nor to make any inquiry respecting the performance by the Borrower of its
obligations hereunder or under any other Loan Document. Any such inquiry which
may be made by the Administrative Agent will not obligate it to make any further
inquiry or to take any action. The Administrative Agent will be entitled to rely
upon advice of counsel concerning legal matters and upon any notice, consent,
certificate, statement or writing which the Administrative Agent believes to be
genuine and to have been presented by a proper Person.
SECTION 10.4. Successor. The Administrative Agent may resign as such at any
time upon at least 30 days' prior notice to the Borrower and all Lenders. If the
Administrative Agent at any time will resign, the Required Lenders may appoint
another Lender as a successor Administrative Agent which will thereupon become
the Administrative Agent in the capacity of the resigning Administrative Agent
hereunder. If no successor Administrative Agent will have been so appointed by
the Required Lenders, and will have accepted such
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appointment, within 30 days after the retiring Administrative Agent's giving
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which will be one of the
Lenders or a commercial banking institution organized under the laws of the U.S.
(or any State thereof) or a U.S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as the Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent will be entitled to
receive from the retiring Administrative Agent such documents of transfer and
assignment as such successor Administrative Agent may reasonably request, and
will thereupon succeed to and become vested with all rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent will be discharged from its duties and obligations under this Agreement.
After any retiring Administrative Agent's resignation hereunder as the
Administrative Agent, the provisions of
(a) this Article X will inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Administrative Agent under
this Agreement; and
(b) Section 11.3 and Section 11.4 will continue to inure to its
benefit.
SECTION 10.5. Loans Made, Letters of Credit Issued by Administrative Agent
and Loans Made by Administrative Agent. The Administrative Agent will have the
same rights and powers with respect to (x) the Loans and Commitments made by it
or any of its affiliates, (y) the Notes held by it or any of its affiliates and
(z) its participating interests in the Letters of Credit as any other Lender and
may exercise the same as if it were not the Administrative Agent. The
Administrative Agent and its affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with the Parent, Borrower or any
Subsidiary or affiliate of the Borrower as if the Administrative Agent was not
the Administrative Agent hereunder.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Administrative Agent and each other Lender, and based on
such Lender's review of the financial information of the Borrower, this
Agreement, the other Loan Documents (the terms and provisions of which being
satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitment. Each Lender also acknowledges that it will,
independently of the Administrative Agent and each other Lender, and based on
such other documents, information and investigations as it will deem appropriate
at any time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. (a) The provisions of this
Agreement and of each other Loan Document (subject, in the case of any
Guarantee (as such term is defined in the Restated Credit Agreement) or
Collateral Document, to the terms of the Intercreditor Agreement) may from
time to time be amended, modified or waived, if such amendment, modification
or waiver is in writing and consented to by the Borrower and the
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Required Lenders; provided, however, that no such amendment, modification or
waiver which would:
(i) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders will be effective
unless consented to by each Lender;
(ii) modify this Section 11.1, change the definition of "Required
Lenders", increase the Commitment Amount, the Letter of Credit Commitment
Amount, the Loan Commitment Amount or (except as otherwise contemplated by
this Agreement) the Percentage of any Lender, reduce any fees described in
Article III, release all or substantially all of the Collateral (except as
otherwise specified in the Restated Credit Agreement or any Loan Document),
release any guarantor under any Guarantee (as defined in the Restated
Credit Agreement), or extend any Commitment Termination Date will be made
without the consent of each Lender;
(iii) extend the due date for, or reduce the amount of, (A) any
scheduled repayment or prepayment of principal of or interest on or fees
payable in respect of any Loan (or reduce the principal amount of or rate
of interest on or fees payable in respect of any Loan) will be made without
the consent of the holder of that Note evidencing such Loan, or (B) any
Reimbursement Obligation will be made without the consent of the Lender to
whom such Reimbursement Obligation is owed;
(iv) affect adversely the interests, rights or obligations of the
Fronting Bank in its capacity as the Fronting Bank will be made without the
consent of the Fronting Bank;
(v) affect adversely the interests, rights or obligations of the
Administrative Agent in its capacity as the Administrative Agent will be
made without consent of the Administrative Agent.
(b) For purposes of clause (a) above, if any Lender which is also a
lender under the Restated Credit Agreement consents to any amendment,
waiver, consent or other modification of any provision of the Restated
Credit Agreement, such Lender will automatically, and without requiring any
notice, approval, consent or other action, be deemed to have consented to
any comparable amendment, waiver, consent or other modification of the
corresponding provisions of this Agreement (with such changes in
interpretation as the context may require) unless such Lender will
otherwise notify the Administrative Agent and the Borrower within five days
of the effectiveness of the Restated Credit Agreement amendment, waiver,
consent or other modification.
No failure or delay on the part of the Administrative Agent, any Lender or the
holder of any Note in exercising any power or right under this Agreement or any
other Loan Document will operate as a waiver thereof, nor will any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case will entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Administrative
Agent or any Lender under this Agreement or any other Loan Document will, except
as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or
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approval hereunder will require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
SECTION 11.2. Notices. All notices and other communications provided to any
party hereto under this Agreement or any other Loan Document will be in writing
or by facsimile and addressed, delivered or transmitted to such party at its
address, or facsimile number set forth on Schedule I or set forth in the
Assignment and Acceptance or at such other address or facsimile number as may be
designated by such party in a notice to the other parties. Any notice, if mailed
and properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, will be deemed given when received; any notice, if
transmitted by facsimile, will be deemed given when transmitted.
SECTION 11.3. Payment of Costs and Expenses. The Borrower agrees to pay on
demand all reasonable expenses of the Administrative Agent (including the
reasonable fees and out-of-pocket expenses of counsel to the Administrative
Agent and of local counsel, if any, who may be retained by counsel to the
Administrative Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from time
to time hereafter be required, whether or not the transactions contemplated
hereby are consummated, and
(b) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower covenants to pay on demand all reasonable costs and expenses of the
Administrative Agent, the Fronting Bank and the Lenders incurred in the
enforcement of the Administrative Agent's, the Fronting Bank's or any Lender's
rights under this Agreement and any Loan Document (including the reasonable fees
and expenses of counsel for the Administrative Agent, the Fronting Bank and such
Lender with respect thereto) and, further, covenants that it will indemnify the
Administrative Agent, the Fronting Bank and the Lenders on demand against all
loss or damage to such Persons arising out of the issuance of or other action
taken by such Persons in connection with any Letter of Credit or Loan including
the costs relating to any legal process instituted by any party restraining or
seeking to restrain the Fronting Bank from accepting or paying any Letter of
Credit or Draft. The Borrower also agrees that neither the Administrative Agent,
the Fronting Bank nor any Lender will have any liability to it for any reason in
respect of the issuance of any Letter of Credit or Loan other than on account of
the Administrative Agent's, the Fronting Bank's or such Lender's gross
negligence or wilful misconduct. All payments to be made to the Administrative
Agent, the Fronting Bank and such Lender hereunder will, subject to Section 5.6,
be made for value on the date due and free of any withholding tax or levy, other
than taxes imposed on the net income of the Administrative Agent, the Fronting
Bank or such Lender, and the Borrower covenants that such taxes or levies, other
than as excepted, will be paid by the Borrower. The provisions of this paragraph
will survive payment in full hereunder.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Administrative Agent,
the Fronting Bank and each
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Lender and each of their respective affiliates, officers, directors, employees
and agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including the reasonable fees and expenses
of counsel for the Administrative Agent, the Fronting Bank and such Lender with
respect thereto (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan or the use of any
Letter of Credit; or
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of the Borrower as the result of any determination
by the Required Lenders pursuant to Article VI not to make any Credit
Extension);
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct.
SECTION 11.5. Survival. The obligations of the Borrower under Sections 5.3,
5.4, 5.5, 5.6, 11.3 and 11.4, and the obligations of the Lenders under Section
10.1, will in each case survive any termination of this Agreement, the payment
in full of all Obligations and the termination of all Commitments. The
representations and warranties made by the Borrower in this Agreement and in
each other Loan Document will survive the execution and delivery of this
Agreement and each such other Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction will, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 11.7. Headings. The various headings of this Agreement and of each
other Loan Document are inserted for convenience only and will not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This Agreement
may be executed by the parties hereto in several counterparts, each of which
will be deemed to be an original and all of which will constitute together but
one and the same agreement. This Agreement will become effective when
counterparts hereof executed on behalf of the Borrower and each Lender (or
notice thereof satisfactory to the Administrative Agent) will have been received
by the Administrative Agent and notice thereof will have been given by the
Administrative Agent to the Borrower and each Lender.
SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT AND EACH
OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE
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STATE OF NEW YORK. This Agreement and the other Loan Documents constitute the
entire understanding among the parties hereto with respect to the subject matter
hereof and (subject to Section 11.5) supersede any prior agreements, written or
oral, with respect thereto.
SECTION 11.10. Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) No Borrower may assign or transfer its rights or obligations
hereunder without the prior written consent of the Administrative Agent and
all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Loans and Commitments; Participations
in Loans and Commitments. Each Lender may assign, or sell participations in, its
Loans and Commitments to one or more other Persons in accordance with this
Section 11.11 and subject to the terms of the Intercreditor Agreement.
SECTION 11.11.1. Assignments. Any Lender, pursuant to an Assignment and
Acceptance,
(a) with the written consent of the Borrower, the Fronting Bank and
the Administrative Agent (in each case, which consent will not be
unreasonably delayed or withheld and, which consent, in the case of the
Borrower, will not be required during the continuation of an Event of
Default) may at any time assign and delegate to one or more financial
institutions; and
(b) with the consent of the Fronting Bank (not to be unreasonably
withheld or delayed), and notice to the Borrower and the Administrative
Agent, but without the consent of the Borrower or the Administrative Agent,
may assign and delegate to any other Lender or any Lender (as defined in
the Restated Credit Agreement),
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or a fraction of such Lender's total Loans and
Commitments in a minimum amount of $5,000,000 of Loans and Commitments (other
than in the case of an assignment to any other Lender or any Affiliate of a
Lender or an assignment of the remaining Loans and Commitments of such assignor
Lender), that no Borrower will be required to pay an amount under Section 5.6
that is greater than the amount which it would have been required to pay had no
assignment been made and provided, however, that, the Borrower and the
Administrative Agent will be entitled to continue to deal solely and directly
with such Lender in connection with the interests so assigned and delegated to
an Assignee Lender until
(c) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Lender, will have been given to the Borrower and the
Administrative Agent by such Lender and such Assignee Lender,
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(d) such Assignee Lender will have executed and delivered to the
Borrower and the Administrative Agent an Assignment and Acceptance,
accepted by the Administrative Agent, and
(e) the processing fees described below will have been paid.
(f) the Administrative Agent will have registered such assignment and
delegation in the Register pursuant to clause (b) of Section 2.6.
From and after the date that the Administrative Agent accepts such Assignment
and Acceptance and such assignment and delegation is registered in the Register,
(i) the Assignee Lender thereunder will be deemed automatically to have become a
party hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in connection with such
Assignment and Acceptance, will have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (ii) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Assignment and Acceptance, will be
released from its obligations hereunder and under the other Loan Documents.
Subject to the provisions of Section 2.6, within five Business Days after its
receipt of notice that the Administrative Agent has received an executed
Assignment and Acceptance and solely if requested by the Assignee Lender
thereunder, the Borrower will execute and deliver to the Administrative Agent
(for delivery to the relevant Assignee Lender) new Notes evidencing such
Assignee Lender's assigned Loans and Commitments and, if the assignor Lender has
Loans and Commitments hereunder and had previously requested Notes, replacement
Notes in the principal amount of the Loans and Commitments retained by the
assignor Lender hereunder (such Notes to be in exchange for, but not in payment
of, those Notes then held by such assignor Lender). Each such Note will be dated
the date of the predecessor Notes. The assignor Lender will mark the predecessor
Notes "exchanged" and deliver them to the Borrower. Accrued interest on the
assigned Loans and Commitments and accrued fees, will be paid as provided in
this Agreement or in the Assignment and Acceptance. Accrued interest on that
part of the assigned Loans and Commitments will be paid to the assignor Lender.
Accrued interest and accrued fees will be paid at the same time or times
provided in this Agreement. Such assignor Lender or such Assignee Lender must
also pay a processing fee to the Administrative Agent upon delivery of any
Assignment and Acceptance in the amount of $3,500 unless such assignment and
delegation is by a Lender to its Affiliate or if such assignment and delegation
is by a Lender to the Federal Reserve Bank, as provided below or otherwise
consented to by the Administrative Agent. Any attempted assignment and
delegation not made in accordance with this Section 11.11.1 will be null and
void. Nothing in this Section will prevent or prohibit any Lender from pledging
its rights (but not its obligations to make Loans or to issue or participate in
Letters of Credit) under this Agreement and/or its Loans and/or Notes hereunder
to a Federal Reserve Bank in support of borrowing made by such Lender from such
Federal Reserve Bank.
SECTION 11.11.2. Participations. Any Lender may at any time sell to one or
more commercial banks or other Persons (each of such commercial banks and other
Persons being herein called a "Participant") participating interests (or a
sub-participating interest, in the case of a Lender's participating interest in
a Letter of Credit) in any of the Loans, Commitments, or other interests of such
Lender hereunder; provided, however, that
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<PAGE>
(a) no participation or sub-participation contemplated in this Section
11.11 will relieve such Lender from its Commitments or its other
obligations hereunder or under any other Loan Document,
(b) such Lender will remain solely responsible for the performance of
its Commitments and such other obligations,
(c) the Borrower and the Administrative Agent will continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the other Loan
Documents,
(d) no Participant, unless such Participant is an affiliate of such
Lender, or is itself a Lender, will be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any actions of
the type described in clause (ii) or (iii) of Section 11.1, and
(e) no Borrower will be required to pay any amount under Section 5.6
that is greater than the amount which it would have been required to pay
had no participating interest been sold.
SECTION 11.11.3. Fronting Bank Assignments. In the event that S&P, Moody's
or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of
Lenders that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by InsuranceWatch Ratings Service)) shall, after
the date that any Lender becomes a Lender, downgrade the long-term certificate
of deposit rating or long-term senior, unsecured debt rating of such Lender, and
the resulting ratings shall be below BBB-, Baa3 or C (or BB, in the case of
Lender that is an insurance company (or B, in the case of an insurance company
not rated by InsuranceWatch Ratings Service)), then each of the Fronting Bank
and the Borrower shall have the individual right, but not the obligation, upon
notice to such Lender and the Administrative Agent, to replace (or, in the case
of a request by the Fronting Bank, to request the Borrower to use its reasonable
efforts to replace) such Lender with an Assignee Lender (in accordance with and
subject to the restrictions contained in Section 11.11.1), and such affected
Lender hereby agrees to transfer and assign without recourse (in accordance with
and subject to the restrictions contained in Section 11.11.1) all of its
interests, rights and obligations in respect of its Commitment, Loans and other
Obligations owing to it, together with the obligations of such affected Lender
hereunder, to such Assignee Lender; provided, however, that (i) no such
assignment shall conflict with any law, rule and regulation or order of any
governmental authority and (ii) such Assignee Lender shall pay to such affected
Lender in immediately available funds on the date of such assignment the
principal of and interest and fees (if any) accrued to the date of payment on
the Loans made, and Letters of Credit participated in, by such Lender hereunder
and all other amounts accrued for such Lender's account or owed to it hereunder.
Upon any such termination or assignment, such Lender will cease to be a party
hereto but will continue to be entitled to the benefits of any provisions of
this Agreement which by their terms survive the termination of this Agreement.
SECTION 11.12. Other Transactions. Nothing contained herein will preclude
the Administrative Agent, the Fronting Lender or any other Lender from engaging
in any
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<PAGE>
<PAGE>
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Borrower or any of their affiliates in which the
Borrower or such affiliate is not restricted hereby from engaging with any other
Person.
SECTION 11.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS,
THE FRONTING BANK, THE PARENT OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY,
NEW YORK. THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY,
NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.14. Waiver of Jury Trial. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE ADMINISTRATIVE AGENT, THE LENDERS, THE FRONTING BANK, THE PARENT OR THE
BORROWER. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL
AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND EACH OF THE PARENT AND THE
BORROWER ACKNOWLEDGES THAT
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<PAGE>
<PAGE>
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, THE
FRONTING BANK AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER
LOAN DOCUMENT.
SECTION 11.15. UCP; etc. (a) The Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce (the "UCP") will in all respects apply to each Letter of Credit issued
hereunder and will be deemed for such purpose to be a part hereof as if fully
incorporated herein. In the event of any conflict between the UCP and the
governing law of the Agreement, the UCP will prevail to the extent necessary to
remove the conflict.
(b) In the event of any issuance of a Letter of Credit for which the
Borrower may apply from time to time hereafter, or, of any extension of the
maturity or time for presentation of any Draft, or, of any renewal, extension or
increase in the amount of a Letter of Credit or any other modifications of its
terms, in each case with the consent or at the request of the Borrower, the
terms of the Agreement will continue in force and apply to the Letter of Credit
so issued, or, to a Letter of Credit so renewed, extended, increased or
otherwise modified, or, to any, Draft, document or property covered thereby and
to any action taken by the Fronting Bank or its agents or correspondents in
accordance with such issuance, renewal, extension, increase or other
modification.
SECTION 11.16. Usury Restraint. The provisions of this Agreement shall be
subject to any applicable law, regulation, order, rule or direction (a "Usury
Restraint") which prohibits or restricts the charging, receipt or retention of
interest or other amounts at the rates and amounts set forth herein (the "Stated
Rate") in excess (the "Excess") of the maximum rates or amount (the "Maximum
Rate") stipulated in the Usury Restraint. The provisions of this Agreement shall
not require the payment or permit the collection of interest in excess of the
Maximum Rate from time to time. If the Lenders comply (whether or not required
to do so at law) with such Usury Restraint then, to the extent permitted by law,
a subsequent reduction in the Stated Rate below the Maximum Rate shall be deemed
not to reduce the Stated Rate below the Maximum Rate until the total amount of
interest and other amounts earned and retained, measured by a dollar amount,
equals the amount of interest and other amounts which would have been earned and
retained hereunder, inclusive of the Excess, measured by a dollar amount, if the
Stated Rate had not been held at the Maximum Rate or any amount had not been
refunded to the Borrower.
SECTION 11.17. Judgment Currency. The Obligations of the Borrower and each
other Loan Party in respect of any sum due to any Lender, the Fronting Bank or
the Administrative Agent hereunder, under the Notes or under or in respect of
any other Loan Document shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than Dollars, be discharged only to the extent that
on the Business Day following receipt by such Lender, the Fronting Bank or the
Administrative Agent of any sum adjudged to be so due in the Judgment Currency,
such Lender, the Fronting Bank or the Administrative Agent, in accordance with
normal banking procedures, purchases Dollars with the Judgment Currency. If the
amount of Dollars so purchased is less than the sum originally due to such
Lender, the Fronting Bank or the Administrative Agent, the Borrower and the
Parent agrees as a separate obligation and notwithstanding any such judgment, to
indemnify each Lender, the Fronting Bank and the Administrative Agent, as the
case may be, against such loss.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
AUTHENTIC FITNESS PRODUCTS INC.
By:
----------------------------------------
Title:
AUTHENTIC FITNESS CORPORATION
By:
----------------------------------------
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:
----------------------------------------
Title: Senior Relationship Manager
<PAGE>
<PAGE>
LENDERS:
THE BANK OF NOVA SCOTIA
By: [signature]
----------------------------------------
Title:
THE BANK OF NEW YORK
By: /s/ Eliza S. Adams
----------------------------------------
Title: Eliza S. Adams
Vice President
COMMERZBANK AG, NEW YORK BRANCH
By: /s/ Robert Donahue
----------------------------------------
Title: Robert Donahue, Vice President
By: /s/ Peter Doyle
----------------------------------------
Title: Peter Doyle, Asst. Vice President
FIRST UNION NATIONAL BANK
By: /s/ Frances Straus
----------------------------------------
Title: Vice President
FLEET BANK, N.A.
By: [signature]
----------------------------------------
Title: SVP
<PAGE>
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By: Peggy Erlenkotter
----------------------------------------
Title: Duly Authorized Signatory
NATIONSBANK, N.A.
By: /s/ David H. Dinkins
----------------------------------------
Title: David H. Dinkins
Vice President
UNION BANK OF CALIFORNIA, N.A.
By: [signature]
----------------------------------------
Title: Vice President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AUTHENTIC FITNESS CORPORATION FOR THE PERIOD ENDED
JANUARY 2, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-03-1999
<PERIOD-START> JUL-05-1998
<PERIOD-END> JAN-02-1999
<CASH> 1,230
<SECURITIES> 0
<RECEIVABLES> 102,761
<ALLOWANCES> 6,006
<INVENTORY> 100,361
<CURRENT-ASSETS> 211,374
<PP&E> 78,337
<DEPRECIATION> 27,465
<TOTAL-ASSETS> 327,056
<CURRENT-LIABILITIES> 189,136
<BONDS> 28,073
0
0
<COMMON> 23
<OTHER-SE> 130,190
<TOTAL-LIABILITY-AND-EQUITY> 327,056
<SALES> 117,656
<TOTAL-REVENUES> 117,656
<CGS> 70,128
<TOTAL-COSTS> 70,128
<OTHER-EXPENSES> 47,295
<LOSS-PROVISION> 9,962
<INTEREST-EXPENSE> 5,940
<INCOME-PRETAX> (5,707)
<INCOME-TAX> (2,226)
<INCOME-CONTINUING> (3,481)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2,518)
<NET-INCOME> (5,999)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
