SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
-----------------------
Date of Report
(Date of earliest
event reported): February 16, 1999
PlayCore, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-20450 36-3808989
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
1212 Barberry Drive, Janesville, Wisconsin 53545
(Address of principal executive offices, including zip code)
(608) 755-4777
(Registrant's telephone number)
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Item 2. Acquisition or Disposition of Assets.
On February 16, 1999, HI Acquisition Corp., a wholly-owned subsidiary
of PlayCore Wisconsin, Inc. ("PlayCore Wisconsin"), merged with and into
Heartland Industries, Inc. (DE) ("Heartland") pursuant to an Agreement and Plan
of Merger dated as of February 4, 1999, by and among Heartland, PlayCore
Wisconsin, HI Acquisition Corp. and certain stockholders of Heartland (the
"Merger"). PlayCore Wisconsin is a wholly-owned subsidiary of PlayCore, Inc.
("PlayCore"). Under the terms of the Merger, (i) the shares of Heartland's
Series A Preferred Stock, $.01 par value, were converted into aggregate cash
consideration of $5.7 million and a promissory note from PlayCore Wisconsin for
$500,000; (ii) the shares of Heartland's Cumulative Preferred Stock, $.01 par
value, were converted into aggregate cash consideration of $0.97; and (iii) the
shares of Common Stock, par value $.01, were converted into aggregate cash
consideration of $10,000. The shares of Common Stock, $.01 par value, of HI
Acquisition Corp. were converted into one share of Common Stock, $.01 par value,
of Heartland. Upon consummation of the Merger, Heartland became a wholly-owned
subsidiary of PlayCore Wisconsin. In connection with the consummation of the
Merger, approximately $7.1 million of Heartland's bank debt was repaid. The
total merger consideration paid by PlayCore Wisconsin was determined on the
basis of arm's length negotiations between the parties. There was no material
relationship between the stockholders of PlayCore and Heartland or any of their
affiliates, directors, officers or associates prior to the Merger.
The Merger was financed by amending and restating the existing Credit
Agreement between PlayCore, PlayCore Wisconsin and Fleet National Bank, acting
as agent for itself and the other lenders which from time to time are parties
thereto. The agreement was amended and restated to increase the revolving credit
facility under the agreement to $28.0 million from $20.0 million, to increase
the term loan A under the agreement to $38.0 million from $32.8 million, and to
increase the term loan B under the agreement to $9.0 million from $4.4 million.
PlayCore is a leading designer, manufacturer and marketer of commercial
and consumer playground equipment. Heartland is one of the nation's largest
manufacturers and marketers of wooden storage products such as yard barns,
custom built garages and weekender cabins.
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits. The exhibits listed in the accompanying Exhibit
Index are filed as part of this Current Report on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PLAYCORE, INC.
Date: March 2, 1999 By:/s/ Richard E. Ruegger
------------------------------------------
Richard E. Ruegger
Vice President - Finance, Chief Financial
Officer and Treasurer
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PLAY CORE, INC.
Exhibit Index to Current Report on Form 8-K
Dated February 16, 1999
Exhibit
Number
(2.1) Agreement and Plan of Merger dated as of February 4, 1999, by and among
PlayCore Wisconsin, Inc., HI Acquisition Corp., Heartland Industries,
Inc. (DE) and certain of the stockholders of Heartland Industries, Inc.
(DE). Schedules and exhibits to the Agreement and Plan of Merger have
not been filed herewith. The Company agrees to furnish a copy of any
omitted schedule or exhibit to the Commission upon request.
(4.1) Amended and Restated Credit Agreement dated as of February 16, 1999, by
and among PlayCore, Inc., PlayCore Wisconsin, Inc. and Fleet National
Bank, as agent for itself and the other lenders which from time to time
are parties thereto. Schedules and exhibits to the Amended and Restated
Credit Agreement have not been filed herewith. The Company agrees to
furnish a copy of any omitted schedule or exhibit to the Commission
upon request.
(99.1) Press Release of PlayCore, Inc. dated February 16, 1999.
AGREEMENT AND PLAN OF MERGER
among
PlayCore Wisconsin, Inc.
and
HI Acquisition Corp.
(the "Buyer Group")
and
certain of the Shareholders of Heartland Industries, Inc. (DE)
(the "Shareholders")
and
HEARTLAND INDUSTRIES, INC. (DE)
(the "Company")
February 4, 1999
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TABLE OF CONTENTS
Page
1. The Merger............................................................1
1.1 The Merger.........................................................1
1.2 Effect of the Merger...............................................1
1.3 Adoption by Stockholders...........................................2
1.4 Adoption of this Agreement by the Sole
Stockholder of Buyer..............................................2
1.5 Consummation of the Merger.........................................2
1.6 Charter; Bylaws; Directors and Officers............................2
1.7 The Closing........................................................2
2. Conversion of Shares..................................................3
2.1 Conversion of Shares...............................................3
2.2 Payment of Merger Consideration....................................4
2.3 Working Capital; Adjustment to Series A Consideration..............5
2.4 Company Obligations Adjustment.....................................8
2.5 Uncollected Checks.................................................8
2.6 Stock Options, Warrants, Treasury Shares, Etc......................8
2.7 Closing of Stock Transfer Books....................................8
3. Representations and Warranties of the Shareholders and the Company....8
3.1 Corporate...........................................................9
3.2 Capitalization......................................................9
3.3 No Violation.......................................................10
3.4 Financial Statements...............................................10
3.5 No Litigation......................................................11
3.6 No Undisclosed Liabilities.........................................11
3.7 Intellectual Property; Computer Software...........................11
3.8 Owned Real Property; Leased Property...............................11
3.9 Title to and Condition of Property.................................12
3.10 Compliance With Laws and Orders....................................13
3.11 Inventory..........................................................13
3.12 Accounts Receivable................................................13
3.13 Material Contracts.................................................14
3.14 Taxes..............................................................14
1.15 Environmental Matters..............................................15
1.16 Insurance..........................................................17
1.17 Bank Accounts......................................................17
1.18 Employee Benefits..................................................17
1.19 Absence of Certain Changes.........................................18
1.20 Labor Matters......................................................18
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1.21 Major Customers and Suppliers......................................19
1.22 Product Warranty and Product Liability.............................20
1.23 Affiliates'Relationships to Company................................20
1.24 Year 2000 Compliance...............................................20
1.25 Non-Compete Agreements.............................................20
1.26 Independent Contractors............................................21
1.27 No Other Representations...........................................21
4. Individual Representations and Warranties of each Shareholder.........21
4.1 Title to Shares....................................................21
4.2 Authorization; Validity of Agreement...............................21
4.3 No Violations; Governmental Filings................................22
5. Representations and Warranties of the Buyer Group.....................22
5.1 Organization of the Buyer..........................................22
5.2 Authorization; Validity of Agreement...............................22
5.3 No Violations; Governmental Filings................................23
6. Covenants and Agreements..............................................23
6.1 [intentionally omitted]............................................23
6.2 Escrow Agreement...................................................23
6.3 Noncompetition; Confidentiality....................................23
6.4 General Release....................................................24
6.5 Conduct of the Business by the Company Pending the Closing.........25
6.6 Access to Information..............................................26
6.7 HSR Filings; Consents..............................................26
6.8 Public Statements..................................................27
6.9 Repayment of Indebtedness..........................................27
6.10 Payment of Management Bonus........................................27
6.11 Payment of Transactional Fees......................................27
6.12 Tax Returns........................................................27
6.13 Appraisal Rights...................................................28
6.14 Other Actions......................................................28
6.15 Indemnification of Directors and Officers and Controlling Persons..28
6.16 Severance..........................................................29
7. Conditions to the Closing.............................................29
7.1 Conditions Precedent to the Shareholders'Obligations to Close......29
7.2 Conditions Precedent to the Buyer Group's Obligations to Close.....30
8. Closing Deliveries and Actions........................................31
8.1 By the Buyer Group.................................................31
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8.2 By the Shareholders................................................31
9. Termination...........................................................32
10. Indemnification.......................................................33
10.1 Indemnification by the Shareholders................................33
10.2 Indemnification by the Company.....................................34
10.3 Indemnification by the Buyer Group.................................34
10.4 Time Limitations...................................................34
10.5 Limitations on Amount; Order of Claims.............................35
10.6 Procedure for Indemnification--Third Party Claims
other than Taxes..................................................36
10.7 Procedure for Indemnification - Tax Claims.........................37
10.8 Mitigation of Damages..............................................37
10.9 Knowledge and Material Qualifiers..................................38
10.10 Recovery of Legal Fees and Expenses................................38
10.11 Certain Environmental Matters......................................38
10.12 Breach of Independent Contractor Representation....................39
11. Miscellaneous.........................................................39
11.1 Disclosure Schedule................................................39
11.2 Shareholders'Representative........................................39
11.3 Company's Knowledge................................................40
11.4 Amendments.........................................................40
11.5 Waiver.............................................................40
11.6 Jurisdiction.......................................................40
11.7 Notices............................................................41
11.8 Entire Agreement...................................................42
11.9 Further Assurances.................................................42
11.10 Severability.......................................................42
11.11 Assignment.........................................................43
iii
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Schedules
Schedule 3.1(a) Qualifications to do Business
Schedule 3.1(c) Directors and Officers
Schedule 3.2(a) Capitalization
Schedule 3.4 Financial Statements
Schedule 3.5 Litigation
Schedule 3.6 Undisclosed Liabilities
Schedule 3.7 Intellectual Property
Schedule 3.8 Leased Real Property; Material Facilities
Schedule 3.9(a)(i) Leased Personal Property
Schedule 3.9(a)(ii) Liens
Schedule 3.10(a) Compliance with Laws and Orders
Schedule 3.10(b) Licenses and Permits
Schedule 3.12 Accounts Receivable
Schedule 3.13 Material Contracts
Schedule 3.14 Tax Audits
Schedule 3.15 Environmental
Schedule 3.16 Insurance
Schedule 3.17 Bank Accounts
Schedule 3.18(a) Employee Benefit Plans
Schedule 3.19 Absence of Changes
Schedule 3.21(a) Major Customers
Schedule 3.21(b) Major Suppliers
Schedule 3.21(c) Sales Representatives
Schedule 3.22 Product Liability
Schedule 3.23 Affiliate Obligations
Schedule 3.25 Non-compete Agreements
Schedule 4.1 Liens on the Shares
Schedule 4.3 Governmental Filings (Shareholders)
Schedule 5.3(b) Governmental Filings (Buyer Group)
Schedule 6.3 Shareholders Subject to Non-Compete
Schedule 6.7(b) Consents
Schedule 6.10 Management Bonus
Schedule 6.11 Transactional Fees
Schedule 7.2(d) Material Consents
Schedule 10.11(c) Environmental Compliance
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Exhibits
Exhibit A Shareholders
Exhibit B Form of Certificate of Merger
Exhibit C Form of Promissory Note
Exhibit D Working Capital Schedule
Exhibit E [intentionally omitted]
Exhibit F Form of Escrow Agreement
Exhibit 8.1(i) Opinion of Counsel to the Buyer Group
Exhibit 8.2(h) Opinion of Counsel to the Shareholders
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AGREEMENT AND PLAN OF MERGER
Dated February 4, 1999
The parties to this Agreement are PlayCore Wisconsin, Inc., a corporation
organized under the laws of the state of Wisconsin and formerly known as Newco,
Inc. (the "Parent"), and HI Acquisition Corp., a corporation organized under the
laws of the state of Delaware and a wholly-owned subsidiary of Parent (the
"Buyer" and together with Parent, the "Buyer Group"), on the one hand, and
Heartland Industries, Inc. (DE), a corporation organized under the laws of the
state of Delaware (the "Company") and those shareholders of the Company set
forth on Exhibit A hereto (collectively the "Shareholders"), on the other hand.
The Company is sometimes referred to herein as the "Surviving Corporation."
RECITALS
A. The Buyer Group, the Company and the Shareholders desire that Buyer
merge with and into the Company (the "Merger"), upon the terms and conditions
set forth herein and in accordance with the Delaware General Corporation Law
("DGCL") with the result that the Company will continue as the Surviving
Corporation and the separate existence of the Buyer shall cease.
B. The Board of Directors of the Company has determined that the Merger
is in the best interests of the Company's stockholders and has duly adopted a
resolution declaring advisable and approving this Agreement and the transactions
contemplated thereby.
C. The Shareholders wish to designate an agent and attorney-in-fact with
authority to act on their behalf in connection with the Merger and the
transactions contemplated herein.
D. The Company is engaged in the business of manufacturing and selling
yard barns, outdoor storage sheds and buildings, garages and weekender cabins
(the "Business").
It is therefore agreed as follows:
1. The Merger.
1.1 The Merger. Upon the terms and conditions hereinafter set forth and
in accordance with the DGCL, at the Effective Time (as hereinafter defined),
Buyer shall be merged with and into the Company and thereupon the separate
existence of Buyer shall cease and the Company shall continue to exist as the
Surviving Corporation under and be governed by the DGCL.
1.2 Effect of the Merger. After the Effective Time, pursuant to the DGCL,
the separate existence of Buyer will cease and the Surviving Corporation shall
succeed, without other transfer, to all the rights and property of Buyer and
shall be subject to all the debts and liabilities of Buyer in the same manner as
if the Surviving Corporation had itself incurred them.
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1.3 Adoption by Stockholders. Upon the execution of this Agreement, the
stockholders of the Company holding at least a majority of the outstanding
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), shall adopt this Agreement and approve the transactions contemplated
herein and the Certificate of Merger (as defined in Section 1.5), the Escrow
Agreement (as defined in section 6.2) and the Note (defined in Section 2.1(a))
(the Certificate of Merger, the Escrow Agreement and the Note are collectively
referred to herein as the "Ancillary Instruments") by written consent action
(the "Stockholders' Consent") as permitted by the DGCL and the Company's
Certificate of Incorporation and Bylaws.
1.4 Adoption of this Agreement by the Sole Stockholder of Buyer. This
Agreement has been adopted by Parent, which is the sole stockholder of Buyer,
pursuant to a written consent action as permitted by the DGCL.
1.5 Consummation of the Merger. The Merger shall become effective upon
the filing with the Secretary of State of the state of Delaware of a duly
executed Certificate of Merger in the form of Exhibit B (the "Certificate of
Merger"). The Merger shall be effective when the Certificate of Merger has been
filed. The date and time when the Merger is effective is referred to as the
"Effective Time".
1.6 Charter; Bylaws; Directors and Officers. The Certificate of
Incorporation of the Company from and after the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation as provided by the
DGCL. The Bylaws of the Company from and after the Effective Time shall be the
Bylaws of the Surviving Corporation. The initial directors and officers of the
Surviving Corporation on and after the Effective Time shall be the directors and
officers, respectively, of the Buyer immediately prior to the Effective Time, in
each case until their respective successors are duly elected and qualified.
1.7 The Closing. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53213 at 10:00 a.m., local time, on February 15, 1999, or such other date, time
or place as may be agreed to in writing by the parties hereto (the "Closing
Date").
2. Conversion of Shares.
2.1 Conversion of Shares. By virtue of the Merger and without any action
on the part of the holders of capital stock of the Company, at the Effective
Time all outstanding shares of capital stock of the Company shall be converted
as follows:
(a) Company Series A Preferred Stock. The shares of series A preferred
stock of the Company, par value $.01 per share (the "Series A Preferred Stock"),
issued and outstanding immediately prior to the Effective Time shall be
converted into (i) the right to receive in cash an aggregate amount equal to the
Series A Cash Consideration, (ii) the right to receive in cash an aggregate of
$1,321,600, plus any interest earned thereon in accordance with the terms of the
Escrow Agreement (as defined herein) less any amounts paid to Buyer Group in
accordance with the terms thereof (the "Additional Series A Consideration") and
(iii) the right to receive an
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aggregate of $500,000 pursuant to a subordinated Promissory Note (the "Note"),
substantially in the form of Exhibit C hereto (the "Note Consideration" together
with the Series A Cash Consideration and the Additional Series A Consideration,
the "Series A Consideration"), in each case to be paid to the Shareholders'
Representative (as defined herein) in accordance with Section 2.2 allocated as
set forth in Schedule 2.2. Immediately after the Effective Time, all shares of
Series A Preferred Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive his, her or its pro rata share of
the Series A Consideration allocated as set forth in Schedule 2.2. The Series A
Cash Consideration is subject to adjustment as set forth in Sections 2.3 and
2.4. "Series A Cash Consideration" shall mean an amount equal to $4,970,863 (A)
plus or minus the amount of Cash (defined below) as of January 31, 1999, (B)
less (1) the amount paid by the Company to certain management personnel of the
Company pursuant to Section 6.10, (2) the amount paid by the Company to certain
third parties pursuant to Section 6.11, (3) the amount of the Cumulative
Consideration and Common Consideration, as such terms are defined in Section
2.1(b) and (c) below, and (C) either (1) adjusted downward dollar for dollar by
the amount the outstanding balance (principal and accrued interest) under the
Provident Loan Agreement as of January 31, 1999 is greater than $6,207,537 or
(2) adjusted upward dollar for dollar by the amount the outstanding balance
under the Provident Loan Agreement as of January 31, 1999 is less than
$6,207,537. "Cash" shall mean the sum of (whether positive or negative) the cash
in the Bank Accounts (as defined herein) as of January 31, 1999 plus the amount
of cash evidenced by the checks listed on the Branch Check List (as defined
herein) as determined in accordance with past practice of the Company.
(b) Company Cumulative Preferred Stock. The shares of cumulative
preferred stock of the Company, par value $.01 per share (the "Cumulative
Preferred Stock"), issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive in cash an aggregate of the
product of .01 and the number of shares of Cumulative Preferred Stock
outstanding immediately prior to the Effective Time (the "Cumulative
Consideration") to be paid to the Shareholders' Representative in accordance
with Section 2.2 allocated as set forth in Schedule 2.2. Immediately after the
Effective Time, all shares of Cumulative Preferred Stock shall no longer be
outstanding and shall automatically be canceled and retired and cease to exist,
and each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive his, her or
its pro rata share of the Cumulative Consideration allocated as set forth in
Schedule 2.2.
(c) Company Common Stock. The shares of Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive in cash an aggregate of the product of .01 and the number of
shares of Common Stock outstanding immediately prior to the Effective Time (the
"Common Consideration") to be paid to the Shareholders' Representative in
accordance with Section 2.2 allocated as set forth in Schedule 2.2. Immediately
after the Effective Time, all shares of Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and cease to exist,
and each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive his, her or
its pro rata share of the Common Consideration allocated as set forth in
Schedule 2.2.
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(d) Buyer's Shares. Each of the shares of common stock, par value $.01 of
the Buyer (the "Buyer's Common Stock"), issued and outstanding immediately prior
to the Effective Time shall, upon surrender of the certificate formerly
representing the Buyer's Common Stock, be converted into and become one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
(e) Dissenting Shareholders. Any issued and outstanding shares of capital
stock held by a stockholder of the Company who shall not have voted in favor of
the Merger nor consented thereto in writing and who shall have properly
demanded, in writing, appraisal for such shares in accordance with Section 262
of the DGCL and who objects to the Merger and complies with all of the
provisions of the DGCL concerning the right of such person to dissent from the
Merger and demand appraisal of such shares (a "Dissenting Stockholder") shall
not be converted into the right to receive any portion of the Merger
Consideration (as defined below), but shall, from and after the Effective Time,
represent only the right to receive such consideration as may be determined to
be due to such Dissenting Stockholder pursuant to the DGCL; provided, however,
shares of stock outstanding immediately prior to the Effective Time and held by
a Dissenting Stockholder who shall, after the Effective Time, effectively
withdraw his, her or its demand for appraisal or lose his, her or its right of
appraisal, in either case pursuant to the DGCL, of such shares, shall, if such
shares are shares of Series A Preferred Stock, be deemed to be converted, as of
the Effective Time, into the right to receive his, her or its pro rata share of
the Class A Consideration in accordance with this Article 2, without interest,
or, if such shares are shares of Cumulative Preferred Stock, be deemed to be
converted, as of the Effective Time, into the right to receive his, her or its
pro rata share of the Cumulative Consideration in accordance with this Article
2, without interest, or if such shares are shares of Common Stock, be deemed to
be converted, as of the Effective Time, into the right to receive his, her or
its pro rata share of the Common Consideration in accordance with Article 2,
without interest. Any party hereto which receives a demand from a Dissenting
Stockholder for payment of his, her or its shares of Company stock shall give
prompt notice of such demand to each other party hereto. Such notice shall
include the identity of the Dissenting Shareholder and a summary of such
Dissenting Shareholder's demand.
2.2 Payment of Merger Consideration.
(a) Common Stock, Cumulative and Series A Considerations. The Common
Stock Consideration, Cumulative Consideration and Series A Consideration shall
be paid by the Buyer in accordance with Schedule 2.2 and delivered to the
Shareholders' Representative for payment to the stockholders of the Company in
accordance with Section 2.2(d).
(b) Additional Series A Consideration. The Additional Series A
Consideration shall be paid by the Buyer to the escrow agent (the "Escrow
Agent") under the Escrow Agreement to be entered into pursuant to Section 6.2.
(c) Note Consideration. Payments under the Note shall be paid by the
Buyer Group to the Shareholders' Representative in accordance with the terms of
the Note and this Agreement. Payments under the Note may be offset pursuant to
Section 10.5(b) by the amount of any indemnification claim which the Buyer
Group, Buyer's Affiliates or the Surviving Corporation may have pursuant to
Article 10; provided, however, that if Shareholders' Representative objects
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to Buyer's offset for amounts due under the Note for any such claim within 30
days of notice of such claim and such claim is greater than $50,000, or the
aggregate of such claim and all prior claims for which the Buyer Group claimed
an offset is greater than $75,000, the amount due under the Note (to the extent
of such claim) shall be paid to the Escrow Agent to be held as Additional Series
A Consideration and distributed in accordance with the Escrow Agreement.
(d) Shareholders' Representative. The Shareholders' Representative shall
be solely responsible for distributing to each holder of shares of Common Stock,
Cumulative Preferred Stock and Series A Preferred Stock such holder's pro rata
share of Common Consideration, Cumulative Consideration and Series A
Consideration (collectively, the "Merger Consideration"), respectively, in
accordance with the number of shares of Common Stock, Cumulative Preferred Stock
and Series A Preferred Stock owned by such holder immediately prior the
Effective Time as set forth on Schedule 3.2. Shareholders' Representative shall
distribute Merger Consideration to stockholders only upon receipt by
Shareholders' Representative of such holder's stock certificate evidencing
Series A Preferred Stock, Cumulative Preferred Stock or Common Stock,
respectively. Shareholders' Representative shall forward all such certificates
to the Company upon receipt. If the Shareholders' Representative fails or is
unable to distribute all of the Merger Consideration received by it within 120
days of such receipt, it shall promptly return any remaining Merger
Consideration to the Buyer Group. Buyer Group shall indemnify the Shareholders'
Representative and the Shareholders against any legitimate claim by any person
who held capital stock of the Company immediately prior to the Effective Time
for payment of such returned Merger Consideration; provided, however, that Buyer
Group's indemnification obligation under this Section shall not exceed in the
aggregate the amount of such returned Merger Consideration. No interest shall
accrue or be payable on any Merger Consideration except as provided in the Note
or under Delaware law. Neither the Buyer Group, Surviving Corporation nor the
Shareholders' Representative shall be liable to any holder of shares of Common
Stock, Cumulative Preferred Stock or Series A Preferred Stock for any Merger
Consideration (or dividends or distributions with respect thereto) delivered to
a public official as required by any applicable abandoned property, escheat or
similar law.
2.3 Working Capital; Adjustment to Series A Consideration.
(a) Within 90 days following the Closing, the Buyer Group shall cause to
be delivered to the Shareholders' Representative, a "Working Capital Schedule"
as of January 31, 1999 (the "Closing Working Capital Schedule") to be prepared
in accordance with the past practices of the Company and the results of the
Inventory (as defined below). A Working Capital Schedule Forecast as of January
31, 1999 is annexed hereto as Exhibit D (the "Working Capital Schedule
Forecast") which has been prepared by the Company in accordance with the past
practices of the Company. The Closing Working Capital Schedule shall set forth
the Buyer Group's calculations at and as of January 31, 1999 of the Net Working
Capital and the Series A Cash Consideration Adjustment , as such terms are
defined in subsection (e) of this Section 2.3. On January 29, 1999, Company has
conducted its standard month end physical inventory in accordance with the past
practices of the Company (the "Inventory"). The Company shall allow Buyer Group
and its representatives and advisors to conduct such testing of the Inventory
prior to
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the Closing Date as they deem appropriate, and if discrepancies are determined,
the Buyer Group may require the Company to conduct a second inventory that shall
be conducted no more than three days prior to the Closing Date at which Buyer
Group and its representatives and advisors may be present and fully participate
in all aspects of such second inventory.
(b) The Shareholders' Representative and the Shareholders' accountants
shall review the same and advise the Buyer Group within 45 days of receipt of
the Closing Working Capital Schedule of any dispute or disagreement.
(c) Any dispute or disagreement which may arise between the Buyer Group
and the Shareholders' Representative as to the appropriate amount of the Series
A Cash Consideration Adjustment calculated in accordance with this Agreement
shall be resolved in the following manner:
(i) If the Shareholders' Representative disputes the amount of the
Series A Cash Consideration Adjustment, he shall notify the Buyer Group
in writing (a "Dispute Notice"), within 45 days after receipt of the
Closing Working Capital Schedule, that such party disputes the amount of
the Series A Cash Consideration Adjustment as set forth in the Closing
Working Capital Schedule. Such notice shall specify in reasonable detail
the nature of the dispute and shall include a computation of the amount
claimed as the proper amount of the Series A Cash Consideration
Adjustment calculated in accordance with this Agreement.
(ii) During the 45 day period following the date of delivery of
the Dispute Notice, the Shareholders' Representative and the Buyer Group
shall in good faith attempt to resolve such dispute by mutual agreement;
if the Shareholders' Representative and the Buyer Group are able to
resolve the dispute, the parties shall set forth the Series A Cash
Consideration Adjustment in a written agreement signed by both parties
(the "Series A Cash Consideration Adjustment Agreement").
(iii) If at the end of the 45 day period following the date of
delivery of the Dispute Notice, the Shareholders' Representative and the
Buyer Group shall have failed to reach a mutual written agreement with
respect to the proper amount of the Series A Cash Consideration
Adjustment, the matter shall be referred to the Chicago office of Arthur
Andersen, independent certified public accountants (the "Arbitrator"),
which shall act as an arbitrator and shall issue and deliver, by personal
delivery, its report (the "Arbitrator's Report") as to its calculation of
the Series A Cash Consideration Adjustment in accordance with this
Agreement within 60 days after the date such dispute is referred to the
Arbitrator. The Arbitrator shall have the right to conduct such
investigation as it deems necessary in order to perform its duties under
this Section 2.3, and each party shall cooperate fully with such
investigation. The Buyer Group on the one hand and the Shareholders on
the other hand shall bear the costs and expenses of the Arbitrator in
connection with any such arbitration. This provision for arbitration
shall be specifically enforceable by the parties hereto and the decision
of the Arbitrator in accordance with the provisions hereof shall be
final, conclusive, binding and enforceable against each of the parties
hereto.
(d) Not later than the close of business on the second business day
following the Determination Date (as defined in subsection (e) of this Section
2.3), (i) if the Series A Cash
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Consideration Adjustment is a negative number, the Shareholders shall be jointly
and severally obligated to deliver to the Buyer Group in the aggregate an amount
equal to the absolute value of such number or (ii) if the Series A Cash
Consideration Adjustment is a positive number, the Buyer Group shall be jointly
and severally obligated to deliver to the Shareholders' Representative an amount
equal to such number, provided, however, that the amount delivered by the Buyer
Group pursuant to this Section 2.3(d)(ii) shall not exceed the difference
between (1) principal and accrued but unpaid interest thereon outstanding under
the Provident Loan Agreement (as defined herein) as of January 31, 1999 less the
amount of Cash (as defined in Section 2.1(a)) and (2) $5,302,000. If the Series
A Cash Consideration Adjustment is zero, than no amount shall be due under this
Agreement to any party hereto.
(e) As used herein, the following terms shall have the following
meanings:
(i) (a) "Current Assets" shall mean the current assets of the
Company, specified in Exhibit D, calculated in accordance with the past
practices of the Company, and (b) "Current Liabilities" shall mean the
current liabilities of the Company, specified in Exhibit D, calculated in
accordance with the past practices of the Company, less any Accrued
Interest and Management Fees (as described in Exhibit D).
(ii) "Net Working Capital" shall mean Current Assets less Current
Liabilities, as calculated in accordance with this Section 2.3.
(iii) "Determination Date" shall mean the earlier of (A) the date
which is 45 days following the delivery of the Closing Working Capital
Schedule, provided that no Dispute Notice shall have been delivered to
either the Buyer Group or the Shareholders' Representative by such date,
and (B) if a Dispute Notice is timely delivered in accordance with
subsection (e) of this Section 2.3, the earlier of (1) mutual agreement
by the parties of the amount of the Series A Cash Consideration
Adjustment and (2) the date of delivery of the Arbitrator's Report.
(iv) "Series A Cash Consideration Adjustment " shall mean the
difference between $3,300,000 and the Net Working Capital. The Series A
Cash Consideration Adjustment will be a positive number if the Net
Working Capital is greater than $3,300,000 and a negative number if the
Net Working Capital is less than $3,300,000 in each case, as calculated
and set forth in (A) the Closing Working Capital Schedule, if no Dispute
Notice shall have been delivered to either the Buyer Group or the
Shareholders' Representative pursuant to this Agreement by the date which
is 45 days following the delivery of the Closing Working Capital
Schedule, (B) the Series A Cash Consideration Adjustment Agreement, if
any, if the parties mutually agree in writing to the Series A Cash
Consideration Adjustment, or (C) the Arbitrator's Report, if such report
is required and delivered in accordance with this Agreement.
2.4 Company Obligations Adjustment. After taking into consideration the
payments (the "Sections 6.9, 6.10 and 6.11 Payments") to be made by the Company
to the third parties referred to in Sections 6.9, 6.10 and 6.11 (the
"Obligees"), (a) any additional amounts determined to be actually owed to the
Obligees by the Company shall, after receipt of invoices or
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other documentation from each Obligee setting forth the final amount owed by the
Company to such Obligee for the obligations described in Sections 6.9, 6.10 and
6.11, be paid by the Shareholders to the Buyer Group and (b) any amount by which
the Section 6.9, 6.10 and 6.11 Payments were greater than the actual amounts
owed to the Obligees by the Company shall, upon receipt by the Surviving
Corporation of such amount from the Obligees, be paid by the Surviving
Corporation to the Shareholders' Representative as additional Series A Cash
Consideration to be distributed by the Shareholders' Representative pursuant to
Section 2.2.
2.5 Uncollected Checks. If any of the checks listed in the Branch Check
List fail to result in actual credit to the Company, the Shareholders shall be
jointly and severally liable to pay to the Buyer Group the amount uncollected on
such checks, and shall make such payment within 45 days of the Closing Date.
Such payment by the Shareholders shall be conditioned upon an assignment to the
Shareholders of the Company's rights against the makers of such checks.
2.6 Stock Options, Warrants, Treasury Shares, Etc. Prior to the Effective
Time, the Company shall cause each outstanding stock option, warrant or other
right to purchase any capital stock of the Company, if any, whether or not then
exercisable or vested, to be canceled, and no cash or other consideration shall
be paid or delivered in exchange therefor. Any shares of capital stock held in
the treasury of the Company, if any, shall be canceled and retired and no cash,
securities or other consideration shall be paid in respect of such shares.
2.7 Closing of Stock Transfer Books. On and after the date of this
Agreement there shall be no transfers on the stock transfer books of the Company
of shares of capital stock of the Company that were issued and outstanding
immediately prior to the date hereof.
3. Representations and Warranties of the Shareholders and the Company.
The Company and Shareholders, severally in the manner provided in Section
10.1(b), make the following representations and warranties to the Buyer Group,
each of which is true and correct on the date hereof and shall survive the
Closing of the transactions provided for herein as set forth in Section 10.4.
3.1 Corporate.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware, and is duly qualified as
a foreign corporation in all jurisdictions in which it is required to be
qualified. The states in which the Company is licensed or qualified to do
business are listed in Schedule 3.1(a).
(b) The Company has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as and where such
business is now being conducted.
(c) The copies of the Certificate of Incorporation and Bylaws of the
Company, including any amendments thereto, which have been delivered by the
Company to Buyer Group are true, correct and complete copies of such instruments
as presently in effect. The corporate minute book and stock records of the
Company which have been furnished to Buyer Group for inspection
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are true, correct and complete and accurately reflect all material corporate
action taken by the Company. The directors and officers of the Company are
listed in Schedule 3.1(c) (the "Directors and Officers").
(d) The Company has all necessary power, legal right, capacity and
authority to execute and deliver this Agreement and each Ancillary Instrument to
which it is a party, perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. This Agreement and
each Ancillary Instrument to which the Company is a party has been authorized by
the Company's Board of Directors and will be authorized by the stockholders of
the Company upon execution of the Stockholders' Consent and, except for
execution of the Stockholders' Consent, no further action by the Company's Board
of Directors or stockholders is necessary therefore.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of 1,900,000
shares of Common Stock, 100,000 shares of Series A Preferred Stock and 1,000
shares of Cumulative Preferred Stock. There are 1,000,000 shares of Common
Stock, 1,143.32 shares of Series A Preferred Stock and 85.6547 shares of
Cumulative Preferred Stock issued and outstanding (the Series A Preferred Stock
and Cumulative Preferred Stock are collectively referred to as the "Preferred
Stock"). Schedule 3.2(a) sets forth each holder of Common Stock and Preferred
Stock and the number of shares of Common Stock, Series A Preferred Stock and
Cumulative Preferred Stock held by each such holder immediately prior to the
Effective Time. All such shares of capital stock of the Company are validly
issued, fully paid and nonassessable. Except as set forth in Schedule 3.2(a),
there are no (i) securities convertible into or exchangeable for any of the
Company's capital stock or other securities, (ii) options, warrants or other
rights to purchase or subscribe to capital stock or other securities of the
Company or securities which are convertible into or exchangeable for capital
stock or other securities of the Company, or (iii) Contracts or arrangements of
any kind relating to the issuance, sale or transfer of any capital stock or
other equity securities of the Company, any such convertible or exchangeable
securities or any such options, warrants or other rights.
(b) The Company does not own nor ever has owned any outstanding shares of
capital stock or other equity interests of any partnership, joint venture,
trust, corporation, limited liability company or other entity and there are no
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock or equity interest of the Company.
3.3 No Violation. Neither the execution or delivery by the Company of
this Agreement or any of the Ancillary Instruments to which it is a party, the
performance by the Company of its obligations hereunder or thereunder nor the
consummation by the Company of the transactions contemplated hereby will, (a)
violate any provision of the Company's Certificate of Incorporation, Bylaws or
other organizational documents, (b) except for the Contracts set forth on
Schedule 6.7(b), violate any provision of any Contract to which the Company is a
party or by which any of the properties or assets of the Company may be bound or
otherwise subject, (c) violate any statute, law, ordinance, rule or regulation
(collectively, "Laws") or any order, writ, injunction, judgment, plan or decree
(collectively, "Orders") of any court, arbitrator, department, commission,
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board, bureau, agency, authority, instrumentality or other body, whether
federal, state, municipal, foreign or other (collectively, "Government
Entities"), or (d) except for applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), will require any
authorization, consent, approval, exemption or other action by or notice to any
Government Entity.
3.4 Financial Statements. Schedule 3.4 contains (i) the balance sheet,
related statements of operations, changes in shareholder's equity and cash flows
(including the related notes) of the Company for the fiscal years ended January
31, 1997 and January 31, 1996 respectively audited by Coopers & Lybrand L.L.P.
(now known as PricewaterhouseCoopers) and the report of that firm is included in
Schedule 3.4, and the draft audited balance sheet, related statements of
operations, changes in shareholder's equity and cash flows (including the
related notes) of the Company for the fiscal year ended January 31, 1998 (all of
the foregoing, the "Financial Statements") and (ii) a balance sheet as of
November 30, 1998 and the related statement of operations, changes in
shareholder's equity and cash flows for the nine-month period then ended (the
"Interim Financial Statement"). The Financial Statements and Interim Financial
Statement are true, complete and accurate, have been prepared in accordance with
the books and records of the Company, fairly present the financial position and
results of operations and cash flow of the Company as of the dates thereof and
for the periods covered thereby and have been prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP"), except
with respect to the Interim Financial Statement for the absence of footnotes and
for adjustments and accruals.
3.5 No Litigation. Except as set forth in Schedule 3.5, there is no
action, suit, arbitration, proceeding, investigation or inquiry, whether civil,
criminal or administrative ("Litigation") pending or, to the Knowledge of the
Company, threatened against Company, its directors (in such capacity), its
business or any of its assets. Except as set forth in Schedule 3.5, neither
Company nor its business or assets is subject to any Order of any Government
Entity.
3.6 No Undisclosed Liabilities. Except as and to the extent specifically
disclosed in the Interim Financial Statement, or in Schedule 3.6, Company does
not have any liabilities, commitments or obligations (secured or unsecured, and
whether accrued, absolute, contingent, direct or indirect), other than
commercial liabilities and obligations incurred since the date of the Interim
Financial Statement in the ordinary course of business and consistent with past
practice.
3.7 Intellectual Property; Computer Software. Schedule 3.7 lists all
trademarks, tradenames, business identifiers, service marks, logos, assumed
names, copyrights, patents, material computer programs, and all material related
registrations and applications therefor (collectively, "Intellectual Property")
that are owned by the Company or used by the Company in the operation of its
business. All such Intellectual Property, together with all inventions, know
how, trade secrets, discoveries, improvements, designs, shop and royalty rights,
all other types of intellectual property that are owned by the Company or used
by the Company in the operation of its business, are referred to herein as the
"Trade Rights". Except as set forth in Schedule 3.7, the Company has all rights
by virtue of ownership, license or other agreement to use all Trade Rights in
connection with its business consistent with past practice. All Trade Rights
shown as registered in Schedule 3.7 has been properly registered, all pending
registrations and applications have been properly made and filed and all
annuity, maintenance, renewal and other fees relating to registrations or
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applications are current. The Company has all Trade Rights to conduct the
Business of Company as it is currently being conducted. The operation of the
Company's Business as it is currently conducted is not infringing and has not
infringed any Trade Rights of another person or entity, nor to the Knowledge of
the Company is any other person or entity infringing the Trade Rights of the
Company utilized by the Company in the operation of its Business as it is
currently conducted. Company has not granted any license or made any assignment
of any Trade Rights, nor does Company pay any royalties or other consideration
for the right to use any Trade Rights of others. Without limiting any of the
foregoing general representations and warranties, except as disclosed on
Schedule 3.7, Company has not entered into any contracts, commitments or
understandings regarding Trade Rights related to the new yard barn door further
described in Schedule 3.7 and, to the Shareholders' or Company's knowledge, no
person or entity other than Company has made or asserted any claim or right to
such Trade Rights.
3.8 Owned Real Property; Leased Property. The Company does not own, and
has never owned, any real property. The Company leases no real property other
than those listed in Schedule 3.8 and Company is not a party to any lease of
real property other than those described in Schedule 3.8. All real property
leases described in Schedule 3.8 to which the Company is a party are in full
force and effect in accordance with their terms and no real property lease has
been assigned, modified, supplemented or amended except as set forth in Schedule
3.8. Company is not in default under any real property lease, nor has any event
or omission occurred which through the passage of time or the giving of notice,
or both, would constitute a default thereunder, and to the knowledge of Company,
no landlord or subtenant is in default under any such real property lease, nor
has any event or omission occurred, which through the passage of time or the
giving of notice, or both, would constitute a default thereunder. Company has
delivered to Buyer Group true, complete and correct copies of each real property
lease listed in Schedule 3.8, and all assignments, supplements and amendments
related thereto, each such real property lease represents the entire agreement
of understanding between each respective landlord or subtenant and Company with
respect to the leased real property. Schedule 3.8 sets forth the material terms
for each real property lease, which terms are true, complete and correct. No
security deposits have been deposited with any landlord except as set forth in
Schedule 3.8. Except as set forth on Schedule 6.7(b), no consents are required
from any landlord as a result of the transactions contemplated in this
Agreement. These are now in full force and effect for all leased real property
duly issued certificates of occupancy permitting the real property and
improvements located thereon to be legally used and occupied as the same are now
constituted. To Company's knowledge, with respect to the leased real property
comprising the facilities designated as material facilities on Schedule 3.8 (the
"Material Facilities"), (a) no fact or condition exists which would prohibit or
adversely affect the ordinary rights of access to and from the leased real
property from and to the existing highways and roads and there is no pending or
threatened restriction or denial, governmental or otherwise, upon such ingress
and egress, and (b) there is not (i) any claim of adverse possession involving
any of the Material Facilities, (ii) any property which encroaches on any of the
boundaries of any Material Facility, or (iii) any structure of any other party
which encroaches on the boundaries of any Material Facility. To Company's
knowledge, no public improvements have been commenced and none are planned in
which either case may result in special assessments against or otherwise have a
material adverse effect on any Material Facility. To Company's knowledge,
neither in whole nor any part of the leased real property is subject to any
governmental decree or order to be sold or is being
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condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor has any such condemnation,
expropriation or taking been proposed.
3.9 Title to and Condition of Property.
(a) Title. The Company has good title, free and clear of all mortgages,
liens, security interests, claims, pledges, licenses, options, conditional sales
contracts, assessments, levies, easements, covenants, reservations,
restrictions, limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens"), to all of Company's assets, business and properties,
including without limitation all such assets and properties reflected in the
Interim Financial Statement, except for (i) those items of the leased personal
property listed on Schedule 3.9(a)(i) which are leased by the Company pursuant
to leases listed on Schedule 3.13, (ii) the Liens set forth on Schedule
3.9(a)(ii), and (iii) Liens, such as liens for taxes not yet delinquent,
mechanics' liens or Liens for municipal and zoning ordinances and easements for
public utilities, which do not materially interfere with or restrain the
Company's operation of the Business or the use of the Company's assets and
properties.
(b) Condition. All material assets owned or utilized by the Company, are
in reasonable operating condition and repair (normal wear and tear excepted).
3.10 Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 3.10(a), Company is in
Material compliance with all applicable Laws and Orders, including, without
limitation, those applicable to discrimination in employment, occupational
safety and health, trade practices, competition and pricing, product warranties,
zoning, building and sanitation, employment, retirement and labor relations,
product advertising and the Environmental Laws (as hereinafter defined). Except
as set forth in Schedule 3.10(a), since January 1, 1994, the Company has not
received notice of any Material violation or alleged violation of, and is
subject to no Liability for past or continuing Material violation of, any Laws
or Orders. All reports and returns required to be filed by Company with any
Government Entity have been filed, and were accurate and complete when filed.
Without limiting the generality of the foregoing (i) Company has made all
required payments to its unemployment compensation reserve accounts with the
appropriate governmental departments of the states where it is required to
maintain such accounts, and each of such accounts has a positive balance and
(ii) Company has delivered to Buyer Group copies of all reports of Company for
the past five (5) years required under the federal Occupational Safety and
Health Act of 1970, as amended, and under all other applicable health and safety
laws and regulations. The deficiencies, if any, noted on such reports have been
corrected.
(b) Licenses and Permits. Except as set forth in Schedule 3.10(b),
Company has all Material licenses, permits, approvals, authorizations and
consents of all Government Entities and all certification organizations required
for the conduct of the Business (as presently conducted and as proposed to be
conducted) and operation of Company's facilities. All such licenses, permits,
approvals, authorizations and consents are described in Schedule 3.10(b) and,
except as set forth in Schedule 3.10(b), are in full force and effect. To the
Knowledge of the Company and except as set forth in Schedule 3.10(b), Company
(including its operations, properties and assets) is and has
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been in Material compliance with all such permits and licenses, approvals,
authorizations and consents.
3.11 Inventory. The inventory of the Company has been, and as of the
Effective Time will have been, acquired in the open market, in the ordinary
course of business consistent with past practice, at market prices prevailing at
the time and consists, and as of the Effective Time will have consisted, of a
quality and quantity usable and saleable in the ordinary course of business, net
of reserves.
3.12 Accounts Receivable. The accounts receivable of the Company have
arisen, and as of the Effective Time will have arisen, from arm's length bona
fide transactions actually made in the ordinary course of the Company's business
consistent with past practice. All accounts receivable of the Company are
collectible (net of the reserve shown on the Interim Financial Statement for
doubtful accounts) in the ordinary course of business; are subject to no
counterclaim or setoff other than in the ordinary course of business; and are
not in dispute. Schedule 3.12 contains an aged schedule of accounts receivable
included in the Interim Financial Statement.
3.13 Material Contracts. Schedule 3.13 sets forth a list of every
contract, obligations, understanding, agreement or other commitment (whether
written or oral) (collectively, "Contracts") entered into by the Company that
(i) provides for aggregate future payments by or to the Company of more than
$50,000 or has an unexpired term exceeding six months or may not be canceled
upon more than 30 days notice without any liability, penalty or premium; (ii)
that was entered into by the Company with any Affiliate (as herein defined);
(iii) that involves the purchase, lease or ownership of any real property by or
for the Company; or (iv) that is a loan agreement, promissory note, letter of
credit, guaranty or other evidence of indebtedness (the foregoing, collectively,
"Material Contracts"). The Company has provided to Buyer Group a true, complete
and correct copy of each Material Contract. Without limiting the generality of
the foregoing, Company is not a party to nor is it bound by any Contract
requiring Company to assign any interest in any trade secret or proprietary
information, or prohibiting or restricting Company from competing in any
business or geographical area or soliciting customers or otherwise restricting
it from carrying on its business anywhere in the world. Company is not in
default under any Material Contract, nor to the knowledge of the Company has any
event or omission occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or cause the acceleration
of any of Company's obligations or result in the creation of any Lien on any of
the assets owned, used or occupied by Company. To the Company's knowledge, no
third party is in default under any Material Contract, nor has any event or
omission occurred which, through the passage of time or the giving of notice, or
both, would constitute a default thereunder or give rise to an automatic
termination, or the right of discretionary termination, thereof. Each Material
Contract which by its terms requires the consent of a party thereto to the
Merger and the consummation of the transactions contemplated by this Agreement
is listed on Schedule 6.7(b).
3.14 Taxes.
(a) Tax Returns. The Company: (i) has duly and timely filed with the
appropriate authorities all Tax Returns (as defined below) required to be filed
by or on behalf of the Company on or before the date hereof and has delivered to
the Buyer Group true and complete
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copies of all such Tax Returns for each of its three (3) most recent fiscal
years, which Tax Returns are true, correct and complete, and (ii) has duly and
timely paid or caused to be timely paid all Taxes (as defined below) due and
payable in respect of all periods up to and including the date hereof, including
without limitation all Taxes shown as due on any Tax Return. The provision made
on the Interim Financial Statement for Taxes is sufficient for the payment of
all Taxes not yet payable in respect of all periods up to and including the date
hereof.
(b) Tax Audits. The federal and state income Tax Returns of Company have
been audited by the Internal Revenue Service and appropriate state taxing
authorities for the periods and to the extent set forth in Schedule 3.14, and
Company has not received from the Internal Revenue Service or from the tax
authorities of any state, county, local or other jurisdiction any notice of
underpayment of taxes or other deficiency which has not been paid nor any
objection to any return or report filed by Company. There are outstanding no
agreements or waivers extending the statutory period of limitations applicable
to any Tax Return.
(c) Other. Since January 1, 1993, Company has not (i) filed any consent
or agreement under Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) applied for any tax ruling, (iii) entered into a
closing agreement with any taxing authority, (iv) filed an election under
Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed election
under Section 338(e) of the Code occurred), (v) made any payments, or been a
party to an agreement (including this Agreement) that under any circumstances
could obligate it to make payments that will not be deductible because of
Section 280G of the Code, or (vi) been a party to any tax allocation or tax
sharing agreement. The Company is not a "United States real property holding
company" within the meaning of Section 897 of the Code.
For purposes of this Agreement, "Tax" means any tax, fee, levy, duty,
assessment or other governmental charge imposed by any governmental authority
(including without limitation any income, franchise, gross receipts, property,
sales, use, excise, services, value added, ad valorem, withholding, social
security, estimated, accumulated earnings, transfer, license, privilege,
payroll, profits, capital stock, employment, unemployment, severance, stamp,
minimum, environmental, occupancy, customs or occupation tax), including without
limitation any liability therefor as a result of Treasury Regulation '1.1502-6
(or any comparable state, local or foreign Tax provision), as a transferee
(including under Section 6901 of the Code or any comparable state, local or
foreign Tax provision) or as a result of any Tax sharing or similar agreement,
and any interest, additions to tax and penalties in connection therewith. "Tax
Return" means any return, declaration, report, estimate, claim, information
return or statement and any amendment thereto, together with any supporting
information or schedules, which is filed or required to be filed under
applicable Law in connection with the determination, assessment, collection,
payment, refund or administration of any Tax, whether on a consolidated,
combined, unitary or separate basis or otherwise.
3.15 Environmental Matters.
(a) Definitions. For purposes of this Section 3.15 the following terms
shall have the following meanings:
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"Environmental Claim" shall mean any investigation, notice, violation,
demand, suit, injunction, order, consent decree, penalty, fine, lien,
proceeding, or claim (whether administrative, judicial, or private in nature)
arising (i) pursuant to, or in connection with, a violation by the Company of
any Environmental Law, (ii) in connection with any Hazardous Material, (iii)
from any abatement, removal, remedial, corrective, or other response action by
the Company in connection with a Hazardous Material, Environmental Law or order
of a Government Entity or (iv) from any damage, injury, threat, or harm to the
environment by the Company.
"Environmental Law" shall mean any current Legal Requirement and any
Legal Requirement in effect as of and including the Closing Date pertaining to
the protection of the environment, including without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC
9601 et seq., the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 USC 6901 et seq. ("RCRA"), and any implementing law, and any
amendment, rule, or regulation issued thereunder.
"Governmental Approval" shall mean any permit, license, variance,
certificate, clearance, closure, exemption, decision or action or approval of a
Government Entity which is required under an Environmental Law.
"Hazardous Material" shall mean any material which is hazardous or toxic
to the environment and which is subject to regulation, control or remediation
under Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyl ("PCBs") and petroleum (including crude oil and any
fraction thereof).
"Legal Requirement" shall mean any treaty, convention, statute, law,
regulation, ordinance, Governmental Approval, injunction, judgement, order,
consent decree, or other requirement of any Government Entity relating to
health, safety, natural resources and the environment.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injection, escaping, leaching, dumping, or disposing into
the indoor or outdoor environment including, without limitation, the abandonment
or discarding of barrels, drums, containers, tanks, and other receptacles
containing or previously containing any Hazardous Material.
(b) Warranties and Representations. Except as set forth in Schedule 3.15:
(i) The Company has obtained all necessary Governmental Approvals
necessary for the operations of their businesses and properties.
(ii) The Company has not (a) caused any Release or disposal of any
Hazardous Material at the Real Property or (b) caused any Release of any
Hazardous Material at any third party property.
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(iii) The Company has not received any notification of any actual or
potential responsibility for any Release at any third party property.
(iv) To the Knowledge of the Company, no real property leased or owned by
the Company contains any: (a) underground storage tank, (b) asbestos containing
building material, PCBs, radon, or urea formaldehyde foam, (c) landfill or dump,
or (d) hazardous waste management facility as defined pursuant to RCRA or any
comparable state law.
(v) To the Knowledge of the Company, there is no Environmental Claim
involving any real property leased by the Company or other property formerly
leased or operated by the Company or any subsidiary or to the knowledge of the
Company threatened against the Company or any subsidiary.
(vi) To the Knowledge of the Company, there are no conditions on, under
or in any way affecting the real property owned or leased by the Company which
would impose liability to the Company under any Environmental Law.
(vii) Company does not utilize and has not utilized in the past any
underground storage tanks, or any underground hoists, at any real property owned
or leased by the Company, or formerly owned or leased by the Company.
3.16 Insurance. Schedule 3.16 contains a list of all policies of
insurance covering the Company, including policies of life, fire, theft,
casualty, product liability, workmen's compensation, business interruption,
employee fidelity and other casualty and liability insurance. All such policies
are valid, outstanding and enforceable policies, and no such policy (nor any
previous policy) provides for or is subject to any currently enforceable
retroactive rate or premium adjustment, loss sharing arrangement or other actual
or contingent liability arising wholly or partially out of events arising prior
to the date hereof. No notice of cancellation or termination has been received
with respect to any such policy, and neither Company nor any Shareholder has
knowledge of any act or omission of Company which could result in cancellation
of any such policy prior to its scheduled expiration date. There is no claim by
Company pending under any such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies, and neither
Company nor any of the Shareholders knows of any basis for denial of any claim
under any such policy.
3.17 Bank Accounts. Schedule 3.17 sets forth the names and locations of
all banks, depositories and other financial institutions in which the Company
has an account and the names of all persons authorized to draw thereon (the
"Bank Accounts").
3.18 Employee Benefits.
(a) Schedule 3.18(a) lists each "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other material employee benefit (including, without
limitation, non-qualified), bonus, deferred compensation, incentive, stock
option, phantom equity, stock appreciation rights (or other
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equity-based), severance, change-in-control and fringe benefit plans (each a
"Plan" and collectively the "Plans") currently maintained for the benefit of, or
contributed to or by the Company or any trade or business, whether or not
incorporated that, together with the Company would be deemed treated as a
"single employer" within the meaning of Section 414 of the Internal Revenue Code
of 1986 (the "Code") (an "ERISA Affiliate"). A true, complete and correct copy
of each Plan and any and all documents related thereto have been provided by
Company to the Buyer Group.
(b) Neither the Company nor any ERISA Affiliate has maintained, adopted
or established, contributed to or been required to contribute to, or otherwise
participated or been required to participate in (i) a "multiemployer plan" as
defined in Section 3(37) of ERISA or (ii) a Plan subject to Title IV of ERISA,
Section 302 of ERISA, or Sections 412 and 4971 of the Code. No amount is due or
owing from the Company on account of a "multiemployer plan" or on account of any
withdrawal therefrom.
(c) The Company is in Material compliance with all provisions of ERISA,
the Code and all other Laws applicable to the Plans. The Company has timely
filed all Material reports with respect to any Plans. The Internal Revenue
Service has issued a favorable determination letter with respect to each Plan
that is intended to be a "qualified plan" within the meaning of Section 401(a)
of the Code, and, as of the date hereof there are no circumstances nor any
events that have occurred that could materially adversely affect the qualified
status of any such plan or the related trust.
(d) The Company is not subject to any Material dispute or controversy
under any Law governing the Plans.
(e) There does not now exist, nor do any circumstances now exist that
could reasonably be expected to result in, any Material liability of the Company
under (i) Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and
4971 of the Code, (iv) section 4980B of the Code or sections 502 or 601-608 of
ERISA, or (v) any other legal requirement with respect to any Plan, other than
such liabilities that arise solely out of, or relate solely to, the benefits
provided to participants and beneficiaries of such Plans.
(f) No Plan provides Material benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable law, (ii) death benefits
or retirement benefits under any "employee pension benefit plan" as defined in
Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company, or (iv) benefits the full cost of which
is borne by the current or former employee (or his beneficiary).
3.19 Absence of Certain Changes. Except as and to the extent set forth in
Schedule 3.19, since the date of the Interim Financial Statement there has not
been (a) any material adverse change in the financial condition, assets,
liabilities, business, prospects or operations of Company other than changes
caused by general economic or industry conditions or trends or (b) any loss,
damage or destruction, whether covered by insurance or not, affecting Company's
business or properties.
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3.20 Labor Matters. Within the last five years Company has not
experienced any labor disputes, union organization attempts or any work stoppage
due to labor disagreements in connection with its business. Company is in
compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. There is no unfair labor practice charge
or complaint against Company pending or, to the Company's knowledge, threatened.
There is no labor strike, dispute, request for representation, slowdown or
stoppage actually pending or, to the Company's knowledge, threatened against or
affecting Company nor any secondary boycott with respect to products of Company.
There are no administrative charges or court complaints against Company
concerning alleged employment discrimination or other employment related matters
pending or threatened before the U.S. Equal Employment Opportunity Commission or
any Government Entity. The Company has never been a party to a collective
bargaining agreement with any union.
3.21 Major Customers and Suppliers.
(a) Major Customers. Schedule 3.21(a) contains a list of the five largest
customers, including distributors, of Company for each of the two (2) most
recent fiscal years (determined on the basis of the total dollar amount of net
sales) showing the total dollar amount of net sales to each such customer during
each such year. Neither Company nor any Shareholder has any knowledge or
information of any facts indicating that any of the customers listed on Schedule
3.21(a) will not continue to be customers of the Company after the Closing at
substantially the same level of purchases as heretofore.
(b) Major Suppliers. Schedule 3.21(b) contains a list of the fifteen
largest suppliers to Company for each of the two (2) most recent fiscal years
(determined on the basis of the total dollar amount of purchases) showing the
total dollar amount of purchases from each such supplier during each such year.
Neither Company nor any Shareholder has any knowledge or information of any
facts indicating that any of the suppliers listed on Schedule 3.21(b) will not
continue to be suppliers to the Company after the Closing and will not continue
to supply the Company with substantially the same quantity and quality of goods
at competitive prices.
(c) Sales Representatives. The Company has no, and has not had in the
last twelve months, any franchisees. The Company does not sell, and has not sold
during the last three years, its Products to any entity for resale other than to
retailers. Schedule 3.21(c) contains (i) a list of all persons and entities that
sell the Company's Products (defined in Section 3.22) on a commission basis
pursuant to a Contract with Company (collectively, "Sales Representatives"), and
clearly identifies such Sales Representatives with whom the Company has entered
into a written Contract regarding the sale of the Company's Products, (ii) a
sample copy of all written sales representative or dealer Contracts and policy
statements, together with a description of all substantial modifications or
exceptions thereto, and (iii) a description of all material oral Contracts with
any Sales Representative. Except as set forth in Schedule 3.21(c), the Company
has provided to Buyer Group a true, complete and correct executed copy of each
written Contract regarding the sale of the Company's Products, including without
limitation each sales representative and dealer Contract. The Company has paid
all commissions due any Sales Representative where the failure to pay such
amount would cause such obligation to be in default of the Company's Contract
with
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such Sales Representative. Except as set forth on Schedule 3.21(c), the Company
has not terminated any Sales Representative in the last twelve months. Each
Sales Representative which has been terminated in the last twelve months (i) has
been paid all commissions due such Sales Representative which were accrued in
the ordinary course, (ii) was terminated in accordance with all applicable Laws
and with any Contract Company had with such Sales Representative and (iii) is
not currently involved in any dispute with Company relating to such termination.
3.22 Product Warranty and Product Liability. Schedule 3.22 contains a
true, correct and complete copy of Company's standard warranty or warranties for
sales of Products (as defined below) and, except as stated therein, there are no
warranties, commitments or obligations with respect to the return, repair or
replacement of Products. Schedule 3.22 contains a description of all product
liability claims and similar Litigation relating to products manufactured or
sold, or services rendered, which are presently pending or which to Company's or
any Shareholder's knowledge are threatened, or which have been asserted or
commenced against Company within the last two years (whether or not covered by
insurance). There are no defects in design, construction or manufacture of
Products which would adversely affect performance or create an unusual risk of
injury to persons or property. None of the Products has been the subject of any
replacement, field fix, retrofit, modification or recall campaign by Company
and, to Company's knowledge, no facts or conditions exist which could reasonably
be expected to result in such a recall campaign. The Products have been designed
and manufactured so as to meet and comply with all governmental standards and
specifications currently in effect and have received all governmental approvals
necessary to allow their sale and use. As used herein, the term "Products" means
any and all products currently or at any time previously manufactured,
distributed or sold by Company, or by any predecessor of Company under any brand
name or mark under which products are or have been manufactured, distributed or
sold by Company.
3.23 Affiliates' Relationships to Company.
(a) No Adverse Interests. No Affiliate has any direct or indirect
interest in (i) any entity which does business with Company or is competitive
with Company's business, or (ii) any property, asset or right which is used by
Company in the conduct of its business.
(b) Obligations. All obligations of any Affiliate to Company, and all
obligations of Company to any Affiliate, which are not otherwise listed on
Schedule 3.13, are listed on Schedule 3.23. All Contracts of the Company with
any Affiliate, stockholder of the Company, Affiliate of any stockholder of the
Company or any third party relating to the payment of any fees for investment or
advisory services are set forth on Schedule 3.23 regardless of whether such
Contracts are set forth on any other Schedule hereto.
3.24 Year 2000 Compliance. To the knowledge of the Company, none of the
assets of the Company will require any material repair, rewrite, conversion or
other adaptation that would cost the Company more than $100,000 in the aggregate
in order to allow such assets to be used on any date after December 31, 1999
without material failure resulting from the assets' use of or reference to any
date after December 31, 1999.
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3.25 Non-Compete Agreements. Schedule 3.25 contains a list of all persons
with whom the Company has entered into an agreement which contains a
non-competition covenant (the "Non-compete Agreements"). Except as set forth in
Schedule 3.25, the Company has provided to Buyer Group a true, correct and
complete executed copy of each Non-Compete Agreement. Schedule 3.25 also
contains a list of all Company Division Managers, Regional Managers, Production
Center Managers, Branch Managers, and Assistant Branch Managers with whom the
Company has not entered into a Non-compete Agreement. To the Company's
Knowledge, except as set forth in Schedule 3.25, no current or past Non-compete
Agreement has been held invalid by any Government Entity. Except as set forth on
Schedule 3.25, the Company has enforced the Non-compete Agreements in all
instances in which the Company has been made aware of a material violation of
the non-competition covenant set forth in a particular Non-compete Agreement.
3.26 Independent Contractors. Company has at all times treated the
persons engaged by it to assemble and install its Products (the "Independent
Contractors") as independent contractors consistent with the standards set forth
in Revenue Ruling 87-41 1987-1 CB 296.
3.27 No Other Representations. Except as provided herein in this Article
3 and Article 4 below, neither the Company nor the Shareholders make any
representations or warranties to the Buyer Group.
4. Individual Representations and Warranties of each Shareholder. Each
Shareholder hereby severally and not jointly represents and warrants to the
Buyer Group as follows:
4.1 Title to Shares. The shares of capital stock of the Company set forth
opposite such Shareholder's name on Schedule 3.2 are owned of record and
beneficially by such Shareholder, free and clear of all Liens, except for such
Liens, if any, as set forth on Schedule 4.1, which Liens, if any, will be
satisfied at the Closing. The shares of capital stock owned by such Shareholder
have been duly authorized, are validly issued, fully paid and nonassessable. 4.2
Authorization; Validity of Agreement. Such Shareholder has all necessary power,
legal right, capacity and authority to execute and deliver this Agreement and
each Ancillary Instrument to which it is a party, perform his, her or its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. As to each Shareholder that is an entity, this
Agreement and each Ancillary Instrument to which such Shareholder is a party has
been duly authorized by all necessary corporate, partnership, trust or
beneficiary action, as the case may be, on the part of such Shareholder and no
further action on behalf of any manager, owner, partner, shareholder, director,
officer, beneficiary or trustee of such Shareholder is necessary therefor. This
Agreement has been duly executed and delivered by such Shareholder and is, and
each such Ancillary Instrument to which such Shareholder is a party when
executed and delivered will be, a valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
subject to (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) equitable principles of law.
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4.3 No Violations; Governmental Filings.
(a) The execution, delivery and performance of this Agreement, and each
Ancillary Instrument to which such Shareholder is a party, by such Shareholder
does not, and the consummation by such Shareholder of the transactions
contemplated hereby and thereby will not, (i) violate any provision of the
Certificate of Incorporation, Bylaws or other corporate, organizational or
governing document of such Shareholder, (ii) violate any provision of any
Contract to which such Shareholder is a party or by which any of its properties
or assets may be bound or otherwise subject or (iii) violate any Order of any
Government Entity or any Law applicable to such Shareholder or any of his, hers
or its properties or assets.
(b) Except as set forth in Schedule 4.3, no filing, notice or
registration with any Governmental Entity is required in connection with the
execution, delivery and performance of this Agreement, or any Ancillary
Instrument to which such Shareholder is a party, by such Shareholder or the
consummation by such Shareholder of the transactions contemplated hereby or
thereby.
5. Representations and Warranties of the Buyer Group. Each member of the
Buyer Group jointly and severally represents and warrants to the Shareholders as
follows:
5.1 Organization of the Buyer. Each member of the Buyer Group is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Parent is the parent entity of
Buyer. The amount of Parent's total assets as of December 31, 1998 was in excess
of $75,000,000.
5.2 Authorization; Validity of Agreement. Each member of the Buyer Group
has all necessary power, legal right, capacity and authority to execute and
deliver this Agreement, and each Ancillary Instrument to which any member of the
Buyer Group is a party, perform its obligations hereunder and thereunder and
consummate the transactions contemplated hereby and thereby. This Agreement and
each Ancillary Instrument to which a member of the Buyer Group is a party has
been duly authorized by all necessary corporate action on the part of such
member of the Buyer Group. This Agreement has been duly executed and delivered
by each member of the Buyer Group and is, and each Ancillary Instrument to which
a member of the Buyer Group is a party when executed and delivered will be, a
valid and binding obligation of such member of the Buyer Group, enforceable
against such member of the Buyer Group in accordance with its terms, subject to
(a) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (b) equitable
principles of law.
5.3 No Violations; Governmental Filings.
(a) The execution, delivery and performance of this Agreement, and each
Ancillary Instrument to which a member of the Buyer Group is a party, by each
member of the Buyer Group does not, and the consummation by each member of the
Buyer Group of the transactions contemplated hereby and thereby will not, (i)
violate any provision of the Certificate of Incorporation and Bylaws of any
member of the Buyer Group, (ii) violate any provision of any Contract to which
any member of the Buyer Group is a party or by which any of its properties or
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assets may be bound or otherwise subject or (iii) violate any Order of any
Government Entity or any Law, applicable to any member of the Buyer Group or any
of its properties or assets.
(b) Except as set forth in Schedule 5.3(b), no filing, notice or
registration with any Governmental Entity is required by any member of the Buyer
Group in connection with the execution, delivery and performance of this
Agreement, or any Ancillary Instrument to which a member of the Buyer Group is a
party, or the consummation by any member of the Buyer Group of the transactions
contemplated hereby and thereby.
6. Covenants and Agreements.
6.1 [intentionally omitted].
6.2 Escrow Agreement. At the Closing, Shareholders, Shareholders'
Representative and Buyer shall execute and deliver an escrow agreement in the
form of Exhibit F hereto (the "Escrow Agreement").
6.3 Noncompetition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer and Parent to execute this Agreement and complete the
transactions contemplated hereby, and in order to preserve the goodwill
associated with the business of Company, each Shareholder listed on Schedule 6.3
(the "Non-Compete Shareholders") hereby covenants and agrees as follows:
(a) Covenant Not to Compete. For a period of five years from the Closing
Date, no Non-Compete Shareholder will directly or indirectly:
(i) engage in, continue in or carry on any business which competes
with the Business or is substantially similar thereto, including owning
or controlling any financial interest in any corporation, partnership,
firm or other form of business organization which is so engaged;
(ii) consult with, advise or assist in any way, whether or not for
consideration, any corporation, partnership, firm or other business
organization which is now or becomes a competitor of Company or the
Surviving Corporation in any aspect with respect to the Business,
including, but not limited to, advertising or otherwise endorsing the
products of any such competitor; soliciting customers or otherwise
serving as an intermediary for any such competitor; loaning money or
rendering any other form of financial assistance to or engaging in any
form of business transaction on other than an arm's length basis with any
such competitor;
(iii) offer employment to an employee of Company or the Surviving
Corporation, without the prior written consent of Parent; or
(iv) engage in any practice the purpose of which is to evade the
provisions of this covenant not to compete or to commit any act which
adversely affects the Business;
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provided, however, that the foregoing shall not prohibit the ownership of
securities of corporations which are listed on a national securities
exchange or traded in the national over-the-counter market in an amount
which shall not exceed 5% of the outstanding shares of any such
corporation. The parties agree that the geographic scope of this covenant
not to compete shall extend to all states, provinces or regions in which
the Company is currently engaged or has engaged in any aspect of the
Business. The parties agree that the Buyer Group may sell, assign or
otherwise transfer this covenant not to compete, in whole or in part, to
any person, corporation, firm or entity that purchases all or part of the
business of the Company. In the event a court of competent jurisdiction
determines that the provisions of this covenant not to compete are
excessively broad as to duration, geographical scope or activity, it is
expressly agreed that this covenant not to compete shall be construed so
that the remaining provisions shall not be affected, but shall remain in
full force and effect, and any such over broad provisions shall be
deemed, without further action on the part of any person, to be modified,
amended and/or limited, but only to the extent necessary to render the
same valid and enforceable in such jurisdiction.
(b) Covenant of Confidentiality. No Non-Compete Shareholder shall at any
time subsequent to the Closing, except as explicitly requested by Buyer, (i) use
for any purpose, (ii) disclose to any person, or (iii) keep or make copies of
documents, tapes, discs or programs containing, any confidential information
concerning Company. For purposes hereof, "confidential information" shall mean
and include, without limitation, all Intellectual Property in which Company has
an interest, all customer lists and customer information, and all other
information concerning Company's processes, apparatus, equipment, packaging,
products, marketing and distribution methods, not previously disclosed to the
public directly by Company.
(c) Equitable Relief for Violations. Each Non-Compete Shareholder agrees
that the provisions and restrictions contained in this Section 6.3 are necessary
to protect the legitimate continuing interests of Buyer Group and the Surviving
Corporation, and that any violation or breach of these provisions will result in
irreparable injury to the Buyer Group for which a remedy at law would be
inadequate and that, in addition to any relief at law which may be available to
the Buyer Group for such violation or breach and regardless of any other
provision contained in this Agreement, the Buyer Group shall be entitled to seek
injunctive and other equitable relief as a court may grant after considering the
intent of this Section 6.3.
6.4 General Release. Upon Closing, each of the Shareholders absolutely,
unconditionally and irrevocably releases and discharges the Surviving
Corporation and the directors, officers, agents and employees of Company from
all claims that any of the undersigned may have against the Company or its
directors, officers, agents and employees, whether known or unknown, whether
contingent or absolute, whether liquidated or unliquidated, whether foreseen or
unforeseen, whether anticipated or unanticipated, whether suspected or
unsuspected, whether arising in favor of any Shareholder as a result of his, her
or its capacity as a stockholder, director, officer or employee of the Company
or in any other capacity, and whether arising by operation of law or otherwise.
Notwithstanding the foregoing, (i) this release shall not apply to any claim any
Shareholder may have which arises after the Closing Date or arises under this
Agreement or any document executed in connection herewith; and (ii) this release
shall not apply to any claim any of the undersigned may have in his or her
capacity as an employee of the Company for employment
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compensation for current periods and employee benefits generally applicable to
all employees of the Company. In addition to and in no way limiting the
generality of the foregoing, no Shareholder shall seek to enforce any obligation
of contribution against the Company with respect to any of the representations
or warranties contained in Article 3 or with respect to the performance of any
of the covenants made by Company herein.
6.5 Conduct of the Business by the Company Pending the Closing. During
the period from the date hereof to the Closing, the Company covenants, and each
Shareholder covenants, to cause the Company, to conduct its business in the
ordinary course, consistent with past practice. Without limiting the generality
of the foregoing, unless otherwise expressly provided in this Agreement, prior
to the Closing, the Company covenants that it will not and the Shareholders
covenant to use their commercially reasonable efforts so that the Company will
not:
(a) issue or sell any stock or any other security;
(b) declare or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) to any of its stockholders;
(c) make any loans, advances or capital contributions to, or investments
in, any other person or entity (other than loans or advances to employees in
accordance with past practices);
(d) sell, lease or otherwise dispose of any of its properties or assets,
except for sales in the ordinary course of business and consistent with past
practice;
(e) make any capital expenditure or commitment for additions to property,
plant, equipment or other capital assets in excess of $100,000;
(f) take any action which materially adversely affects the rights and
franchises of Company, the business organization of Company or the Company's
present relationships with suppliers and customers and others having business
relationships with Company;
(g) enter into any Contract, except Contracts which are in the ordinary
course of business and consistent with past practice, are not material to the
Company (individually or in the aggregate) and would not have been required to
be disclosed in the Disclosure Schedule had they been in existence on the date
of this Agreement;
(h) amend its Certificate of Incorporation or Bylaws or make any changes
in authorized or issued capital stock;
(i) directly or indirectly (through a representative or otherwise)
solicit or furnish any information to any prospective buyer, commence, or
conduct presently ongoing, negotiations with any other party or enter into any
agreement with any other party concerning the sale of Company, Company's assets
or business or any part thereof or any equity securities of Company (an
"Acquisition Proposal"); or
(j) enter into any agreement to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions.
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6.6 Access to Information. Between the date of this Agreement and the
Closing, the Company's officers, directors, employees, agents, accountants and
counsel to, upon reasonable notice, shall (a) afford the officers, employees and
authorized agents, accountants, counsel and representatives of the Buyer Group
complete access, during normal business hours, to (i) the offices, properties,
plants, other facilities, books, Contracts, documents and records of the Company
and any records concerning the Company maintained and accumulated by its
representatives, and (ii) those officers, directors, employees, agents,
accountants and counsel of the Company who have any knowledge relating to the
Company or the Company's business; (b) furnish to the officers, employees and
authorized agents, accountants, counsel and representatives of the Buyer Group
such additional financial and operating data and other information regarding the
Company or the Company's business (including, without limitation, any Contracts,
licenses and patents in effect as of the date hereof and any Contracts, or
licenses being negotiated or entered into between the date hereof and the
Closing Date), properties and goodwill of the Company as the Buyer Group may
from time to time request; (c) with and only with the prior written consent of
the Shareholders' Representative, allow the Buyer Group access to any properties
for the purposes of conducting environmental, safety and health audit activities
(including sampling); and (d) with the prior consent of the Shareholders in each
instance, allow access to vendors, customers, manufacturers of its machinery and
equipment, and others having business dealings with Company.
6.7 HSR Filings; Consents.
(a) The Company, the Shareholders, and the Buyer Group will promptly take
all actions necessary and shall promptly cooperate with each other party with
regard to any filing required under the HSR Act, and shall use all reasonable
efforts, and cooperate with each other, to promptly comply with any request for
additional information in connection therewith.
(b) Prior to the Closing, the Company shall use its best efforts to
obtain the consents set forth on Schedule 6.7(b).
(c) Prior to the Closing, the Company shall use all reasonable efforts to
obtain an estoppel certificate or status letter, in a form acceptable to Buyer
Group, from the landlord under each lease of real property comprising all or any
portion of a Material Facility.
6.8 Public Statements. Announcements concerning the transactions provided
for in this Agreement by Buyer Group, Company or Shareholders may be subject to
the approval of the other parties in all essential respects, except that
approval of the Shareholders or Company shall not be required as to any
statements or other information which Parent may submit to the Securities and
Exchange Commission or Parent's stockholders or be required to make pursuant to
any rule or regulation of the Securities and Exchange Commission, the American
Stock Exchange or any other national securities exchange on which the securities
of Parent are traded, or otherwise be required to make by Law. Shareholders
shall act hereunder only through Shareholders' Representative.
6.9 Repayment of Indebtedness. At or prior to the Effective Time, the
Buyer shall satisfy in full and retire all outstanding indebtedness of the
Company under that certain Loan and Security Agreement dated October 14, 1994,
by and between the Company and The Provident Bank (and as amended from time to
time, the "Provident Loan Agreement") and all notes, loan
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agreements and other documents and instruments evidencing, securing or otherwise
pertaining to the Provident Loan Agreement.
6.10 Payment of Management Bonus. At the Effective Time, the Company
shall pay to certain management personnel of the Company the "Management Bonus"
described on Schedule 6.10.
6.11 Payment of Transactional Fees. At the Effective Time, the Company
shall pay to Stonebridge Associates, LLC, Parker Chapin Flattau & Klimpl, LLP,
attorneys for the Company and the Shareholders and such other accountants and
consultants the fees set forth on Schedule 6.11 for services rendered in
connection with the transactions contemplated herein.
6.12 Tax Returns.
(a) After the Closing Date, the Buyer and the Shareholders shall each
make available to the other, upon reasonable request, all information, records
or other documents relating to Company Taxes and shall preserve all such
information, records or other documents until after the expiration of any
applicable statute of limitations (including extensions).
(b) After the Closing, the Shareholders and the Buyer each shall:
(i) assist (and cause the Company and its personnel to assist at
no charge) the Company in preparing any Company tax returns in accordance
with this Section 6.12;
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any tax returns with respect to the
Company;
(iii) make available to the other and to any tax authority as
reasonably requested all information, records, and documents relating to
taxes of the Company;
(iv) provide timely notice to the other in writing of any pending
or threatened tax audits or assessments with respect to the Company for
taxable periods for which the other may have a liability under Article 10
hereof; and
(v) furnish the other with copies of all correspondence received
from any tax authority in connection with any tax audit or information
request with respect to any taxable period for which the other may have a
liability under Article 10 hereof.
6.13 Appraisal Rights. Shareholders' Representative and each Shareholder
will be responsible for and take all actions necessary to resolve any claims for
appraisal rights under the DGCL by any Dissenting Shareholder. Each party hereto
will keep each other party hereto fully informed and aware of any events
relating to any claims for appraisal rights under the DGCL by any Dissenting
Shareholder.
6.14 Other Actions. Each of the parties hereto shall use all reasonable
efforts to (i) take, or cause to be taken, all actions, (ii) do, or cause to be
done, all things, and (iii) execute and deliver all such documents, instruments
and other papers, as in each case may be necessary,
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proper or advisable under applicable laws, or reasonably required to in order to
carry out the terms and provisions of this Agreement and to consummate and make
effective the transactions contemplated hereby.
6.15 Indemnification of Directors and Officers and Controlling Persons.
(a) For a period of six (6) years after the Effective Time, Parent shall
cause Company to insure and guaranty that the provisions with respect to
indemnification by the Company now existing in favor of any of the present and
former directors and officers of the Company (all of the foregoing, together
with their respective heirs and representatives, the "Indemnified Parties"), as
set forth in its certificate of incorporation or by laws or pursuant to other
agreements (including any insurance policies), shall survive the transactions
contemplated by this Agreement, and shall not be amended, repealed or modified
in any manner as to adversely affect the rights of such Indemnified Parties.
Parent agrees that, from and after the Effective Time, it shall cause Company to
maintain, for not less than six years from the Effective Time, the current
policies of directors' and officers' liability insurance maintained by the
Company; provided that the Company may substitute therefor policies of at least
the same coverage containing terms and conditions which are no less advantageous
to the Indemnified Parties; provided, further, that neither Parent nor Company
shall be under any obligation to indemnify any Indemnified Party under this
Section 6.15 for any breach by an Indemnified Party of any of its
representations, warranties or covenants set forth herein or for any acts,
omissions or other matters described in clauses (i) - (iii) of Section 10.1
hereof.
(b) If the Company or any of its successors or assigns (i) reorganizes or
consolidates with or merges into any other person and is not the resulting,
continuing or surviving corporation or entity of such consolidation or merger or
(ii) liquidates, dissolves or transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of the surviving
company assume the obligations set forth in this Section 6.15.
(c) Anything to the contrary notwithstanding, nothing in this Section
6.15 shall limit the right of the Buyer Group from asserting its rights to
indemnification from the Shareholders under Article 10.
(d) This Section 6.15 shall survive the Closing of any of the
transactions contemplated hereby, is intended to benefit the Indemnified Parties
(each of which shall be entitled to enforce this Section 6.15 against the
Surviving Corporation as a third party beneficiary of this Agreement), and shall
be binding on all successors and assigns of Surviving Corporation.
6.16 Severance. If within twelve (12) months of the Closing Date any of
the persons set forth in Section 6.1 are terminated from employment with the
Company and are entitled due to such termination to any severance payments under
an Officer Agreement identified in Schedule 3.18(a), the Shareholders shall pay
to the Company an amount equal to one-half of the amount of such severance
payments made to such person pursuant to such Officer Agreement.
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7. Conditions to the Closing.
7.1 Conditions Precedent to the Shareholders' Obligations to Close. The
obligations of the Shareholders to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver by the Shareholders, at or
prior to the Closing, of the following conditions:
(a) the representations and warranties of the Buyer Group contained in
this Agreement shall be true and correct in all material respects as of the date
made and as of the Closing Date as if made on and as of the Closing Date;
(b) the Buyer Group shall have performed in all material respects its
obligations under this Agreement (including delivery of the items and
performance of the actions required, as specified in Section 8.1) required to be
performed by it at or prior to the Closing pursuant to the terms hereof;
(c) any waiting period applicable to the consummation of the transactions
contemplated hereby under the HSR Act shall have expired or been terminated; and
(d) the consents required to be obtained by the Company under this
Agreement shall have been obtained.
7.2 Conditions Precedent to the Buyer Group's Obligations to Close. The
obligations of the Buyer Group to consummate the transactions contemplated
hereby shall be subject to the satisfaction or written waiver by each member of
the Buyer Group, at or prior to the Closing, of the following conditions:
(a) the representations and warranties of the Company and the
Shareholders contained in this Agreement shall be true and correct in all
material respects as of the date made and as of the Closing Date as if made on
and as of the Closing Date;
(b) the Company and the Shareholders shall have performed in all material
respects each of their obligations under this Agreement (including delivery of
the items and performance of the actions required as specified in Section 8.2)
required to be performed by them at or prior to the Closing pursuant to the
terms hereof;
(c) any waiting period applicable to the consummation of the transactions
contemplated hereby under the HSR Act shall have expired or been terminated;
(d) the Company shall have obtained the consents set forth on Schedule
7.2(d);
(e) the Company shall have delivered to the Buyer Group a fully executed
Shareholders' Consent;
(f) no Litigation shall have been commenced or threatened, and no
investigation by any Government Entity shall have been commenced, against Buyer
Group, Company, or
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Shareholder or any of the affiliates, officers or directors of any of them, with
respect to the transactions contemplated hereby;
(g) the Company shall have delivered to the Buyer Group a written release
from each party, other than the Company, to each Contract (i) either set forth
on Schedule 3.23 or (ii) of the type described in Section 3.23(b) to which the
Company has been a party during the six months prior to the date hereof, in each
case terminating such Contract and releasing the Company from all obligations
under such Contract and certifying that all amounts owed to such party by the
Company under such Contract have been paid in full;
(h) the Company shall have delivered to the Buyer Group a list of all
checks received by a Company branch office from customers of the Company which
as of the Closing Date have not yet been deposited in a Company Bank Account
(the "Branch Check List") and the Branch Check List shall be true and correct in
all respects;
(i) the Company shall have delivered to the Buyer Group Stockholder and
Board of Directors consent actions authorizing the actions of the Company's
directors and officers for certain periods prior to the Closing in a form
reasonably satisfactory to Buyer Group; and
(j) the Company shall have delivered to the Buyer Group a certificate
executed by the secretary of the Company certifying (i) the signatures of the
officers of the Company executing this Agreement or any Ancillary Instrument and
(ii) the identities of each holder of Common Stock, Series A Preferred Stock or
Cumulative Preferred Stock and the number of each class of shares held by such
holder immediately prior to the Effective Time.
8. Closing Deliveries and Actions.
8.1 By the Buyer Group. At the Closing, the Buyer Group shall:
(a) cause payment to be made to the Escrow Agent in accordance with the
terms of Section 2.2(b);
(b) cause payment to be made to The Provident Bank in accordance with the
terms of Section 6.9;
(c) cause payment of the Management Bonus in accordance with Section
6.10;
(d) cause payment to be made to Stonebridge Associates, LLC in accordance
with the terms of Section 6.11;
(e) cause payment to be made for all other outstanding professional
services in accordance with Section 6.11;
(f) cause payment to be made to the Shareholders' Representative in
accordance with Section 2.2;
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(g) deliver to Shareholders a certificate executed by an executive
officer of the Buyer attesting to the satisfaction of the conditions set forth
in Section 7.1(a) and 7.1(b);
(h) deliver to Shareholders the Escrow Agreement, executed by each member
of the Buyer Group; and
(i) deliver to Shareholders the opinion of Foley & Lardner, counsel to
the Buyer Group, substantially in the form attached as Exhibit 8.1(i).
8.2 By the Shareholders. At the Closing, there shall also be delivered to
the Buyer:
(a) the stock certificates representing the shares of stock of the
Company owned by the Shareholders, duly endorsed in blank or accompanied by
stock transfer powers and the minute books, stock certificate books and stock
transfer ledgers of the Company;
(b) a certificate executed by the Shareholders' Representative (as
hereinafter defined) attesting to the satisfaction of the conditions set forth
in Section 7.2(a), 7.2(b) and 7.2(h);
(c) a certificate with respect to the Company from the state of Delaware
and all jurisdictions in which the Company is qualified to do business attesting
as to its good standing therein as of dates recent to the Closing Date;
(d) the Certificate of Incorporation of the Company, certified as true
and correct by the Secretary of State of the state of Delaware, and the Bylaws
of the Company, certified as true and correct by the Secretary of the Company;
(e) the Escrow Agreement, executed by each Shareholder and the
Shareholders' Representative;
(f) a tax, lien and judgment search showing no items not disclosed in the
Disclosure Schedules;
(g) the resignations, dated the Closing Date, of each Director and
Officer;
(h) the opinion of Parker Chapin Flattau & Klimpl, LLP counsel to the
Shareholders and the Company, in the form attached as Exhibit 8.2(h); and
(i) the consents required to be obtained by the Company or Shareholders
under this Agreement, including without limitation the consents set forth in
Schedule 6.7(b).
9. Termination. This agreement may be terminated prior to the Closing (a)
by mutual written consent of the Buyer Group and the Shareholders or (b) by the
Buyer Group, on the one hand, or the Shareholders, on the other hand, if the
Closing shall not have occurred on or before February 28, 1999, provided the
terminating party has not, through breach of a representation, warranty or
consent, prevented the Closing from occurring on or before such date. Prompt
written notice of any such termination shall be given to the other parties
specifying
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the reason for such termination and upon any such termination this Agreement
shall forthwith terminate without, however, any waiver of the rights of the
parties for breaches of this Agreement.
10. Indemnification.
10.1 Indemnification by the Shareholders.
(a) Each Shareholder, severally in the manner set forth in Section
10.1(b) and Section 10.1(c), hereby agrees to indemnify, defend and hold
harmless each member of the Buyer Group, the Surviving Corporation and each of
their respective directors, officers, employees and controlled or controlling
persons ("Buyer's Affiliates") for all losses, liabilities, claims, damages,
judgments, awards, costs and expenses (including without limitation, interest,
penalties, court costs and attorneys fees and expenses) (collectively,
"Damages") incurred by, asserted against, resulting to or imposed on any member
of the Buyer Group, Buyer's Affiliates or the Surviving Corporation, directly or
indirectly, as a result of or arising out of (i) the inaccuracy or breach of any
representation or warranty of any Shareholder or the Company contained or made
in this Agreement (regardless of whether such breach is deemed "material" for
purposes of Section 7.2(a)) made by any Shareholder or the Company as of the
date of this Agreement or the Closing Date; (ii) the breach by any Shareholder
or the Company of any covenant, agreement or obligation of any Shareholder or
the Company contained in this Agreement (regardless of whether such covenant is
deemed "material" for purposes of Section 7.2(b)) made by any Shareholder or the
Company as of the date of this Agreement or the Closing Date; or (iii) any
assertion by any past or current stockholder of the Company in their capacity as
a stockholder of (A) any claim for appraisal rights for shares of stock of the
Company pursuant to the DGCL or any other applicable Law, or (B) any suit or
action relating to the Merger or any of the transactions contemplated by this
Agreement or any of the Ancillary Instruments or (C) any suit or action relating
to any action taken by the stockholders and/or directors of the Company in their
capacity as stockholders and/or directors of the Company. Regardless of the
foregoing, however, breaches of representations and warranties contained in
Sections 4.1, 4.2 or 4.3 hereof shall be subject only to several indemnification
by the respective Shareholders who shall have made and breached such
representations and warranties.
(b) With respect to any Damages for which the Shareholders may be liable
under this Section 10.1 (other than as set forth in the last sentence of Section
10.1(a)):
(i) William J. Kidd and Carla G. Kidd shall be jointly and
severally responsible for 30.42% of such Damages;
(ii) James Sulat, the Stein 1995 Irrevocable Trust and Tradco
(Barbados) Inc. shall be jointly and severally responsible for 26.96% of
such Damages;
(iii) Kurt L. Kamm and Judy L. Kamm shall be jointly and severally
responsible for 21.18% of such Damages; and
(iv) All of the Shareholders other than those named in items (i,
(ii) and (iii) above (the "Remaining Shareholders") shall be jointly and
severally responsible for 21.44% of such Damages in the manner set forth
in Section 10.1(c).
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(c) An amount of Series A Cash Consideration equal to the maximum
exposure of the Remaining Shareholders pursuant to Section 10.5(c) will, rather
than be paid to the Remaining Shareholders, be paid to the Escrow Agent and held
as a separate escrow fund under the Escrow Agreement (the "Additional Escrow
Fund"). The Additional Escrow Fund will be held pursuant to the Escrow Agreement
for a period of 18 months after the Closing and no amount thereof shall be
released eight months after the Closing at the time certain other escrow funds
are to be released under the Escrow Agreement. Any claim for Damages under
Section 10.1, with respect to the Remaining Shareholders' joint and several
obligations for an aggregate of 21.44% of such Damages, shall be asserted only
against the Additional Escrow Fund by the Buyer Group by notice to the Escrow
Agent under Section 5 of the Escrow Agreement. To the extent no claim has been
asserted by the Buyer Group with respect to Damages under Section 10.1 on the
18-month anniversary of the Closing (and after resolution of any claim that may
be outstanding on such 18-month anniversary), any remaining portion of the
Additional Escrow Fund shall be paid to the Shareholders' Representative for
delivery to the Remaining Shareholders in amounts pro rata according to their
ownership of shares of Series A Preferred Stock immediately prior to the
Effective Time.
10.2 Indemnification by the Company. The Company shall indemnify, defend
and hold harmless each member of the Buyer Group and each of the Buyer's
Affiliates for all Damages incurred by, asserted against, resulting to or
imposed on any member of the Buyer Group or any of the Buyer's Affiliates,
directly or indirectly, as a result of or arising out of (i) the breach of any
representation or warranty of any Shareholder or the Company contained in this
Agreement which occurs prior to the Closing Date; (ii) the breach by any
Shareholder or the Company of any covenant, agreement or obligation of any
Shareholder or the Company contained in this Agreement which occurs prior to the
Closing Date; or (iii) any assertion by any past or current stockholder of the
Company of any suit or action relating to the Merger or any of the transactions
contemplated by this Agreement or any of the Ancillary Instruments. The
indemnification obligations of the Company under this Section 10.2 shall only
exist until, and shall be automatically terminated and extinguished upon,
Effective Time.
10.3 Indemnification by the Buyer Group. The Buyer Group shall indemnify
Shareholders for any Damages as a result of (i) the breach of any representation
or warranty made by the Buyer Group in this Agreement and (ii) the breach by any
member of the Buyer Group of any covenant, agreement or obligation of the Buyer
Group contained in this Agreement.
10.4 Time Limitations. The Shareholders shall have no liability for
indemnification with respect to any representation or warranty (other than the
representations and warranties in Sections 3.14, 3.15, 4.1, 4.2 and 4.3) unless,
on or before eighteen months after the Closing, a member of the Buyer Group
notifies the Shareholders of a claim of indemnity specifying the basis thereof
in reasonable detail. A claim for indemnification under Section 10.1(i) arising
out of the inaccuracy or a breach of any representation or warranty set forth in
Section 3.14 (a "Tax Related Claim") may be made by any member of the Buyer
Group, Buyer's Affiliates or the Surviving Corporation at any time until the
expiration of the applicable statute of limitations (and any extension thereof,
which extension shall require the consent of the Shareholders' Representative
which shall not be unreasonably withheld). A claim for indemnification under
Section 10.1(i) arising out of the inaccuracy or a breach of any representation
or warranty set forth in Section 3.15
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(an "Environmental Claim") may be made by any member of the Buyer Group, Buyer's
Affiliates or the Surviving Corporation at any time until the fifty-fourth month
anniversary of the Closing. A claim for indemnification under Section 10.1(i)
arising out of the inaccuracy or breach of any representation or warranty set
forth in Section 4.1, 4.2 or 4.3 may be made by any member of the Buyer Group,
Buyer's Affiliates or the Surviving Corporation at any time until the seventh
anniversary of the Closing.
10.5 Limitations on Amount; Order of Claims.
(a) The Shareholders shall not have any liability for indemnification
under Section 10.1(i) arising out of the inaccuracy or a breach of any
representation or warranty of the Company or the Shareholders, (other than
representations and warranties in Section 3.15) unless and until the total of
all Damages incurred by the Buyer Group, Buyer's Affiliates or the Surviving
Corporation exceeds $250,000 (the "Basket"), and then the Shareholders in the
aggregate shall only be responsible for the Damages in excess of that amount.
The Shareholders shall not have any liability for indemnification under Section
10.1(i) for any inaccuracy or breach of any representation or warranty of the
Shareholders or the Company (other than representations and warranties in
Section 3.15) unless and until the total of all Damages incurred by the Buyer
Group, Buyer's Affiliates or the Surviving Corporation for a particular
inaccuracy or breach of representation or warranty exceeds $10,000, (the
"Mini-Basket") and, in such event, the amount of such item shall be counted for
purposes of determining whether the Basket has been exceeded and, if the Basket
has been exceeded, the Buyer Group, Buyer's Affiliates or the Surviving
Corporation shall be entitled to indemnification for such breach to the extent
the Basket would then be exceeded. Notwithstanding the foregoing, neither the
Basket nor the Mini-Basket shall apply to Damages incurred by Buyer Group,
Buyer's Affiliates or the Surviving Corporation arising out of or relating to
Environmental Claims.
(b) In the event of any indemnification claim for Damages under Section
10.1, the Buyer Group, Buyer's Affiliates or the Surviving Corporation shall
seek indemnification in the following manner: (i) first, from the Additional
Series A Consideration in accordance with the terms and conditions of the Escrow
Agreement, (ii) second, to the extent that such Damages have not already been
satisfied in the manner set forth in Section 10.5(b)(i), then by a reduction of
the Note by the amount of such Damages not already satisfied and (iii) then the
Buyer Group, Buyer's Affiliates or the Surviving Corporation shall be entitled
to receive payment for the balance of such Damages from the Shareholders as
contemplated in Section 10.1(b) and Section 10.1(c); provided, however, and
notwithstanding the foregoing, Buyer Group, Buyer's Affiliates or the Surviving
Corporation may seek indemnification from any or all Shareholders for any breach
by any Shareholder of its obligations set forth in Sections 2.3(d), 2.4, 2.5,
10.11(c) or 6.16 without first seeking indemnification from the Additional
Series A Consideration or through a reduction of the Note. Any amounts due and
payable to another party pursuant to Sections 2.3(d), 2.4, 2.5, 10.11(c) and 6.6
shall bear interest at a rate of 1 1/2% per month until paid by the party owing.
(c) The maximum aggregate liability of the Shareholders for Damages under
Section 10.1 shall be:
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(i) for all Damages other than with respect to Environmental
Claims or claims for indemnification under Section 10.1(iii) (a
"Shareholder Claim"), a maximum of $1,500,000 (such claims "General
Claims");
(ii) for Damages with respect to Environmental Claims (exclusive
of amounts owed under 10.11(c)), a maximum of $1,750,000 and subject to
the provisions of subsection (d) below (less any damages for General
Claims or Shareholder Claims); and
(iii) for Damages with respect to Shareholder Claims, a maximum of
$3,000,000 (less any Damages for General Claims and Environmental
Claims).
(d) In the event Shareholders' liability for Damages exceeds $1,500,000
and Buyer Group, Buyer's Affiliates or the Surviving Corporation shall seek
indemnification for an Environmental Claim, Shareholders shall be responsible
for providing indemnification for such Environmental Claim in an amount equal to
fifty percent (50%) of the Environmental Claim until the aggregate liability
reaches the maximum described in Section 10.5(c)(ii) above.
10.6 Procedure for Indemnification--Third Party Claims other than Taxes.
(a) Except in the case of any action, suit or proceeding, or written
threat thereof relating to a Tax Claim, promptly after receipt by an indemnified
party of written notice of the commencement against it by any third party
(including but not limited to any Governmental Entity) of any action, suit or
proceeding, or written threat thereof, such indemnified party will, if a claim
is to be made against an indemnifying party under this Article 10, give notice
to the indemnifying party thereof. The indemnified party shall furnish to the
indemnifying party in reasonable detail the information possessed by the
indemnified party with respect to such indemnification claim.
(b) The indemnifying party shall have 30 days after the notice from the
indemnified party to notify the indemnified party in writing of its election to
defend the third party claim or demand on behalf of the indemnified party. If
the indemnifying party elects to defend such third party claim or demand, the
indemnified party shall make available to the indemnifying party all materials
reasonably required for that purpose and shall otherwise assist and cooperate
with the indemnifying party in the defense of such third party claim or demand,
and so long as the indemnifying party is defending such third party claim in
good faith, the indemnified party shall not pay, settle or compromise such third
party claim or demand. If the indemnifying party elects to defend such third
party claim or demand, the indemnifying party shall have the right to control
the defense of such third party claim or demand, at the indemnifying party's own
expense. If the indemnifying party does not elect to defend such third party
claim or demand or does not defend such third party claim or demand in good
faith, the indemnified party shall have the right, in addition to any other
right or remedy it may have hereunder, at the indemnifying party's expense, to
defend such third party claim or demand.
10.7 Procedure for Indemnification - Tax Claims.
(a) If a notice of deficiency, proposed adjustment, adjustment,
assessment, audit, examination or other administrative or court proceeding,
suit, dispute or other claim (a "Tax
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Claim") shall be delivered, sent, commenced or initiated to or against the Buyer
by any Tax authority with respect to Taxes for which the Buyer is entitled to
indemnification from the Shareholders, the Buyer shall promptly notify the
Shareholders in writing of the Tax Claim.
(b) If the Tax Claim relates to any period of time prior to the Closing
Date, the Shareholders may, within 30 days after written notice from the Buyer,
assume and control the defense of such Tax Claim at their own cost and expense,
subject to Section 10.5(a), and with their own counsel, and the Buyer agrees to
cooperate with the Shareholders in pursuing such contest. If the Shareholders
elect to assume the defense of any such Tax Claim, notwithstanding anything to
the contrary contained herein: (i) the Shareholders shall consult with the Buyer
and shall not enter into any settlement or make a payment with respect to any
such Tax Claim without the Buyer's consent (which consent is within the
reasonable discretion of the Buyer); (ii) the Shareholders shall keep the Buyer
informed of all material developments and events relating to any such Tax Claim;
and (iii) at its own cost and expense, the Buyer shall have the right to
participate in (but not to control) the defense of any such Tax Claim.
(c) In connection with the contest of any Tax Claim that the Shareholders
have the right to control but do not timely elect to control pursuant to Section
10.7(b) hereof or any Tax Claim which relates to any period of time after the
Closing Date, such contest shall be controlled by the Buyer, and the
Shareholders agree to cooperate with the Buyer in pursuing such contest.
10.8 Mitigation of Damages. Anything to the contrary contained herein
notwithstanding, in all events, any party who may have any claim for indemnity
hereunder shall take all commercially reasonable steps to mitigate the Damages
that arise in connection with such matters.
(a) No party shall have any liability to another party under this Article
10 for Damages to the extent that such Damages relate to a liability or matter
with respect to which the indemnified party has made recovery from an insurance
company or from the person causing the damages, to the extent of such recovery.
(b) If the indemnifying party makes any payment pursuant to this Article
10 or otherwise by reason of the transactions contemplated by this Agreement or
the other documents executed hereunder under any theory of recovery, the
indemnifying party shall be subrogated, to the extent of such payment and to the
extent permitted by law, to any rights and remedies of the indemnified party to
recoup amounts paid from third parties with respect to the matters giving rise
to indemnification hereunder.
(c) The obligation of an indemnifying party shall be adjusted so as to
give effect to any net reduction in federal, state or local income tax liability
determined on a consolidated basis to which the party being indemnified
hereunder will be actually entitled in connection with the satisfaction by the
indemnifying party of any indemnification claim brought by the party being
indemnified.
(d) The remedies provided in this Article 10 shall be exclusive as to any
claim by a party under this Agreement or any other document executed hereunder
or arising out of the
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transactions provided for herein and therein and shall preclude assertion by any
party of any other rights or the seeking of any other remedies against another
party, including, without limitation, any rights or remedies such party may have
under any Environmental Law.
10.9 Knowledge and Material Qualifiers. For purposes of determining
whether and the extent to which Buyer Group, Buyer's Affiliates or Surviving
Corporation are able to seek indemnification from the Shareholders under Section
10.1(i) for the inaccuracy or breach of any representation or warranty of any
Shareholder or the Company, the use of the term "Knowledge" or "Material", when
capitalized herein, as a qualifier in any such representation or warranty shall
be disregarded and all claims for such indemnification shall be determined as if
neither term was present in such representation or warranty. The parties hereto
expressly acknowledge that the sole purpose for using the term "Knowledge" or
"Material", when capitalized herein, in any representation or warranty is to
determine whether the Company and the Shareholders have satisfied the Closing
condition set forth in Section 7.2(a).
10.10 Recovery of Legal Fees and Expenses. In the event that a party
hereto shall assert a claim for indemnification against any other party hereto
and it shall be determined that the asserting party is not entitled for
indemnification with respect to such claim, the asserting party shall promptly
pay to the non-asserting party all of the non-asserting party's expenses
(including but not limited to legal fees and expenses) incurred by the
non-asserting party in investigating, negotiating, litigating, arbitrating
and/or otherwise addressing such claim.
10.11 Certain Environmental Matters.
(a) The Shareholders shall only be liable for Damages incurred by the
Surviving Corporation as a result of a breach of a representation or warranty in
Section 3.15 where: (i) the Surviving Corporation is required by a Governmental
Entity to incur such Damages; or (ii) the Surviving Corporation incurs such
Damages to meet the requirements of any Environmental Law.
(b) The Surviving Corporation shall not initiate any sampling activities
on the property unless: (i) the Surviving Corporation is required by a
Governmental Entity to perform such activities; (ii) the Surviving Corporation
performs such activities to meet the requirements of any Environmental Law;
(iii) the Surviving Corporation initiates such activities in connection with the
potential purchase of any leased property by third parties; or (iv)
Shareholders' Representative consents to the Surviving Corporation's performance
of such activities.
(c) The Shareholders shall reimburse the Surviving Corporation, severally
in accordance with Section 10.1(b), for all costs and expenses incurred by the
Surviving Corporation on or after the Closing Date to put the Surviving
Corporation and its business, facilities and assets in minimum compliance with
all Environmental Laws to the extent provided in Schedule 10.11(c) up to a
maximum of $75,000. Buyer Group may not seek indemnification under this Article
10 for amounts reimbursed by the Shareholders under this Section 10.11(c)
(d) For purposes of determining whether and to the extent to which Buyer
Group, Buyer's Affiliates or Surviving Corporation are able to seek
indemnification from the Shareholders under Section 10.1(i) for the inaccuracy
or breach of any representation or warranty
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of any Shareholder or the Company set forth in Section 3.10(a), Section 3.10(b)
or 3.15, the language "Except as set forth in Schedule 3.10(a)", "Except as set
forth in Schedule 3.10(b)" and "Except as set forth in Schedule 3.15" contained
in such sections, respectively, shall be disregarded and the information set
forth in Schedule 3.10(a), Schedule 3.10(b) and Schedule 3.15 shall be deemed
not to have been disclosed to the Buyer Group. The parties acknowledge that the
sole purpose of including such schedules in the Disclosure Schedules is to
determine whether the condition set forth in Section 7.2(a) has been met by the
Company and the Shareholders for purposes of Closing.
10.12 Breach of Independent Contractor Representation. The Shareholders
shall not be liable for Damages incurred by the Surviving Corporation as a
result of a breach of a representation or warranty contained in Section 3.26 in
the event of any change in the Surviving Corporation's treatment of the
Independent Contractors from the manner of treatment by the Company prior to the
date hereof.
11. Miscellaneous.
11.1 Disclosure Schedule. Information set forth in the disclosure
schedules to this Agreement (collectively referred to herein as the "Disclosure
Schedule") specifically refers to the article and section of this Agreement to
which such information is responsive and such information shall not be deemed to
have been disclosed with respect to any other article or section of this
Agreement or for any other purpose. The Disclosure Schedule shall not vary,
change or alter the language of the representations and warranties contained in
this Agreement and, to the extent the language in the Disclosure Schedule does
not conform in every respect to the language of such representations and
warranties, such language shall be disregarded and be of no force or effect.
11.2 Shareholders' Representative. Each Shareholder hereby designates and
appoints William J. Kidd as the exclusive agent, attorney-in-fact and
representative (the "Shareholders' Representative") for and on behalf of each
such Shareholder with full power of substitution, to:
(a) receive and accept service of any and all notices, requests and other
communications to be delivered to the Shareholders in accordance with the terms
of this Agreement including, without limitation, service of all legal process;
(b) pay all Merger Consideration received by the Shareholders'
Representative to the holders of the Common Stock, Cumulative Preferred Stock
and Series A Preferred Stock in accordance with this Agreement;
(c) send to the Buyer or its successors or assigns any and all notices,
requests and other communications in accordance with the terms of this
Agreement; and
(d) be each Shareholder's sole and exclusive representative to
communicate, respond, consent, confess, answer or otherwise act with respect to
any matter arising out of or involving this Agreement (including, without
limitation, all notices, requests and demands by the Buyer Group claiming for
indemnification under this Agreement). In the event of, and from the
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time of the death or disability of William J. Kidd, the Buyer Group shall
continue to address all notices, requests and other communications to the
remaining party or parties, until there is delivered to the Buyer Group an
instrument duly executed by all the Shareholders or their legal representatives
appointing a successor to such deceased or disabled person(s) on all of the same
terms and conditions as set forth herein.
11.3 Company's Knowledge. Whenever a representation made by Company in
this Agreement is subject to the qualification of "knowledge" or "Knowledge,"
such representation is based upon the knowledge of any of the Directors or
Officers after due inquiry and investigation.
11.4 Amendments. This agreement can be amended, supplemented or modified,
any provision hereof may be waived, only by a written instrument making specific
reference to this Agreement signed by the party against whom the same is sought
to be enforced.
11.5 Waiver. No course of dealing of any party hereto, no omission,
failure or delay on the part of any party hereto in asserting or exercising any
right hereunder, and no partial or single exercise of any right hereunder by any
party hereto shall constitute or operate as a waiver of any such right or any
other right hereunder. No waiver of any provision hereof shall be effective
unless in writing and signed by or on behalf of the party to be charged
therewith. No waiver of any provision hereof shall be deemed or construed as a
continuing waiver, as a waiver in respect of any other or subsequent breach or
default of such provision, or as a waiver of any other provision hereof unless
expressly so stated in writing and signed by or on behalf of the party to be
charged therewith.
11.6 Jurisdiction. This agreement shall be governed by the laws of the
State of Delaware (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
Jurisdiction and venue of any suit or action to enforce this Agreement or for
indemnification under the provisions of Article 10 hereof shall rest solely in
any state or federal court located in the State of Delaware and the Buyer, the
Company and each Shareholder hereby submits to the personal jurisdiction of the
state and federal courts in Delaware for the purpose of resolving any and all
matters arising under or in respect of this Agreement and agrees that personal
service upon each such party may be made by delivery thereof to such party at
the address specified herein.
11.7 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission or (b) confirmed delivery by a standard
courier service or delivery by hand at the following addresses (or at such other
address for a party as shall be specified by like notice):
if to the Company, to:
Heartland Industries, Inc.
11590 North Meridian, Suite 690
P.O. Box 1770
Carmel, Indiana 46032
Facsimile: (317) 575-9962
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<PAGE>
with a copy to:
Edward R. Mandell, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 704-6288
if to the Shareholders, to:
William J. Kidd
Kidd & Company, LLC
Three Pickwick Plaza
Greenwich, CT 06830
Facsimile: (203) 661-1839
with a copy to:
Edward R. Mandell, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 704-6288
if to the Buyer Group or Surviving Corporation, to:
Frederic L. Contino, Chief Executive Officer
PlayCore, Inc.
1212 Barberry Drive
Janesville, Wisconsin 53545
Facsimile: (608)755-4763
with a copy to:
Benjamin F. Garmer, III, Esq.
Foley & Lardner
Firstar Center
777 East Wisconsin Avenue
Mlwaukee, Wisconsin 53202-5367
Facsimile: (414) 297-4900
11.8 Entire Agreement. This agreement (together with the Schedules and
Exhibits hereto) and the agreements and documents delivered pursuant to this
Agreement, constitute the entire agreement of the parties with respect to the
subject matter hereof, and collectively supersede
39
<PAGE>
all other prior or contemporaneous negotiations, commitments, agreements and
understandings (whether written or oral), between the parties with respect to
the subject matter hereof. The covenants, representations, warranties, terms and
conditions of this Agreement represent a negotiated allocation of the economic
risks of this transaction and shall be unaffected by any investigation
heretofore or hereafter made by Buyer Group, or any knowledge of Buyer Group
other than as specifically disclosed in the Disclosure Schedule delivered to
Buyer Group at the time of the execution of this Agreement.
11.9 Further Assurances. Each party hereto covenants and agrees promptly
to execute, deliver, file or record such agreements, instruments, certificates
and other documents and to perform such other and further acts as the other
party hereto may reasonably request or as may otherwise be necessary or proper
to consummate and perfect the transactions contemplated hereby.
11.10 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, or unenforceable, then (a) such provision, covenant or
restriction shall be construed by limiting and reducing it so as to be
enforceable to the fullest extent permitted under applicable law and shall
thereupon be enforced as so limited and reduced and (b) the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
11.11 Assignment. This agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. This
agreement is not intended to confer upon any other person except the parties
hereto any rights or remedies hereunder.
40
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
HI ACQUISITION CORP.
By: /s/Richard E. Ruegger
Name: Richard E. Ruegger
Title: Vice President - Finance
and Secretary
PLAYCORE WISCONSIN, INC.
By: /s/Richard E. Ruegger
Name: Richard E. Ruegger
Title: Vice President - Finance
and Treasurer
[Intentionally Left Blank]
41
<PAGE>
HEARTLAND INDUSTRIES, INC. (DE)
By: /s/Richard R. Hettlinger
Richard R. Hettlinger, President
The UCLA-Kamm Unitrust, Shareholder
/s/William J. Kidd
William J. Kidd, Shareholder By: /s/Kurt C. Kamm
Kurt C. Kamm, Trustee
/s/Carla G. Kidd /s/Judy L. Kamm
Carla G. Kidd, Shareholder Judy L. Kamm, Trustee
/s/Kurt L. Kamm
Kurt L. Kamm, Shareholder Stein 1995 Irrevocable Trust,
Shareholder
By: /s/Issac Stein
Judy L. Kamm Issac Stein, Trustee
Judy L. Kamm, Shareholder
/s/James Sulat Tradco (Barbados) Inc., Shareholder
James Sulat, Shareholder
By:/s/
Name:
/s/Frank LaHaye Title:
Frank LaHaye, Shareholder
Peregine Ventures II,. L.P.,
Shareholder
/s/Gene Miller By:/s/
Gene Miller, Shareholder Name:
Title:
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLAYCORE, INC.
PLAYCORE WISCONSIN, INC.
AMENDED AND RESTATED
CREDIT AGREEMENT
Originally dated as of March 13, 1997
Amended and Restated as of February 16, 1999
FLEET NATIONAL BANK, Agent
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
Page
1. Definitions; Certain Rules of Construction............................1
2. The Credits..........................................................30
2.1. Revolving Credit............................................30
2.1.1. Revolving Loan.....................................30
2.1.2. Maximum Amount of Revolving Credit.................30
2.1.3. Borrowing Requests.................................31
2.1.4. Revolving Notes....................................31
2.2. Term Loan A.................................................31
2.2.1. Term Loan A........................................31
2.2.2. Term Loan A Notes..................................32
2.3. Term Loan B.................................................32
2.3.1. Term Loan B........................................32
2.3.2. Term Loan B Notes..................................32
2.4. Letters of Credit...........................................32
2.4.1. Issuance of Letters of Credit......................32
2.4.2. Requests for Letters of Credit.....................33
2.4.3. Form and Expiration of Letters of Credit...........33
2.4.4. Lenders' Participation in Letters of Credit........33
2.4.5. Presentation.......................................33
2.4.6. Payment of Drafts..................................34
2.4.7. Uniform Customs and Practice.......................34
2.4.8. Subrogation........................................35
2.4.9. Modification, Consent, etc.........................36
2.5. Application of Proceeds.....................................36
2.5.1. Revolving Loan.....................................36
2.5.2. Term Loans.........................................36
2.5.3. Letters of Credit..................................36
2.5.4. Specifically Prohibited Applications...............36
2.6. Nature of Obligations of Lenders to Make Extensions of
Credit ..... ...............................................36
3. Interest; LIBOR Pricing Options; Fees.........................37
3.1. Interest....................................................37
3.2. LIBOR Pricing Options.......................................37
3.2.1. Election of LIBOR Pricing Options..................37
3.2.2. Notice to Lenders and Borrower.....................38
3.2.3. Selection of LIBOR Interest Periods................38
3.2.4. Additional Interest................................39
3.2.5. Violation of Legal Requirements....................39
3.2.6. Funding Procedure..................................39
3.3. Commitment Fees.............................................40
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Page
3.4. Letter of Credit Fees.......................................40
3.5. Changes in Circumstances; Yield Protection..................40
3.5.1. Reserve Requirements, etc..........................40
3.5.2. Taxes..............................................41
3.5.3. Capital Adequacy...................................41
3.5.4. Regulatory Changes.................................42
3.5.5. Compensation Claims................................42
3.5.6. Mitigation.........................................42
3.6. Computations of Interest and Fees...........................43
4. Payment..............................................................43
4.1. Payment at Maturity.........................................43
4.2. Scheduled Required Prepayments..............................43
4.2.1. Term Loan A........................................43
4.2.2. Term Loan B........................................44
4.3. Contingent Required Prepayments.............................45
4.3.1. Excess Credit Exposure.............................45
4.3.2. Excess Cash Flow...................................45
4.3.3. Net Asset Sale Proceeds............................46
4.3.4. Net Debt Proceeds..................................46
4.3.5. Net Equity Proceeds................................46
4.4. Voluntary Prepayments.......................................46
4.5. Letters of Credit...........................................47
4.6. Reborrowing; Application of Payments, etc...................47
4.6.1. Reborrowing........................................47
4.6.2. Order of Application...............................47
4.6.3. Payment with Accrued Interest, etc.................48
4.6.4. Payments for Lenders...............................48
5. Conditions to Extending Credit.......................................48
5.1. Conditions on Initial Closing Date..........................48
5.1.1. Notes...............................................49
5.1.2. Payment of Fees....................................49
5.1.3. Legal Opinions.....................................49
5.1.4. Guarantee and Security Agreement...................49
5.1.5. Guarantee and Pledge Agreement.....................49
5.1.6. Real Estate Collateral.............................49
5.1.7. Perfection of Security.............................50
5.1.8. Acquisition........................................50
5.1.9. Capitalization, etc................................51
5.1.10. Termination of Prior Credit Agreement.............51
5.1.11. Unaudited Annual Financial Statements.............52
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Page
5.1.12. Insurance.........................................52
5.1.13. Environmental Review..............................52
5.1.14. Amendment of Securities Purchase Agreements.......52
5.1.15. Proper Proceedings................................52
5.1.16. General...........................................52
5.2. Conditions to Each Extension of Credit......................53
5.2.1. Officer's Certificate..............................53
5.2.2. Legality, etc......................................53
6. General Covenants....................................................53
6.1. Taxes and Other Charges; Accounts Payable...................53
6.1.1. Taxes and Other Charges............................53
6.1.2. Accounts Payable...................................54
6.2. Conduct of Business, etc....................................54
6.2.1. Types of Business..................................54
6.2.2. Maintenance of Properties..........................54
6.2.3. Statutory Compliance...............................54
6.2.4. Compliance with Material Agreements................55
6.3. Insurance...................................................55
6.3.1. Business Interruption Insurance....................55
6.3.2. Property Insurance.................................55
6.3.3. Liability Insurance................................55
6.3.4. Flood Insurance....................................55
6.4. Financial Statements and Reports............................56
6.4.1. Annual Reports.....................................56
6.4.2. Quarterly Reports..................................57
6.4.3. Monthly Reports....................................59
6.4.4. Borrowing Base Reports.............................59
6.4.5. Other Reports......................................59
6.4.6. Notice of Litigation, Defaults, etc................60
6.4.7. ERISA Reports......................................60
6.4.8. Other Information; Audit...........................60
6.5. Certain Financial Tests.....................................61
6.5.1. Consolidated Net Worth.............................61
6.5.2. Consolidated EBITDA................................61
6.5.3. Consolidated Total Debt to Consolidated EBITDA.....62
6.5.4. Consolidated Adjusted EBITDA Plus Rent to
Consolidated Fixed
Charges Plus Rent....................................................62
6.5.5. Capital Expenditures...............................63
6.6. Indebtedness................................................63
6.7. Guarantees; Letters of Credit...............................64
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Page
6.8. Liens.......................................................65
6.9. Investments and Acquisitions................................66
6.10. Distributions...............................................67
6.11. Asset Dispositions and Mergers..............................68
6.12. Issuance of Stock by Subsidiaries; Subsidiary
Distributions...............................................69
6.12.1. Issuance of Stock by Subsidiaries.................69
6.12.2. No Restrictions on Subsidiary Distributions.......69
6.13. Voluntary Prepayments of Other Indebtedness.................69
6.14. Derivative Contracts........................................69
6.15. Negative Pledge Clauses.....................................70
6.16. ERISA, etc..................................................70
6.17. Transactions with Affiliates................................70
6.18. Interest Rate Protection....................................70
6.19. Environmental Laws..........................................71
6.19.1. Compliance with Law and Permits...................71
6.19.2. Notice of Claims, etc.............................71
7. Representations and Warranties.......................................71
7.1. Organization and Business...................................71
7.1.1. The Holding Company................................71
7.1.2. Subsidiaries.......................................72
7.1.3. Qualification......................................72
7.1.4. Capitalization.....................................72
7.2. Financial Statements and Other Information; Material
Agreements..................................................73
7.2.1. Financial Statements and Other Information.........73
7.2.2. Material Agreements................................74
7.3. Agreements Relating to Financing Debt, Investments, etc.....74
7.4. Changes in Condition........................................75
7.5. Title to Assets.............................................75
7.6. Operations in Conformity With Law, etc......................75
7.7. Litigation..................................................75
7.8. Authorization and Enforceability............................76
7.9. No Legal Obstacle to Agreements.............................76
7.10. Defaults....................................................77
7.11. Licenses, etc...............................................77
7.12. Tax Returns.................................................77
7.13. Certain Business Representations............................78
7.13.1. Labor Relations...................................78
7.13.2. Antitrust.........................................78
7.13.3. Consumer Protection...............................78
7.13.4. Extraordinary Obligations.........................78
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Page
7.13.5. Future Expenditures...............................78
7.13.6. Year 2000 Issues..................................78
7.14. Environmental Regulations...................................79
7.14.1. Environmental Compliance..........................79
7.14.2. Environmental Litigation..........................79
7.14.3. Hazardous Material................................79
7.14.4. Environmental Condition of Properties.............80
7.15. Pension Plans...............................................80
7.16. Acquisition Agreement, etc..................................80
7.17. Government Regulation; Margin Stock.........................80
7.17.1. Government Regulation.............................80
7.17.2. Margin Stock......................................81
7.18. Disclosure..................................................81
8. Defaults.............................................................81
8.1. Events of Default...........................................81
8.1.1. Payment............................................81
8.1.2. Specified Covenants................................81
8.1.3. Other Covenants....................................81
8.1.4. Representations and Warranties.....................81
8.1.5. Cross Default, etc.................................82
8.1.6. Ownership; Liquidation; etc........................82
8.1.7. Enforceability, etc................................83
8.1.8. Judgments..........................................83
8.1.9. ERISA..............................................83
8.1.10. Bankruptcy, etc...................................84
8.2. Certain Actions Following an Event of Default...............84
8.2.1. Terminate Obligation to Extend Credit..............84
8.2.2. Specific Performance; Exercise of Rights...........84
8.2.3. Acceleration.......................................85
8.2.4. Enforcement of Payment; Credit Security; Setoff....85
8.2.5. Cumulative Remedies................................85
8.3. Annulment of Defaults.......................................85
8.4. Waivers.....................................................86
9. Expenses; Indemnity..................................................86
9.1. Expenses....................................................86
9.2. General Indemnity...........................................87
9.3. Indemnity With Respect to Letters of Credit.................87
10. Operations; Agent....................................................87
10.1. Interests in Credits........................................88
10.2. Agent's Authority to Act, etc...............................88
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Page
10.3. Borrower to Pay Agent, etc..................................88
10.4. Lender Operations for Advances, Letters of Credit, etc......88
10.4.1. Advances..........................................88
10.4.2. Letters of Credit.................................89
10.4.3. Agent to Allocate Payments, etc...................89
10.4.4. Delinquent Lenders; Nonperforming Lenders.........90
10.5. Sharing of Payments, etc....................................91
10.6. Amendments, Consents, Waivers, etc..........................91
10.7. Agent's Resignation.........................................93
10.8. Concerning the Agent........................................93
10.8.1. Action in Good Faith, etc.........................93
10.8.2. No Implied Duties, etc............................93
10.8.3. Validity, etc.....................................94
10.8.4. Compliance........................................94
10.8.5. Employment of Agents and Counsel..................94
10.8.6. Reliance on Documents and Counsel.................94
10.8.7. Agent's Reimbursement.............................94
10.9. Rights as a Lender..........................................95
10.10. Independent Credit Decision.................................95
10.11. Indemnification.............................................96
11. Successors and Assigns; Lender Assignments and Participations........96
11.1. Assignments by Lenders......................................96
11.1.1. Assignees and Assignment Procedures...............96
11.1.2. Terms of Assignment and Acceptance................97
11.1.3. Register..........................................98
11.1.4. Acceptance of Assignment and Assumption...........98
11.1.5. Federal Reserve Bank..............................99
11.1.6. Further Assurances................................99
11.2. Credit Participants.........................................99
11.3. Replacement of Lender......................................100
12. Confidentiality.....................................................101
13. Foreign Lenders.....................................................101
14. Notices.............................................................102
15. Course of Dealing; Amendments and Waivers...........................102
16. No Strict Construction..............................................103
17. Defeasance..........................................................103
18. Venue; Service of Process...........................................103
19. WAIVER OF JURY TRIAL................................................104
20. General.............................................................104
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EXHIBITS
1 - Heartland Financial Data for Periods Prior to Initial Closing Date
2.1.4 - Revolving Note
2.2.2 - Term Loan A Note
2.3.2 - Term Loan B Note
5.1.4 - Guarantee and Security Agreement
5.1.5 - Guarantee and Pledge Agreement
5.2.1 - Officer's Certificate
6.4. - Compliance Certificate
7.1 - Holding Company and its Subsidiaries
7.2.2 - Material Agreements
7.3 - Financing Debt, Certain Investments, etc.
7.14 - Hazardous Material Sites
10.1 - Commitments
11.1.1 - Assignment and Acceptance
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PLAYCORE, INC.
PLAYCORE WISCONSIN, INC.
AMENDED AND RESTATED
CREDIT AGREEMENT
This Agreement, dated as of February 16, 1999, is among PlayCore
Wisconsin, Inc., a Wisconsin corporation formerly known as "Newco, Inc.", the
Subsidiaries of PlayCore Wisconsin, Inc. from time to time party hereto,
PlayCore Wisconsin, Inc.'s corporate parent, PlayCore, Inc., a Delaware
corporation formerly known as "Swing-N-Slide Corp.", the Lenders from time to
time party hereto and Fleet National Bank, both in its capacity as a Lender and
in its capacity as agent for itself and the other Lenders. The parties agree as
follows:
Recitals: Pursuant to this Agreement, the Lenders are extending to the
Borrower a $28,000,000 revolving credit facility, including a $1,000,000
sub-allotment for Letters of Credit, a $38,000,000 Term Loan A facility and a
$9,000,000 Term Loan B facility. All the credit facilities mature on March 13,
2003, except the Term Loan B facility, which matures on June 30, 2003. The
credit facilities are guaranteed by the Holding Company and the Borrower's
Subsidiaries and are secured by liens on substantially all the assets and stock
of the Borrower and its Subsidiaries. Proceeds of the term loan facilities are
being used by the Borrower to acquire Heartland on the Initial Closing Date for
an aggregate cash purchase price of approximately $12,500,000, to repay
indebtedness and for general corporate purposes as provided herein.
Amendment and Restatement: Effective as of the Initial Closing Date, this
Agreement amends and restates in its entirety the Credit Agreement dated as of
March 13, 1997, as amended and in effect on the date hereof prior to giving
effect to this Agreement, among the Borrower, its Subsidiaries, the Holding
Company and a group of lenders for which Fleet is acting as agent. On the
Initial Closing Date the Lenders will make such assignments and other
arrangements among themselves so that the Notes and Letter of Credit Exposure
are held by the Lenders in accordance with their Percentage Interests. Amounts
in respect of interest, commitment fees, Letter of Credit fees and other amounts
payable hereunder shall be calculated in accordance with the terms of the Credit
Agreement referred to above as in effect prior to the amendment and restatement
on the Initial Closing Date for periods prior to the Initial Closing Date and in
accordance with this Agreement (as it amends and restates such Credit Agreement)
for periods from and after the Initial Closing Date.
1. Definitions; Certain Rules of Construction. Certain capitalized terms are
used in this Agreement and in the other Credit Documents with the specific
meanings defined below in this Section 1. Except as otherwise explicitly
specified to the contrary or unless the context clearly requires otherwise, (a)
the capitalized term "Section" refers to sections of this Agreement, (b) the
capitalized term "Exhibit" refers to exhibits to this Agreement, (c) references
to a
<PAGE>
particular Section include all subsections thereof, (d) the word "including"
shall be construed as "including without limitation", (e) accounting terms not
otherwise defined herein have the meaning provided under GAAP, (f) references to
a particular statute or regulation include all rules and regulations thereunder
and any successor statute, regulation or rules, in each case as from time to
time in effect, (g) references to a particular Person include such Person's
successors and assigns to the extent not prohibited by this Agreement and the
other Credit Documents and (h) references to "Dollars" or "$" mean United States
Funds. References to "the date hereof" mean the date first set forth above.
1.1. "Accumulated Benefit Obligations" means the actuarial present value
of the accumulated benefit obligations under any Plan, calculated in accordance
with Statement No. 87 of the Financial Accounting Standards Board.
1.2. "Acquisition" means the merger of HI Acquisition Corp., a Delaware
corporation that is a Wholly Owned Subsidiary of the Borrower, into Heartland
pursuant to the Acquisition Agreement, pursuant to which the Heartland Sellers
will receive an aggregate of $12,500,000 in cash and Seller Subordinated Notes
in the aggregate principal amount of $500,000.
1.3. "Acquisition Agreement" means the Agreement and Plan of Merger dated
February 4, 1999 among the Borrower, HI Acquisition Corp., certain Heartland
shareholders and Heartland, as in effect on the date hereof and as subsequently
amended in accordance with Section 6.2.4.
1.4. "Affected Lender" is defined in Section 11.3.
1.5. "Affiliate" means, with respect to the Holding Company (or any other
specified Person), any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the Holding
Company (or such specified Person), and shall include (a) any officer or
director or general partner of the Holding Company (or such specified Person),
(b) any Person of which the Holding Company (or such specified Person) or any
Affiliate (as defined in clause (a) above) of the Holding Company (or such
specified Person) shall, directly or indirectly, beneficially own either (i) at
least 10% of the outstanding equity securities having the general power to vote
or (ii) at least 10% of all equity interests or (c) any Person directly or
indirectly controlling the Holding Company through a management agreement,
voting agreement or other contract.
1.6. "Agent" means Fleet in its capacity as agent for the Lenders
hereunder, as well as its successors and assigns in such capacity pursuant to
Section 10.7.
1.7. "Agreement" means this Credit Agreement as from time to time
amended, modified and in effect.
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1.8. "Applicable Margin" means, (a) prior to August 1, 1999, the highest
percentage rate set forth in the table below and (b) on each day during any
month commencing after July 31, 1999, the percentage in the table below set
opposite the ratio of (i) Consolidated Senior Debt as of the end of the most
recent period of four consecutive fiscal quarters for which financial statements
have been (or are required to have been) furnished to the Lenders in accordance
with Sections 6.4.1 and 6.4.2 prior to the first day of such month to (ii)
Consolidated EBITDA for such period:
Ratio of Consolidated Senior Debt Applicable Base Applicable
to Consolidated EBITDA Rate Margin LIBOR Margin
Greater than or equal to 3.0 2.00% 3.25%
Greater than or equal to 2.75 and
less than 3.0 1.75% 3.00%
Greater than or equal to 2.5 and
less than 2.75 1.50% 2.75%
Greater than or equal to 2.25 and
less than 2.5 1.25% 2.50%
Greater than or equal to 2.00 and
less than 2.25 1.00% 2.25%
Less than 2.00 0.75% 2.00%
Changes in the Applicable Margin shall occur on the first day of each month
after quarterly financial statements have been (or are required to have been)
furnished to the Lenders in accordance with Sections 6.4.1 or 6.4.2 from time to
time. In the event that the financial statements required to be delivered
pursuant to Section 6.4.1 or 6.4.2, as applicable, are not delivered when due,
then during the period from the date upon which such financial statements were
required to be delivered until the date upon which they are actually delivered,
the ratio of Consolidated Senior Debt to Consolidated EBITDA shall be deemed for
purposes of this definition to be greater than 3.0.
1.9. "Applicable Maturity Date" means (a) with respect to the Revolving
Loan, the Final Revolving Maturity Date, (b) with respect to Term Loan A, the
Final Term Loan A Maturity Date and (c) with respect to Term Loan B, the Final
Term Loan B Maturity Date.
1.10. "Applicable Rate" means, at any date, the sum of:
(a) (i) with respect to each portion of the Revolving Loan and
Term Loan A subject to a LIBOR Pricing Option, the sum of the
Applicable Margin plus the LIBOR Rate with respect to such LIBOR
Pricing Option;
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(ii) with respect to each other portion of the Revolving
Loan and Term Loan A, the sum of the Applicable Margin plus the
Base Rate;
(iii) with respect to Term Loan B subject to a LIBOR
Pricing Option, the sum of 3.75% plus the LIBOR Rate with respect
to such LIBOR Pricing Option;
(iv) with respect to each other portion of Term Loan B, the
sum of 2.75% plus the Base Rate;
plus (b) an additional 2% effective on the day the Agent
notifies the Borrower that the interest rates hereunder are
increasing as a result of the occurrence and continuance of
an Event of Default until the earlier of such time as (i)
such Event of Default is no longer continuing or (ii) such
Event of Default is deemed no longer to exist, in each case
pursuant to Section 8.3.
1.11. "Assignee" is defined in Section 11.1.1.
1.12. "Assignment and Acceptance" is defined in Section 11.1.1.
1.13. "Banking Day" means any day other than Saturday, Sunday or a day on
which banks in Boston, Massachusetts are authorized or required by law or other
governmental action to close and, if such term is used with reference to a LIBOR
Pricing Option, any day on which dealings are effected in Eurodollars in
question by first-class banks in the London inter-bank Eurodollar markets in New
York, New York.
1.14. "Bankruptcy Code" means Title 11 of the United States Code.
1.15. "Bankruptcy Default" means an Event of Default referred to in
Section 8.1.10.
1.16. "Base Rate" means, on any date, the greater of (a) the rate of
interest announced by Fleet at the Boston Office as its Prime Rate or (b) the
sum of 1/2% plus the Federal Funds Rate.
1.17. "Borrower" means PlayCore Wisconsin, Inc., a Wisconsin corporation
formerly known as "Newco, Inc."
1.18. "Borrowing Base" means, on any date, the sum of:
(a) 80% of Eligible Accounts Receivable arising from the
Swing-N-Slide Division,
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plus (b) 85% of Eligible Accounts Receivable arising from the
Game Time Division,
plus (b) the following percentages of Eligible Inventory for the
categories indicated below:
(i) 50% of Eligible Inventory consisting of raw
materials,
(ii) 25% of Eligible Inventory consisting of
work-in-process,
(iii) 50% of Eligible Inventory consisting of
finished goods;
provided, however, that the Borrowing Base shall be reduced to $1.00 during any
period when the Holding Company has failed to furnish the computation of the
Borrowing Base required by Section 6.4.4, commencing five days after such
computation was originally due.
1.19. "Boston Office" means the principal banking office of Fleet in
Boston, Massachusetts.
1.20. "By-laws" means all written by-laws, rules, regulations and all
other documents relating to the management, governance or internal regulation of
any Person other than an individual, or interpretive of the Charter of such
Person, all as from time to time in effect.
1.21. "Capital Expenditures" means, for any period, amounts added or
required to be added to the property, plant and equipment or other fixed assets
account on the Consolidated balance sheet of the Borrower (or other specified
Person) and its Subsidiaries, prepared in accordance with GAAP, in respect of
(a) the acquisition, construction, improvement or replacement of land,
buildings, machinery, equipment, leaseholds and any other real or personal
property, (b) to the extent not included in clause (a) above, materials,
contract labor and direct labor relating thereto (excluding amounts properly
expensed as repairs and maintenance in accordance with GAAP) and (c) software
development costs to the extent not expensed; provided, however, that Capital
Expenditures shall not include amounts added or required to be added as a result
of acquisitions of the stock or substantially all of the assets of another
company as a going concern permitted by Section 6.9.
1.22. "Capitalized Lease" means any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
1.23. "Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in
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accordance with GAAP, including Statement Nos. 13 and 98 of the Financial
Accounting Standards Board.
1.24. "Cash Equivalents" means:
(a) negotiable certificates of deposit, time deposits (including
sweep accounts), demand deposits and bankers' acceptances having a
maturity of nine months or less and issued by any United States financial
institution having capital and surplus and undivided profits aggregating
at least $100,000,000 and rated at least Prime-1 by Moody's or A-1 by S&P
or issued by any Lender;
(b) corporate obligations having a maturity of nine months or less
and rated at least Prime-1 by Moody's or A-1 by S&P or issued by any
Lender;
(c) any direct obligation of the United States of America or any
agency or instrumentality thereof, or of any state or municipality
thereof, (i) which has a remaining maturity at the time of purchase of
not more than one year or which is subject to a repurchase agreement with
any Lender (or any other financial institution referred to in clause (a)
above) exercisable within one year from the time of purchase and (ii)
which, in the case of obligations of any state or municipality, is rated
at least AAA by Moody's or AAA by S&P; and
(d) any mutual fund or other pooled investment vehicle rated at
least Aa by Moody's or AA by S&P which invests principally in obligations
described above.
1.25. "CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
1.26. "Charter" means the articles of organization, certificate of
incorporation, statute, constitution, joint venture agreement, partnership
agreement, trust indenture, limited liability company agreement or other charter
document of any Person other than an individual, each as from time to time in
effect.
1.27. "Closing Date" means the Initial Closing Date and each other date
on which any extension of credit is made pursuant to Sections 2.1, 2.2, 2.3 or
2.4.
1.28. "Code" means the federal Internal Revenue Code of 1986.
1.29. "Commitment" means, with respect to any Lender, such Lender's
obligations to extend the credits contemplated by Section 2. The original
Commitments are set forth in Exhibit 10.1 and the subsequent Commitments shall
be recorded from time to time in the Register.
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1.30. "Computation Covenants" means Sections 6.5, 6.6.7, 6.6.13, 6.9.6,
6.9.7, 6.9.8, 6.9.9, 6.10.3, 6.10.4, 6.10.5, 6.11.1, 6.11.4 and 6.16.
1.31. "Consolidated" and "Consolidating", when used with reference to any
term, mean that term as applied to the accounts of the Borrower (or other
specified Person) and all of its Subsidiaries (or other specified group of
Persons), or such of its Subsidiaries as may be specified, consolidated (or
combined) or consolidating (or combining), as the case may be, in accordance
with GAAP and with appropriate deductions for minority interests in
Subsidiaries.
1.32. "Consolidated Adjusted EBITDA" means, for any period, Consolidated
EBITDA minus Capital Expenditures (including, for the portion of any period
prior to the Initial Closing Date, Capital Expenditures incurred by Heartland as
set forth in Exhibit 1) minus taxes based upon or measured by net income
(including Distributions to the Holding Company in respect of taxes permitted by
Section 6.10.6, but not including deferred taxes) to the extent deducted from
Consolidated Net Income used to determine Consolidated EBITDA.
1.33. "Consolidated EBITDA" means, for any period, the total of:
(a) Consolidated Net Income; plus
(b) all amounts deducted in computing such Consolidated Net
Income in respect of:
(i) depreciation, amortization and other noncash
charges,
(ii) Consolidated Interest Expense,
(iii) taxes based upon or measured by net income
(including Distributions to the Holding Company in
respect of taxes permitted by Section 6.10.6), and
(iv) any extraordinary and nonrecurring losses,
minus (c) to the extent included in computing such
Consolidated Net Income any extraordinary and
nonrecurring gains;
provided, however, that Consolidated EBITDA for portions of any period prior to
the Initial Closing Date shall include amounts for Heartland as set forth in
Exhibit 1.
1.34. "Consolidated Excess Cash Flow" means, for any period, the total
of:
(a) Consolidated EBITDA,
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minus (b) Capital Expenditures,
minus (c) taxes based upon or measured by net income that are
actually paid (or to be paid currently) in cash
(including Distributions to the Holding Company in
respect of taxes permitted by Section 6.10.6),
minus (d) Consolidated Fixed Charges (but in no event
including contingent prepayments required by Section
4.3),
minus (e) voluntary prepayments of the Term Notes and other
term Financing Debt of the Borrower and its
Subsidiaries (including Distributions paid to the
Holding Company on account of the voluntary
prepayment of its term Financing Debt) permitted by
this Agreement,
minus (f) Consolidated Working Capital Factor (if a positive
number),
plus (g) Consolidated Working Capital Factor (if a negative
number); provided, however, that in adding the
Consolidated Working Capital Factor to compute
Consolidated Excess Cash Flow, the amount of the
negative Consolidated Working Capital Factor
described in this clause (g) shall be added as if it
were a positive number.
1.35. "Consolidated Fixed Charges" means, for any period, the sum of:
(a) Consolidated Interest Expense,
plus (b) the aggregate amount of all mandatory scheduled
payments and sinking fund payments with respect to
principal paid by the Borrower and its Subsidiaries
in respect of Consolidated Total Debt, including
payments in the nature of principal under
Capitalized Leases and Distributions paid to the
Holding Company on account of mandatory scheduled
payments and sinking fund payments with respect to
its Financing Debt, but in no event including
contingent prepayments required by Section 4.3,
plus (c) mandatory dividends paid or payable by the Borrower
or any of its Subsidiaries to third parties.
1.36. "Consolidated Interest Expense" means, for any period, the
aggregate amount of interest, including commitment fees, payments in the nature
of interest under Capitalized Leases and net payments under Interest Rate
Protection Agreements, accrued by the Borrower and its Subsidiaries in
accordance with GAAP on a Consolidated basis, whether such interest is reflected
as an item of expense or capitalized, and excluding in any event the
amortization of deferred financing charges and PIK Interest and including in any
event Distributions paid to the
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Holding Company on account of interest on its Financing Debt and cash payments
made during such period on account of PIK Interest expensed during a prior
period.
1.37. "Consolidated Net Income" means, for any period, the net income (or
loss) of the Borrower and its Subsidiaries, determined in accordance with GAAP
on a Consolidated basis minus the amount of Distributions paid to the Holding
Company pursuant to Sections 6.10.3, 6.10.4 and 6.10.6 and any other
Distributions paid to the Holding Company on account of taxes, interest on
Indebtedness, management fees and corporate overhead expense; provided, however,
that Consolidated Net Income shall not include:
(a) the income (or loss) of any Person accrued prior to the date
such Person becomes a Subsidiary or is merged into or consolidated with
the Borrower or any of its Subsidiaries;
(b) the income (or loss) of any Person (other than a Subsidiary)
in which the Borrower or any of its Subsidiaries has an ownership
interest; provided, however, that (i) Consolidated Net Income shall
include amounts in respect of the income of such Person when actually
received in cash by the Borrower or such Subsidiary in the form of
dividends or similar Distributions and (ii) Consolidated Net Income shall
be reduced by the aggregate amount of all Investments, regardless of the
form thereof, made by the Borrower or any of its Subsidiaries in such
Person for the purpose of funding any deficit or loss of such Person;
(c) all amounts included in computing such net income (or loss) in
respect of (i) the write-up of any asset on or after December 31, 1997,
including the subsequent amortization or expensing of the written-up
portion of assets on account of the Acquisition or (ii) the retirement of
any Indebtedness or equity at less than face value after December 31,
1997;
(d) extraordinary and nonrecurring gains;
(e) the income of any Subsidiary to the extent the payment of such
income in the form of a Distribution or repayment of Indebtedness to the
Borrower or a Wholly Owned Subsidiary is not permitted, whether on
account of any Charter or By-law restriction, any agreement, instrument,
deed or lease or any law, statute, judgment, decree or governmental
order, rule or regulation applicable to such Subsidiary;
(f) any after-tax gains or losses attributable to returned surplus
assets of any Plan;
(g) the write off after the Initial Closing Date of capitalized
financing costs incurred prior to the Initial Closing Date;
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(h) any deferred or other credit representing the excess of the
equity in any Subsidiary of the Borrower at the date of acquisition
thereof over the cost of the Investment in such Subsidiary;
(i) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of income
accrued during the same period;
(j) any aggregate net gain (but not any aggregate net loss)
arising from the sale, conversion, exchange or other disposition of
capital assets, including (i) all non-current assets and, without
duplication, (ii) the following, whether or not current: (A) fixed
assets, whether tangible or intangible, (B) all inventory sold in
conjunction with the disposition of fixed assets and (C) all shares of
capital stock or other securities;
(k) any net gain from the collection of any proceeds of life
insurance policies;
(l) any gain arising from the acquisition of any shares of capital
stock or other securities, or the extinguishment, under GAAP, of any
Indebtedness, of the Borrower or any Subsidiary of the Borrower;
(m) any net income or gain (but not any net loss) from (i) any
change in accounting principles in accordance with GAAP, (ii) any prior
period adjustments resulting from any change in accounting principles in
accordance with GAAP and (iii) any discontinued operations or the
disposition thereof;
(n) any portion of Consolidated Net Income that cannot be freely
converted into United States Funds; and
(o) any other non-cash gain included in Consolidated Net Income.
1.38. "Consolidated Net Worth" means, at any date, the total of:
(a) stockholders' equity of the Borrower and its Subsidiaries
determined in accordance with GAAP on a Consolidated basis, excluding the
effect of any foreign currency translation adjustments;
minus (b) the amount by which such stockholders' equity has been
increased after December 31, 1997 by the items described in clauses (a)
through (o) of the definition of Consolidated Net Income or by goodwill.
1.39. "Consolidated Rental Obligations" shall mean, for any period, all
rents and other amounts (including as such amounts all payments which such
Person is obligated to make
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to the lessor on termination of any lease and/or on surrender of the leased
property other than payments for which such Person is contingently liable on
account of early termination or breach of such lease) paid, payable or
guaranteed during such period by the Borrower and its Subsidiaries on a
Consolidated basis, as lessee or sublessee under any lease (other than a
Capitalized Lease), excluding any amount required to be paid by such Person
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes, utilities and similar charges,
determined in accordance with GAAP; provided, however, that Consolidated Rental
Obligations for portions of any period prior to the Initial Closing Date shall
include amounts for Heartland as set forth in Exhibit 1. Whenever the amount of
Consolidated Rental Obligations are determined for any period, to the extent
that such Consolidated Rental Obligations are not definitely determinable by the
terms of the lease, the Consolidated Rental Obligations not so definitely
determinable shall be estimated in good faith and in such reasonable manner as
the board of directors of the Holding Company may determine (as evidenced by a
certified resolution of such board of directors promptly delivered to the
Agent).
1.40. "Consolidated Senior Debt" means, at any date, Consolidated Total
Debt minus the Seller Subordinated Debt minus the Senior Subordinated Notes.
1.41. "Consolidated Total Debt" means, at any date, all Financing Debt of
the Borrower and its Subsidiaries on a Consolidated basis.
1.42. "Consolidated Working Capital Factor" means, for any period, the
amount (whether positive or negative) equal to:
Current Assets
(a) Accounts Receivable:
(i) the amount, if any, by which accounts receivable at
the end of such period were greater than accounts
receivable at the beginning of such period,
minus (ii) the amount, if any, by which accounts receivable at
the end of such period were less than accounts
receivable at the beginning of such period,
(b) Inventory:
plus (i) the amount, if any, by which inventory at the end of
such period was greater than inventory at the
beginning of such period,
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minus (ii) the amount, if any, by which inventory at the end of
such period was less than inventory at the beginning
of such period,
(c) Prepaid Expenses:
plus (i) the amount, if any, by which prepaid expenses at the
end of such period were greater than prepaid
expenses at the beginning of such period,
minus (ii) the amount, if any, by which prepaid expenses at the
end of such period were less than prepaid expenses
at the beginning of such period,
Current Liabilities
(d) Accounts Payable:
plus (i) the amount, if any, by which accounts payable at the
end of such period were less than accounts payable
at the beginning of such period,
minus (ii) the amount, if any, by which accounts payable at the
end of such period were greater than accounts
payable at the beginning of such period,
(e) Accrued Expenses
plus (i) the amount, if any, by which accrued expenses at the
end of such period were less than accrued expenses
at the beginning of such period,
minus (ii) the amount, if any, by which accrued expenses at the
end of such period were greater than accrued
expenses at the beginning of such period,
all with respect to the Borrower and its Subsidiaries as determined in
accordance with GAAP on a Consolidated basis.
1.43. "Convertible Subordinated Debentures" means the Holding Company's
10% Convertible Subordinated Debentures due 2004 issued (a) in 1995 to
GreenGrass Holdings in an original aggregate principal amount of $4,300,000 and
(b) in 1997 to other stockholders of the Holding Company in an original
aggregate principal amount not exceeding $3,300,000 in
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form identical (except for the conversion price) to the Convertible Subordinated
Debentures described in the foregoing clause (a).
1.44. "Credit Documents" means:
(a) this Agreement, the Notes, each Letter of Credit, each draft
presented or accepted under a Letter of Credit, the Guarantee and
Security Agreement, the Guarantee and Pledge Agreement, the fee agreement
contemplated by Section 5.1.2 and each Interest Rate Protection Agreement
provided by a Lender (or an Affiliate of a Lender) to the Holding Company
or any of its Subsidiaries, each as from time to time in effect; and
(b) any other present or future agreement or instrument from time
to time entered into among the Holding Company, any of its Subsidiaries
or any other Obligor, on one hand, and the Agent, any Letter of Credit
Issuer or all the Lenders, on the other hand, relating to, amending or
modifying this Agreement or any other Credit Document referred to above
or which is stated to be a Credit Document, each as from time to time in
effect.
1.45. "Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Holding Company, the Borrower, any of its
Subsidiaries or any other Obligor owing to the Agent or any Lender (or any
Affiliate of a Lender) under or in connection with this Agreement or any other
Credit Document, including obligations in respect of principal, interest,
reimbursement obligations under Letters of Credit and Interest Rate Protection
Agreements provided by a Lender (or an Affiliate of a Lender), commitment fees,
Letter of Credit fees, amounts provided for in Sections 3.2.4, 3.5 and 9 and
other fees, charges, indemnities and expenses from time to time owing hereunder
or under any other Credit Document (whether accruing before or after a
Bankruptcy Default).
1.46. "Credit Participant" is defined in Section 11.2.
1.47. "Credit Security" means all assets now or from time to time
hereafter subjected to a security interest, mortgage or charge (or intended or
required so to be subjected pursuant to the Guarantee and Security Agreement,
the Guarantee and Pledge Agreement or any other Credit Document) to secure the
payment or performance of any of the Credit Obligations on a pari passu basis,
including the assets described in section 3.1 of the Guarantee and the Security
Agreement and in section 3.1 of the Guarantee and Pledge Agreement.
1.48. "Default" means any Event of Default and any event or condition
which with the passage of time or giving of notice, or both, would become an
Event of Default and the filing against the Holding Company, any of its
Subsidiaries or any other Obligor of a petition commencing an involuntary case
under the Bankruptcy Code.
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1.49. "Delinquency Period" is defined in Section 10.4.4.
1.50. "Delinquent Lender" is defined in Section 10.4.4.
1.51. "Delinquent Payment" is defined in Section 10.4.4.
1.52. "Designated Financing Debt" means Financing Debt incurred by the
Holding Company or any of its Subsidiaries after the Initial Closing Date other
than Financing Debt permitted by Sections 6.6.1 (the Loan), 6.6.7 (purchase
money Indebtedness and Capitalized Leases) and 6.6.9 (intercompany
Indebtedness).
1.53. "Distribution" means, with respect to the Holding Company (or other
specified Person):
(a) the declaration or payment of any dividend or distribution on
or in respect of any shares of any class of capital stock of or other
equity interests in the Holding Company (or such specified Person);
(b) the purchase, redemption or other retirement of any shares of
any class of capital stock of or other equity interest in the Holding
Company (or such specified Person) or of options, warrants or other
rights for the purchase of such shares, directly, indirectly through a
Subsidiary or otherwise;
(c) any other distribution on or in respect of any shares of any
class of capital stock of or equity or other beneficial interest in the
Holding Company (or such specified Person);
(d) any payment of principal or interest with respect to, or any
purchase, redemption or defeasance of, any Financing Debt of the Holding
Company (or such specified Person) which by its terms or the terms of any
agreement is subordinated to the payment of the Credit Obligations; and
(e) any payment, loan or advance by the Holding Company (or such
specified Person) to, or any other Investment by the Holding Company (or
such specified Person) in, the holder of any shares of any class of
capital stock of or equity interest in the Holding Company (or such
specified Person), or any Affiliate of such holder (including the payment
of management and transaction fees and expenses);
provided, however, that the term "Distribution" shall not include (i) dividends
payable in perpetual common stock of or other similar equity interests in the
Holding Company (or such specified Person) or (ii) payments in the ordinary
course of business in respect of (A) reasonable compensation paid to employees,
officers and directors, (B) advances and reimbursements to employees for travel
expenses, drawing accounts and similar expenditures,
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or (C) rent paid to, or accounts payable for services rendered or goods sold by,
non-Affiliates that own capital stock of or other equity interests in the
Holding Company (or such specified Person).
1.54. "Eligible Accounts Receivable" means, at any date, the remainder
of:
(a) the aggregate amount carried as accounts receivable (reduced
appropriately for doubtful accounts and customer returns) on the most
recent borrowing base report of the Borrower and its Subsidiaries
delivered in accordance with Section 6.4.4,
minus (b) the aggregate amount of any such accounts receivable that are
unpaid more than 60 days past the due date or 150 days past the date of
the original invoice,
minus (c) discounts, commissions and distribution fees payable by the
Borrower or any Subsidiary (other than to the Borrower or a Wholly Owned
Subsidiary) in respect of such accounts receivable,
minus (d) the amount of such accounts receivable due from Affiliates,
minus (e) all payments under such accounts receivable to be made in a
currency other than United States Funds that is not freely convertible
into United States Funds or that may not be freely withdrawn from the
country of origin,
minus (f) all payments under such accounts receivable due from a Person
located outside the United States of America and Canada, unless supported
by receivables insurance reasonably satisfactory to the Agent or by an
irrevocable letter of credit issued by a United States bank.
minus (g) accounts receivable subject to Liens other than Liens securing
the Credit Obligations,
minus (h) the aggregate amount of any such accounts receivable that are
unpaid more than 90 days past the date of the original invoice to the
extent such accounts receivable exceed 50% of Eligible Accounts
Receivable,
minus (i) all such accounts receivable due from any Person and its
Affiliates in the event at least 25% of such accounts receivable due from
such Person and its Affiliates are unpaid more than 60 days past the due
date or 150 days past the date of the original invoice,
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minus (j) in the case only of such accounts receivable from the
Swing-N-Slide Division, accrued advertising and volume rebates in respect
of such accounts receivable,
minus (k) the amount of such accounts receivable due from individuals
(but in no event subtracting the amount of accounts receivable due from
credit card issuers).
1.55. "Eligible Inventory" means, at any date, the remainder of:
(a) the aggregate amount carried as inventory, at the lower of
cost or market value, on the most recent borrowing base report of the
Borrower and its Subsidiaries delivered in accordance with Section 6.4.4,
minus (b) advance payments from customers reflected on the Consolidated
balance sheet of the Borrower and its Subsidiaries,
minus (c) inventory subject to Liens other than Liens securing the Credit
Obligations,
minus (d) inventory located outside the United States of America,
minus (e) inventory for consignment sale,
minus (f) obsolete and damaged inventory to the extent not previously
covered by reserves on the Consolidated balance sheet of the Borrower and
its Subsidiaries,
minus (g) packaging supplies included in such inventory,
minus (h) inventory that has been carried on the Consolidated balance
sheet of the Borrower and its Subsidiaries for more than one year,
minus (i) inventory in transit between locations,
minus (j) inventory not covered by a perfected, first priority Lien
securing the Credit Obligations,
minus (k) product samples on site at branch and distribution locations;
provided, however, that this clause (k) shall not exclude from "Eligible
Inventory" product samples on site at locations owned or leased by
Heartland in an amount not exceeding the lesser of (i) $1,000,000 or (ii)
50% of the net book value of all such product samples described in this
proviso.
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1.56. "Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment, including OSHA.
1.57. "Equity Transaction" means any issuance by the Holding Company or
any of its Subsidiaries after the Initial Closing Date of any shares of its
capital stock, other equity interests or options, warrants or other purchase
rights to acquire such capital stock or other equity interests to, or receipt of
a capital contribution from, any Person other than:
(a) any Obligors,
(b) the officers, employees and directors of the Holding Company,
the Borrower or any of the Borrower's Subsidiaries,
(c) GreenGrass Holdings and its Affiliates and investors in funds
managed by Glencoe, but only to the extent:
(i) funds invested pursuant to this clause (c) in the
Holding Company are used for the purpose of acquiring shares held
by minority stockholders of the Holding Company (but in no event
including GreenGrass Holdings and such Affiliates and investors)
and
(ii) funds invested pursuant to this clause (c) in the
Borrower and its Subsidiaries are not made directly or indirectly
to remedy a Default or in anticipation of a Default, and
(d) any other purchaser of capital stock of the Holding Company,
but only to the extent the funds invested pursuant to this clause (d) are
used to make an acquisition approved in writing by the Required Lenders.
1.58. "ERISA" means the federal Employee Retirement Income Security Act
of 1974.
1.59. "ERISA Group Person" means the Holding Company, any Subsidiary of
the Holding Company and any Person which is a member of the controlled group or
under common control with the Holding Company or any Subsidiary within the
meaning of section 414 of the Code or section 4001(a)(14) of ERISA.
1.60. "Eurodollars" means, with respect to any Lender, deposits of United
States Funds in a non-United States office or an international banking facility
of such Lender.
1.61. "Event of Default" is defined in Section 8.1.
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1.62. "Exchange Act" means the federal Securities Exchange Act of 1934.
1.63. "Federal Funds Rate" means, for any day, the rate equal to the
weighted average (rounded upward to the nearest 1/8%) of (a) the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, (a) as such weighted average is published for
such day (or, if such day is not a Banking Day, for the immediately preceding
Banking Day) by the Federal Reserve Bank of New York or (b) if such rate is not
so published for such Banking Day, quotations received by the Agent from three
federal funds brokers of recognized standing selected by the Agent. Each
determination by the Agent of the Federal Funds Rate shall, in the absence of
manifest error, be conclusive.
1.64. "Final Revolving Maturity Date" means March 13, 2003.
1.65. "Final Term Loan A Maturity Date" means March 13, 2003.
1.66. "Final Term Loan B Maturity Date" means June 30, 2003.
1.67. "Financial Officer" of the Holding Company (or other specified
Person) means its chief executive officer, chief financial officer, chief
operating officer, chairman, president, treasurer or any of its vice presidents
whose primary responsibility is for its financial affairs, all of whose
incumbency and signatures have been certified to the Agent by the secretary or
other appropriate attesting officer of the Holding Company (or such specified
Person).
1.68. "Financing Debt" means each of the items described in clauses (a)
through (f) of the definition of the term "Indebtedness" and, without
duplication, any Guarantees of such items.
1.69. "Fleet" means Fleet National Bank.
1.70. "Funding Liability" means (a) any Eurodollar deposit which was used
(or deemed by Section 3.2.6 to have been used) to fund any portion of the Loan
subject to a LIBOR Pricing Option, and (b) any portion of the Loan subject to a
LIBOR Pricing Option funded (or deemed by Section 3.2.6 to have been funded)
with the proceeds of any such Eurodollar deposit.
1.71. "GAAP" means generally accepted accounting principles as from time
to time in effect, including the statements and interpretations of the United
States Financial Accounting Standards Board; provided, however, that for
purposes of compliance with Section 6 (other than Section 6.4) and the related
definitions, "GAAP" means such principles as in effect on December 31, 1997 as
applied by the Borrower and its Subsidiaries in the preparation of the most
recent annual statements referred to in Section 7.2.1(a), and consistently
followed, without giving effect to any subsequent changes thereto.
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1.72. "Game Time Division" means the operating division of the Borrower
that conducts primarily only the business conducted by Game Time, Inc. prior to
its acquisition by the Borrower and other activities relating thereto.
1.73. "Game Time Sellers" means Ross D. Siragusa, Jr., John R. Siragusa
and Richard D. Siragusa.
1.74. "Glencoe" means Glencoe Investment Corporation, a Delaware
corporation.
1.75. "GreenGrass Holdings" means GreenGrass Holdings, a Delaware general
partnership, between GreenGrass Management LLC and GreenGrass Capital LLC and
Greengrass Capital II, LLC.
1.76. "Guarantee" means, with respect to the Holding Company (or other
specified Person):
(a) any guarantee by the Holding Company (or such specified
Person) of the payment or performance of, or any contingent obligation by
the Holding Company (or such specified Person) in respect of, any
Indebtedness or other obligation of any primary obligor;
(b) any other arrangement whereby credit is extended to a primary
obligor on the basis of any promise or undertaking of the Holding Company
(or such specified Person), including any binding "comfort letter" or
"keep well agreement" written by the Holding Company (or such specified
Person), to a creditor or prospective creditor of such primary obligor,
to (i) pay the Indebtedness of such primary obligor, (ii) purchase an
obligation owed by such primary obligor, (iii) pay for the purchase or
lease of assets or services regardless of the actual delivery thereof or
(iv) maintain the capital, working capital, solvency or general financial
condition of such primary obligor;
(c) any liability of the Holding Company (or such specified
Person), as a general partner of a partnership in respect of Indebtedness
or other obligations of such partnership;
(d) any liability of the Holding Company (or such specified
Person) as a joint venturer of a joint venture in respect of Indebtedness
or other obligations of such joint venture;
(e) any liability of the Holding Company (or such specified
Person) with respect to the tax liability of others as a member of a
group (other than a group
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consisting solely of the Holding Company and its Subsidiaries) that is
consolidated for tax purposes; and
(f) reimbursement obligations, whether contingent or matured, of
the Holding Company (or such specified Person) with respect to letters of
credit, bankers acceptances, surety bonds, other financial guarantees and
Interest Rate Protection Agreements,
in each case whether or not any of the foregoing are reflected on the balance
sheet of the Holding Company (or such specified Person) or in a footnote
thereto; provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Guarantee and the amount of Indebtedness resulting from such
Guarantee shall be the maximum amount that the guarantor may become obligated to
pay in respect of the obligations (whether or not such obligations are
outstanding at the time of computation).
1.77. "Guarantee and Security Agreement" is defined in Section 5.1.4.
1.78. "Guarantee and Pledge Agreement" is defined in Section 5.1.5.
1.79. "Guarantor" means the Holding Company and each Subsidiary party to,
or which subsequently becomes party to, the Guarantee and Security Agreement as
a Guarantor.
1.80. "Hazardous Material" means any pollutant, toxic or hazardous
material or waste, including any "hazardous substance" or "pollutant" or
"contaminant" as defined in section 101(14) of CERCLA or any other Environmental
Law or regulated as toxic or hazardous under RCRA or any other Environmental
Law.
1.81. "Heartland" means Heartland Industries, Inc. (DE), a Delaware
corporation.
1.82. "Heartland Sellers" means the shareholders of Heartland immediately
prior to the Acquisition.
1.83. "Holding Company" means PlayCore, Inc., a Delaware corporation
formerly known as "Swing-N-Slide Corp."
1.84. "Indebtedness" means all obligations, contingent or otherwise,
which in accordance with GAAP are required to be classified upon the balance
sheet of the Holding Company (or other specified Person) as liabilities, but in
any event including (without duplication):
(a) borrowed money;
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(b) indebtedness evidenced by notes, debentures or similar
instruments;
(c) Capitalized Lease Obligations;
(d) the deferred purchase price of assets or securities, including
related noncompetition, consulting and stock repurchase obligations
(other than ordinary trade accounts payable within six months after the
incurrence thereof in the ordinary course of business);
(e) mandatory redemption or dividend rights on capital stock (or
other equity);
(f) reimbursement obligations, whether contingent or matured, with
respect to letters of credit, bankers acceptances, surety bonds, other
financial guarantees and Interest Rate Protection Agreements (without
duplication of other Indebtedness supported or guaranteed thereby);
(g) unfunded pension liabilities;
(h) obligations that are immediately and directly due and payable
out of the proceeds of or production from property;
(i) liabilities secured by any Lien existing on property owned or
acquired by the Holding Company (or such specified Person), whether or
not the liability secured thereby shall have been assumed; and
(j) all Guarantees in respect of Indebtedness of others.
1.85. "Indemnified Party" is defined in Section 9.2.
1.86. "Initial Closing Date" means February 16, 1999 or such other date
prior to April 1, 1999 agreed to by the Holding Company and the Agent as the
first Closing Date hereunder.
1.87. "Interest Rate Protection Agreement" means any interest rate swap,
interest rate cap, interest rate hedge or other contractual arrangement that
converts variable interest rates into fixed interest rates, fixed interest rates
into variable interest rates or other similar arrangements.
1.88. "Investment" means, with respect to the Holding Company (or other
specified Person):
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(a) any share of capital stock, partnership or other equity
interest, evidence of Indebtedness or other security issued by any other
Person;
(b) any loan, advance or extension of credit to, or contribution
to the capital of, any other Person;
(c) any Guarantee of the Indebtedness of any other Person;
(d) any acquisition of all, or any division or similar operating
unit of, the business of any other Person or the assets comprising such
business, division or unit; and
(e) any other similar investment.
The investments described in the foregoing clauses (a) through (e) shall
be included in the term "Investment" whether they are made or acquired by
purchase, exchange, issuance of stock or other securities, merger,
reorganization or any other method; provided, however, that the term
"Investment" shall not include (i) trade and customer accounts and notes
receivable for property leased, goods furnished or services rendered in the
ordinary course of business and payable on a current basis in accordance with
customary trade terms, (ii) deposits, advances or prepayments to suppliers for
property leased or licensed, goods furnished and services rendered in the
ordinary course of business, (iii) advances to employees for relocation and
travel expenses, drawing accounts and similar expenditures, (iv) stock or other
securities acquired in connection with the satisfaction or enforcement of
Indebtedness or claims due to the Holding Company (or such specified Person) or
as security for any such Indebtedness or claim or (v) demand deposits in banks
or similar financial institutions.
In determining the amount of outstanding Investments:
(A) the amount of any Investment shall be the cost thereof minus
any returns of capital in cash on such Investment (determined in
accordance with GAAP without regard to amounts realized as income on such
Investment);
(B) the amount of any Investment in respect of a purchase
described in clause (d) above shall include the amount of any Financing
Debt assumed in connection with such purchase or secured by any asset
acquired in such purchase (whether or not any Financing Debt is assumed)
or for which any Person that becomes a Subsidiary is liable on the date
on which the securities of such Person are acquired; and
(C) no Investment shall be increased as the result of an increase
in the undistributed retained earnings of the Person in which the
Investment was made or decreased as a result of an equity interest in the
losses of such Person.
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1.89. "Legal Requirement" means any present or future requirement imposed
upon any of the Lenders or the Holding Company and its Subsidiaries by any law,
statute, rule, regulation, directive, order, decree or guideline (or any
interpretation thereof by courts or of administrative bodies) of the United
States of America, or any jurisdiction in which any LIBOR Office is located or
any state or political subdivision of any of the foregoing, or by any board,
governmental or administrative agency, central bank or monetary authority of the
United States of America, any jurisdiction in which any LIBOR Office is located,
or any political subdivision of any of the foregoing.
1.90. "Lender" means each of the Persons listed as lenders on the
signature page hereto, including Fleet in its capacity as a Lender and such
other Persons who may from time to time own a Percentage Interest in the Credit
Obligations, but the term "Lender" shall not include any Credit Participant.
1.91. "Lending Officer" means such individuals whom the Agent may
designate by notice to the Holding Company from time to time as an officer who
may receive telephone requests for borrowings under Section 2.1.3.
1.92. "Letter of Credit" is defined in Section 2.4.1.
1.93. "Letter of Credit Exposure" means, at any date, the sum of (a) the
aggregate face amount of all drafts that may then or thereafter be presented by
beneficiaries under all Letters of Credit then outstanding, plus (b) the
aggregate face amount of all drafts that the Letter of Credit Issuer has
previously accepted under Letters of Credit but has not paid.
1.94. "Letter of Credit Issuer" means, for any Letter of Credit, Fleet
or, in the event Fleet does not for any reason issue a requested Letter of
Credit, another Lender designated by the Agent to issue such Letter of Credit.
1.95. "LIBOR Basic Rate" means, for any LIBOR Interest Period:
(a) the rate of interest at which deposits of United States Funds
are offered in the London interbank market for a period of time equal to
such LIBOR Interest Period that appears on the Telerate Page 3750 as of
11:00 a.m. London time two Banking Days prior to the Banking Day on which
such LIBOR Interest Period begins or
(b) if no such rate appears on the Telerate Page 3750, the rate of
interest determined by the Agent to be the average of up to four interest
rates per annum at which deposits of United States Funds are offered in
the London interbank market for a period of time equal to such LIBOR
Interest Period which appear on the Reuter's Screen LIBO Page as of 11:00
a.m. London time two Banking Days prior to the Banking Day on which such
LIBOR Interest Period begins if at least two such offered rates so appear
on the Reuter's Screen LIBO Page or
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(c) if no such rate appears on the Telerate Page 3750 and fewer
than two offered rates appear on the Reuter's Screen LIBO Page, the rate
of interest at which deposits of United States Funds in an amount
comparable to the portion of the Loan as to which the related LIBOR
Pricing Option has been elected and which have a term corresponding to
such LIBOR Interest Period are offered to the Agent by first class banks
in the London inter-bank market for delivery in immediately available
funds at a LIBOR Office on the first day of such LIBOR Interest Period as
determined by the Agent at approximately 11:00 a.m. (London time) two
Banking Days prior to the date upon which such LIBOR Interest Period is
to commence (which determination by the Agent shall, in the absence of
manifest error, be conclusive).
1.96. "LIBOR Interest Period" means any period, selected as provided in
Section 3.2.1, of one, two, three or six months, commencing on any Banking Day
and ending on the corresponding date in the subsequent calendar month so
indicated (or, if such subsequent calendar month has no corresponding date, on
the last day of such subsequent calendar month); provided, however, that subject
to Section 3.2.3, if any LIBOR Interest Period so selected would otherwise begin
or end on a date which is not a Banking Day, such LIBOR Interest Period shall
instead begin or end, as the case may be, on the immediately preceding or
succeeding Banking Day as determined by the Agent in accordance with the then
current banking practice in the inter-bank LIBOR market with respect to LIBOR
deposits at the applicable LIBOR Office, which determination by the Agent shall,
in the absence of manifest error, be conclusive.
1.97. "LIBOR Office" means such non-United States office or international
banking facility of any Lender as the Lender may from time to time select.
1.98. "LIBOR Pricing Options" means the options granted pursuant to
Section 3.2.1 to have the interest on any portion of the Loan computed on the
basis of a LIBOR Rate.
1.99. "LIBOR Rate" for any LIBOR Interest Period means the rate, rounded
upward to the nearest 1/100%, obtained by dividing (a) the LIBOR Basic Rate for
such LIBOR Interest Period by (b) an amount equal to 1 minus the LIBOR Reserve
Rate; provided, however, that if at any time during such LIBOR Interest Period
the LIBOR Reserve Rate applicable to any outstanding LIBOR Pricing Option
changes, the LIBOR Rate for such LIBOR Interest Period shall automatically be
adjusted to reflect such change, effective as of the date of such change to the
extent required by the Legal Requirement implementing such change.
1.100. "LIBOR Reserve Rate" means the stated maximum rate (expressed as a
decimal) of all reserves (including any basic, supplemental, marginal or
emergency reserve or any reserve asset), if any, as from time to time in effect,
required by any Legal Requirement to be maintained by any Lender against (a)
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve System applicable to LIBOR Pricing
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Options, (b) any other category of liabilities that includes LIBOR deposits by
reference to which the interest rate on portions of the Loan subject to LIBOR
Pricing Options is determined, (c) the principal amount of or interest on any
portion of the Loan subject to a LIBOR Pricing Option or (d) any other category
of extensions of credit, or other assets, that includes loans subject to a LIBOR
Pricing Option by a non-United States office of any of the Lenders to United
States residents.
1.101. "Lien" means, with respect to the Holding Company (or any other
specified Person):
(a) any lien, encumbrance, mortgage, pledge, charge or security
interest of any kind upon any property or assets of the Holding Company
(or such specified Person), whether now owned or hereafter acquired, or
upon the income or profits therefrom;
(b) the acquisition of, or the agreement to acquire, any property
or asset upon conditional sale or subject to any other title retention
agreement, device or arrangement (including a Capitalized Lease);
(c) the sale, assignment, pledge or transfer for security of any
accounts, general intangibles or chattel paper of the Holding Company (or
such specified Person), with or without recourse;
(d) the transfer of any tangible property or assets for the
purpose of subjecting such items to the payment of previously outstanding
Indebtedness in priority to payment of the general creditors of the
Holding Company (or such specified Person); and
(e) the existence for a period of more than 120 consecutive days
of any Indebtedness against the Holding Company (or such specified
Person) which if unpaid would by law or upon a Bankruptcy Default be
given any priority over general creditors.
1.102. "Loan" means, collectively, the Revolving Loan and the Term Loans.
1.103. "Margin Stock" means "margin stock" within the meaning of
Regulations T, U or X of the Board of Governors of the Federal Reserve System.
1.104. "Material Adverse Change" means, since any specified date or from
the circumstances existing immediately prior to the happening of any specified
event, a material adverse change in (a) the business, assets, financial
condition, income or prospects of the Holding Company and its Subsidiaries (on a
Consolidated basis), whether as a result of (i) general economic conditions
affecting the playground equipment industry, (ii) difficulties in
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obtaining supplies and raw materials, (iii) fire, flood or other natural
calamities, (iv) environmental pollution, (v) regulatory changes, judicial
decisions, war or other governmental action or (vi) any other event or
development, whether or not related to those enumerated above or (b) the ability
of the Obligors to perform their obligations under the Credit Documents or (c)
the rights and remedies of the Agent and the Lenders under the Credit Documents.
1.105. "Material Agreements" is defined in Section 7.2.2.
1.106. "Maximum Amount of Revolving Credit" is defined in Section 2.1.2.
1.107. "Moody's" means Moody's Investors Service, Inc.
1.108. "Multiemployer Plan" means any Plan that is a "multiemployer plan"
as defined in section 4001(a)(3) of ERISA.
1.109. "Net Asset Sale Proceeds" means the cash proceeds of the sale or
disposition of assets (including by way of merger) by the Borrower or any of its
Subsidiaries after the Initial Closing Date, net of (a) any Indebtedness
permitted by Section 6.6.7 (Capitalized Leases and purchase money indebtedness)
secured by assets being sold in such transaction required to be paid from such
proceeds, (b) income taxes that, as estimated by the Borrower in good faith,
will be required to be paid by the Borrower or any of its Subsidiaries in cash
as a result of, and within 15 months after, such sale or disposition, (c)
reasonable reserves for liabilities resulting from the sale of assets and (d)
all reasonable expenses of the Borrower or any of its Subsidiaries payable in
connection with the sale or disposition; provided, however, that "Net Asset Sale
Proceeds" shall not include cash proceeds:
(i) of asset sales permitted by Section 6.11.1,
(ii) of mergers permitted by Section 6.11.2, or
(iii) in an amount not exceeding $1,000,000 in any fiscal
year in the aggregate (or $3,000,000 in the aggregate since the
date hereof) that will be used to acquire replacement or other
assets within six months after such sale or disposition; provided,
however, that if any amount in this clause (iii) is not actually
used to acquire replacement or other assets within such six-month
period, such amount shall become Net Asset Sale Proceeds.
1.110. "Net Debt Proceeds" means cash proceeds of the incurrence of
Designated Financing Debt by the Holding Company or any of its Subsidiaries (net
of reasonable out-of-pocket transaction fees and expenses).
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1.111. "Net Equity Proceeds" means the cash proceeds received by the
Holding Company or any of its Subsidiaries in connection with any Equity
Transaction (net of reasonable out-of-pocket fees and expenses).
1.112. "Nonperforming Lender" is defined in Section 10.4.4.
1.113. "Notes" means, collectively, the Revolving Notes and the Term
Notes.
1.114. "Obligor" means the Borrower, the Holding Company, each other
Guarantor and each other Person guaranteeing or providing collateral for the
Credit Obligations.
1.115. "OSHA" means the federal Occupational Health and Safety Act.
1.116. "Overdue Reimbursement Rate" means, at any date, the highest
Applicable Rate then in effect.
1.117. "Payment Date" means (a) the last Banking Day of each month,
beginning on the first such date after the Initial Closing Date and (b) the
Final Term Loan B Maturity Date.
1.118. "PBGC" means the Pension Benefit Guaranty Corporation or any
successor entity.
1.119. "Percentage Interest" means, with respect to any Lender, the
Commitment of such Lender in the respective portions of the Loan and Letter of
Credit Exposure. For purposes of votes and consents of the Lenders, Percentage
Interests shall be computed as follows: (a) at all times when no Event of
Default under Section 8.1.1 and no Bankruptcy Default exists, the ratio that the
respective Commitments of any Lender with respect to the Revolving Loan plus the
respective outstanding Term Loans of such Lender bears to the total Commitments
of all Lenders with respect to the Revolving Loan plus the total outstanding
Term Loans of all Lenders, as from time to time in effect and reflected in the
Register, and (b) at all other times, the ratio that the respective amounts of
the Loan and Letter of Credit Exposure owing to any Lender bear to the total
outstanding Loan and Letter of Credit Exposure owing to all Lenders.
1.120. "Performing Lender" is defined in Section 10.4.4.
1.121. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company, business trust, trust, organization, business or
government or any governmental agency or political subdivision thereof.
1.122. "PIK Interest" means any accrued interest payments on Financing
Debt that are postponed or made through the issuance of "payment-in-kind" notes
or other similar
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securities (including book-entry accrual with respect to such postponed interest
payments), all in accordance with the terms of such Financing Debt; provided,
however, that in no event shall PIK Interest include payments made with cash or
Cash Equivalents.
1.123. "Plan" means any pension benefit plan subject to Title IV of ERISA
maintained, or to which contributions have been made or are required to be made,
by any ERISA Group Person within six years prior to the date hereof.
1.124. "Prior Credit Agreement" means the Loan and Security Agreement
dated October 14, 1994 between Heartland and The Provident Bank.
1.125. "RCRA" means the federal Resource Conservation and Recovery Act,
42 U.S.C. ss. 690, et seq.
1.126. "Register" is defined in Section 11.1.3.
1.127. "Related Fund" means, with respect to any Lender that is a fund
that invests in senior bank loans, any other fund that invests in senior bank
loans and is managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
1.128. "Replacement Lender" is defined in Section 11.3.
1.129. "Required Lenders" means, with respect to any approval, consent,
modification, waiver or other action to be taken by the Agent or the Lenders
under the Credit Documents which require action by the Required Lenders, such
Lenders as own at least a majority of the Percentage Interests; provided,
however, that with respect to any matters referred to in the proviso to Section
10.6, Required Lenders means such Lenders as own at least the respective
portions of the Percentage Interests required by Section 10.6.
1.130. "Revolving Loan" is defined in Section 2.1.4.
1.131. "Revolving Notes" is defined in Section 2.1.4.
1.132. "S&P" means Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc.
1.133. "Securities Act" means the federal Securities Act of 1933.
1.134. "Securities Purchase Agreements" means those certain Securities
Purchase Agreements dated March 13, 1997 among the Holding Company, the Borrower
and each of Massachusetts Mutual Life Insurance Company, MassMutual Corporate
Investors, MassMutual Participation Investors and MassMutual Corporate Value
Partners Limited, as previously
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furnished to the Lenders and as amended, modified and supplemented from time to
time in accordance with Section 6.2.4.
1.135. "Seller Subordinated Debt" means, collectively, (a) the Borrower's
$2,000,000 10% Subordinated Note due 2005 payable to the Game Time Sellers and
(b) the Borrower's $500,000 10% Subordinated Promissory Notes due 2004 payable
to the Heartland Sellers.
1.136. "Senior Subordinated Notes" means the Borrower's $12,500,000 12%
Senior Subordinated Notes due 2005 issued pursuant to the Securities Purchase
Agreements.
1.137. "Subsidiary" means any Person of which the Holding Company (or
other specified Person) shall at the time, directly or indirectly through one or
more of its Subsidiaries, (a) own at least 50% of the outstanding capital stock
(or other shares of beneficial interest) entitled to vote generally, (b) hold at
least 50% of the partnership, joint venture or similar interests or (c) be a
general partner or joint venturer; provided, however, that "Subsidiary" shall
not include any Unrestricted Affiliate regardless of the ownership thereof by
the Holding Company.
1.138. "Swing-N-Slide Division" means the operating divisions and
Subsidiaries of the Borrower other than the Game Time Division.
1.139. "Tax" means any present or future tax, levy, duty, impost,
deduction, withholding or other charges of whatever nature at any time required
by any Legal Requirement (a) to be paid by any Lender or (b) to be withheld or
deducted from any payment otherwise required hereby to be made to any Lender, in
each case on or with respect to its obligations hereunder, the Loan, any payment
in respect of the Credit Obligations or any Funding Liability not included in
the foregoing; provided, however, that the term "Tax" shall not include taxes
imposed upon or measured by the net income of such Lender (other than
withholding taxes) or franchise taxes.
1.140. "Term Loan A" is defined in Section 2.2.1.
1.141. "Term Loan A1" is defined in Section 2.2.1.
1.142. "Term Loan A2" is defined in Section 2.2.1.
1.143. "Term Loan A Note" is defined in Section 2.2.2.
1.144. "Term Loan B" is defined in Section 2.3.1.
1.145. "Term Loan B1" is defined in Section 2.3.1.
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1.146. "Term Loan B2" is defined in Section 2.3.1.
1.147. "Term Loan B Note" is defined in Section 2.3.2.
1.148. "Term Loans" means Term Loan A and Term Loan B, collectively.
1.149. "Term Notes" means the Term Loan A Notes and the Term Loan B
Notes, collectively.
1.150. "Uniform Customs and Practice" is defined in Section 2.4.7.
1.151. "United States Funds" means such coin or currency of the United
States of America as at the time shall be legal tender therein for the payment
of public and private debts.
1.152. "Unrestricted Affiliate" means a Person acquired by the Holding
Company in accordance with Section 6.9.7 and which is designated in writing by
the Holding Company to the Agent as an "Unrestricted Affiliate".
1.153. "Wholly Owned Subsidiary" means any Subsidiary of which all of the
outstanding capital stock (or other shares of beneficial interest) entitled to
vote generally (other than directors' qualifying shares) is owned by the Holding
Company (or other specified Person) directly, or indirectly through one or more
Wholly Owned Subsidiaries.
2. The Credits.
2.1. Revolving Credit.
2.1.1. Revolving Loan. Subject to all the terms and conditions of
this Agreement and so long as no Default exists, from time to time on and
after the Initial Closing Date and prior to the Final Revolving Maturity
Date the Lenders will, severally in accordance with their respective
Commitments in the Revolving Loan, make loans to the Borrower in such
amounts as may be requested by the Borrower in accordance with Section
2.1.3. The sum of the aggregate principal amount of loans made under this
Section 2.1.1 at any one time outstanding plus the Letter of Credit
Exposure shall in no event exceed the lesser of (a) the Maximum Amount of
Revolving Credit or (b) the Borrowing Base. In no event will the
principal amount of loans at any one time outstanding made by any Lender
pursuant to this Section 2.1, together with such Lender's Percentage
Interest in the Letter of Credit Exposure, exceed such Lender's
Commitment with respect to the Revolving Loan.
2.1.2. Maximum Amount of Revolving Credit. The term "Maximum
Amount of Revolving Credit" means (a) (i) $28,000,000 minus (ii) Net
Asset Sale Proceeds described in Section 4.3.3 and Net Debt Proceeds
described in Section 4.3.4,
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in each case to the extent allocable to the Revolving Loan in accordance
with Section 4.6.2, or (b) the amount (in an integral multiple of
$500,000) to which the then applicable amount set forth in clause (a)(i)
above shall have been irrevocably reduced from time to time by notice
from the Borrower to the Agent.
2.1.3. Borrowing Requests. The Borrower may from time to time
request a loan under Section 2.1.1 by providing to the Agent a notice
(which may be given by a telephone call received by a Lending Officer if
promptly confirmed in writing). Such notice must be not later than noon
(Boston time) on the first Banking Day (third Banking Day if any portion
of such loan will be subject to a LIBOR Pricing Option on the requested
Closing Date) prior to the requested Closing Date for such loan. The
notice must specify (a) the amount of the requested loan (which shall be
not less than $50,000 and an integral multiple of $50,000) and (b) the
requested Closing Date therefor (which shall be a Banking Day). Upon
receipt of such notice, the Agent will promptly inform each other Lender
(by telephone or otherwise). Each such loan will be made at the Boston
Office by depositing the amount thereof to the general account of the
Borrower with the Agent. In connection with each such loan, the Borrower
shall furnish to the Agent a certificate in substantially the form of
Exhibit 5.2.1.
2.1.4. Revolving Notes. The aggregate principal amount of the
loans outstanding from time to time under this Section 2.1 is referred to
as the "Revolving Loan". The Agent shall keep a record of the Revolving
Loan as part of the Register. The Revolving Loan shall be deemed owed to
each Lender having a Commitment therein severally in accordance with such
Lender's Percentage Interest therein, and all payments thereon shall be
for the account of each Lender in accordance with its Percentage Interest
therein. The Borrower's obligations to pay each Lender's Percentage
Interest in the Revolving Loan shall be evidenced by a separate note of
the Borrower in substantially the form of Exhibit 2.1.4 (the "Revolving
Notes"), payable to each Lender in accordance with such Lender's
Percentage Interest in the Revolving Loan.
2.2. Term Loan A.
2.2.1. Term Loan A. Subject to all the terms and conditions of
this Agreement and so long as no Default exists, on the Initial Closing
Date the Lenders will, in accordance with their respective Percentage
Interests in Term Loan A, severally lend to the Borrower as a term loan
$38,000,000, including $32,500,000 in principal amount previously
outstanding ("Term Loan A1") and $5,500,000 in principal amount as an
incremental advance on the Initial Closing Date ("Term Loan A2"). The
aggregate principal amount of the loans made pursuant to this Section
2.2.1 at any one time outstanding, including both Term Loan A1 and Term
Loan A2, is referred to as "Term Loan A". In connection with Term Loan A,
the Borrower shall furnish to the Agent a certificate in substantially
the form of Exhibit 5.2.1.
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2.2.2. Term Loan A Notes. Term Loan A shall be made at the Boston
Office by crediting the amount of such loan to the general account of the
Borrower with the Agent against delivery to the Agent of the separate
term notes of the Borrower (the "Term Loan A Notes") payable to the
respective Lenders, and marked to indicate whether such notes evidence
Term Loan A1 or Term Loan A2. The Term Loan A Notes issued to each Lender
shall be in an aggregate principal amount equal to such Lender's
Percentage Interest in Term Loan A, and shall be in substantially the
form of Exhibit 2.2.2. The Agent shall keep a record of Term Loan A1 and
Term Loan A2 as part of the Register.
2.3. Term Loan B.
2.3.1. Term Loan B. Subject to all the terms and conditions of
this Agreement and so long as no Default exists, on the Initial Closing
Date the Lenders will, in accordance with their respective Percentage
Interests in Term Loan B, severally lend to the Borrower as a term loan
$9,000,000, including $4,400,000 in principal amount previously
outstanding ("Term Loan B1") and $4,600,000 in principal amount as an
incremental advance on the Initial Closing Date ("Term Loan B2"). The
aggregate principal amount of the loans made pursuant to this Section
2.3.1 at any one time outstanding, including both Term Loan B1 and Term
Loan B2, is referred to as "Term Loan B". In connection with Term Loan B,
the Borrower shall furnish to the Agent a certificate in substantially
the form of Exhibit 5.2.1.
2.3.2. Term Loan B Notes. Term Loan B shall be made at the Boston
Office by crediting the amount of such loan to the general account of the
Borrower with the Agent against delivery to the Agent of the separate
term notes of the Borrower (the "Term Loan B Notes") payable to the
respective Lenders, and marked to indicate whether such notes evidence
Term Loan B1 or Term Loan B2. The Term Loan B Notes issued to each Lender
shall be in an aggregate principal amount equal to such Lender's
Percentage Interest in Term Loan B, and shall be in substantially the
form of Exhibit 2.3.2. The Agent shall keep a record of Term Loan B1 and
Term Loan B2 as part of the Register.
2.4. Letters of Credit.
2.4.1. Issuance of Letters of Credit. Subject to all the terms and
conditions of this Agreement and so long as no Default exists, from time
to time on and after the Initial Closing Date and prior to the Final
Revolving Maturity Date, the Letter of Credit Issuer will issue for the
account of the Borrower one or more irrevocable documentary or standby
letters of credit (the "Letters of Credit"). Letter of Credit Exposure
plus the Revolving Loan shall in no event exceed the lesser of (a) the
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Maximum Amount of Revolving Credit or (b) the Borrowing Base. Letter of
Credit Exposure shall in no event exceed $1,000,000.
2.4.2. Requests for Letters of Credit. The Borrower may from time
to time request a Letter of Credit to be issued by providing to the
Letter of Credit Issuer (and the Agent if the Letter of Credit Issuer is
not the Agent) a notice which is actually received not less than five
Banking Days prior to the requested Closing Date for such Letter of
Credit specifying (a) the amount of the requested Letter of Credit, (b)
the beneficiary thereof, (c) the requested Closing Date and (d) the
principal terms of the text for such Letter of Credit. Each Letter of
Credit will be issued by forwarding it to the Borrower or to such other
Person as directed in writing by the Borrower. In connection with the
issuance of any Letter of Credit, the Borrower shall furnish to the
Letter of Credit Issuer (and the Agent if the Letter of Credit Issuer is
not the Agent) a certificate in substantially the form of Exhibit 5.2.1
and any customary application forms required by the Letter of Credit
Issuer. In the event of any inconsistency between such application forms
and this Agreement, this Agreement shall govern.
2.4.3. Form and Expiration of Letters of Credit. Each Letter of
Credit issued under this Section 2.4 and each draft accepted or paid
under such a Letter of Credit shall be issued, accepted or paid, as the
case may be, by the Letter of Credit Issuer at its principal office. No
Letter of Credit shall provide for the payment of drafts drawn
thereunder, and no draft shall be payable, at a date which is later than
the earlier of (a) the date 12 months after the date of issuance or (b)
the Final Revolving Maturity Date. Each Letter of Credit and each draft
accepted under a Letter of Credit shall be in such form and minimum
amount, and shall contain such terms, as the Letter of Credit Issuer and
the Borrower may agree upon at the time such Letter of Credit is issued,
including a requirement of not less than three Banking Days after
presentation of a draft before payment must be made thereunder.
2.4.4. Lenders' Participation in Letters of Credit. Upon the
issuance of any Letter of Credit, a participation therein, in an amount
equal to each Lender's Percentage Interest in the Revolving Loan, shall
automatically be deemed granted by the Letter of Credit Issuer to each
such Lender on the date of such issuance and such Lenders shall
automatically be obligated, as set forth in Section 10.4, to reimburse
the Letter of Credit Issuer to the extent of their respective Percentage
Interests in the Revolving Loan for all obligations incurred by the
Letter of Credit Issuer to third parties in respect of such Letter of
Credit not reimbursed by the Borrower. The Letter of Credit Issuer will
send to each Lender (and the Agent if the Letter of Credit Issuer is not
the Agent) a confirmation regarding the participations in Letters of
Credit outstanding during such month.
2.4.5. Presentation. The Letter of Credit Issuer may accept or pay
any draft presented to it, regardless of when drawn and whether or not
negotiated, if such draft,
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the other required documents and any transmittal advice are presented to
the Letter of Credit Issuer and dated on or before the expiration date of
the Letter of Credit under which such draft is drawn. Except insofar as a
particular Letter of Credit contains express, contrary instructions, the
Letter of Credit Issuer may honor as complying with the terms of any
Letter of Credit and with this Agreement any drafts or other documents
otherwise in order signed or issued by an administrator, executor,
conservator, trustee in bankruptcy, debtor in possession, assignee for
benefit of creditors, liquidator, receiver or other legal representative
of the party authorized under such Letter of Credit to draw or issue such
drafts or other documents.
2.4.6. Payment of Drafts. At such time as a Letter of Credit
Issuer makes any payment on a draft presented or accepted under a Letter
of Credit, the Borrower will on demand pay to the Agent in immediately
available funds the amount of such payment. Unless the Borrower shall
otherwise pay to the Agent the amount required by the foregoing sentence,
such amount shall be considered a loan under Section 2.1.1 and part of
the Revolving Loan as if the Borrower had paid in full the amount
required with respect to the Letter of Credit by borrowing such amount
under Section 2.1.1 to the extent such amount does not cause the
Revolving Loan to exceed the Maximum Amount of Revolving Credit.
2.4.7. Uniform Customs and Practice. The most recent version of
the Uniform Customs and Practice for Documentary Credits approved by a
Congress of the International Chamber of Commerce and adhered to by the
Letter of Credit Issuer (the "Uniform Customs and Practice"), shall be
binding on the Borrower and the Letter of Credit Issuer except to the
extent otherwise provided herein, in any Letter of Credit or in any other
Credit Document. Anything in the Uniform Customs and Practice to the
contrary notwithstanding:
(a) Neither the Borrower nor any beneficiary of any Letter of
Credit shall be deemed an agent of any Letter of Credit Issuer.
(b) With respect to each Letter of Credit, neither the Letter of
Credit Issuer nor its correspondents shall be responsible for or shall
have any duty to ascertain (unless the Letter of Credit Issuer or such
correspondent is grossly negligent or willful in failing so to
ascertain):
(i) the genuineness of any signature;
(ii) the validity, form, sufficiency, accuracy, genuineness
or legal effect of any endorsements;
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(iii) delay in giving, or failure to give, notice of
arrival, notice of refusal of documents or of discrepancies in
respect of which any Letter of Credit Issuer refuses the documents
or any other notice, demand or protest;
(iv) the performance by any beneficiary under any Letter of
Credit of such beneficiary's obligations to the Borrower;
(v) inaccuracy in any notice received by the Letter of
Credit Issuer;
(vi) the validity, form, sufficiency, accuracy, genuineness
or legal effect of any instrument, draft, certificate or other
document required by such Letter of Credit to be presented before
payment of a draft if such instrument, draft, certificate or other
document appears on its face to comply with the requirements of
the Letter of Credit, or the office held by or the authority of
any Person signing any of the same; or
(vii) failure of any instrument to bear any reference or
adequate reference to such Letter of Credit, or failure of any
Person to note the amount of any instrument on the reverse of such
Letter of Credit or to surrender such Letter of Credit or to
forward documents in the manner required by such Letter of Credit.
(c) The occurrence of any of the events referred to in the Uniform
Customs and Practice or in the preceding clauses of this Section 2.4.7
shall not affect or prevent the vesting of any of the Letter of Credit
Issuer's rights or powers hereunder or the Borrower's obligation to make
reimbursement of amounts paid under any Letter of Credit or any draft
accepted thereunder.
(d) The Borrower will promptly examine (i) each Letter of Credit
(and any amendments thereof) sent to it by the Letter of Credit Issuer
and (ii) all instruments and documents delivered to it from time to time
by the Letter of Credit Issuer. The Borrower will notify the Letter of
Credit Issuer of any claim of noncompliance by notice actually received
within three Banking Days after receipt of any of the foregoing
documents, the Borrower being conclusively deemed to have waived any such
claim against such Letter of Credit Issuer and its correspondents unless
such notice is given. The Letter of Credit Issuer shall have no
obligation or responsibility to send any such Letter of Credit or any
such instrument or document to the Borrower.
(e) In the event of any conflict between the provisions of this
Agreement and the Uniform Customs and Practice, the provisions of this
Agreement shall govern.
2.4.8. Subrogation. Upon any payment by a Letter of Credit Issuer
under any Letter of Credit and until the reimbursement of such Letter of
Credit Issuer by the
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Borrower with respect to such payment, the Letter of Credit Issuer shall
be entitled to be subrogated to, and to acquire and retain, the rights
which the Person to whom such payment is made may have against the
Borrower, all for the benefit of the Lenders. The Borrower will take such
action as the Letter of Credit Issuer may reasonably request, including
requiring the beneficiary of any Letter of Credit to execute such
documents as the Letter of Credit Issuer may reasonably request, to
assure and confirm to the Letter of Credit Issuer such subrogation and
such rights, including the rights, if any, of the beneficiary to whom
such payment is made in accounts receivable, inventory and other
properties and assets of any Obligor.
2.4.9. Modification, Consent, etc. If the Borrower requests or
consents in writing to any modification or extension of any Letter of
Credit, or waives any failure of any draft, certificate or other document
to comply with the terms of such Letter of Credit, and if the Letter of
Credit Issuer consents thereto, the Letter of Credit Issuer shall be
entitled to rely on such request, consent or waiver. This Agreement shall
be binding upon the Borrower with respect to such Letter of Credit as so
modified or extended, and with respect to any action taken or omitted by
such Letter of Credit Issuer pursuant to any such request, consent or
waiver.
2.5. Application of Proceeds.
2.5.1. Revolving Loan. Subject to Section 2.5.4, the Borrower will
apply the proceeds of the Revolving Loan for working capital and other
lawful corporate purposes of the Holding Company and its Subsidiaries.
2.5.2. Term Loans. The Borrower will apply the proceeds of the
Term Loans to fund the Acquisition, to fund Capital Expenditures, to
refinance existing term debt and to pay fees and expenses related to the
foregoing.
2.5.3. Letters of Credit. Letters of Credit shall be issued only
for such lawful corporate purposes as the Borrower has requested in
writing and to which the Letter of Credit Issuer agrees.
2.5.4. Specifically Prohibited Applications. The Borrower will
not, directly or indirectly, apply any part of the proceeds of any
extension of credit made pursuant to the Credit Documents to purchase or
to carry Margin Stock or to any transaction prohibited by Legal
Requirements applicable to the Lenders or by the Credit Documents.
2.6. Nature of Obligations of Lenders to Make Extensions of Credit. The
Lenders' obligations to extend credit under this Agreement are several and are
not joint or joint and several. If on any Closing Date any Lender shall fail to
perform its obligations under this Agreement, the aggregate amount of
Commitments to make the extensions of credit under this
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Agreement shall be reduced by the amount of unborrowed Commitment of the Lender
so failing to perform and the Percentage Interests shall be appropriately
adjusted. Lenders that have not failed to perform their obligations to make the
extensions of credit contemplated by Section 2 may, if any such Lender so
desires, assume, in such proportions as such Lenders may agree, the obligations
of any Lender who has so failed and the Percentage Interests shall be
appropriately adjusted. The provisions of this Section 2.6 shall not affect the
rights of the Borrower against any Lender failing to perform its obligations
hereunder.
3. Interest; LIBOR Pricing Options; Fees.
3.1. Interest. The Loan shall accrue and bear interest at a rate per
annum which shall at all times equal the Applicable Rate. Prior to any stated or
accelerated maturity of the Loan, the Borrower will, on each Payment Date, pay
the accrued and unpaid interest on the portion of the Loan which was not subject
to a LIBOR Pricing Option. On the last day of each LIBOR Interest Period or on
any earlier termination of any LIBOR Pricing Option, the Borrower will pay the
accrued and unpaid interest on the portion of the Loan which was subject to the
LIBOR Pricing Option which expired or terminated on such date. In the case of
any LIBOR Interest Period longer than three months, the Borrower will also pay
the accrued and unpaid interest on the portion of the Loan subject to the LIBOR
Pricing Option having such LIBOR Interest Period at three-month intervals, the
first such payment to be made on the last Banking Day of the three-month period
which begins on the first day of such LIBOR Interest Period. On the stated or
any accelerated maturity of the Loan, the Borrower will pay all accrued and
unpaid interest on the Loan, including any accrued and unpaid interest on any
portion of the Loan which is subject to a LIBOR Pricing Option. Upon the
occurrence and during the continuance of an Event of Default, the Lenders may
require accrued interest to be payable on demand or at regular intervals more
frequent than each Payment Date. All payments of interest hereunder shall be
made to the Agent for the account of each Lender in accordance with such
Lender's Percentage Interest.
3.2. LIBOR Pricing Options.
3.2.1. Election of LIBOR Pricing Options. Subject to all of the
terms and conditions hereof and so long as no Default exists, the
Borrower may from time to time, by irrevocable notice to the Agent
actually received not less than three Banking Days prior to the
commencement of the LIBOR Interest Period selected in such notice, elect
to have such portion of the Loan as the Borrower may specify in such
notice accrue and bear interest during the LIBOR Interest Period so
selected at the Applicable Rate computed on the basis of the LIBOR Rate.
In the event the Borrower at any time fails to elect a LIBOR Pricing
Option under this Section 3.2.1 for any portion of the Loan (upon
termination of a LIBOR Pricing Option or otherwise), then such portion of
the Loan will accrue and bear interest at the Applicable Rate based on
the Base Rate. No election of a LIBOR Pricing Option shall become
effective:
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(a) if, prior to the commencement of any such LIBOR Interest
Period, the Agent determines that (i) the electing or granting of the
LIBOR Pricing Option in question would violate a Legal Requirement,
whether or not having the force of law so long as compliance therewith is
customary commercial practice, (ii) Eurodollar deposits in an amount
comparable to the principal amount of the Loan as to which such LIBOR
Pricing Option has been elected and which have a term corresponding to
the proposed LIBOR Interest Period are not readily available in the
London inter-bank Eurodollar market, or (iii) by reason of circumstances
affecting the London inter-bank Eurodollar market, adequate and
reasonable methods do not exist for ascertaining the interest rate
applicable to such deposits for the proposed LIBOR Interest Period; or
(b) if the Required Lenders shall have advised the Agent by
telephone or otherwise at or prior to noon (Boston time) on the second
Banking Day prior to the commencement of such proposed LIBOR Interest
Period (and shall have subsequently confirmed in writing) that, after
reasonable efforts to determine the availability of Eurodollar deposits,
the Required Lenders reasonably anticipate that Eurodollar deposits in an
amount equal to the Percentage Interest of the Required Lenders in the
portion of the Loan as to which such LIBOR Pricing Option has been
elected and which have a term corresponding to the LIBOR Interest Period
in question will not be offered in the Eurodollar market to the Required
Lenders at a rate of interest that does not exceed the anticipated LIBOR
Basic Rate.
3.2.2. Notice to Lenders and Borrower. The Agent will promptly
inform each Lender (by telephone or otherwise) of each notice received by
it from the Borrower pursuant to Section 3.2.1 and of the LIBOR Interest
Period specified in such notice. Upon determination by the Agent of the
LIBOR Rate for such LIBOR Interest Period or in the event such election
shall not become effective, the Agent will promptly notify the Borrower
and each Lender (by telephone or otherwise) of the LIBOR Rate so
determined or why such election did not become effective, as the case may
be.
3.2.3. Selection of LIBOR Interest Periods. LIBOR Interest Periods
shall be selected so that:
(a) the minimum portion of the Loan subject to any LIBOR Pricing
Option shall be $1,000,000 and an integral multiple of $500,000;
(b) no more than 10 LIBOR Pricing Options shall be outstanding at
any one time;
(c) a portion of each of Term Loan A and Term Loan B equal to or
greater than the amount of the next mandatory prepayment required by
Section 4.2 shall not be subject to a LIBOR Pricing Option on the date
such mandatory prepayment is required to be made; and
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(d) no LIBOR Interest Period with respect to any portion of the
Loan shall expire later than the Applicable Maturity Date for such
portion of the Loan.
3.2.4. Additional Interest. If any portion of the Loan subject to
a LIBOR Pricing Option is repaid, or any LIBOR Pricing Option is
terminated for any reason (including acceleration of maturity), on a date
which is prior to the last Banking Day of the LIBOR Interest Period
applicable to such LIBOR Pricing Option, the Borrower will pay to the
Agent for the account of each Lender in accordance with such Lender's
Percentage Interest, in addition to any amounts of interest otherwise
payable hereunder, an amount equal to the present value (calculated in
accordance with this Section 3.2.4) of interest for the unexpired portion
of such LIBOR Interest Period on the portion of the Loan so repaid, or as
to which a LIBOR Pricing Option was so terminated, at a per annum rate
equal to the excess, if any, of (a) the rate applicable to such LIBOR
Pricing Option minus (b) the rate of interest obtainable by the Agent
upon the purchase of debt securities customarily issued by the Treasury
of the United States of America which have a maturity date approximating
the last Banking Day of such LIBOR Interest Period. The present value of
such additional interest shall be calculated by discounting the amount of
such interest for each day in the unexpired portion of such LIBOR
Interest Period from such day to the date of such repayment or
termination at a per annum interest rate equal to the interest rate
determined pursuant to clause (b) of the preceding sentence, and by
adding all such amounts for all such days during such period. The
determination by the Agent of such amount of interest shall, in the
absence of manifest error, be conclusive. For purposes of this Section
3.2.4, if any portion of the Loan which was to have been subject to a
LIBOR Pricing Option is not outstanding on the first day of the LIBOR
Interest Period applicable to such LIBOR Pricing Option other than for
reasons described in Section 3.2.1, the Borrower shall be deemed to have
terminated such LIBOR Pricing Option.
3.2.5. Violation of Legal Requirements. If any Legal Requirement
shall prevent any Lender from funding or maintaining through the purchase
of deposits in the London interbank Eurodollar market any portion of the
Loan subject to a LIBOR Pricing Option or otherwise from giving effect to
such Lender's obligations as contemplated by Section 3.2, (a) the Agent
may by notice to the Borrower terminate all of the affected LIBOR Pricing
Options, (b) the portion of the Loan subject to such terminated LIBOR
Pricing Options shall immediately bear interest thereafter at the
Applicable Rate computed on the basis of the Base Rate and (c) the
Borrower shall make any payment required by Section 3.2.4.
3.2.6. Funding Procedure. The Lenders may fund any portion of the
Loan subject to a LIBOR Pricing Option out of any funds available to the
Lenders. Regardless of the source of the funds actually used by any of
the Lenders to fund any portion of the Loan subject to a LIBOR Pricing
Option, however, all amounts payable
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hereunder, including the interest rate applicable to any such portion of
the Loan and the amounts payable under Sections 3.2.4 and 3.5, shall be
computed as if each Lender had actually funded such Lender's Percentage
Interest in such portion of the Loan through the purchase of deposits in
such amount of the type by which the LIBOR Basic Rate was determined with
a maturity the same as the applicable LIBOR Interest Period relating
thereto and through the transfer of such deposits from an office of the
Lender having the same location as the applicable LIBOR Office to one of
such Lender's offices in the United States of America.
3.3. Commitment Fees. In consideration of the Lenders' commitments to
make the extensions of credit provided for in Section 2.1, while such
commitments are outstanding, the Borrower will pay to the Agent for the account
of the Lenders in accordance with the Lenders' respective Commitments in the
Revolving Loan, on each Payment Date, an amount equal to interest computed at
the rate of 0.50% per annum on the amount by which (a) the average daily Maximum
Amount of Revolving Credit during the month or portion thereof ending on such
Payment Date exceeded (b) the sum of (i) the average daily Revolving Loan during
such month or portion thereof plus (ii) the average daily Letter of Credit
Exposure during such month or portion thereof; provided, however, that the first
such payment shall be for the period beginning on the Initial Closing Date and
ending on the first Payment Date.
3.4. Letter of Credit Fees. The Borrower will pay to the Agent for the
account of each of the Lenders having a Percentage Interest in the Letters of
Credit, in accordance with the Lenders' respective Percentage Interests, on each
Payment Date occurring in March, June, September and December, a Letter of
Credit fee equal to interest at a rate per annum equal to the Applicable Margin
indicated for the LIBOR Rate on the average daily Letter of Credit Exposure
during the three-month period or portion thereof ending on such Payment Date.
The Borrower will pay to the Agent for the account of the Letter of Credit
Issuer, on each Payment Date occurring in March, June, September and December, a
fronting fee equal to interest at a rate per annum equal to 0.25% on the average
daily Letter of Credit Exposure during the three-month period or portion thereof
ending on such Payment Date. The Borrower will pay to the Letter of Credit
Issuer customary service charges and expenses for its services in connection
with the Letters of Credit at the times and in the amounts from time to time in
effect in accordance with its general rate structure, including fees and
expenses relating to issuance, amendment, negotiation, cancellation and similar
operations.
3.5. Changes in Circumstances; Yield Protection.
3.5.1. Reserve Requirements, etc. If any Legal Requirement
(whether or not having the force of law so long as compliance therewith
is customary commercial practice) shall (a) impose, modify, increase or
deem applicable any insurance assessment, reserve, special deposit or
similar requirement against any Funding Liability or the Letters of
Credit, (b) impose, modify, increase or deem applicable any other
requirement or condition with respect to any Funding Liability or the
Letters of
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Credit, or (c) change the basis of taxation of Funding Liabilities or
payments in respect of any Letter of Credit (other than changes in the
rate of taxes measured by the overall net income of such Lender) and the
effect of any of the foregoing shall be to increase the cost to any
Lender of issuing, making, funding or maintaining its respective
Percentage Interest in any portion of the Loan subject to a LIBOR Pricing
Option or any Letter of Credit, to reduce the amounts received or
receivable by such Lender under this Agreement or to require such Lender
to make any payment or forego any amounts otherwise payable to such
Lender under this Agreement (other than any Tax or any reserves that are
included in computing the LIBOR Reserve Rate), then such Lender may claim
compensation from the Borrower under Section 3.5.5.
3.5.2. Taxes. All payments of the Credit Obligations shall be made
without set-off or counterclaim and free and clear of any deductions,
including deductions for Taxes, unless the Borrower is required by law to
make such deductions. If (a) any Lender shall be subject to any Tax with
respect to any payment of the Credit Obligations or its obligations
hereunder or (b) the Borrower shall be required to withhold or deduct any
Tax on any payment on the Credit Obligations, then such Lender may claim
compensation from the Borrower under Section 3.5.5 to the extent such
Lender is then in compliance with any applicable requirements of Section
13. Whenever Taxes must be withheld by the Borrower with respect to any
payments of the Credit Obligations, the Borrower shall promptly furnish
to the 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. If the
Borrower fails to pay any such Taxes when due or fails to remit to the
Agent for the account of the applicable Lender the required receipts
evidencing payment of any such Taxes so withheld or deducted, the
Borrower shall indemnify the affected Lender for any incremental Taxes
and interest or penalties that may become payable by such Lender as a
result of any such failure. In the event any Lender receives a refund of
any Taxes for which it has received payment from the Borrower under this
Section 3.5.2, such Lender shall promptly pay the amount of such refund
to the Borrower, together with any interest thereon actually earned by
such Lender.
3.5.3. Capital Adequacy. If any Lender shall determine that
compliance by such Lender with any Legal Requirement (whether or not
having the force of law so long as compliance therewith is customary
commercial practice) regarding capital adequacy of banks or bank holding
companies has or would have the effect of reducing the rate of return on
the capital of such Lender and its Affiliates as a consequence of such
Lender's commitment to make the extensions of credit contemplated hereby,
or such Lender's maintenance of the extensions of credit contemplated
hereby, to a level below that which such Lender could have achieved but
for such compliance (taking into consideration the policies of such
Lender and its Affiliates with respect to capital adequacy immediately
before such compliance and assuming that the capital of such Lender and
its Affiliates was fully utilized prior to such compliance) by an amount
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deemed by such Lender to be material, then such Lender may claim
compensation from the Borrower under Section 3.5.5.
3.5.4. Regulatory Changes. If any Lender shall determine that (a)
any change in any Legal Requirement (including any new Legal Requirement)
(whether or not having the force of law so long as compliance therewith
is customary commercial practice) after the date hereof shall directly or
indirectly (i) reduce the amount of any sum received or receivable by
such Lender with respect to the Loan or the Letters of Credit or the
return to be earned by such Lender on the Loan or the Letters of Credit,
(ii) impose a cost on such Lender or any Affiliate of such Lender that is
attributable to the making or maintaining of, or such Lender's commitment
to make, its portion of the Loan or the Letters of Credit, or (iii)
require such Lender or any Affiliate of such Lender to make any payment
on, or calculated by reference to, the gross amount of any amount
received by such Lender under any Credit Document (other than Taxes or
income or franchise taxes), and (b) such reduction, increased cost or
payment shall not be fully compensated for by an adjustment in the
Applicable Rate or the Letter of Credit fees, then such Lender may claim
compensation from the Borrower under Section 3.5.5.
3.5.5. Compensation Claims. Within 15 days after the receipt by
the Borrower of a certificate from any Lender setting forth why it is
claiming compensation under this Section 3.5 and computations (in
reasonable detail) of the amount thereof, the Borrower shall pay to such
Lender such additional amounts as such Lender sets forth in such
certificate as sufficient fully to compensate it on account of the
foregoing provisions of this Section 3.5, together with interest on such
amount from the 15th day after receipt of such certificate until payment
in full thereof at the Overdue Reimbursement Rate. The determination by
such Lender of the amount to be paid to it and the basis for computation
thereof hereunder shall be conclusive so long as (a) the Lender acts in
good faith, (b) the Lender's determination does not contain any manifest
error and (c) the Lender used reasonable averaging and attribution
methods. The Borrower shall be entitled to replace any such Lender in
accordance with Section 11.3.
3.5.6. Mitigation. Each Lender shall take such commercially
reasonable steps as it may determine are not disadvantageous to it,
including changing lending offices to the extent feasible, in order to
reduce amounts otherwise payable by the Borrower to such Lender pursuant
to Sections 3.2.4 and 3.5 or to make LIBOR Pricing Options available
under Sections 3.2.1 and 3.2.5. In addition, the Borrower shall not be
responsible for costs (a) under Section 3.5 arising more than 90 days
prior to receipt by the Borrower of the certificate from the affected
Lender pursuant to such Section 3.5 or (b) under Section 3.2.4 arising
from the termination of LIBOR Pricing Options more than 90 days prior to
the demand by the Agent for payment under Section 3.2.4.
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3.6. Computations of Interest and Fees. For purposes of this Agreement,
interest, commitment fees and Letter of Credit fees (and any other amount
expressed as interest or such fees) shall be computed on the basis of a 360-day
year for actual days elapsed. If any payment required by this Agreement becomes
due on any day that is not a Banking Day, such payment shall, except as
otherwise provided in the LIBOR Interest Period, be made on the next succeeding
Banking Day. If the due date for any payment of principal is extended as a
result of the immediately preceding sentence, interest shall be payable for the
time during which payment is extended at the Applicable Rate.
4. Payment.
4.1. Payment at Maturity. On the Applicable Maturity Date or any
accelerated maturity of the Loan, the Borrower will pay to the Agent for the
account of the Lenders an amount equal to the portion of the Loan then due,
together with all accrued and unpaid interest and fees with respect thereto and
on the latest Applicable Maturity Date or any accelerated maturity of the Loan,
all other Credit Obligations then outstanding.
4.2. Scheduled Required Prepayments.
4.2.1. Term Loan A.
4.2.1.1. Term Loan A1. On each Payment Date set forth
below, the Borrower will pay to the Agent for the account of the
Lenders as a prepayment of Term Loan A1 the lesser of (a) the
amount set forth below for such date, adjusted to the extent
required by Section 4.6.2 or (b) the principal amount of Term Loan
A1 then outstanding.
Payment Date Amount
March 31, 1999 $ 406,250
June 30, 1999 $1,531,250
September 30, 1999 $1,531,250
December 31, 1999 $1,531,250
March 31, 2000 $ 700,000
June 30, 2000 $2,600,000
September 30, 2000 $2,600,000
December 31, 2000 $2,600,000
March 31, 2001 $ 800,000
June 30, 2001 $2,900,000
September 30, 2001 $2,900,000
December 31, 2001 $2,900,000
March 31, 2002 $ 800,000
June 30, 2002 $2,900,000
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September 30, 2002 $2,900,000
December 31, 2002 $2,900,000
4.2.1.1. Term Loan A2. On each Payment Date set forth
below, the Borrower will pay to the Agent for the account of the
Lenders as a prepayment of Term Loan A2 the lesser of (a) the
amount set forth below for such date, adjusted to the extent
required by Section 4.6.2 or (b) the principal amount of Term Loan
A2 then outstanding.
Payment Date Amount
March 31, 1999 $ 0
June 30, 1999 $ 0
September 30, 1999 $ 0
December 31, 1999 $ 0
March 31, 2000 $25,000
June 30, 2000 $75,000
September 30, 2000 $75,000
December 31, 2000 $75,000
March 31, 2001 $75,000
June 30, 2001 $475,000
September 30, 2001 $475,000
December 31, 2001 $475,000
March 31, 2002 $300,000
June 30, 2002 $1,150,000
September 30, 2002 $1,150,000
December 31, 2002 $1,150,000
4.2.2. Term Loan B.
4.2.2.1. Term Loan B1. On each Payment Date set forth
below, the Borrower will pay to the Agent, for the account of the
Lenders as a prepayment of Term Loan B1, the lesser of (a) the
amount set forth below for such date, adjusted to the extent
required by Section 4.6.2, and (b) the principal amount of Term
Loan B1 then outstanding.
Payment Date Amount
June 30, 1999 $33,333
September 30, 1999 $33,333
December 31, 1999 $33,334
June 30, 2000 $33,333
September 30, 2000 $33,333
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December 31, 2000 $33,334
June 30, 2001 $33,333
September 30, 2001 $33,333
December 31, 2001 $33,334
June 30, 2002 $33,333
September 30, 2002 $33,333
December 31, 2002 $33,334
June 30, 2003 $4,000,000
4.2.2.2. Term Loan B2. On each Payment Date set forth
below, the Borrower will pay to the Agent, for the account of the
Lenders as a prepayment of Term Loan B2, the lesser of (a) the
amount set forth below for such date, adjusted to the extent
required by Section 4.6.2, and (b) the principal amount of Term
Loan B2 then outstanding.
Payment Date Amount
June 30, 1999 $33,333
September 30, 1999 $33,333
December 31, 1999 $33,334
June 30, 2000 $33,333
September 30, 2000 $33,333
December 31, 2000 $33,334
June 30, 2001 $33,333
September 30, 2001 $33,333
December 31, 2001 $33,334
June 30, 2002 $33,333
September 30, 2002 $33,333
December 31, 2002 $33,334
June 30, 2003 $4,200,000
4.3. Contingent Required Prepayments.
4.3.1. Excess Credit Exposure. If at any time the Revolving Loan
exceeds the limits set forth in Section 2.1, the Borrower shall within
one Banking Day pay the amount of such excess to the Agent as a
prepayment of the Revolving Loan. If at any time the Letter of Credit
Exposure exceeds the limits set forth in Section 2.3, the Borrower shall
within one Banking Day pay the amount of such excess to the Agent to be
applied as provided in Section 4.5.
4.3.2. Excess Cash Flow. Within five Banking Days after the date
annual financial statements have been (or are required to have been)
furnished by the Holding Company to the Lenders in accordance with
Section 6.4.1, beginning with the annual
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financial statements for the year ending December 31, 1999, the Borrower
shall pay to the Agent as a prepayment of the Loans, to be applied as
provided in Section 4.6.2 in an amount equal to (a) 75% of Consolidated
Excess Cash Flow for its most recently completed fiscal year if
Consolidated Total Debt as of the end of such year exceeds or is equal to
350% Consolidated EBITDA for such year or (b) 50% of Consolidated Excess
Cash Flow for its most recently completed year if Consolidated Total Debt
as of the end of such year is less than 350% of Consolidated EBITDA for
such year.
4.3.3. Net Asset Sale Proceeds. Within five days prior to the sale
or other disposition of any assets by the Borrower or any of its
Subsidiaries that would result in Net Asset Sale Proceeds, the Borrower
shall provide written notice to the Lenders of the closing date for such
asset sale or disposition and the amount of the Net Asset Sale Proceeds.
Upon receipt by the Borrower or any of its Subsidiaries of Net Asset Sale
Proceeds, the Borrower shall within three Banking Days pay to the Agent
as a prepayment of the Loan, to be applied as provided in Section 4.6.2
the lesser of (a) the amount of such Net Asset Sale Proceeds or (b) the
amount of the Loan.
4.3.4. Net Debt Proceeds. Within five days prior to the incurrence
of Designated Financing Debt by the Holding Company or any of its
Subsidiaries, the Borrower shall provide written notice to the Lenders of
the closing date for such Designated Financing Debt and the amount of the
Net Debt Proceeds. Within three Banking Days after the incurrence of such
Designated Financing Debt, the Borrower shall pay to the Agent as a
prepayment of the Loan, to be applied as provided in Section 4.6.2 the
lesser of (a) the amount of such Net Debt Proceeds or (b) the amount of
the Loan; provided; however, that the Borrower shall be required to pay
only 75% of Net Debt Proceeds under this Section 4.3.4 as a result of the
issuance of additional Convertible Subordinated Debentures after the
Initial Closing Date.
4.3.5. Net Equity Proceeds. Within five days prior to the issuance
of any equity securities by the Holding Company or any of its
Subsidiaries that would result in Net Equity Proceeds, the Borrower shall
provide written notice to the Lenders of the closing date for such
issuance and the amount of the Net Equity Proceeds. Within three Banking
Days after the receipt by the Holding Company or any of its Subsidiaries
of Net Equity Proceeds, the Borrower shall pay to the Agent as a
prepayment of the Loan to be applied as provided in Section 4.6.2 the
lesser of (a) 75% of the amount of such Net Equity Proceeds or (b) the
amount of the Loan.
4.4. Voluntary Prepayments. In addition to the prepayments required by
Sections 4.2 and 4.3, the Borrower may from time to time prepay all or any
portion of the Loan (in a minimum amount of $50,000 and an integral multiple of
$50,000, or such lesser amount as is then outstanding), without premium or
penalty of any type (except as provided in Section 3.2.4 with respect to the
early termination of LIBOR Pricing Options). Voluntary Term Loan prepayments
must be allocated between Term Loan A and Term Loan B pro rata
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based on the relative outstanding principal amounts thereof, and shall be
applied pro rata to the remaining amortization installments pursuant to Section
4.2.1 or 4.2.2, as the case may be. The Borrower shall give the Agent at least
one Banking Day prior notice of its intention to prepay the Revolving Loan under
this Section 4.4, specifying the date of payment, the total amount of the
Revolving Loan to be paid on such date and the amount of interest to be paid
with such prepayment.
The Borrower shall give the Lenders at least five days prior notice of
its intention to prepay the Term Loans under this Section 4.4, specifying the
date of payment, the total amount of Term Loan A and Term Loan B to be paid on
such date and the amount of interest to be paid with such prepayment.
4.5. Letters of Credit. If on the Final Revolving Maturity Date or any
accelerated maturity of the Credit Obligations the Lenders shall be obligated in
respect of a Letter of Credit or a draft accepted under a Letter of Credit, the
Borrower will either:
(a) prepay such obligation by depositing with the Agent an amount
of cash, or
(b) deliver to the Agent a standby letter of credit (designating
the Agent as beneficiary and issued by a bank and on terms reasonably
acceptable to the Agent),
in each case in an amount equal to the portion of the then Letter of Credit
Exposure issued for the account of the Borrower. Any such cash so deposited and
the cash proceeds of any draw under any standby Letter of Credit so furnished,
including any interest thereon, shall be returned by the Agent to the Borrower
only when, and to the extent that, the amount of such cash held by the Agent
exceeds the Letter of Credit Exposure at such time and no Default then exists;
provided, however, that if an Event of Default occurs and the Credit Obligations
become or are declared immediately due and payable, the Agent may apply such
cash, including any interest thereon, to the payment of any of the Credit
Obligations as provided in section 3.5.6 of the Guarantee and Security
Agreement.
4.6. Reborrowing; Application of Payments, etc.
4.6.1. Reborrowing. The amounts of the Revolving Loan prepaid
pursuant to Section 4.4 may be reborrowed from time to time prior to the
Final Maturity Date in accordance with Section 2.1, subject to the limits
set forth therein. No portion of the Term Loans prepaid hereunder may be
reborrowed.
4.6.2. Order of Application. Any prepayment of the Loan pursuant
to Sections 4.3.2, 4.3.3, 4.3.4 or 4.3.5 shall be applied first to Term
Loan A and Term Loan B, with any balance to the Revolving Loan and, only
in the case of prepayments under Sections 4.3.3 (Net Asset Sale Proceeds)
and 4.3.4 (Net Debt Proceeds), to the permanent reduction of the
Revolving Loan Commitments whether or not any
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Revolving Loan is then outstanding. Prepayments of Term Loan A and Term
Loan B made pursuant to Sections 4.3.2, 4.3.3, 4.3.4, 4.3.5 or 4.4 shall
be applied pro rata to the remaining amortization installments pursuant
to Section 4.2.1 or 4.2.2, as the case may be, and shall be allocated
between Term Loan A and Term Loan B (and between Term Loan A1 and Term
Loan A2 and between Term Loan B1 and Term Loan B2) pro rata based on the
relative outstanding principal amounts thereof, except as provided below.
Any Lender who does not wish to receive a prepayment of Term Loan B under
Sections 4.3 or 4.4 must notify the Agent and the Borrower within two
Banking Days after receipt of notice of such proposed prepayment. If the
Borrower accepts such Lender's election not to receive such prepayment of
Term Loan B, the portion of the Net Asset Sale Proceeds that would have
been applied to the repayment of the portion of Term Loan B held by such
Lender shall instead be applied to the repayment of Term Loan A. If the
Borrower does not accept such Lender's election not to receive such
prepayment of Term Loan B, the Borrower shall promptly provide notice
thereof to such Lender and the Agent, and shall allocate such prepayments
between Term Loan A and Term Loan B pro rata based on the relative
outstanding principal amounts thereof. Subject to the foregoing, any
prepayment of the Loan shall be applied first to the portion of the Loan
not then subject to LIBOR Pricing Options, then the balance of any such
prepayment shall be applied to the portion of the Loan then subject to
LIBOR Pricing Options, in the chronological order of the respective
maturities thereof (or as the Borrower may otherwise specify in writing),
together with any payments required by Section 3.2.4.
4.6.3. Payment with Accrued Interest, etc. Upon all prepayments of
the Term Loans, the Borrower shall pay to the Agent the principal amount
to be prepaid, together with unpaid interest in respect thereof accrued
to the date of prepayment. Notice of prepayment having been given in
accordance with Section 4.4, and whether or not notice is given of
prepayments pursuant to Sections 4.2 and 4.3, the amount specified to be
prepaid shall become due and payable on the date specified for
prepayment.
4.6.4. Payments for Lenders. All payments of principal hereunder
shall be made to the Agent for the account of the Lenders in accordance
with the Lenders' respective Percentage Interests.
5. Conditions to Extending Credit.
5.1. Conditions on Initial Closing Date. The obligations of the Lenders
to make any extension of credit pursuant to Section 2 shall be subject to the
satisfaction, on or before the Initial Closing Date, of the conditions set forth
in this Section 5.1 as well as the further conditions in Section 5.2. If the
conditions set forth in this Section 5.1 are not met on or prior to the Initial
Closing Date, the Lenders shall have no obligation to make any extensions of
credit hereunder.
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5.1.1. Notes. The Borrower shall have duly executed and delivered
to the Agent a Revolving Note, Term Loan A Notes for each Lender having a
Percentage Interest in such portion of the Loan and Term Loan B Notes for
each Lender having a Percentage Interest in such portion of the Loan.
5.1.2. Payment of Fees. The Borrower shall have paid to the Agent
the fees contemplated by the separate agreement between the Agent and the
Holding Company dated on or prior to the date hereof.
5.1.3. Legal Opinions. On the Initial Closing Date, the Lenders
shall have received from the following counsel their respective opinions
with respect to the transactions contemplated by the Credit Documents,
which opinions shall be in form and substance reasonably satisfactory to
the Required Lenders:
(a) Foley & Lardner, special counsel for the Holding
Company and its Subsidiaries.
(b) Confirmation to the Lenders of the opinion of Parker
Chapin Flattau & Klimpl, LLP, counsel to Heartland and the
Heartland Sellers, delivered under the Acquisition Agreement.
(c) Ropes & Gray, special counsel for the Agent.
The Holding Company authorizes and directs its special
counsel to furnish the foregoing opinion.
5.1.4. Guarantee and Security Agreement. Each of the Borrower and
its Subsidiaries, including Heartland, shall have duly authorized,
executed and delivered to the Agent a Guarantee and Security Agreement in
substantially the form of Exhibit 5.1.4 (the "Guarantee and Security
Agreement") (or a joinder thereto in form reasonably satisfactory to the
Agent), as well as the patent and trademark security agreements
contemplated therein.
5.1.5. Guarantee and Pledge Agreement. The Holding Company shall
have duly authorized, executed and delivered to the Agent a Guarantee and
Pledge Agreement in substantially the form of Exhibit 5.1.5 (the
"Guarantee and Pledge Agreement").
5.1.6. Real Estate Collateral. The Obligors shall have duly
authorized, executed, acknowledged and delivered to the Agent a mortgage
on each material real property owned by the Borrower and its Subsidiaries
and a leasehold mortgage on each material real property leased by the
Borrower and its Subsidiaries (other than Heartland, none of whose
leaseholds is material to the Borrower and its Subsidiaries
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taken as a whole), with a landlord's consent and waiver and any other
documents required to allow for the recording or filing of a leasehold
mortgage, in each case in form and substance reasonably satisfactory to
the Agent, together with, for each such real property: (a) title
insurance with such insurer, in such amount, in such form and with such
exceptions as are reasonably satisfactory to the Agent, (b) an
environmental site assessment report in such form, with such conclusions
and from such environmental engineering firm as are reasonably
satisfactory to the Agent, (c) a survey on each real property owned by
the Borrower and its Subsidiaries that is reasonably satisfactory to the
Agent and (d) a legal opinion of local counsel with respect to the
recording and enforceability of such mortgages and leasehold mortgages in
form and substance reasonably satisfactory to the Agent.
5.1.7. Perfection of Security. Each Obligor shall have duly
authorized, executed, acknowledged, delivered, filed, registered and
recorded such security agreements, notices, financing statements and
other instruments as the Agent may have reasonably requested in order to
perfect the Liens purported or required pursuant to the Credit Documents
to be created in the Credit Security and shall have paid all filing or
recording fees or taxes required to be paid in connection therewith,
including any recording, mortgage, documentary, transfer or intangible
taxes.
5.1.8. Acquisition. Other than as consented to by the Agent in
writing, with the consent of the Required Lenders if such consent is
material:
(a) The provisions of the Acquisition Agreement shall not
have been amended, modified, waived or terminated.
(b) All of the representations and warranties of the
Heartland Sellers set forth in the Acquisition Agreement shall be
complete and correct in all material respects on and as of the
Initial Closing Date with the same force and effect as though made
on and as of such date.
(c) All of the other conditions to the obligations of the
Borrower and its Subsidiaries set forth in the Acquisition
Agreement shall have been satisfied.
(d) Any material consent, authorization, order or approval
of any Person required in connection with the transactions
contemplated by the Acquisition Agreement shall have been obtained
and shall be in full force and effect.
(e) All of the items required to be delivered under the
Acquisition Agreement shall have been so delivered.
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(f) The merger of HI Acquisition Corp. into Heartland shall
have been consummated in accordance with the Acquisition Agreement
and Wisconsin and Delaware corporate law.
(g) Contemporaneously with the making by the Lenders of the
first extension of credit hereunder, the Holding Company shall
have furnished to the Lenders a certificate of a Financial Officer
to the effect that the closing has occurred under the Acquisition
Agreement and to the effect that each of the conditions set forth
in this Section 5.1.8 has been satisfied.
5.1.9. Capitalization, etc.
(a) On the Initial Closing Date, (i) the lesser of (A) the
Maximum Amount of Revolving Credit and (B) the Borrowing Base
shall exceed (ii) the Revolving Loan by at least $2,000,000.
(b) On the Initial Closing Date, the Seller Subordinated
Debt owing to the Heartland Sellers shall be funded on terms
reasonably satisfactory to the Lenders.
(c) After giving effect to the Acquisition and the
incurrence of the Seller Subordinated Debt, the Senior
Subordinated Notes and the Credit Obligations, the Holding Company
and its Subsidiaries, taken as a whole:
(i) will be solvent;
(ii) will have assets having a fair saleable value
in excess of the amount required to pay their probable
liability on their existing debts as such debts become
absolute and mature;
(iii) will have access to adequate capital for the
conduct of their business; and
(iv) will have the ability to pay their debts from
time to time incurred as such debts mature.
(d) The Holding Company shall have furnished to the Lenders
a certificate of a Financial Officer to such effect, together with
detailed computations verifying the items in clause (a) above and
calculations pursuant to Section 7.2.1(e) demonstrating compliance
with the Computation Covenants, in each case giving pro forma
effect to the Acquisition and the incurrence of the Credit
Obligations.
5.1.10. Termination of Prior Credit Agreement. Contemporaneously
with the initial advances hereunder, Heartland shall have paid in full
all principal, interest and
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other accrued and outstanding amounts under the Prior Credit Agreement,
all commitments to extend further credit under the Prior Credit Agreement
shall have been terminated, all Liens securing amounts owing under the
Prior Credit Agreement shall have been released and the Prior Credit
Agreement shall have become terminated and of no further force or effect
(except for indemnity provisions that by their terms survive the
termination of the Prior Credit Agreement).
5.1.11. Unaudited Annual Financial Statements. The Holding Company
shall have furnished to the Lenders the respective unaudited Consolidated
balance sheets for the Holding Company and its Subsidiaries and for
Heartland as of December 31, 1998 and the respective unaudited
Consolidated income statements for the year then ended, together with the
pro forma balance sheet and income statement for the Holding Company and
its Subsidiaries, including Heartland on a pro forma basis, for such date
and period, all in a form reasonably satisfactory to the Agent.
5.1.12. Insurance. The Agent shall have reviewed the insurance
policies of the Holding Company and its Subsidiaries, including
Heartland, and the results of such review shall be satisfactory to the
Agent.
5.1.13. Environmental Review. A third party environmental
engineering firm reasonably acceptable to the Agent shall have reviewed
an environmental due diligence report with respect to Heartland and the
results of such review shall be satisfactory to the Agent.
5.1.14. Modification of Securities Purchase Agreements. The
Securities Purchase Agreements shall have been modified to permit the
Acquisition and to make other conforming changes in form and substance
reasonably satisfactory to the Agent.
5.1.15. Proper Proceedings. This Agreement, each other Credit
Document and the transactions contemplated hereby and thereby shall have
been authorized by all necessary corporate or other proceedings. All
necessary consents, approvals and authorizations of any governmental or
administrative agency or any other Person of any of the transactions
contemplated hereby or by any other Credit Document shall have been
obtained and shall be in full force and effect.
5.1.16. General. All legal and corporate proceedings in connection
with the transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to the Agent and the Agent shall have
received copies of all documents, including certified copies of the
Charter and By-Laws of the Holding Company and the other Obligors,
records of corporate proceedings, certificates as to signatures and
incumbency of officers and opinions of counsel, which the Agent may have
reasonably requested in connection therewith, such documents where
appropriate to be certified by proper corporate or governmental
authorities.
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5.2. Conditions to Each Extension of Credit. The obligations of the
Lenders to make any extension of credit pursuant to Section 2 shall be subject
to the satisfaction, on or before the Closing Date for such extension of credit,
of the following conditions:
5.2.1. Officer's Certificate. The representations and warranties
contained in Section 7 shall be true and correct on and as of such
Closing Date with the same force and effect as though made on and as of
such date (except as to any representation or warranty which refers to a
specific earlier date); no Default shall exist on such Closing Date prior
to or immediately after giving effect to the requested extension of
credit; no Material Adverse Change shall have occurred since December 31,
1997, and the Borrower shall have furnished to the Agent in connection
with the requested extension of credit a certificate to these effects, in
substantially the form of Exhibit 5.2.1, signed by a Financial Officer.
5.2.2. Legality, etc. The making of the requested extension of
credit shall not (a) subject any Lender to any penalty or special tax
(other than a Tax for which the Borrower is required to reimburse the
Lenders under Section 3.5), (b) be prohibited by any Legal Requirement or
(c) violate any credit restraint program of the executive branch of the
government of the United States of America, the Board of Governors of the
Federal Reserve System or any other governmental or administrative agency
so long as any Lender reasonably believes that compliance therewith is in
the best interests of such Lender.
6. General Covenants. Each of the Holding Company, the Borrower and the other
Guarantors covenants that, until all of the Credit Obligations shall have been
paid in full and until the Lenders' commitments to extend credit under this
Agreement and any other Credit Document shall have been irrevocably terminated,
the Holding Company and its Subsidiaries will comply with the following
provisions:
6.1. Taxes and Other Charges; Accounts Payable.
6.1.1. Taxes and Other Charges. Each of the Holding Company and
its Subsidiaries shall duly pay and discharge, or cause to be paid and
discharged, before the same becomes in arrears, all taxes, assessments
and other governmental charges imposed upon such Person and its
properties, sales or activities, or upon the income or profits therefrom,
as well as all claims for labor, materials or supplies which if unpaid
might by law become a Lien upon any of its property; provided, however,
that any such tax, assessment, charge or claim need not be paid if the
validity or amount thereof shall at the time be contested in good faith
by appropriate proceedings and if such Person shall, in accordance with
GAAP, have set aside on its books adequate reserves with respect thereto;
and provided, further, that each of the Holding Company and its
Subsidiaries shall pay or bond, or cause to be paid or bonded, all such
taxes,
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assessments, charges or other governmental claims immediately upon the
commencement of proceedings to foreclose any Lien which may have attached
as security therefor (except to the extent such proceedings have been
dismissed or stayed).
6.1.2. Accounts Payable. Each of the Holding Company and its
Subsidiaries shall promptly pay when due, or in conformity with customary
trade terms, all accounts payable incident to the operations of such
Person not referred to in Section 6.1.1; provided, however, that any such
accounts payable need not be paid if the validity or amount thereof shall
at the time be contested in good faith and if such Person shall, in
accordance with GAAP, have set aside on its books adequate reserves with
respect thereto.
6.2. Conduct of Business, etc.
6.2.1. Types of Business. The Holding Company and its Subsidiaries
shall not substantially engage in any business other than (a) children's
consumer and commercial indoor and outdoor play products, (b) new
products that utilize the Borrower's metal fabrication or plastic forming
core competencies, (c) yard barns, storage sheds, stand-alone garages and
weekender cabins or (d) substantially similar products to those
identified in clauses (a), (b) and (c) that may be sold through home
centers, mass merchants or commercial and industrial trade classes, and
other activities related thereto.
6.2.2. Maintenance of Properties. Each of the Holding Company and
its Subsidiaries:
(a) shall keep its properties in such repair, working order
and condition, and shall from time to time make such repairs,
replacements, additions and improvements thereto as are necessary
for the efficient operation of its businesses and shall comply at
all times in all material respects with all material franchises,
licenses and leases to which it is party so as to prevent any loss
or forfeiture thereof or thereunder, except where (i) compliance
is at the time being contested in good faith by appropriate
proceedings and (ii) failure to comply with the provisions being
contested has not resulted, and does not create a material risk of
resulting, in the aggregate in any Material Adverse Change; and
(b) shall do all things necessary to preserve, renew and
keep in full force and effect and in good standing its legal
existence and authority necessary to continue its business;
provided, however, that this Section 6.2.2(b) shall not prevent
the merger, consolidation or liquidation of Subsidiaries permitted
by Section 6.11.
6.2.3. Statutory Compliance. Each of the Holding Company and its
Subsidiaries shall comply in all material respects with all valid and
applicable statutes,
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laws, ordinances, zoning and building codes and other rules and
regulations of the United States of America, of the states and
territories thereof and their counties, municipalities and other
subdivisions and of any foreign country or other jurisdictions applicable
to such Person, except where (a) compliance therewith shall at the time
be contested in good faith by appropriate proceedings and (b) failure so
to comply with the provisions being contested has not resulted, and does
not create a material risk of resulting, in the aggregate in any Material
Adverse Change.
6.2.4. Compliance with Material Agreements. Each of the Holding
Company and its Subsidiaries shall comply in all material respects with
the Material Agreements (to the extent not in violation of the other
provisions of this Agreement or any other Credit Document). Without the
prior written consent of the Required Lenders, no Material Agreement
shall be amended, modified, waived or terminated in any manner that would
have in any material respect an adverse effect on the interests of the
Lenders.
6.3. Insurance.
6.3.1. Business Interruption Insurance. Each of the Holding
Company and its Subsidiaries shall maintain with financially sound and
reputable insurers insurance related to interruption of business, either
for loss of revenues or for extra expense, in the manner customary for
businesses of similar size engaged in similar activities.
6.3.2. Property Insurance. Each of the Holding Company and its
Subsidiaries shall keep its assets which are of an insurable character
insured by financially sound and reputable insurers against theft and
fraud and against loss or damage by fire, explosion and hazards insured
against by extended coverage to the extent, in amounts and with
deductibles at least as favorable as those generally maintained by
businesses of similar size engaged in similar activities.
6.3.3. Liability Insurance. Each of the Holding Company and its
Subsidiaries shall maintain with financially sound and reputable insurers
insurance against liability for hazards, risks and liability to persons
and property, including product liability insurance, to the extent, in
amounts and with deductibles at least as favorable as those maintained as
of the date hereof and as generally maintained by businesses of similar
size engaged in similar activities; provided, however, that it may effect
workers' compensation insurance or similar coverage with respect to
operations in any particular state or other jurisdiction through an
insurance fund operated by such state or jurisdiction or by meeting the
self-insurance requirements of such state or jurisdiction.
6.3.4. Flood Insurance. Each of the Holding Company and its
Subsidiaries shall at all times keep each parcel of real property owned
or leased by it which is (a) included in the Credit Security, (b) in an
area determined by the Director of the Federal
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Emergency Management Agency to be subject to special flood hazard and (c)
in a community participating in the National Flood Insurance Program,
insured against such special flood hazards in an amount equal to the
maximum limit of coverage available for the particular type of property
under the federal National Flood Insurance Act of 1968.
6.4. Financial Statements and Reports. Each of the Holding Company and
its Subsidiaries shall maintain a system of accounting in which correct entries
shall be made of all transactions in relation to their business and affairs in
accordance with generally accepted accounting practice. The fiscal year of the
Holding Company and its Subsidiaries shall end on December 31 in each year and
the fiscal quarters of the Holding Company and its Subsidiaries shall end on
March 31, June 30, September 30 and December 31 in each year.
6.4.1. Annual Reports. The Holding Company shall furnish to the
Lenders as soon as available, and in any event within 90 days after the
end of each fiscal year, the Consolidated and Consolidating balance
sheets of the Holding Company and its Subsidiaries and of the Borrower
and its Subsidiaries as at the end of such fiscal year, the Consolidated
and Consolidating statements of income and Consolidated statements of
changes in shareholders' equity and of cash flows of the Holding Company
and its Subsidiaries and of the Borrower and its Subsidiaries for such
fiscal year (all in reasonable detail) and together, in the case of
Consolidated financial statements, with comparative figures for the
immediately preceding fiscal year, all accompanied by:
(a) Reports of Ernst & Young LLP (or, if they cease to be auditors
of the Holding Company and its Subsidiaries, other independent certified
public accountants of recognized national standing reasonably
satisfactory to the Required Lenders), containing no material
qualification, to the effect that they have audited the foregoing
Consolidated financial statements in accordance with generally accepted
auditing standards and that such Consolidated financial statements
present fairly, in all material respects, the financial position of the
Holding Company and its Subsidiaries and of the Borrower and its
Subsidiaries covered thereby at the dates thereof and the results of
their operations for the periods covered thereby in conformity with GAAP.
(b) The statement of such accountants that they have caused this
Agreement to be reviewed and that in the course of their audit of the
Holding Company and its Subsidiaries no facts have come to their
attention that cause them to believe that any Default exists and in
particular that they have no knowledge of any Default under Sections 6.5
through 6.20 or, if such is not the case, specifying such Default and the
nature thereof. This statement is furnished by such accountants with the
understanding that the examination of such accountants cannot be relied
upon to give such accountants knowledge of any such Default except as it
relates to accounting or auditing matters within the scope of their
audit.
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(c) A certificate of the Holding Company signed by a Financial
Officer to the effect that such officer has caused this Agreement to be
reviewed and has no knowledge of any Default, or if such officer has such
knowledge, specifying such Default and the nature thereof, and what
action the Holding Company has taken, is taking or proposes to take with
respect thereto.
(d) Computations by the Holding Company comparing the financial
statements referred to above with the most recent budget for such fiscal
year furnished to the Lenders in accordance with Section 6.4.5.
(e) Computations by the Holding Company in substantially the form
of Exhibit 6.4 demonstrating, as of the end of such fiscal year,
compliance with the Computation Covenants, certified by a Financial
Officer.
(f) Calculations, as at the end of such fiscal year, of (i) the
Accumulated Benefit Obligations for each Plan covered by Title IV of
ERISA (other than Multiemployer Plans) and (ii) the fair market value of
the assets of such Plan allocable to such benefits.
(g) Supplements to Exhibits 7.1 and 7.3, exhibit 3.3 to the
Guarantee and Security Agreement and exhibit 3.2 to the Guarantee and
Pledge Agreement showing any changes in the information set forth in such
exhibits not previously furnished to the Lenders in writing, as well as
any changes in the Charter, Bylaws or incumbency of officers of the
Obligors from those previously certified to the Agent.
(h) In the event of a change in GAAP after December 31, 1997,
computations by the Holding Company, certified by a Financial Officer,
reconciling the financial statements referred to above with financial
statements prepared in accordance with GAAP as applied to the other
covenants in Section 6 and related definitions.
(i) In reasonable detail, management's discussion and analysis of
the results of operations and the financial condition of the Holding
Company and its Subsidiaries and the Borrower and its Subsidiaries as at
the end of and for the year covered by such financial statements.
6.4.2. Quarterly Reports. The Holding Company shall furnish to the
Lenders as soon as available and, in any event, within 45 days after the
end of each of the first three fiscal quarters of the Holding Company,
the internally prepared Consolidated and Consolidating balance sheets of
the Holding Company and its Subsidiaries and the Borrower and its
Subsidiaries as of the end of such fiscal quarter, the Consolidated and
Consolidating statements of income and Consolidated statements of changes
in shareholders' equity and of cash flows of the Holding Company and its
Subsidiaries and the Borrower and its Subsidiaries for such fiscal
quarter and for the portion of the fiscal
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year then ended (all in reasonable detail) and together, in the case of
Consolidated statements, with comparative figures for the same period in
the preceding fiscal year, all accompanied by:
(a) A certificate of the Holding Company signed by a Financial
Officer to the effect that such Consolidated financial statements have
been prepared in accordance with GAAP and present fairly, in all material
respects, the financial position of the Holding Company and its
Subsidiaries and the Borrower and its Subsidiaries covered thereby at the
dates thereof and the results of their operations for the periods covered
thereby, subject only to normal year-end audit adjustments and the
addition of footnotes.
(b) A certificate of the Holding Company signed by a Financial
Officer to the effect that such officer has caused this Agreement to be
reviewed and has no knowledge of any Default, or if such officer has such
knowledge, specifying such Default and the nature thereof and what action
the Holding Company has taken, is taking or proposes to take with respect
thereto.
(c) Computations by the Holding Company comparing the financial
statements referred to above with the most recent budget for the period
covered thereby furnished to the Lenders in accordance with Section
6.4.5.
(d) Computations by the Holding Company in substantially the form
of Exhibit 6.4 demonstrating, as of the end of such quarter, compliance
with the Computation Covenants, certified by a Financial Officer.
(e) Supplements to Exhibits 7.1 and 7.3, exhibit 3.3 to the
Guarantee and Security Agreement and exhibit 3.2 to the Guarantee and
Pledge Agreement showing any changes in the information set forth in such
exhibits not previously furnished to the Lenders in writing, as well as
any changes in the Charter, Bylaws or incumbency of officers of the
Obligors from those previously certified to the Agent.
(f) In the event of a change in GAAP after December 31, 1997,
computations by the Holding Company, certified by a Financial Officer,
reconciling the financial statements referred to above with financial
statements prepared in accordance with GAAP as applied to the other
covenants in Section 6 and related definitions.
(g) In reasonable detail, management's discussion and analysis of
the results of operations and financial condition of the Holding Company
and its Subsidiaries and the Borrower and its Subsidiaries as at the end
of and for the fiscal period covered by the financial statements referred
to above.
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6.4.3. Monthly Reports. The Borrower shall furnish to the Lenders
as soon as available and, in any event, within 25 days after the end of
each month, the internally prepared Consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such month and the
Consolidated statement of income of the Borrower and its Subsidiaries for
such month (all in reasonable detail), all accompanied by a certificate
of the Holding Company signed by a Financial Officer to the effect that
such financial statements were prepared in accordance with GAAP and
present fairly, in all material respects, the financial position of the
Persons covered thereby at the dates thereof and the results of their
operations for the periods covered thereby, subject only to normal
year-end audit adjustments and the addition of footnotes.
6.4.4. Borrowing Base Reports. The Borrower shall furnish to the
Lenders, as soon as available and, in any event (a) within 20 days after
the end of each month, or (b) within 10 days following any request by the
Agent if more frequently than monthly, but not more frequently than once
per week, a certificate of a Financial Officer supplying computations of
the Borrowing Base at the end of such month (or week, as the case may
be).
6.4.5. Other Reports. The Holding Company shall promptly furnish
to the Lenders:
(a) As soon as prepared and in any event before the beginning of
each fiscal year, an annual budget and operating projections for such
fiscal year of the Holding Company and its Subsidiaries, prepared in a
manner consistent with the manner in which the financial projections
described in Section 7.2.1 were prepared.
(b) Any material updates of such budget and projections.
(c) Any management letters furnished to the Holding Company or any
of its Subsidiaries by the Holding Company's auditors.
(d) All budgets, projections, statements of operations and other
reports furnished generally to the shareholders of the Holding Company.
(e) Such registration statements, proxy statements and reports,
including Forms S-1, S-2, S-3, S-4, 10-K, 10-Q and 8-K, as may be filed
by the Holding Company or any of its Subsidiaries with the Securities and
Exchange Commission.
(f) Any 90-day letter or 30-day letter from the federal Internal
Revenue Service (or the equivalent notice received from state or other
taxing authorities) asserting tax deficiencies against the Holding
Company or any of its Subsidiaries.
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6.4.6. Notice of Litigation, Defaults, etc. The Holding Company
shall promptly furnish to the Lenders notice of any litigation or any
administrative or arbitration proceeding (a) which creates a material
risk of resulting, after giving effect to any applicable insurance, in
the payment by the Holding Company and its Subsidiaries of more than
$750,000 or (b) which results, or creates a material risk of resulting,
in a Material Adverse Change. Promptly upon acquiring knowledge thereof,
the Holding Company shall notify the Lenders of the existence of any
Default or Material Adverse Change, specifying the nature thereof and
what action the Holding Company or any Subsidiary has taken, is taking or
proposes to take with respect thereto.
6.4.7. ERISA Reports. The Holding Company shall furnish to the
Lenders as soon as available the following items with respect to any
Plan:
(a) any request for a waiver of the funding standards or an
extension of the amortization period,
(b) any reportable event (as defined in section 4043 of ERISA),
unless the notice requirement with respect thereto has been waived by
regulation,
(c) any notice received by any ERISA Group Person that the PBGC
has instituted or intends to institute proceedings to terminate any Plan,
or that any Multiemployer Plan is insolvent or in reorganization,
(d) notice of the possibility of the termination of any Plan by
its administrator pursuant to section 4041 of ERISA, and
(e) notice of the intention of any ERISA Group Person to withdraw,
in whole or in part, from any Multiemployer Plan.
6.4.8. Other Information; Audit. From time to time at reasonable
intervals upon request of any authorized officer of any Lender, each of
the Holding Company and its Subsidiaries shall furnish to such Lender
such other information regarding the business, assets, financial
condition, income or prospects of the Holding Company and its
Subsidiaries as such officer may reasonably request, including copies of
all tax returns, licenses, agreements, leases and instruments to which
any of the Holding Company or its Subsidiaries is party. Each Lender's
authorized officers and representatives shall have the right during
normal business hours upon reasonable notice and at reasonable intervals
to examine the books and records of the Holding Company and its
Subsidiaries, to make copies and notes therefrom for the purpose of
ascertaining compliance with or obtaining enforcement of this Agreement
or any other Credit Document. The Agent, upon reasonable advance notice,
may undertake to have
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the Borrower and its Subsidiaries reviewed by the Agent's commercial
financial examiners and fixed asset appraisers.
6.5. Certain Financial Tests.
6.5.1. Consolidated Net Worth. Consolidated Net Worth shall at all
times exceed the sum of (a) $14,000,000 plus (b) the amount by which
Consolidated Net Worth has been increased after the Initial Closing Date
as a result of capital contributions, the issuance of capital stock or
partnership interests of the Holding Company or any of its Subsidiaries,
the issuance of warrants, options or other rights to acquire such capital
stock or partnership interests or the exercise of warrants, options or
other rights or the conversion of securities into such capital stock plus
(c) 75% of Consolidated Net Income (if positive) for each fiscal quarter
of the Holding Company after December 31, 1998.
6.5.2. Consolidated EBITDA. For each period of four consecutive
fiscal quarters of the Holding Company, Consolidated EBITDA shall equal
or exceed the amount specified in the table below.
Period Ending Amount
March 31, 1999 $19,500,000
June 30, 1999 $20,250,000
September 30, 1999 $20,750,000
December 31, 1999 through
March 31, 2000 $21,250,000
June 30, 2000 $22,000,000
September 30, 2000 $23,000,000
December 31, 2000 through
March 31, 2001 $23,750,000
June 30, 2001 through
September 30, 2001 $24,500,000
December 31, 2001 through
September 30, 2002 $25,000,000
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December 31, 2002 through
September 30, 2003 $25,500,000
December 31, 2003 and thereafter $26,000,000
6.5.3. Consolidated Total Debt to Consolidated EBITDA.
Consolidated Total Debt shall not on any date exceed the percentage set
forth in the table below of Consolidated EBITDA for the most recently
completed period of four consecutive fiscal quarters for which financial
reports have been (or are required to have been) furnished to the Lenders
in accordance with Section 6.4.1 or 6.4.2.
Period Ending Percentage
March 31, 1999 400%
June 30, 1999 375%
September 30, 1999 through
March 31, 2000 350%
June 30, 2000 325%
September 30, 2000 300%
December 31, 2000 through
March 31, 2001 275%
June 30, 2001 through
September 30, 2001 265%
December 31, 2001 and thereafter 250%
6.5.4. Consolidated Adjusted EBITDA Plus Rent to Consolidated
Fixed Charges Plus Rent. For each period of four consecutive fiscal
quarters of the Holding Company, (a) the sum of Consolidated Adjusted
EBITDA plus one third of Consolidated Rental Obligations shall equal or
exceed the percentage specified in the table below of (b) the sum of
Consolidated Fixed Charges plus one third of Consolidated Rental
Obligations:
Period Ending Percentage
September 30, 1997 through
March 31, 2001 110%
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June 30, 2001 and thereafter 115%
6.5.5. Capital Expenditures. The aggregate amount of Capital
Expenditures in any fiscal year of the Holding Company ending on or after
December 31, 1998 shall not exceed the sum of (a) the amount set forth in
the table below plus (b) the amount by which Capital Expenditures made in
the immediately preceding fiscal year were less than the amount specified
in the table below for such preceding fiscal year.
Fiscal Year Ending Amount
December 31, 1999 $6,200,000
Thereafter $5,000,000
6.6. Indebtedness. Neither the Holding Company nor any of its
Subsidiaries shall create, incur, assume or otherwise become or remain liable
with respect to any Indebtedness (or become contractually committed to do so),
except the following:
6.6.1. Indebtedness in respect of the Credit Obligations.
6.6.2. Guarantees permitted by Section 6.7.
6.6.3. Current liabilities, other than Financing Debt, incurred in
the ordinary course of business.
6.6.4. To the extent that payment thereof shall not at the time be
required by Section 6.1, Indebtedness in respect of taxes, assessments,
governmental charges and claims for labor, materials and supplies.
6.6.5. Indebtedness secured by Liens of carriers, warehouses,
mechanics and landlords permitted by Sections 6.8.5 and 6.8.6.
6.6.6. Indebtedness in respect of judgments or awards (a) which
have been in force for less than the applicable appeal period or (b) in
respect of which the Holding Company or any Subsidiary shall at the time
in good faith be prosecuting an appeal or proceedings for review and, in
the case of each of clauses (a) and (b), the Holding Company or such
Subsidiary shall have taken appropriate reserves therefor in accordance
with GAAP and execution of such judgment or award shall not be levied.
6.6.7. To the extent permitted by Section 6.8.7, Indebtedness in
respect of Capitalized Lease Obligations or secured by purchase money
security interests; provided, however, that the aggregate principal
amount of all Indebtedness permitted by this Section 6.6.7 at any one
time outstanding shall not exceed $1,000,000.
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6.6.8. Indebtedness in respect of deferred taxes arising in the
ordinary course of business.
6.6.9. Indebtedness in respect of intercompany loans and advances
among the Holding Company and its Subsidiaries which are not prohibited
by Section 6.9.
6.6.10. The Seller Subordinated Debt, the Convertible Subordinated
Debentures and the Senior Subordinated Notes.
6.6.11. Unfunded pension liabilities and obligations with respect
to Plans so long as the Holding Company and all ERISA Group Persons are
in compliance with Section 6.16.
6.6.12. Other Indebtedness outstanding on the date hereof and
described in Exhibit 7.3 and (except with respect to the Prior Credit
Agreement, which shall be terminated on the Initial Closing Date) all
renewals and extensions thereof not in excess of the amount thereof
outstanding immediately prior to such renewal or extension.
6.6.13. Indebtedness (other than Financing Debt) in addition to
the foregoing; provided, however, that the aggregate amount of all such
Indebtedness at any one time outstanding shall not exceed $2,000,000,
minus the amount of Indebtedness then outstanding under Section 6.6.7.
6.7. Guarantees; Letters of Credit. Neither the Holding Company nor any
of its Subsidiaries shall become or remain liable with respect to any Guarantee,
including reimbursement obligations, whether contingent or matured, under
letters of credit or other financial guarantees by third parties (or become
contractually committed do to so), except the following:
6.7.1. Letters of Credit and Guarantees of the Credit Obligations.
6.7.2. Guarantees by the Holding Company of Indebtedness and other
obligations incurred by its Subsidiaries and permitted by Section 6.6.
6.7.3. The Borrower and its Subsidiaries may join a consolidated
group for federal income tax purposes that includes only the Holding
Company and its Subsidiaries so long as the liability of the Borrower and
its Subsidiaries is limited by a tax sharing agreement among the members
of such group to the extent provided in Section 6.10.6.
6.7.4. Guarantees by the Guarantors of the Senior Subordinated
Notes.
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6.8. Liens. Neither the Holding Company nor any of its Subsidiaries shall
create, incur or enter into, or suffer to be created or incurred or to exist,
any Lien (or become contractually committed to do so), except the following:
6.8.1. Liens on the Credit Security that secure the Credit
Obligations.
6.8.2. Liens to secure taxes, assessments and other governmental
charges, to the extent that payment thereof shall not at the time be
required by Section 6.1.
6.8.3. Deposits or pledges made (a) in connection with, or to
secure payment of, workers' compensation, unemployment insurance, old age
pensions or other social security, (b) in connection with casualty
insurance maintained in accordance with Section 6.3, (c) to secure the
performance of bids, tenders, contracts (other than contracts relating to
Financing Debt) or leases, (d) to secure statutory obligations or surety
or appeal bonds, (e) to secure indemnity, performance or other similar
bonds in the ordinary course of business or (f) in connection with
contested amounts to the extent that payment thereof shall not at that
time be required by Section 6.1.
6.8.4. Liens in respect of judgments or awards, to the extent that
such judgments or awards are permitted by Section 6.6.6 but only to the
extent that such Liens are junior to the Liens on the Credit Security
granted to secure the Credit Obligations.
6.8.5. Liens of carriers, warehouses, mechanics and similar Liens,
in each case (a) in existence less than 90 days from the date of creation
thereof or (b) being contested in good faith by the Holding Company or
any Subsidiary in appropriate proceedings (so long as the Holding Company
or such Subsidiary shall, in accordance with GAAP, have set aside on its
books adequate reserves with respect thereto).
6.8.6. Encumbrances in the nature of (a) zoning restrictions, (b)
easements, (c) restrictions of record on the use of real property, (d)
landlords' and lessors' Liens on rented premises and (e) restrictions on
transfers or assignment of leases, which in each case do not materially
detract from the value of the encumbered property or impair the use
thereof in the business of the Holding Company or any Subsidiary.
6.8.7. Liens constituting (a) purchase money security interests
(including mortgages, conditional sales, Capitalized Leases and any other
title retention or deferred purchase devices) in real property, interests
in leases or tangible personal property (other than inventory) existing
or created on the date on which such property is acquired, and (b) the
renewal, extension or refunding of any security interest referred to in
the foregoing clause (a) in an amount not to exceed the amount thereof
remaining unpaid immediately prior to such renewal, extension or
refunding; provided, however, that (i) each such security interest shall
attach solely to the particular item of property
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so acquired, and the principal amount of Indebtedness (including
Indebtedness in respect of Capitalized Lease Obligations) secured thereby
shall not exceed the cost (including all such Indebtedness secured
thereby, whether or not assumed) of such item of property; and (ii) the
aggregate principal amount of all Indebtedness secured by Liens permitted
by this Section 6.8.7 shall not exceed the amount permitted by Section
6.6.7.
6.8.8. Restrictions under federal and state securities laws on the
transfer of securities.
6.8.9. Liens as in effect on the date hereof described in Exhibit
7.3 and securing Indebtedness permitted by Section 6.6.12.
6.9. Investments and Acquisitions. Neither the Holding Company nor any of
its Subsidiaries shall have outstanding, acquire or hold any Investment
(including any Investment consisting of the acquisition of any business) (or
become contractually committed to do so), except the following:
6.9.1. Investments of the Holding Company and its Subsidiaries in
Wholly Owned Subsidiaries which are Guarantors or the Borrower as of the
date hereof or which have become Wholly Owned Subsidiaries and Guarantors
after the date hereof to the extent permitted by the other provisions of
this Section 6.9; provided, however, that no such Investment shall
involve the transfer by the Holding Company or the Borrower of any
material assets other than cash.
6.9.2. Intercompany loans and advances from any Wholly Owned
Subsidiary to the Borrower but in each case only to the extent reasonably
necessary for Consolidated tax planning.
6.9.3. Investments in Cash Equivalents.
6.9.4. Guarantees permitted by Section 6.7.
6.9.5. The Acquisition on the Initial Closing Date contemplated by
the Acquisition Agreement.
6.9.6. So long as immediately before and after giving effect
thereto no Default exists, Investments by the Borrower and its Wholly
Owned Subsidiaries consisting of the negotiated acquisition of other
Persons and businesses; provided; however, that the amount of all such
Investments shall not exceed (a) $1,500,000 at all times prior to the
period described in clause (b) below and (b) $3,500,000 after the end of
the first fiscal quarter when the ratio of Consolidated Total Debt to
Consolidated EBITDA for the preceding four fiscal quarters is less than
325%.
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6.9.7. The Holding Company may acquire Unrestricted Affiliates so
long as (a) immediately before and after giving effect thereto no Default
exists, (b) the board of directors of the Person being acquired shall
have approved such acquisition and (c) the aggregate amount of all
Investments made pursuant to this Section 6.9.7 since the date hereof
shall not exceed 25% of the Net Equity Proceeds received after the date
hereof.
6.9.8. Loans and advances to employees of the Borrower and its
Subsidiaries to enable them to purchase capital stock of the Holding
Company in an amount not to exceed $250,000 at any one time outstanding.
6.9.9. Loans and advances to employees of the Borrower and its
Subsidiaries for business expenses or personal needs in an amount not to
exceed $500,000 at any one time outstanding.
6.10. Distributions. Neither the Holding Company nor any of its
Subsidiaries shall make any Distribution (or become contractually committed to
do so), except the following:
6.10.1. So long as immediately before and after giving effect
thereto no Default exists, Subsidiaries of the Borrower may make
Distributions to the Borrower or any Wholly Owned Subsidiary of the
Borrower and the Borrower and its Subsidiaries may make Investments
permitted by Sections 6.9.1 and 6.9.2.
6.10.2. The Borrower may make scheduled, mandatory cash payments
of interest on the Senior Subordinated Notes and the Seller Subordinated
Debt, and may pay mandatory payments of principal on the Senior
Subordinated Notes as scheduled of $50,000 on September 13, 2002,
$250,000 on March 13, 2003, $250,000 on September 13, 2003, $5,700,000 on
March 13, 2004 and $6,250,000 on March 13, 2005 and upon a mandatory put
of the Senior Subordinated Notes and "Put Securities" (as defined
therein) under the Securities Purchase Agreements upon a "Change in
Control" (as defined therein), all in accordance with their terms,
including subordination terms.
6.10.3. So long as immediately before and after giving effect
thereto no Default exists, the Borrower may make cash Distributions to
the Holding Company in an amount equal to the scheduled, mandatory cash
payments of interest on the Convertible Subordinated Debentures in
accordance with their terms, including subordination terms; provided,
however, that the aggregate cash payments made in respect of the
Convertible Subordinated Debentures shall not exceed the lesser of (a)
$1,110,000 per annum or (b) 10% of the outstanding principal amount of
the Convertible Subordinated Debentures at the time such payment is made.
6.10.4. The Borrower may make Distributions to the Holding Company
in an aggregate amount not exceeding (a) so long as immediately before
and after giving
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effect thereto no Default exists, $75,000 per calendar quarter to pay
management and consulting fees to Glencoe and Desai Capital Management
Incorporated pursuant to the Management Consulting Agreement dated as of
February 16, 1996 among the Borrower, the Holding Company and such
Persons and (b) amounts paid by such Persons to third parties in
performing consulting services under such Management Consulting
Agreement.
6.10.5. So long as immediately before and after giving effect
thereto no Default exists, the Borrower may make Distributions up to
$200,000 per year to the Holding Company to repurchase Holding Company
stock and options to acquire such stock owned by employees whose
employment with the Borrower and its Subsidiaries has terminated.
6.10.6. So long as immediately before and after giving effect
thereto no Default exists, the Borrower may make Distributions to the
Holding Company on account of the proportionate share of the income taxes
of the Holding Company and its Subsidiaries properly allocable (to the
reasonable satisfaction of the Agent) to the Borrower and its
Subsidiaries.
Upon receipt of Distributions in cash by the Borrower to the Holding
Company permitted by Sections 6.10.3, 6.10.4, 6.10.5 and 6.10.6, the Holding
Company shall promptly make the payments contemplated by such respective
Sections.
6.11. Asset Dispositions and Mergers. Neither the Borrower nor any of its
Subsidiaries shall merge or enter into a consolidation or sell, lease, sell and
lease back, sublease or otherwise dispose of any of its assets (or become
contractually committed to do so), except the following:
6.11.1. The Borrower and any of its Subsidiaries may sell or
otherwise dispose of (a) inventory and Cash Equivalents in the ordinary
course of business, (b) tangible assets to be replaced in the ordinary
course of business within six months by other tangible assets of equal or
greater value and (c) tangible assets that are no longer used or useful
in the business of the Borrower or such Subsidiary; provided, however,
that the aggregate fair market value (book value, if greater) of all
assets disposed of in accordance with the foregoing clauses (b) and (c)
of Section 6.11.1 shall not exceed an aggregate of $250,000 per year.
6.11.2. Any Wholly Owned Subsidiary of the Borrower may merge or
be liquidated into the Borrower or any other Wholly Owned Subsidiary of
the Borrower so long as after giving effect to any such merger to which
the Borrower is a party the Borrower shall be the surviving or resulting
Person.
6.11.3. Mergers constituting Investments permitted by Sections
6.9.5 or 6.9.6.
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6.11.4. So long as immediately before and after giving effect
thereto no Default exists and the Net Asset Sale Proceeds thereof are
applied to repay the Loan as required by Section 4.3.3, the Borrower and
its Subsidiaries may sell for fair value assets during any fiscal year
having a fair market value (book value, if greater) not exceeding
$2,000,000; provided, however, that the sum of the fair market values
(book values, if greater) for all assets sold pursuant to this Section
6.11.4 since the date hereof shall not exceed $5,000,000.
6.11.5. Licensing of products and intangible assets for fair value
in the ordinary course of business.
6.12. Issuance of Stock by Subsidiaries; Subsidiary Distributions.
6.12.1. Issuance of Stock by Subsidiaries. No Subsidiary shall
issue or sell any shares of its capital stock or other evidence of
beneficial ownership to any Person other than (a) the Holding Company or
any Wholly Owned Subsidiary of the Holding Company, which shares shall
have been pledged to the Agent as part of the Credit Security to the
extent required by the Guarantee and Security Agreement and (b) directors
of Subsidiaries as qualifying shares to the extent required by Legal
Requirements.
6.12.2. No Restrictions on Subsidiary Distributions. Except for
this Agreement, the Credit Documents and the Securities Purchase
Agreements and related documents, neither the Holding Company nor any
Subsidiary shall enter into or be bound by any agreement (including
covenants requiring the maintenance of specified amounts of net worth or
working capital) restricting the right of any Subsidiary to make
Distributions or extensions of credit to the Borrower (directly or
indirectly through another Subsidiary).
6.13. Voluntary Prepayments of Other Indebtedness. Neither the Holding
Company nor any of its Subsidiaries shall make any voluntary prepayment of
principal of or interest on any Financing Debt (other than the Credit
Obligations) or make any voluntary redemptions or repurchases of Financing Debt
(other than the Credit Obligations); provided, however, that the Holding Company
may make such payments or redemptions solely through payments in the form of its
common stock.
6.14. Derivative Contracts. Neither the Holding Company nor any of its
Subsidiaries shall enter into any Interest Rate Protection Agreement, foreign
currency exchange contract or other financial or commodity derivative contracts
except to provide hedge protection for an underlying economic transaction in the
ordinary course of business.
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6.15. Negative Pledge Clauses. Neither the Holding Company nor any of its
Subsidiaries shall enter into any agreement, instrument, deed or lease which
prohibits or limits the ability of the Holding Company or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
their respective properties, assets or revenues, whether now owned or hereafter
acquired, or which requires the grant of any collateral for such obligation if
collateral is granted for another obligation, except the following:
6.15.1. This Agreement and the other Credit Documents.
6.15.2. Covenants contained in the Securities Purchase Agreements
with respect to the Senior Subordinated Notes.
6.15.3. Covenants in documents creating Liens permitted by Section
6.8 prohibiting further Liens on the assets encumbered thereby.
6.16. ERISA, etc. Each of the Holding Company and its Subsidiaries shall
comply, and shall cause all ERISA Group Persons to comply, in all material
respects, with the provisions of ERISA and the Code applicable to each Plan.
Each of the Holding Company and its Subsidiaries shall meet, and shall cause all
ERISA Group Persons to meet, all minimum funding requirements applicable to them
with respect to any Plan pursuant to section 302 of ERISA or section 412 of the
Code, without giving effect to any waivers of such requirements or extensions of
the related amortization periods which may be granted, except where the failure
to comply with such requirements would not be reasonably likely to result in a
Material Adverse Change to the Holding Company and its Subsidiaries. At no time
shall the Accumulated Benefit Obligations under any Plan that is not a
Multiemployer Plan exceed the fair market value of the assets of such Plan
allocable to such benefits by more than $500,000. The Holding Company and its
Subsidiaries shall not withdraw, and shall cause all other ERISA Group Persons
not to withdraw, in whole or in part, from any Multiemployer Plan so as to give
rise to withdrawal liability exceeding $500,000 in the aggregate. At no time
shall the actuarial present value of unfunded liabilities of the Holding Company
and its Subsidiaries for post-employment health care benefits other than COBRA
continuation coverage benefits, whether or not provided under a Plan, calculated
in a manner consistent with Statement No. 106 of the Financial Accounting
Standards Board, exceed $500,000.
6.17. Transactions with Affiliates. Neither the Holding Company nor any
of its Subsidiaries shall effect any transaction with any of their respective
Affiliates (except for the Borrower and its Subsidiaries) on a basis less
favorable to the Holding Company and its Subsidiaries than would be the case if
such transaction had been effected with a non-Affiliate; provided, however, that
the Holding Company may pay management fees to Glencoe and Desai Capital
Management Incorporated in an aggregate amount not exceeding $300,000 during any
fiscal year in accordance with Section 6.10.4.
6.18. Interest Rate Protection. The Borrower shall obtain and thereafter
keep in effect one or more Interest Rate Protection Agreements conforming to
International Securities
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Dealers Association standards, each in form and substance reasonably
satisfactory to the Agent, covering a notional amount of at least $20,000,000 in
each case for an aggregate period of not less than two years (or, for the
initial Interest Rate Protection Agreement, through June 2000) .
6.19. Environmental Laws.
6.19.1. Compliance with Law and Permits. Each of the Holding
Company and its Subsidiaries shall use and operate all of its facilities
and properties in material compliance with all Environmental Laws, keep
all necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain in
material compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws.
6.19.2. Notice of Claims, etc. Each of the Holding Company and its
Subsidiaries shall immediately notify the Agent, and provide copies upon
receipt, of all written claims, complaints, notices or inquiries from
governmental authorities relating to the condition of its facilities and
properties or compliance with Environmental Laws, and shall promptly cure
and have dismissed with prejudice to the reasonable satisfaction of the
Agent any actions and proceedings relating to compliance with
Environmental Laws.
6.20. Restricted Operations of Holding Company. The Holding Company will
conduct no operations other than acquiring and owning the capital stock of the
Borrower and Unrestricted Affiliates acquired in accordance with Section 6.9.7
and activities incidental thereto. The Holding Company will own no material
assets other than the stock of the Borrower and such Unrestricted Affiliates and
cash in an amount equal to 25% of Net Equity Proceeds as permitted by Section
6.9.7 or expected to be spent or distributed within 90 days in the ordinary
course of business.
7. Representations and Warranties. In order to induce the Lenders to extend
credit to the Borrower hereunder, each of the Holding Company, the Borrower and
the Guarantors jointly and severally represents and warrants as follows:
7.1. Organization and Business.
7.1.1. The Holding Company. The Holding Company is a duly
organized and validly existing corporation, in good standing under the
laws of Delaware, with all power and authority, corporate or otherwise,
necessary to (a) enter into and perform this Agreement and each other
Credit Document to which it is party, (b) guarantee the Credit
Obligations, (c) grant the Agent for the benefit of the Lenders the
security interests in the Credit Security owned by it to secure the
Credit Obligations and (d) own its properties and carry on the business
now conducted or proposed to be conducted by
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it. Certified copies of the Charter and By-laws of the Holding Company
have been previously delivered to the Agent and are correct and complete.
Exhibit 7.1, as from time to time hereafter supplemented in accordance
with Sections 6.4.1 and 6.4.2, sets forth, as of the later of the date
hereof or the end of the most recent fiscal quarter for which financial
statements are required to be furnished in accordance with such Sections,
(i) the jurisdiction of incorporation of the Holding Company, (ii) the
address of the Holding Company's principal executive office and chief
place of business, (iii) each name, including any trade name, under which
the Holding Company conducts its business and (iv) the jurisdictions in
which the Holding Company keeps tangible personal property.
7.1.2. Subsidiaries. Each Subsidiary of the Holding Company is
duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is organized, with all power and authority,
corporate or otherwise, necessary to (a) enter into and perform this
Agreement and each other Credit Document to which it is party, (b)
guarantee (in the case of the Borrower, incur) the Credit Obligations,
(c) grant the Agent for the benefit of the Lenders the security interest
in the Credit Security owned by such Subsidiary to secure the Credit
Obligations and (d) own its properties and carry on the business now
conducted or proposed to be conducted by it. Certified copies of the
Charter and By-laws of each Subsidiary of the Holding Company have been
previously delivered to the Agent and are correct and complete. Exhibit
7.1, as from time to time hereafter supplemented in accordance with
Sections 6.4.1 and 6.4.2, sets forth, as of the later of the date hereof
or the end of the most recent fiscal quarter for which financial
statements are required to be furnished in accordance with such Sections,
(i) the name and jurisdiction of organization of each Subsidiary of the
Holding Company, (ii) the address of the chief executive office and
principal place of business of each such Subsidiary, (iii) each name
under which each such Subsidiary conducts its business, (iv) each
jurisdiction in which each such Subsidiary keeps tangible personal
property, and (v) the number of authorized and issued shares and
ownership of each such Subsidiary.
7.1.3. Qualification. Each of the Holding Company and its
Subsidiaries is duly and legally qualified to do business as a foreign
corporation or other entity and is in good standing in each state or
jurisdiction in which such qualification is required and is duly
authorized, qualified and licensed under all laws, regulations,
ordinances or orders of public authorities, or otherwise, to carry on its
business in the places and in the manner in which it is conducted, except
for failures to be so qualified, authorized or licensed which would not
in the aggregate result, or create a material risk of resulting, in any
Material Adverse Change.
7.1.4. Capitalization. No options, warrants, conversion rights,
preemptive rights or other statutory or contractual rights to purchase
shares of capital stock or other securities of any Subsidiary now exist,
nor has any Subsidiary authorized any such
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right, nor is any Subsidiary obligated in any other manner to issue
shares of its capital stock or other securities.
7.2. Financial Statements and Other Information; Material Agreements.
7.2.1. Financial Statements and Other Information. The Holding
Company has previously furnished to the Lenders copies of the following:
(a) The audited Consolidated and unaudited Consolidating balance
sheets of the Holding Company and its Subsidiaries and of the Borrower
and its Subsidiaries as at December 31 in each of 1995, 1996 and 1997 and
the audited Consolidated and unaudited Consolidating statements of income
and the audited Consolidated statements of changes in shareholders'
equity and of cash flows of the Holding Company and its Subsidiaries and
of the Borrower and its Subsidiaries for the fiscal years then ended.
(b) The unaudited Consolidated and Consolidating balance sheets of
the Holding Company and its Subsidiaries and of the Borrower and its
Subsidiaries as at September 30, 1998 and the unaudited Consolidated
statements of income, of changes in shareholders' equity and of cash
flows of the Holding Company and its Subsidiaries and of the Borrower and
its Subsidiaries for the portion of the fiscal year then ended.
(c) The Holding Company's report on 10-K for its fiscal year ended
December 31, 1997, as filed with the Securities and Exchange Commission.
(d) The five-year financial and operational projections for the
Holding Company and its Subsidiaries dated December 1998.
(e) Calculations demonstrating pro forma compliance with the
Computation Covenants as of the end of the most recent month or quarter,
as applicable, preceding the date hereof.
(f) Confidential Memorandum for the proposed sale of Heartland
Industries, Inc. (DE) prepared by Stonebridge Associates, LLC.
(g) Heartland Industries, Inc. Due Diligence Report for PlayCore,
Inc. dated December 1998 prepared by Ernst & Young LLP.
The audited Consolidated financial statements (including the notes
thereto) referred to in clause (a) above were prepared in accordance with
GAAP and fairly present in all material respects the financial position
of the Holding Company and its Subsidiaries and of the Borrower and its
Subsidiaries on a Consolidated basis at the respective dates thereof and
the results of their operations for the periods covered thereby. The
unaudited Consolidating financial statements referred to in clause (a)
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above and the unaudited Consolidated and Consolidating financial
statements referred to in clause (b) above were prepared in accordance
with GAAP and fairly present in all material respects the financial
position of the Holding Company and its Subsidiaries and of the Borrower
and its Subsidiaries at the respective dates thereof and the results of
their operations for the periods covered thereby, subject to normal
year-end audit adjustment and the addition of footnotes in the case of
interim financial statements. Neither the Holding Company nor any of its
Subsidiaries has any known contingent liability material to the Holding
Company and its Subsidiaries on a Consolidated basis which is not
reflected in the balance sheets referred to in clauses (a) or (b) above
(or delivered pursuant to Sections 6.4.1 or 6.4.2) or in the notes
thereto.
The Form 10-K referred to in clause (c) above contained all
information required to be contained therein and otherwise complied in
all material respects with the Exchange Act and the rules and regulations
thereunder. Such Form 10-K did not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make
the statements contained therein not misleading in the light of the
circumstances under which they were made.
In the Holding Company's judgment, the financial and operational
projections referred to in clause (d) above constitute a reasonable basis
as of the Initial Closing Date for the assessment of the future
performance of the Holding Company and its Subsidiaries during the
periods indicated therein, it being understood that any projected
financial information represents an estimate, based on various
assumptions, of future results of operations which may or may not in fact
occur.
As of December 1998 the Confidential Memorandum described in
clause (f) above and the Due Diligence Report described in clause (g)
above, taken as a whole, did not contain any untrue statement of material
fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in the light of the
circumstances under which they were made; provided, however, that the
descriptions in such Confidential Memorandum and Due Diligence Report of
other documents and agreements are intended to be summaries only and do
not provide comprehensive descriptions of the terms and conditions
contained in such documents and agreements.
7.2.2. Material Agreements. The Holding Company has previously
furnished to the Lenders correct and complete copies, including all
exhibits, schedules and amendments thereto, of the agreements, each as in
effect on the date hereof, listed in Exhibit 7.2.2 (the "Material
Agreements").
7.3. Agreements Relating to Financing Debt, Investments, etc. Exhibit
7.3, as from time to time hereafter supplemented in accordance with Sections
6.4.1 and 6.4.2, sets forth (a) the amounts (as of the dates indicated in
Exhibit 7.3, as so supplemented) of all Financing Debt
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of the Holding Company and its Subsidiaries and all agreements which relate to
such Financing Debt, (b) all Liens and Guarantees with respect to such Financing
Debt, (c) all agreements which directly or indirectly require the Holding
Company or any Subsidiary to make any Investment, (d) material license
agreements with respect to the products of the Holding Company and its
Subsidiaries, including the parties thereto and the expiration dates thereof and
(e) all trademarks, tradenames, service marks, service names and patents
registered with the federal Patent and Trademark Office (or with respect to
which applications for such registration have been filed). The Holding Company
has furnished the Lenders with correct and complete copies of any agreements
described in clauses (a) through (e) above requested by the Required Lenders.
7.4. Changes in Condition. Since December 31, 1997 no Material Adverse
Change has occurred and between December 31, 1997 and the date hereof, neither
the Holding Company nor any Subsidiary of the Holding Company has entered into
any material transaction outside the ordinary course of business except for the
transactions contemplated by this Agreement and the Material Agreements.
7.5. Title to Assets. The Holding Company and its Subsidiaries have good
and marketable title to all assets necessary for or used in the operations of
their business as now conducted by them and reflected in the most recent balance
sheet referred to in Section 7.2.1 (or the balance sheet most recently furnished
to the Lenders pursuant to Sections 6.4.1 or 6.4.2), and to all assets acquired
subsequent to the date of such balance sheet, subject to no Liens except for
Liens permitted by Section 6.8 and except for assets disposed of as permitted by
Section 6.11.
7.6. Operations in Conformity With Law, etc. The operations of the
Holding Company and its Subsidiaries as now conducted or proposed to be
conducted are not in violation of, nor is the Holding Company or its
Subsidiaries in default under, any Legal Requirement presently in effect, except
for such violations and defaults as do not and will not, in the aggregate,
result, or create a material risk of resulting, in any Material Adverse Change.
The Holding Company has received no notice of any such violation or default and
has no knowledge of any basis on which the operations of the Holding Company or
its Subsidiaries, as now conducted and as currently proposed to be conducted
after the date hereof, would be held so as to violate or to give rise to any
such violation or default.
7.7. Litigation. No litigation, at law or in equity, or any proceeding
before any court, board or other governmental or administrative agency or any
arbitrator is pending or, to the knowledge of the Holding Company, the Borrower
or any other Guarantor, threatened which involves any material risk of any final
judgment, order or liability which, after giving effect to any applicable
insurance, has resulted, or creates a material risk of resulting, in any
Material Adverse Change or which seeks to enjoin the consummation, or which
questions the validity, of any of the transactions contemplated by this
Agreement or any other Credit Document. No judgment, decree or order of any
court, board or other governmental or
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administrative agency or any arbitrator has been issued against or binds the
Holding Company or any of its Subsidiaries which has resulted, or creates a
material risk of resulting, in any Material Adverse Change.
7.8. Authorization and Enforceability. Each of the Holding Company and
each other Obligor has taken all corporate action required to execute, deliver
and perform this Agreement and each other Credit Document to which it is party.
No consent of stockholders of the Holding Company is necessary in order to
authorize the execution, delivery or performance of this Agreement or any other
Credit Document to which the Holding Company is party. Each of this Agreement
and each other Credit Document constitutes the legal, valid and binding
obligation of each Obligor party thereto and is enforceable against such Obligor
in accordance with its terms. The Credit Obligations constitute senior debt for
all purposes of the subordination provisions of the Senior Subordinated Notes,
the Seller Subordinated Debt and the Convertible Subordinated Debentures.
7.9. No Legal Obstacle to Agreements. Neither the execution and delivery
of this Agreement or any other Credit Document, nor the making of any borrowings
hereunder, nor the guaranteeing of the Credit Obligations, nor the securing of
the Credit Obligations with the Credit Security, nor the consummation of any
transaction (other than the Acquisition) referred to in or contemplated by this
Agreement or any other Credit Document, nor the fulfillment of the terms hereof
or thereof (other than the consummation of the Acquisition) or of any other
agreement, instrument, deed or lease contemplated by this Agreement or any other
Credit Document (other than the Acquisition Agreement), has constituted or
resulted in or will constitute or result in:
(a) any breach or termination of the provisions of any agreement,
instrument, deed or lease to which the Holding Company, any of its
Subsidiaries or any other Obligor is a party or by which it is bound, or
of the Charter or By-laws of the Holding Company, any of its Subsidiaries
or any other Obligor;
(b) the violation of any law, statute, judgment, decree or
governmental order, rule or regulation applicable to the Holding Company,
any of its Subsidiaries or any other Obligor;
(c) the creation under any agreement, instrument, deed or lease of
any Lien (other than Liens on the Credit Security which secure the Credit
Obligations) upon any of the assets of the Holding Company, any of its
Subsidiaries or any other Obligor; or
(d) any redemption, retirement or other repurchase obligation of
the Holding Company, any of its Subsidiaries or any other Obligor under
any Charter, By-law, agreement, instrument, deed or lease.
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No approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by the Holding Company, any of its Subsidiaries or any other
Obligor in connection with the execution, delivery and performance of this
Agreement, the Notes or any other Credit Document, the transactions contemplated
hereby or thereby, the making of any borrowing hereunder, the guaranteeing of
the Credit Obligations or the securing of the Credit Obligations with the Credit
Security (other than filings necessary to perfect the Agent's security interest
in the Credit Security).
7.10. Defaults. Neither the Holding Company nor any of its Subsidiaries
is in default under any provision of its Charter or By-laws or of this Agreement
or any other Credit Document. Neither the Holding Company nor any of its
Subsidiaries is in default under any provision of any agreement, instrument,
deed or lease to which it is party or by which it or its property is bound so as
to result, or create a material risk of resulting, in any Material Adverse
Change. Neither the Holding Company nor any of its Subsidiaries has violated any
law, judgment, decree or governmental order, rule or regulation, in each case so
as to result, or create a material risk of resulting, in any Material Adverse
Change.
7.11. Licenses, etc. The Holding Company and its Subsidiaries have all
patents, patent applications, patent licenses, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, licenses,
franchises, permits, authorizations and other rights as are necessary for the
conduct of the business of the Holding Company and its Subsidiaries as now
conducted by them. All of the foregoing are in full force and effect in all
material respects, and each of the Holding Company and its Subsidiaries is in
substantial compliance with the foregoing without any known conflict with the
valid rights of others which has resulted, or creates a material risk of
resulting, in any Material Adverse Change. No event has occurred which permits,
or after notice or lapse of time or both would permit, the revocation or
termination of any such license, franchise or other right or which affects the
rights of any of the Holding Company and its Subsidiaries thereunder so as to
result, or to create a material risk of resulting, in any Material Adverse
Change. No litigation or other proceeding or dispute exists with respect to the
validity or, where applicable, the extension or renewal, of any of the foregoing
which has resulted, or creates a material risk of resulting, in any Material
Adverse Change.
7.12. Tax Returns. Each of the Holding Company and its Subsidiaries has
filed all material tax and information returns which are required to be filed by
it and has paid, or made adequate provision for the payment of, all taxes which
have or may become due pursuant to such returns or to any assessment received by
it, other than taxes and assessments being contested by the Holding Company and
its Subsidiaries in good faith by appropriate proceedings and for which adequate
reserves have been taken in accordance with GAAP. Neither the Holding Company
nor any of its Subsidiaries knows of any material additional assessments or any
basis therefor. The Holding Company reasonably believes that the charges,
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accruals and reserves on the books of the Holding Company and its Subsidiaries
in respect of taxes or other governmental charges are adequate.
7.13. Certain Business Representations.
7.13.1. Labor Relations. No dispute or controversy between the
Holding Company or any of its Subsidiaries and any of their respective
employees has resulted, or is reasonably likely to result, in any
Material Adverse Change, and neither the Holding Company nor any of its
Subsidiaries anticipates that its relationships with its unions or
employees will result, or are reasonably likely to result, in any
Material Adverse Change. The Holding Company and each of its Subsidiaries
is in compliance in all material respects with all federal and state laws
with respect to (a) non-discrimination in employment with which the
failure to comply, in the aggregate, has resulted, or creates a material
risk of resulting, in a Material Adverse Change and (b) the payment of
wages.
7.13.2. Antitrust. Each of the Holding Company and its
Subsidiaries is in compliance in all material respects with all federal
and state antitrust laws relating to its business and the geographic
concentration of its business.
7.13.3. Consumer Protection. Neither the Holding Company nor any
of its Subsidiaries is in violation of any rule, regulation, order, or
interpretation of any rule, regulation or order of the Federal Trade
Commission (including truth-in-lending), with which the failure to
comply, in the aggregate, has resulted, or creates a material risk of
resulting, in a Material Adverse Change.
7.13.4. Extraordinary Obligations. Neither the Holding Company nor
any of its Subsidiaries is party to or bound by any agreement,
instrument, deed or lease or is subject to any Charter, By-law or other
restriction, commitment or requirement which, in the opinion of the
management of such Person, is so burdensome as in the foreseeable future
to result, or create a material risk of resulting, in a Material Adverse
Change.
7.13.5. Future Expenditures. Neither the Holding Company nor any
of its Subsidiaries anticipate that the future expenditures, if any, by
the Holding Company and its Subsidiaries needed to meet the provisions of
any federal, state or foreign governmental statutes, orders, rules or
regulations will be so burdensome as to result, or create a material risk
of resulting, in any Material Adverse Change.
7.13.6. Year 2000 Issues. Based on a review of the operations of
the Holding Company and its Subsidiaries as they related to the
processing, storage and retrieval of data, the Borrower does not believe
that a Material Adverse Change is reasonably likely to occur as a result
of computer software and hardware that will not function with
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respect to periods commencing January 1, 2000 at least as effectively as
with respect to periods ending on or prior to December 31, 1999.
7.14. Environmental Regulations.
7.14.1. Environmental Compliance. Each of the Holding Company and
its Subsidiaries is in compliance in all material respects with the Clean
Air Act, the Federal Water Pollution Control Act, the Marine Protection
Research and Sanctuaries Act, RCRA, CERCLA and any other Environmental
Law in effect in any jurisdiction in which any properties of the Holding
Company or any of its Subsidiaries are located or where any of them
conducts its business, and with all applicable published rules and
regulations (and applicable standards and requirements) of the federal
Environmental Protection Agency and of any similar agencies in states or
foreign countries in which the Holding Company or its Subsidiaries
conducts its business other than those which in the aggregate have not
resulted, and do not create a material risk of resulting, in a Material
Adverse Change.
7.14.2. Environmental Litigation. No suit, claim, action or
proceeding of which the Holding Company or any of its Subsidiaries has
been given notice or otherwise has knowledge is now pending before any
court, governmental agency or board or other forum, or to the Holding
Company's or any of its Subsidiaries knowledge, threatened by any Person
(nor to the Holding Company's or any of its Subsidiaries' knowledge, does
any factual basis exist therefor) for, and neither the Holding Company
nor any of its Subsidiaries have received written correspondence from any
federal, state or local governmental authority with respect to:
(a) noncompliance by the Holding Company or any of its
Subsidiaries with any Environmental Law;
(b) personal injury, wrongful death or other tortious conduct
relating to materials, commodities or products used, generated, sold,
transferred or manufactured by the Holding Company or any of its
Subsidiaries (including products made of, containing or incorporating
asbestos, lead or other hazardous materials, commodities or toxic
substances); or
(c) the release into the environment by the Holding Company or any
of its Subsidiaries of any Hazardous Material generated by the Holding
Company or any of its Subsidiaries whether or not occurring at or on a
site owned, leased or operated by the Holding Company or any of its
Subsidiaries.
7.14.3. Hazardous Material. Exhibit 7.14 contains a list as of the
date hereof of all waste disposal or dump sites at which Hazardous
Material generated by either the Holding Company or any of its
Subsidiaries has been disposed of directly by the
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HoldingCompany or any of its Subsidiaries and all independent contractors
to whom the Holding Company and its Subsidiaries have delivered Hazardous
Material, or to the Holding Company's or any of its Subsidiaries'
knowledge, where Hazardous Material finally came to be located, and
indicates all such sites which are or have been included (including as a
potential or suspect site) in any published federal, state or local
"superfund" or other list of hazardous or toxic waste sites. Any waste
disposal or dump sites at which Hazardous Material generated by either
the Holding Company or any of its Subsidiaries has been disposed of
directly by the Holding Company or any of its Subsidiaries and all
independent contractors to whom the Holding Company or any of its
Subsidiaries have delivered Hazardous Material, or to the Holding
Company's or any of its Subsidiaries' knowledge, where Hazardous Material
finally came to be located, has not resulted, and does not create a
material risk of resulting, in a Material Adverse Change.
7.14.4. Environmental Condition of Properties. None of the
properties owned or leased by the Holding Company or any of its
Subsidiaries has been used as a treatment, storage or disposal site,
other than as disclosed in Exhibit 7.14. No Hazardous Material is present
in any real property currently or formerly owned or operated by the
Holding Company or any of its Subsidiaries except that which has not
resulted, and does not create a material risk of resulting, in a Material
Adverse Change.
7.15. Pension Plans. Neither the Holding Company nor any of its
Subsidiaries has a Plan or a Multiemployer Plan.
7.16. Acquisition Agreement, etc. The Acquisition Agreement is a valid
and binding contract as to the Borrower and, to the best of the Borrower's
knowledge, as to Heartland and the Heartland Sellers. The Borrower is not in
default in any material respect of its obligations under the Acquisition
Agreement and, to the best of the Borrower's knowledge, Heartland and the
Heartland Sellers are not in default in any material respect of any of their
obligations thereunder. The representations and warranties of the Borrower set
forth in the Acquisition Agreement are true and correct in all material respect
as of the date hereof with the same force and effect as though made on and as of
the date hereof. To the best of the Borrower's knowledge all of the
representations and warranties of Heartland and the Heartland Sellers set forth
in the Acquisition Agreement are true and correct in all material respects as of
the date hereof with the same force and effect as though made on and as of the
date hereof.
7.17. Government Regulation; Margin Stock.
7.17.1. Government Regulation. Neither the Borrower nor any of its
Subsidiaries, nor any Person controlling the Borrower or any of its
Subsidiaries or under common control with the Borrower or any of its
Subsidiaries, is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Investment Company Act,
the Interstate Commerce Act or any statute or
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regulation which regulates the incurring by the Borrower or any of its
Subsidiaries of Financing Debt as contemplated by this Agreement and the
other Credit Documents.
7.17.2. Margin Stock. Neither the Borrower nor any of its
Subsidiaries owns any Margin Stock.
7.18. Disclosure. Neither this Agreement nor any other Credit Document to
be furnished to the Lenders by or on behalf of the Holding Company or any of its
Subsidiaries in connection with the transactions contemplated hereby or by such
Credit Document contains any untrue statement of material fact or omits to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
No fact is actually known to the Holding Company or any of its Subsidiaries
which has resulted, or in the future (so far as the Holding Company or any of
its Subsidiaries can reasonably foresee) will result, or creates a material risk
of resulting, in any Material Adverse Change, except to the extent that present
or future general economic conditions may result in a Material Adverse Change.
8. Defaults.
8.1. Events of Default. The following events are referred to as "Events
of Default":
8.1.1. Payment. The Borrower shall fail to make any payment in
respect of: (a) interest or any fee on or in respect of any of the Credit
Obligations owed by it as the same shall become due and payable, and such
failure shall continue for a period of three Banking Days, or (b) any
Credit Obligation with respect to payments made by any Letter of Credit
Issuer under any Letter of Credit or any draft drawn thereunder within
three Banking Days after demand therefor by such Letter of Credit Issuer
or (c) principal of any of the Credit Obligations owed by it as the same
shall become due, whether at maturity or by acceleration or otherwise.
8.1.2. Specified Covenants. The Holding Company or any of its
Subsidiaries shall fail to perform or observe any of the provisions of
Sections 6.5 through 6.7 and Sections 6.9 through 6.20.
8.1.3. Other Covenants. The Holding Company, any of its
Subsidiaries or any other Obligor shall fail to perform or observe any
other covenant, agreement or provision to be performed or observed by it
under this Agreement or any other Credit Document, and such failure shall
not be rectified or cured within 30 days (or, in the case of Section 6.8,
five days) after the earlier of (a) notice thereof by the Agent to the
Holding Company or (b) a Financial Officer shall have actual knowledge
thereof.
8.1.4. Representations and Warranties. Any representation or
warranty of the Holding Company, any of its Subsidiaries or any other
Obligor made to the Lenders or
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the Agent in, pursuant to or in connection with this Agreement or any
other Credit Document, or in any financial statement, report, notice,
mortgage, assignment, UCC financing statement or certificate delivered to
the Agent or any of the Lenders by the Holding Company, any of its
Subsidiaries or any other Obligor in connection herewith or therewith,
shall be materially false on the date as of which it was made.
8.1.5. Cross Default, etc.
(a) The Holding Company or any of its Subsidiaries shall fail to
make any payment when due (after giving effect to any applicable grace
periods) in respect of any Financing Debt (other than the Credit
Obligations) outstanding in an aggregate amount of principal (whether or
not due) and accrued interest exceeding $750,000;
(b) the Holding Company or any of its Subsidiaries shall fail to
perform or observe the terms of any agreement or instrument relating to
such Financing Debt, and such failure shall continue, without having been
duly cured, waived or consented to, beyond the period of grace, if any,
specified in such agreement or instrument, and such failure shall permit
the acceleration of such Financing Debt;
(c) all or any part of such Financing Debt of the Holding Company
or any of its Subsidiaries shall be accelerated or shall become due or
payable prior to its stated maturity (except with respect to voluntary
prepayments thereof) for any reason whatsoever;
(d) any Lien on any property of the Holding Company or any of its
Subsidiaries securing any such Financing Debt shall be enforced by
foreclosure or similar action; or
(e) any holder of any such Financing Debt shall exercise any right
of rescission with respect to the issuance thereof or put or prepayment
or repurchase rights against any Obligor with respect to such Financing
Debt (other than any such rights that may be satisfied with "payment in
kind" notes or other similar securities).
8.1.6. Ownership; Liquidation; etc. Except as permitted by Section
6.11:
(a) the Holding Company shall cease to own, directly or
indirectly, all the capital stock of the Borrower, except to the extent
permitted by Section 6.13.1; or
(b) GreenGrass Holdings shall cease to own, beneficially and of
record, at least a majority of the voting stock and equity capital of the
Holding Company; or
(c) any Person other than GreenGrass Holdings, together with
"affiliates" and "associates" of such Person within the meaning of Rule
12b-2 of the Exchange Act, or
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any "group" including such Person under sections 13(d) and 14(d) of the
Exchange Act, shall acquire after the date hereof beneficial ownership
within the meaning of Rule 13d- 3 of the Exchange Act of more than 33% of
the voting stock of the Holding Company; or
(d) Glencoe shall cease to be a member, or shall cease to have a
designated representative serve on the board, of GreenGrass Holdings; or
(e) the Holding Company, the Borrower, any of the Borrower's
Subsidiaries or any other Obligor shall initiate any action to dissolve,
liquidate or otherwise terminate its existence.
8.1.7. Enforceability, etc. Any Credit Document shall cease for
any reason (other than the scheduled termination thereof in accordance
with its terms) to be enforceable in accordance with its terms or in full
force and effect; or any party to any Credit Document shall so assert in
a judicial or similar proceeding; or the security interests created by
this Agreement or any other Credit Documents shall cease to be
enforceable and of the same effect and priority purported to be created
hereby.
8.1.8. Judgments. A final judgment (a) which, with other
outstanding final judgments against the Holding Company and its
Subsidiaries, exceeds an aggregate of $750,000 in excess of applicable
insurance coverage shall be rendered against the Holding Company or any
of its Subsidiaries, or (b) which grants injunctive relief that results,
or creates a material risk of resulting, in a Material Adverse Change and
in either case if (i) within 60 days after entry thereof, such judgment
shall not have been discharged or execution thereof stayed pending appeal
or (ii) within 60 days after the expiration of any such stay, such
judgment shall not have been discharged.
8.1.9. ERISA. Any "reportable event" (as defined in section 4043
of ERISA) shall have occurred that reasonably could be expected to result
in termination of a Plan or the appointment by the appropriate United
States District Court of a trustee to administer any Plan or the
imposition of a Lien in favor of a Plan; or any ERISA Group Person shall
fail to pay when due amounts aggregating in excess of $500,000 which it
shall have become liable to pay to the PBGC or to a Plan under Title IV
of ERISA; or notice of intent to terminate a Plan shall be filed under
Title IV of ERISA by any ERISA Group Person or administrator; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any Plan or a proceeding
shall be instituted by a fiduciary of any Plan against any ERISA Group
Person to enforce section 515 or 4219(c)(5) of ERISA and such proceeding
shall not have been dismissed within 60 days thereafter; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Plan must be terminated; provided, however,
that none of the foregoing shall constitute an Event
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of Default unless it has resulted in, or reasonably would be expected to
result in, a Material Adverse Change to the Holding Company and its
Subsidiaries.
8.1.10. Bankruptcy, etc. The Holding Company, any of its
Subsidiaries or any other Obligor shall:
(a) commence a voluntary case under the Bankruptcy Code or
authorize, by appropriate proceedings of its board of directors or other
governing body, the commencement of such a voluntary case;
(b) (i) have filed against it a petition commencing an involuntary
case under the Bankruptcy Code that shall not have been stayed, dismissed
or vacated within 60 days after the date on which such petition is filed,
or (ii) file an answer or other pleading within such 60-day period
admitting or failing to deny the material allegations of such a petition
or seeking, consenting to or acquiescing in the relief therein provided,
or (iii) have entered against it an order for relief in any involuntary
case commenced under the Bankruptcy Code;
(c) seek relief as a debtor under any applicable law, other than
the Bankruptcy Code, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief;
(d) have entered against it an order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or
approving its liquidation or reorganization as a debtor or any
modification or alteration of the rights of its creditors or (iii)
assuming custody of, or appointing a receiver or other custodian for, all
or a substantial portion of its property; or
(e) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint, or consent to the
appointment of, or suffer to exist a receiver or other custodian for, all
or a substantial portion of its property.
8.2. Certain Actions Following an Event of Default. If any one or more
Events of Default shall occur, then in each and every such case:
8.2.1. Terminate Obligation to Extend Credit. Upon written request
of the Required Lenders the Agent shall terminate the obligations of the
Lenders to make any further extensions of credit under the Credit
Documents by furnishing notice of such termination to the Borrower.
8.2.2. Specific Performance; Exercise of Rights. Upon written
request of the Required Lenders the Agent shall proceed to protect and
enforce the Lenders' rights by
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suit in equity, action at law and/or other appropriate proceeding, either
for specific performance of any covenant or condition contained in this
Agreement or any other Credit Document (other than Interest Rate
Protection Agreements) or in any instrument or assignment delivered to
the Lenders pursuant to this Agreement or any other Credit Document
(other than Interest Rate Protection Agreements), or in aid of the
exercise of any power granted in this Agreement or any other Credit
Document (other than Interest Rate Protection Agreements) or any such
instrument or assignment.
8.2.3. Acceleration. Upon written request of the Required Lenders
the Agent shall by notice in writing to the Borrower (a) declare all or
any part of the unpaid balance of the Credit Obligations (other than
Interest Rate Protection Agreements) then outstanding to be immediately
due and payable, and (b) require the Borrower immediately to deposit with
the Agent in cash an amount equal to the then Letter of Credit Exposure
(which cash shall be held and applied as provided in Section 4.5), and
thereupon such unpaid balance or part thereof and such amount equal to
the Letter of Credit Exposure shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of
which are hereby expressly waived; provided, however, that if a
Bankruptcy Default shall have occurred, the unpaid balance of the Credit
Obligations (other than Interest Rate Protection Agreements) shall
automatically become immediately due and payable.
8.2.4. Enforcement of Payment; Credit Security; Setoff. Upon
written request of the Required Lenders the Agent shall proceed to
enforce payment of the Credit Obligations in such manner as the Required
Lenders shall direct, to cancel, or instruct other Letter of Credit
Issuers to cancel, any outstanding Letters of Credit which permit the
cancellation thereof and to realize upon any and all rights in the Credit
Security. The Lenders may offset and apply toward the payment of the
Credit Obligations (and/or toward the curing of any Event of Default) any
Indebtedness from the Lenders to the respective Obligors, including any
Indebtedness represented by deposits in any account maintained with the
Lenders, regardless of the adequacy of any security for the Credit
Obligations. The Lenders shall have no duty to determine the adequacy of
any such security in connection with any such offset.
8.2.5. Cumulative Remedies. To the extent not prohibited by
applicable law which cannot be waived, all of the Lenders' rights
hereunder and under each other Credit Document shall be cumulative.
8.3. Annulment of Defaults. Once an Event of Default has occurred, such
Event of Default shall be deemed to exist and be continuing for all purposes of
the Credit Documents (other than Interest Rate Protection Agreements) until the
Required Lenders or the Agent (with the consent of the Required Lenders) shall
have waived such Event of Default in writing, stated in writing that the same
has been cured to such Lenders' reasonable satisfaction or entered into an
amendment to this Agreement which by its express terms cures such Event of
Default, at
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which time such Event of Default shall no longer be deemed to exist or to have
continued. No such action by the Lenders or the Agent shall extend to or affect
any subsequent Event of Default or impair any rights of the Lenders upon the
occurrence thereof. The making of any extension of credit during the existence
of any Default or Event of Default shall not constitute a waiver thereof.
8.4. Waivers. To the extent that such waiver is not prohibited by the
provisions of applicable law that cannot be waived, each of the Holding Company
and the other Obligors waives:
(a) all presentments, demands for performance, notices of
nonperformance (except to the extent required by this Agreement or any
other Credit Document), protests, notices of protest and notices of
dishonor;
(b) any requirement of diligence or promptness on the part of the
Agent or any Lender in the enforcement of its rights under this
Agreement, the Notes or any other Credit Document;
(c) any and all notices of every kind and description which may be
required to be given by any statute or rule of law; and
(d) any defense (other than indefeasible payment in full) which it
may now or hereafter have with respect to its liability under this
Agreement, the Notes or any other Credit Document or with respect to the
Credit Obligations.
9. Expenses; Indemnity.
9.1. Expenses. Whether or not the transactions contemplated hereby shall
be consummated, the Borrower will pay:
(a) all reasonable expenses of the Agent (including the
out-of-pocket expenses related to forming the group of Lenders and
reasonable fees and disbursements of the counsel to the Agent) in
connection with the preparation and duplication of this Agreement and
each other Credit Document, examinations by, and reports of, the Agent's
commercial financial examiners, fixed asset appraisers and environmental
consultants, the transactions contemplated hereby and thereby and
amendments, waivers, consents and other operations hereunder and
thereunder;
(b) all recording and filing fees and transfer and documentary
stamp and similar taxes at any time payable in respect of this Agreement,
any other Credit Document, any Credit Security or the incurrence of the
Credit Obligations; and
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(c) all other reasonable expenses incurred by the Lenders or the
holder of any Credit Obligation in connection with the "work out" or
enforcement of any rights hereunder or under any other Credit Document,
including costs of collection and reasonable attorneys' fees.
9.2. General Indemnity. The Borrower shall indemnify the Lenders and the
Agent and hold them harmless from any liability, loss or damage resulting from
the violation by the Borrower of Section 2.5. In addition, the Borrower shall
indemnify each Lender, the Agent, each of the Lenders' or the Agent's directors,
officers, employees, agents, attorneys, accountants, consultants and each
Person, if any, who controls any Lender or the Agent (each Lender, the Agent and
each of such directors, officers, employees, agents, attorneys, accountants,
consultants and control Persons is referred to as an "Indemnified Party") and
hold each of them harmless from and against any and all claims, damages,
liabilities and reasonable expenses (including reasonable fees and disbursements
of counsel with whom any Indemnified Party may consult in connection therewith
and all reasonable expenses of litigation or preparation therefor) which any
Indemnified Party may incur or which may be asserted against any Indemnified
Party in connection with (a) the Indemnified Party's compliance with or contest
of any subpoena or other process issued against it in any proceeding involving
the Holding Company or any of its Subsidiaries or their Affiliates, (b) any
litigation or investigation involving the Holding Company, any of its
Subsidiaries or their Affiliates, or any officer, director or employee thereof,
(c) the existence or exercise of any security rights with respect to the Credit
Security in accordance with the Credit Documents, or (d) this Agreement, any
other Credit Document or any transaction contemplated hereby or thereby;
provided, however, that the foregoing indemnity shall not apply to litigation
commenced by the Borrower against the Lenders or the Agent which seeks
enforcement of any of the rights of the Borrower hereunder or under any other
Credit Document and is determined adversely to the Lenders or the Agent in a
final nonappealable judgment or to the extent such claims, damages, liabilities
and expenses result from an Indemnified Party's or the Agent's gross negligence
or willful misconduct.
9.3. Indemnity With Respect to Letters of Credit. The Borrower shall
indemnify each Letter of Credit Issuer and its correspondents and hold each of
them harmless from and against any and all claims, losses, liabilities, damages
and reasonable expenses (including reasonable attorneys' fees) arising from or
in connection with any Letter of Credit, including any such claim, loss,
liability, damage or expense arising out of any transfer, sale, delivery,
surrender or endorsement of any invoice, bill of lading, warehouse receipt or
other document at any time held by any Letter of Credit Issuer or held for their
respective accounts by any of their correspondents, in connection with any
Letter of Credit, except to the extent such claims, losses, liabilities, damages
and expenses result from gross negligence or willful misconduct on the part of
the Letter of Credit Issuer.
10. Operations; Agent.
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10.1. Interests in Credits. The Percentage Interest of each Lender in the
portions of the Loan and Letters of Credit, and the related Commitments, shall
be computed based on the maximum principal amount for each Lender as set forth
in the Register, as from time to time in effect. The current Percentage
Interests are set forth in Exhibit 10.1, which may be updated by the Agent from
time to time to conform to the Register.
10.2. Agent's Authority to Act, etc. Each of the Lenders appoints and
authorizes Fleet to act for the Lenders as the Lenders' Agent in connection with
the transactions contemplated by this Agreement and the other Credit Documents
(other than Interest Rate Protection Agreements) on the terms set forth herein.
In acting hereunder, the Agent is acting, pursuant to the direction of the
Lenders, for the account of Fleet to the extent of its Percentage Interest and
for the account of each other Lender to the extent of the Lenders' respective
Percentage Interests, and all action in connection with the enforcement of, or
the exercise of any remedies (other than the Lenders' rights of set-off as
provided in Section 8.2.4 or in any Credit Document) in respect of the Credit
Obligations and Credit Documents (other than Interest Rate Protection
Agreements) shall be taken by the Agent.
10.3. Borrower to Pay Agent, etc. The Borrower and each Guarantor shall
be fully protected in making all payments in respect of the Credit Obligations
to the Agent other than payments under Interest Rate Protection Agreements, in
relying upon consents, modifications and amendments executed by the Agent
purportedly on the Lenders' behalf, and in dealing with the Agent as herein
provided. The Agent may charge the accounts of the Borrower, on the dates when
the amounts thereof become due and payable, with the amounts of the principal of
and interest on the Loan, any amounts paid by the Letter of Credit Issuers to
third parties under Letters of Credit or drafts presented thereunder, commitment
fees, Letter of Credit fees and all other fees and amounts owing under any
Credit Document.
10.4. Lender Operations for Advances, Letters of Credit, etc.
10.4.1. Advances. On each Closing Date (subject to the further
provisions of this Section 10.4.1), each Lender shall advance to the
Agent in immediately available funds such Lender's Percentage Interest in
the portion of the Loan advanced on such Closing Date prior to 12:00 noon
(Boston time). If such funds are not received at such time, but all
applicable conditions set forth in Section 5 have been satisfied, each
Lender authorizes and requests the Agent to advance for the Lender's
account, pursuant to the terms hereof, the Lender's respective Percentage
Interest in such portion of the Loan and agrees to reimburse the Agent in
immediately available funds for the amount thereof prior to 2:00 p.m.
(Boston time) on the day any portion of the Loan is advanced hereunder;
provided, however, that the Agent is not authorized to make any such
advance for the account of any Lender who has previously notified the
Agent in writing that such Lender will not be performing its obligations
to make further advances hereunder; and provided, further, that the Agent
shall be under no obligation to make any such advance.
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Notwithstanding the foregoing provisions of this Section 10.4.1,
the Agent may elect in its discretion to settle advances and payments
with the Lenders on a weekly basis with respect to the portion of the
Revolving Loan for which the Applicable Rate is computed on the basis of
the Base Rate, as follows: During the week the Agent shall make advances,
and collect payments, with respect to such portion of the Revolving Loan
without involving advances from or payments to the other Lenders. By
12:00 noon (Boston time) on the second Banking Day of the following week,
the Agent shall provide to the other Lenders a notice summarizing (a) the
advances and payments made or received by the Agent with respect to such
portion of the Revolving Loan during the previous week and (b) the weekly
settlement amounts to be paid by or to each Lender. By 12:00 noon (Boston
time) on the third Banking Day of such week, each Lender shall pay to the
Agent its Percentage Interest in the net amount of such Revolving Loan
advances over such Revolving Loan payments during the previous week, and
the Agent shall pay to each Lender its Percentage Interest in the net
amount of such Revolving Loan payments over such Revolving Loan advances
during the previous week. Interest on such Revolving Loan advances made
by the Agent shall be for the Agent's account for the period prior to
weekly settlement. Interest on the portion of the Revolving Loan paid by
the Borrower, accruing from the date such payment was made to the weekly
settlement date, shall be the obligation of, and shall be payable by, the
Agent.
10.4.2. Letters of Credit. Each of the Lenders having a Percentage
Interest in the Letters of Credit authorizes and requests each Letter of
Credit Issuer to issue the Letters of Credit provided for in Section 2.4
and to grant each such Lender a participation in each of such Letters of
Credit in an amount equal to its Percentage Interest in the amount of
each such Letter of Credit. Promptly upon the request of the Letter of
Credit Issuer, each such Lender shall reimburse the Letter of Credit
Issuer in immediately available funds for such Lender's Percentage
Interest in the amount of all obligations to third parties incurred by
the Letter of Credit Issuer in respect of each Letter of Credit and each
draft accepted under a Letter of Credit to the extent not reimbursed by
the Borrower by 2:00 p.m. (Boston time) on the Banking Day when due. The
Letter of Credit Issuer will notify each such Lender of the issuance of
any Letter of Credit, the amount and date of payment of any draft drawn
or accepted under a Letter of Credit and whether in connection with the
payment of any such draft the amount thereof was added to the Revolving
Loan or was reimbursed by the Borrower.
10.4.3. Agent to Allocate Payments, etc. All payments of principal
and interest in respect of the extensions of credit made pursuant to this
Agreement, reimbursement of amounts paid by any Letter of Credit Issuer
to third parties under Letters of Credit or drafts presented thereunder,
commitment fees, Letter of Credit fees and other fees under this
Agreement shall, as a matter of convenience, be made by the Borrower and
the Guarantors to the Agent in immediately available funds by noon
(Boston time) on any Banking Day. The share of each Lender shall be
credited to such
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Lender by the Agent in immediately available funds by 2:00 p.m. (Boston
time) on such Banking Day (except for the weekly settlements contemplated
by Section 10.4.1) in such manner that the principal amount of the Credit
Obligations to be paid shall be paid proportionately in accordance with
the Lenders' respective Percentage Interests in such Credit Obligations,
except as otherwise provided in this Agreement. Under no circumstances
shall any Lender be required to produce or present its Notes as evidence
of its interests in the Credit Obligations in any action or proceeding
relating to the Credit Obligations.
10.4.4. Delinquent Lenders; Nonperforming Lenders. In the event
that any Lender fails to reimburse the Agent pursuant to Section 10.4.1
for the Percentage Interest of such lender (a "Delinquent Lender") in any
credit advanced by the Agent pursuant hereto, overdue amounts (the
"Delinquent Payment") due from the Delinquent Lender to the Agent shall
bear interest, payable by the Delinquent Lender on demand, at a per annum
rate equal to (a) the Federal Funds Rate for the first three days overdue
and (b) the sum of 2% plus the Federal Funds Rate for any longer period.
Such interest shall be payable to the Agent for its own account for the
period commencing on the date of the Delinquent Payment and ending on the
date the Delinquent Lender reimburses the Agent on account of the
Delinquent Payment (to the extent not paid by any Obligor as provided
below) and the accrued interest thereon (the "Delinquency Period"),
whether pursuant to the assignments referred to below or otherwise. Upon
notice by the Agent, the Borrower will pay to the Agent the principal
(but not the interest) portion of the Delinquent Payment. During the
Delinquency Period, in order to make reimbursements for the Delinquent
Payment and accrued interest thereon, the Delinquent Lender shall be
deemed to have assigned to the Agent all interest, commitment fees and
other payments made by the Borrower under Section 3 that would have
thereafter otherwise been payable under the Credit Documents to the
Delinquent Lender. During any other period in which any Lender is not
performing its obligations to extend credit under Section 2 (a
"Nonperforming Lender"), the Nonperforming Lender shall be deemed to have
assigned to each Lender that is not a Nonperforming Lender (a "Performing
Lender") all principal and other payments made by the Borrower under
Section 4 that would have thereafter otherwise been payable under the
Credit Documents to the Nonperforming Lender. The Agent shall credit a
portion of such payments to each Performing Lender in an amount equal to
the Percentage Interest of such Performing Lender in an amount equal to
the Percentage Interest of such Performing Lender divided by one minus
the Percentage Interest of the Nonperforming Lender until the respective
portions of the Loan owed to all the Lenders are the same as the
Percentage Interests of the Lenders immediately prior to the failure of
the Nonperforming Lender to perform its obligations under Section 2. The
foregoing provisions shall be in addition to any other remedies the
Agent, the Performing Lenders or the Borrower may have under law or
equity against the Delinquent Lender as a result of the Delinquent
Payment or against the Nonperforming Lender as a result of its failure to
perform its obligations under Section 2.
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10.5. Sharing of Payments, etc. Each Lender agrees that (a) if by
exercising any right of set-off or counterclaim or otherwise, it shall receive
payment of (i) a proportion of the aggregate amount due with respect to its
Percentage Interest in the Loan and Letter of Credit Exposure which is greater
than (ii) the proportion received by any other Lender in respect of the
aggregate amount due with respect to such other Lender's Percentage Interest in
the Loan and Letter of Credit Exposure and (b) if such inequality shall continue
for more than 10 days, the Lender receiving such proportionately greater payment
shall purchase participations in the Percentage Interests in the Loan and Letter
of Credit Exposure held by the other Lenders, and such other adjustments shall
be made from time to time (including rescission of such purchases of
participations in the event the unequal payment originally received is recovered
from such Lender through bankruptcy proceedings or otherwise), as may be
required so that all such payments of principal and interest with respect to the
Loan and Letter of Credit Exposure held by the Lenders shall be shared by the
Lenders pro rata in accordance with their respective Percentage Interests;
provided, however, that this Section 10.5 shall not impair the right of any
Lender to exercise any right of set-off or counterclaim it may have and to apply
the amount subject to such exercise to the payment of Indebtedness of any
Obligor other than such Obligor's Indebtedness with respect to the Loan and
Letter of Credit Exposure. Each Lender that grants a participation in the Credit
Obligations to a Credit Participant shall require as a condition to the granting
of such participation that such Credit Participant agree to share payments
received in respect of the Credit Obligations as provided in this Section 10.5.
The provisions of this Section 10.5 are for the sole and exclusive benefit of
the Lenders and no failure of any Lender to comply with the terms hereof shall
be available to any Obligor as a defense to the payment of the Credit
Obligations.
10.6. Amendments, Consents, Waivers, etc. Except as otherwise set forth
herein, the Agent may (and upon the written request of the Required Lenders the
Agent shall) take or refrain from taking any action under this Agreement or any
other Credit Document, including giving its written consent to any modification
of or amendment to and waiving in writing compliance with any covenant or
condition in this Agreement or any other Credit Document (other than an Interest
Rate Protection Agreement) or any Default or Event of Default, all of which
actions shall be binding upon all of the Lenders; provided, however, that:
(a) Except as provided below, without the written consent of the
Lenders owning at least a majority of the Percentage Interests (other
than any Delinquent Lender during the existence of a Delinquency Period
or Nonperforming Lender so long as such Delinquent Lender is treated the
same as the other Lenders with respect to any actions enumerated below),
no written modification of, amendment to, consent with respect to, waiver
of compliance with or waiver of a Default under, any of the Credit
Documents (other than an Interest Rate Protection Agreement) or action
taken under Section 8.2 shall be made.
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(b) Without the written consent of such Lenders as own 100% of the
Percentage Interests (other than any Delinquent Lender during the
existence of a Delinquency Period or Nonperforming Lender so long as such
Lender is treated the same as the other Lenders with respect to any
actions enumerated below):
(i) No reduction shall be made in (A) the amount of
principal of the Loan or reimbursement obligations for payments
made under Letters of Credit, (B) the interest rate on the Loan
(other than amendments and waivers approved by the Required
Lenders pursuant to clause (a) that modify defined terms used in
calculating the Applicable Margin or that waive an increase in the
Applicable Rate as a result of an Event of Default) or (C) the
Letter of Credit fees or commitment fees with respect to the
credit facility provided herein.
(ii) No change shall be made in the stated, scheduled time
of payment of all or any portion of the Loan (other than
amendments and waivers approved by the Required Lenders pursuant
to clause (a) that modify defined terms used in calculating the
Applicable Margin or Consolidated Excess Cash Flow) or interest
thereon or reimbursement of payments made under Letters of Credit
or fees relating to any of the foregoing payable to the Lenders
and no waiver shall be made of any Default under Section 8.1.1.
(iii) No increase shall be made in the amount, or extension
of the term, of the stated Commitments beyond that provided for
under Section 2.
(iv) No alteration shall be made of the Lenders' rights of
set-off contained in Section 8.2.4.
(v) No release of all or a substantial portion of the
Credit Security or of the Guarantors shall be made (in any event,
the Agent may release particular items of Credit Security or
particular Guarantors in dispositions permitted by Section 6.11
and may release all Credit Security pursuant to Section 17 upon
payment in full of the Credit Obligations and termination of the
Commitments without the written consent of the Lenders).
(vi) No amendment to or modification of this Section
10.6(b) shall be made.
(c) Without the written consent of (i) such Lenders owning at
least a majority of the Percentage Interests (other than Delinquent
Lenders during the existence of a Delinquency Period so long as such
Delinquent Lender is treated the same as the other Lenders with respect
to any actions enumerated below) and (ii) such Lenders holding a majority
of the Percentage Interests in Term Loan B (other than Delinquent Lenders
during the existence of a Delinquency Period so long as such Delinquent
Lender is
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treated the same as the other Lenders with respect to any actions
enumerated below), voting as a separate class, no change may be made in
the allocation of mandatory prepayments under Section 4.2 and 4.3 between
Term Loan A and Term Loan B.
10.7. Agent's Resignation. The Agent may resign at any time by giving at
least 60 days' prior written notice of its intention to do so to each of the
Lenders and the Holding Company and upon the appointment by the Required Lenders
of a successor Agent satisfactory to the Holding Company. If no successor Agent
shall have been so appointed and shall have accepted such appointment within 45
days after the retiring Agent's giving of such notice of resignation, then the
retiring Agent may with the consent of the Holding Company, which shall not be
unreasonably withheld, appoint a successor Agent which shall be a bank or a
trust company organized under the laws of the United States of America or any
state thereof and having a combined capital, surplus and undivided profit of at
least $100,000,000; provided, however, that any successor Agent appointed under
this sentence may be removed upon the written request of the Required Lenders,
which request shall also appoint a successor Agent reasonably satisfactory to
the Holding Company. Upon the appointment of a new Agent hereunder, the term
"Agent" shall for all purposes of this Agreement thereafter mean such successor.
After any retiring Agent's resignation hereunder as Agent, or the removal
hereunder of any successor Agent, the provisions of this Agreement shall
continue to inure to the benefit of such Agent as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
10.8. Concerning the Agent.
10.8.1. Action in Good Faith, etc. The Agent and its officers,
directors, employees and agents shall be under no liability to any of the
Lenders or to any future holder of any interest in the Credit Obligations
for any action or failure to act taken or suffered in good faith, and any
action or failure to act in accordance with an opinion of its counsel
shall conclusively be deemed to be in good faith. The Agent shall in all
cases be entitled to rely, and shall be fully protected in relying, on
instructions given to the Agent by the Required Lenders.
10.8.2. No Implied Duties, etc. The Agent shall have and may
exercise such powers as are specifically delegated to the Agent under
this Agreement or any other Credit Document together with all other
powers incidental thereto. The Agent shall have no implied duties to any
Person or any obligation to take any action under this Agreement or any
other Credit Document except for action specifically provided for in this
Agreement or any other Credit Document to be taken by the Agent. Before
taking any action under this Agreement or any other Credit Document, the
Agent may request an appropriate specific indemnity satisfactory to it
from each Lender in addition to the general indemnity provided for in
Section 10.11. Until the Agent has received such specific indemnity, the
Agent shall not be obligated to take (although it may in its sole
discretion take) any such action under this Agreement or any other Credit
Document.
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Each Lender confirms that the Agent does not have a fiduciary
relationship to it under the Credit Documents. Each of the Borrower and
each Guarantor confirms that neither the Agent nor any other Lender has a
fiduciary relationship to it under the Credit Documents.
10.8.3. Validity, etc. The Agent shall not be responsible to any
Lender or any future holder of any interest in the Credit Obligations (a)
for the legality, validity, enforceability or effectiveness of this
Agreement or any other Credit Document, (b) for any recitals, reports,
representations, warranties or statements contained in or made in
connection with this Agreement or any other Credit Document, (c) for the
existence or value of any assets included in any security for the Credit
Obligations, (d) for the effectiveness of any Lien purported to be
included in the Credit Security, (e) for the specification or failure to
specify any particular assets to be included in the Credit Security, or
(f) unless the Agent shall have failed to comply with Section 10.8.1, for
the perfection of the security interests in the Credit Security.
10.8.4. Compliance. The Agent shall not be obligated to ascertain
or inquire as to the performance or observance of any of the terms of
this Agreement or any other Credit Document; and in connection with any
extension of credit under this Agreement or any other Credit Document,
the Agent shall be fully protected in relying on a certificate of the
Borrower as to the fulfillment by the Borrower of any conditions to such
extension of credit.
10.8.5. Employment of Agents and Counsel. The Agent may execute
any of its duties as Agent under this Agreement or any other Credit
Document by or through employees, agents and attorneys-in-fact and shall
not be responsible to any of the Lenders, the Holding Company or any
other Obligor for the default or misconduct of any such agents or
attorneys-in-fact selected by the Agent acting in good faith. The Agent
shall be entitled to advice of counsel concerning all matters pertaining
to the agency hereby created and its duties hereunder or under any other
Credit Document.
10.8.6. Reliance on Documents and Counsel. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
affidavit, certificate, cablegram, consent, instrument, letter, notice,
order, document, statement, telecopy, telegram, telex or teletype message
or writing reasonably believed in good faith by the Agent to be genuine
and correct and to have been signed, sent or made by the Person in
question, including any telephonic or oral statement made by such Person,
and, with respect to legal matters, upon an opinion or the advice of
counsel selected by the Agent.
10.8.7. Agent's Reimbursement. Each of the Lenders severally
agrees to reimburse the Agent, pro rata in accordance with such Lender's
Percentage Interest, for any reasonable expenses not reimbursed by the
Borrower or the Guarantors (without limiting the obligation of the
Borrower or the Guarantors to make such reimbursement):
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(a) for which the Agent is entitled to reimbursement by the Borrower or
the Guarantors under this Agreement or any other Credit Document, and (b)
after the occurrence of a Default, for any other reasonable expenses
incurred by the Agent on the Lenders' behalf in connection with the
enforcement of the Lenders' rights under this Agreement or any other
Credit Document; provided, however, that the Agent shall not be
reimbursed for any such expenses arising as a result of its gross
negligence or willful misconduct.
10.9. Rights as a Lender. With respect to any credit extended by it
hereunder, Fleet shall have the same rights, obligations and powers hereunder as
any other Lender and may exercise such rights and powers as though it were not
the Agent, and unless the context otherwise specifies, Fleet shall be treated in
its individual capacity as though it were not the Agent hereunder. Without
limiting the generality of the foregoing, the Percentage Interest of Fleet shall
be included in any computations of Percentage Interests. Fleet and its
Affiliates (as well as any other Lender and its Affiliates) may accept deposits
from, lend money to, act as trustee for and generally engage in any kind of
banking or trust business with the Holding Company, any of its Subsidiaries or
any Affiliate of any of them and any Person who may do business with or own an
equity interest in the Holding Company, any of its Subsidiaries or any Affiliate
of any of them, all as if Fleet were not the Agent and without any duty to
account therefor to the other Lenders.
10.10. Independent Credit Decision. Each of the Lenders acknowledges that
it has independently and without reliance upon the Agent, based on the financial
statements and other documents referred to in Section 7.2, on the other
representations and warranties contained herein and on such other information
with respect to the Holding Company and its Subsidiaries as such Lender deemed
appropriate, made such Lender's own credit analysis and decision to enter into
this Agreement and to make the extensions of credit provided for hereunder. Each
Lender represents to the Agent that such Lender will continue to make its own
independent credit and other decisions in taking or not taking action under this
Agreement or any other Credit Document. Each Lender expressly acknowledges that
neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to
such Lender, and no act by the Agent taken under this Agreement or any other
Credit Document, including any review of the affairs of the Holding Company and
its Subsidiaries, shall be deemed to constitute any representation or warranty
by the Agent. Except for notices, reports and other documents expressly required
to be furnished to each Lender by the Agent under this Agreement or any other
Credit Document, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition, financial or otherwise, or creditworthiness of
the Holding Company or any Subsidiary which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates; provided, however, that the Agent shall furnish to the Lenders all
written reports and financial data received by it from the Holding Company and
its Subsidiaries that has not been furnished directly to the Lenders.
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10.11. Indemnification. The holders of the Credit Obligations severally
shall indemnify the Agent and its officers, directors, employees, agents,
attorneys, accountants, consultants and controlling Persons (to the extent not
reimbursed by the Obligors and without limiting the obligation of any of the
Obligors to do so), pro rata in accordance with their respective Percentage
Interests, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time be imposed on, incurred by or
asserted against the Agent or such Persons relating to or arising out of this
Agreement, any other Credit Document, the transactions contemplated hereby or
thereby, or any action taken or omitted by the Agent in connection with any of
the foregoing; provided, however, that the foregoing shall not extend to actions
or omissions which are taken by the Agent with gross negligence or willful
misconduct.
11. Successors and Assigns; Lender Assignments and Participations. Any reference
in this Agreement or any other Credit Document to any of the parties hereto
shall be deemed to include the successors and assigns of such party, and all
covenants and agreements by or on behalf of the Holding Company, the other
Obligors, the Agent or the Lenders that are contained in this Agreement or any
other Credit Document shall bind and inure to the benefit of their respective
successors and assigns; provided, however, that (a) the Holding Company and its
Subsidiaries may not assign their rights or obligations under this Agreement or
any other Credit Document except for mergers or liquidations permitted by
Section 6.11, and (b) the Lenders shall be not entitled to assign their
respective Percentage Interests in the credits extended hereunder or their
Commitments except as set forth below in this Section 11.
11.1. Assignments by Lenders.
11.1.1. Assignees and Assignment Procedures. Each Lender may (a)
without the consent of the Agent or the Holding Company if the proposed
assignee is already a Lender hereunder or a Wholly Owned Subsidiary of
the same corporate parent of which the assigning Lender is a Subsidiary
or a Related Fund, or (b) otherwise with the consents of the Agent and
(so long as no Event of Default exists) the Holding Company (which
consents will not be unreasonably withheld), in compliance with
applicable laws in connection with such assignment, assign to one or more
commercial banks or other financial institutions or mutual funds (each,
an "Assignee") all or a portion of its interests, rights and obligations
under this Agreement and the other Credit Documents, including all or a
portion, which need not be pro rata between the Loan and the Letter of
Credit Exposure, of its Commitment, the portion of the Term Loan A, Term
Loan B, Revolving Loan and Letter of Credit Exposure at the time owing to
it and the Notes held by it, but excluding its rights and obligations as
a Letter of Credit Issuer; provided, however, that:
(i) the aggregate amount of the Commitment of the assigning
Lender subject to each such assignment to any Assignee other than
another Lender
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(determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Agent) shall be in
a minimum amount of $2,500,000 and in increments of $1,000,000
(or, if less, the entire remaining amount of the assigning
Lender's Commitment); and
(ii) the parties to each such assignment shall execute and
deliver to the Agent an Assignment and Acceptance (the "Assignment
and Acceptance") substantially in the form of Exhibit 11.1.1,
together with the Note subject to such assignment and, except in
the event of a transfer pursuant to clause (a) above or Section
11.3, a processing and recordation fee of $3,000 payable to the
Agent by the assigning Lender or the Assignee.
Upon acceptance and recording pursuant to Section 11.1.4, from and after
the effective date specified in each Assignment and Acceptance (which
effective date shall be at least five Banking Days after the execution
thereof unless waived by the Agent):
(A) the Assignee shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights
and obligations of a Lender under this Agreement and
(B) the assigning Lender shall, to the extent provided in such
assignment, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 3.2.4, 3.5 and
9, as well as to any fees accrued for its account hereunder
and not yet paid).
11.1.2. Terms of Assignment and Acceptance. By executing and
delivering an Assignment and Acceptance, the assigning Lender and
Assignee shall be deemed to confirm to and agree with each other and the
other parties hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection
with this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, any other Credit
Document or any other instrument or document furnished pursuant hereto;
(b) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Holding Company and its Subsidiaries or the performance or observance by
the Holding Company or any of its
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Subsidiaries of any of its obligations under this Agreement, any other
Credit Document or any other instrument or document furnished pursuant
hereto;
(c) such Assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 7.2 or Section 6.4 and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(d) such Assignee will independently and without reliance upon the
Agent, such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement;
(e) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and
(f) such Assignee agrees that it will perform in accordance with
the terms of this Agreement all the obligations which are required to be
performed by it as a Lender.
11.1.3. Register. The Agent shall maintain at the Boston Office a
register (the "Register") for the recordation of (a) the names and
addresses of the Lenders and the Assignees which assume rights and
obligations pursuant to an assignment under Section 11.1.1, (b) the
Percentage Interest of each such Lender as set forth in Exhibit 10.1 and
(c) the amount of the Loan and Letter of Credit Exposure owing to each
Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is registered therein
for all purposes as a party to this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
11.1.4. Acceptance of Assignment and Assumption. Upon its receipt
of a completed Assignment and Acceptance executed by an assigning Lender
and an Assignee (and any necessary consent of the Agent and the Holding
Company) together with the Note subject to such assignment, and the
processing and recordation fee referred to in Section 11.1.1, the Agent
shall (a) accept such Assignment and Acceptance, (b) record the
information contained therein in the Register and (c) give prompt notice
thereof to the Borrower. Within five Banking Days after receipt of
notice, the Borrower, at its own expense, shall execute and deliver to
the Agent, in exchange for the surrendered Note, a new Note to the order
of such Assignee in a principal amount equal to the applicable Commitment
and Loan assumed by it pursuant
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to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment and Loan, a new Note to the order of such assigning
Lender in a principal amount equal to the applicable Commitment and Loan
retained by it. Such new Note shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note, and
shall be dated the date of the surrendered Note which it replaces.
11.1.5. Federal Reserve Bank. Notwithstanding the foregoing
provisions of this Section 11, any Lender may at any time pledge or
assign all or any portion of such Lender's rights under this Agreement
and the other Credit Documents to a Federal Reserve Bank; provided,
however, that no such pledge or assignment shall release such Lender from
such Lender's obligations hereunder or under any other Credit Document.
11.1.6. Further Assurances. The Holding Company and its
Subsidiaries shall sign such documents and take such other actions from
time to time reasonably requested by an Assignee to enable it to share in
the benefits of the rights created by the Credit Documents.
11.2. Credit Participants. Each Lender may, without the consent of the
Holding Company or the Agent, in compliance with applicable laws in connection
with such participation, sell to one or more commercial banks or other financial
institutions or mutual funds (each a "Credit Participant") participations in all
or a portion of its interests, rights and obligations under this Agreement and
the other Credit Documents (including all or a portion of its Commitment, the
Loan and Letter of Credit Exposure owing to it and the Note held by it);
provided, however, that:
(a) such Lender's obligations under this Agreement shall remain
unchanged;
(b) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(c) the Credit Participant shall be entitled to the benefit of the
cost protection provisions contained in Sections 3.2.4, 3.5 and 9, but
shall not be entitled to receive any greater payment thereunder than the
selling Lender would have been entitled to receive with respect to the
interest so sold if such interest had not been sold; and
(d) the Borrower, the Agent and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such Lender
shall retain the sole right as one of the Lenders to vote with respect to
the enforcement of the obligations of the Obligors relating to the Loan
and Letter of Credit Exposure and the approval of any amendment,
modification or waiver of any provision of this Agreement (other than
amendments, modifications, consents or waivers described in clause (b) of
the proviso to Section 10.6).
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Each Obligor agrees, to the fullest extent permitted by applicable law, that any
Credit Participant and any Lender purchasing a participation from another Lender
pursuant to Section 10.5 may exercise all rights of payment (including the right
of set-off), with respect to its participation as fully as if such Credit
Participant or such Lender were the direct creditor of the Obligors and a Lender
hereunder in the amount of such participation.
11.3. Replacement of Lender. In the event that any Lender or, to the
extent applicable, any Credit Participant (the "Affected Lender"):
(a) fails to perform its obligations to fund any portion of the
Loan or to issue any Letter of Credit on any Closing Date when required
to do so by the terms of the Credit Documents, or fails to provide its
portion of any LIBOR Pricing Option pursuant to Section 3.2.1 or on
account of a Legal Requirement as contemplated by Section 3.2.5;
(b) demands payment under the provisions of Section 3.5 in an
amount materially in excess of the amounts with respect thereto demanded
by the other Lenders;
(c) refuses to consent to a proposed extension of the Applicable
Maturity Date that is consented to by all of the other Lenders; or
(d) refuses to consent to a proposed amendment, modification,
waiver or other action requiring consent of the holders of 100% of the
Percentage Interests under Section 10.6(b) that is consented to by all of
the other Lenders;
then, so long as no Event of Default exists, the Holding Company shall have the
right to seek a replacement lender which is reasonably satisfactory to the Agent
(the "Replacement Lender"). The Replacement Lender shall purchase the interests
of the Affected Lender in the Loan, Letters of Credit and its Commitment and
shall assume the obligations of the Affected Lender hereunder and under the
other Credit Documents upon execution by the Replacement Lender of an Assignment
and Acceptance and the tender by it to the Affected Lender of a purchase price
agreed between it and the Affected Lender (or, if they are unable to agree, a
purchase price in the amount of the Affected Lender's Percentage Interest in the
Loan and Letter of Credit Exposure, or appropriate credit support for contingent
amounts included therein, and all other outstanding Credit Obligations then owed
to the Affected Lender). No assignment fee pursuant to Section 11.1.1(ii) shall
be required in connection with such assignment. Such assignment by the Affected
Lender shall be deemed an early termination of any LIBOR Pricing Option to the
extent of the Affected Lender's portion thereof, and the Borrower will pay to
the Affected Lender any resulting amounts due under Section 3.2.4. Upon
consummation of such assignment, the Replacement Lender shall become party to
this Agreement as a signatory hereto and shall have all the rights and
obligations of the Affected Lender under this
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Agreement and the other Credit Documents with a Percentage Interest equal to the
Percentage Interest of the Affected Lender, the Affected Lender shall be
released from its obligations hereunder and under the other Credit Documents,
and no further consent or action by any party shall be required. Upon the
consummation of such assignment, the Borrower, the Agent and the Affected Lender
shall make appropriate arrangements so that a new Revolving Note is issued to
the Replacement Lender if it has acquired a portion of the Revolving Loan. The
Borrower and the Guarantors shall sign such documents and take such other
actions reasonably requested by the Replacement Lender to enable it to share in
the benefits of the rights created by the Credit Documents. Until the
consummation of an assignment in accordance with the foregoing provisions of
this Section 11.3, the Borrower shall continue to pay to the Affected Lender any
Credit Obligations as they become due and payable.
12. Confidentiality. Each Lender will make no disclosure of confidential
information furnished to it by the Holding Company or any of its Subsidiaries
unless such information shall have become public, except:
(a) in connection with operations under or the enforcement of this
Agreement or any other Credit Document to Persons who have a reasonable
need to be furnished such confidential information and who agree to
comply with the restrictions contained in this Section 12 with respect to
such information;
(b) pursuant to any statutory or regulatory requirement or any
mandatory court order, subpoena or other legal process;
(c) to any parent or corporate Affiliate of such Lender or to any
Credit Participant, proposed Credit Participant or proposed Assignee;
provided, however, that any such Person shall agree to comply with the
restrictions set forth in this Section 12 with respect to such
information;
(d) to its independent counsel, auditors and other professional
advisors with an instruction to such Person to keep such information
confidential; and
(e) with the prior written consent of the Holding Company, to any
other Person.
13. Foreign Lenders. If any Lender is not created or organized in, or under the
laws of, the United States of America or any state thereof, such Lender shall
deliver to the Borrower and the Agent the forms described in one of the
following two clauses:
(a) Two fully completed and duly executed United States Internal
Revenue Service Form 1001 or 4224 or any successor form, as the case may
be, certifying that such Lender is entitled to receive payments of the
Credit Obligations payable to it without deduction or withholding of any
United States federal income taxes; or
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(b) A statement, executed by such Lender under penalty of perjury,
certifying that such Lender is not a "bank" within the meaning of section
881(c)(3)(A) of the Code and two fully completed and duly executed United
States Internal Revenue Service Forms W-8 or any successor form,
certifying that such Lender is not a "United States person" within the
meaning of section 7701(a)(30) of the Code.
Each Lender that delivers any form or statement pursuant to this Section 13
further undertakes to renew such forms and statements by delivering to the
Borrower and the Agent any updated form, successor form or other certification,
as the case may be, on or before the date that any form or statement previously
delivered pursuant to this Section 13 expires or becomes obsolete or after the
occurrence of any event requiring a change in such most recent form or
statement. If at any time the Borrower and the Agent have not received all forms
and statements (including any renewals thereof) required to be provided by any
Lender pursuant to this Section 13, Section 3.5 shall not apply with respect to
any amount of United States federal income taxes required to be withheld from
payments of the Credit Obligations to such Lender.
14. Notices. Except as otherwise specified in this Agreement or any other Credit
Document, any notice required to be given pursuant to this Agreement or any
other Credit Document shall be given in writing. Any notice, consent, approval,
demand or other communication in connection with this Agreement or any other
Credit Document shall be deemed to be given if given in writing (including
telex, telecopy or similar teletransmission) addressed as provided below (or to
the addressee at such other address as the addressee shall have specified by
notice actually received by the addressor), and if either (a) actually delivered
in fully legible form to such address (evidenced in the case of a telex by
receipt of the correct answerback) or (b) in the case of a letter, unless actual
receipt of the notice is required by any Credit Document five days shall have
elapsed after the same shall have been deposited in the United States mails,
with first-class postage prepaid and registered or certified.
If to the Holding Company or any of its Subsidiaries, to it at its
address set forth in Exhibit 7.1 (as supplemented pursuant to Sections 6.4.1 and
6.4.2), to the attention of the chief financial officer.
If to any Lender or the Agent, to it at its address set forth on the
signature pages of this Agreement or in the Register, with a copy to the Agent.
15. Course of Dealing; Amendments and Waivers. No course of dealing between any
Lender or the Agent, on one hand, and the Borrower or any other Obligor, on the
other hand, shall operate as a waiver of any of the Lenders' or the Agent's
rights under this Agreement or any other Credit Document or with respect to the
Credit Obligations. Each of the Borrower and the Guarantors acknowledges that if
the Lenders or the Agent, without being required to do so by this Agreement or
any other Credit Document, give any notice or information to, or obtain any
consent from, the Borrower or any other Obligor, the Lenders and the Agent shall
not by implication have amended, waived or modified any provision of this
Agreement or any
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other Credit Document, or created any duty to give any such notice or
information or to obtain any such consent on any future occasion. No delay or
omission on the part of any Lender or the Agent in exercising any right under
this Agreement or any other Credit Document or with respect to the Credit
Obligations shall operate as a waiver of such right or any other right hereunder
or thereunder. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right or remedy on any future occasion. No waiver, consent or
amendment with respect to this Agreement or any other Credit Document shall be
binding unless it is in writing and signed by the Agent or the Required Lenders.
16. No Strict Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement and the other Credit Documents with
counsel sophisticated in financing transactions. In the event an ambiguity or
question of intent or interpretation arises, this Agreement and the other Credit
Documents shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement and the other
Credit Documents.
17. Defeasance. When all Credit Obligations have been paid, performed and
reasonably determined by the Lenders to have been indefeasibly discharged in
full, and if at the time no Lender continues to be committed to extend any
credit to the Holding Company hereunder or under any other Credit Document, this
Agreement and the other Credit Documents shall terminate and, at the Holding
Company's written request, accompanied by such certificates and other items as
the Agent shall reasonably deem necessary, the Credit Security shall revert to
the Obligors and the right, title and interest of the Lenders therein shall
terminate. Thereupon, on the Obligors' demand and at their cost and expense, the
Agent shall execute proper instruments, acknowledging satisfaction of and
discharging this Agreement and the other Credit Documents, and shall redeliver
to the Obligors any Credit Security then in its possession; provided, however,
that Sections 3.2.4, 3.5, 9, 10.8.7, 10.11, 12, 18 and 19 shall survive the
termination of this Agreement.
18. Venue; Service of Process. Each of the Borrower and the other Obligors:
(a) Irrevocably submits to the nonexclusive jurisdiction of the
state courts of The Commonwealth of Massachusetts and to the nonexclusive
jurisdiction of the United States District Court for the District of
Massachusetts for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement or any other Credit Document
or the subject matter hereof or thereof.
(b) Waives to the extent not prohibited by applicable law that
cannot be waived, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such proceeding brought in any of the
above-named courts, any claim that it is not subject personally to the
jurisdiction of such court, that its property is exempt or immune from
attachment or execution, that such proceeding is brought in an
inconvenient forum, that the venue of such proceeding is improper, or
that this
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Agreement or any other Credit Document, or the subject matter hereof or
thereof, may not be enforced in or by such court.
Each of the Borrower and the other Obligors consents to service of process in
any such proceeding in any manner at the time permitted by Chapter 223A of the
General Laws of The Commonwealth of Massachusetts and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified in or pursuant to Section 14 is reasonably calculated to give
actual notice.
19. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT
CANNOT BE WAIVED, EACH OF THE BORROWER, THE OTHER OBLIGORS, THE AGENT AND THE
LENDERS WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY CREDIT OBLIGATION OR IN
ANY WAY CONNECTED WITH THE DEALINGS OF THE LENDERS, THE AGENT, THE BORROWER OR
ANY OTHER OBLIGOR IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. Each
of the Borrower and the other Obligors acknowledges that it has been informed by
the Agent that the provisions of this Section 19 constitute a material
inducement upon which each of the Lenders has relied and will rely in entering
into this Agreement and any other Credit Document, and that it has reviewed the
provisions of this Section 19 with its counsel. Any Lender, the Agent, the
Borrower or any other Obligor may file an original counterpart or a copy of this
Section 19 with any court as written evidence of the consent of the Borrower,
the other Obligors, the Agent and the Lenders to the waiver of their rights to
trial by jury.
20. General. Time is (and shall be) of the essence in this Agreement and the
other Credit Documents. All covenants, agreements, representations and
warranties made in this Agreement or any other Credit Document or in
certificates delivered pursuant hereto or thereto shall be deemed to have been
relied on by each Lender, notwithstanding any investigation made by any Lender
on its behalf, and shall survive the execution and delivery to the Lenders
hereof and thereof. The invalidity or unenforceability of any provision hereof
shall not affect the validity or enforceability of any other provision hereof.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof. This Agreement and the other
Credit Documents constitute the entire understanding of the parties with respect
to the subject matter hereof and thereof and supersede all prior and
contemporaneous understandings and agreements, whether written or oral. This
Agreement may be executed in any number of counterparts which together shall
constitute one instrument. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of laws rules) of The
Commonwealth of Massachusetts.
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Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
PLAYCORE, INC.
By /s/
Title: Vice President
PLAYCORE WISCONSIN, INC.
By /s/
Title: Vice President
FLEET NATIONAL BANK
By /s/
Title: Vice President
FLEET NATIONAL BANK
Acquisition Finance Division
One Federal Street
Boston, Massachusetts 02110
Telecopy: (617) 346-4806
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BANKBOSTON, N.A.
By /s/
Title: Vice President
BANKBOSTON, N.A.
Diversified Finance
100 Federal Street
Boston, Massachusetts 02110
Telecopy: (617) 434-4929
LASALLE NATIONAL BANK
By /s/
Title: Vice President
LASALLE NATIONAL BANK
135 South LaSalle Street
Chicago, Illinois 60603
Telecopy: (312) 904-5483
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By/s/Michael P. Hermsen
Title:Vice President
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
1295 State Street
Springfield, Massachusetts 01111-0001
Telecopy: (413) 744-6127
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MASSMUTUAL HIGH YIELD PARTNERS II, LLC
By HYP MANAGEMENT, INC.,
as Managing Member
By/s/Michael P. Hermsen
Title:Vice President
MASSMUTUAL HIGH YIELD PARTNERS II, LLC
1295 State Street
Springfield, Massachusetts 01111-0001
Telecopy: (413) 744-6127
FIRSTAR BANK MILWAUKEE, N.A.
By/s/
Title:Vice President
FIRSTAR BANK MILWAUKEE, N.A.
777 East Wisconsin
Milwaukee, Wisconsin 53202
Telecopy: (414) 765-4632
M & I MARSHALL & ILSLEY BANK
By/s/
Title:Vice President
By/s/
Title:Senior Vice President
M & I MARSHALL & ILSLEY BANK
770 N. Water Street
Milwaukee, Wisconsin 53201
Telecopy: (414) 765-7625
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KEY CORPORATE CAPITAL INC.
By/s/
Title: Vice President
KEY CORPORATE CAPITAL INC.
190 South LaSalle Street - Suite 2840
Chicago, Illinois 60603
Telecopy: (312) 251-0687
The undersigned joins in and becomes
party to the foregoing Agreement as a
Guarantor as of the Initial Closing
Date:
HEARTLAND INDUSTRIES, INC. (DE)
By/s/
Title:Vice President, and
Chief Financial Officer
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PlayCore, Inc.
1212 Barberry Drive
Janesville, WI 53545
AT THE COMPANY: THE FINANCIAL RELATIONS BOARD:
Richard Ruegger General Inquiries Analyst Inquiries
Chief Financial Officer Jeff Wilhoit Tracy Gutwillig
(608) 755-4777 (312) 266-7800 (312) 266-7800
FOR IMMEDIATE RELEASE
TUESDAY, FEBRUARY 16, 1999
PLAYCORE, INC. COMPLETES ACQUISITION OF
HEARTLAND INDUSTRIES, INC.
Janesville, WI, February 16, 1999--PlayCore, Inc. (AMEX: PCO), a leading
commercial and consumer playground equipment company, announced today the
closing of its transaction to acquire Heartland Industries, Inc. As announced on
February 5, 1999, the Company had entered into a definitive agreement with
Heartland, a privately-held manufacturer and marketer of wooden storage
buildings based in Carmel, Indiana. Heartland's products, including yard barns
and custom-built garages, are constructed through its nationwide network of
independent contractors and marketed through 52 company-owned branches;
approximately 650 independent dealers; and national home center chains
throughout the United States. Sales for Heartland totaled approximately $80
million in the twelve-month period ended January 31, 1999.
"The addition of Heartland adds a new Backyard product line to the PlayCore
portfolio," said PlayCore Chief Executive Officer Frederic Contino. "One of
Heartland's fundamental strengths is its reputation for high quality and value
in its backyard products that the everyday consumer needs and appreciates. This
emphasis on product quality and value is consistent with the solid reputation
we've developed among our own Swing-N-Slide product lines. As a complement, our
strength in home center distribution should assist Heartland's penetration into
that channel. The acquisition will also bring to PlayCore wood processing
capabilities, installation and facilities from which we can benefit across all
of our existing product lines. Heartland will enhance our leadership position in
backyard products throughout the U.S. and abroad and enable our entrance into
the higher-priced playset market."
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PlayCore, Inc.
Add -1-
Commenting on the acquisition, Heartland President Richard Hettlinger said, "In
the 23 years of Heartland's existence, the company has forged a reputation for
quality, value and customer service. We are proud that Heartland will become
part of a corporation that shares those same values and vision for leadership in
backyard products."
On February 5, 1999, PlayCore announced that net sales for the year ended
December 31, 1998 increased 28 percent to $114,792,000 compared to 1997. Income
before extraordinary item increased 130 percent to $4,676,000, and diluted
earnings per share before the extraordinary item increased 82 percent to $0.51
from $0.28 in 1997.
Headquartered in Janesville, Wisconsin, PlayCore, Inc. is a leading commercial
and consumer playground equipment and backyard products company. GameTime,
PlayCore's commercial products company, is located in Ft. Payne, Alabama.
GameTime markets its playground systems to municipalities, schools, park
districts, amusement parks and other playground equipment users through a
network of dedicated independent representatives. GameTime is one of the largest
manufacturers and marketers of modular and custom commercial outdoor and indoor
playground equipment in the world. Swing-N-Slide, PlayCore's consumer products
company, markets through hardware and home center customers and has
manufacturing facilities in Janesville, Wisconsin. Its do-it-yourself wooden
playground equipment is the market leader in the U.S. and is sold worldwide
through more than 6,000 home center, building supply and hardware stores.
Certain matters discussed herein are "forward-looking statements." These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are forward-looking
statements. Such forward-looking statements are subject to certain risks and
uncertainties which are described in close proximity to such statements and
which could cause actual results to differ materially from those currently
anticipated. The forward-looking statements made herein are only made as of the
date of this report and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
To receive PlayCore's latest news release and other corporate documents, free of
charge via fax, simply dial 1-800-PRO-INFO. Use company code PCO.
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