<PAGE>
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): April 2, 1997
AFFINITY GROUP, INC.
--------------------
(Exact Name of Registrant As Specified in Its Charter)
DELAWARE
--------
(State or Other Jurisdiction of Incorporation)
0-22852 13-3377709
(Commission File Number) (IRS Employer Identification No.)
64 Inverness Drive East, Englewood, Colorado 80112
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (303) 792-7284
--------------
<PAGE>
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On April 2, 1997, Affinity Group, Inc. and its subsidiaries (the "Company")
acquired the stock of Camping World, Inc. ("Camping World") for $108.0
million in cash, including $19.0 million for non-competition and consulting
agreements with certain Camping World executives. In addition, Affinity
Group Holding, Inc. ("AGH"), the Company's parent corporation, entered into
management incentive agreements with certain Camping World executives
pursuant to which up to an additional $15.0 million will be paid subject to
Camping World achieving certain operating goals. Such contingent amounts
will be payable in $1.0 million annual installments on the first four
anniversaries of the closing and $11.0 million of the fifth anniversary of
the closing. David B. Garvin, the Chairman and founder of Camping World, and
Thomas A. Donnelly, the President of Camping World, have agreed to join the
Company's Board of Directors.
In addition, on April 2, 1997, the Company replaced its credit facility with
a new $75 million credit facility which provides a term loan of $30 million
(reducing in quarterly principal installments of $1.5 million) and a $45
million revolving credit facility. At April 2, 1997, the outstanding balance
under the prior credit facility was $38.6 million which was repaid from the
proceeds of the $30 million term loan under the new credit facility and the
balance from a portion of the capital contribution made by AGH to the
Company as discussed below.
The purchase price of Camping World was funded through capital contributions
by AGH, from the net proceeds from the April 2, 1997 issuance of $130 million
in 11% senior notes due 2007 ("AGH Notes"), net of expenses and repayment of
approximately $7.5 million of AGH's debt, together with draws on the
Company's new $75 million credit facility.
On March 6, 1997, the Company acquired the stock of Ehlert Publishing
Companies ("Ehlert") for $22.3 million, of which $20.8 million was paid in
cash at closing. In addition, a $1.5 million note (the "Ehlert Note") was
issued to the seller of which $1.0 million has recently been paid. The
balance of the Ehlert Note is payable on March 6, 1999, together with
interest at 5% per annum. In addition, John Ehlert, the founder and
principal stockholder of Ehlert, entered into a non-competition agreement
for $200,000. Mr. Ehlert has agreed to join the Company's Board of
Directors.
The purchase price of Ehlert was funded primarily through borrowings under
the Company's previous credit facility, $4 million in capital contributions
to the Company from AGH, and the $1.5 million Ehlert Note.
Camping World is a national specialty retailer offering recreational vehicle
merchandise and services through 26 retail supercenters and mail order
catalogs. Approximately 85% of Camping World's fiscal 1996 revenue were
derived from sales to the approximately 465,000 members of its President's
Club. Ehlert is a specialty publisher of sports and recreation magazines
focusing on four niches: snowmobiling, personal
1
<PAGE>
watercraft, archery and all-terrain vehicles with a total circulation of
approximately 1.4 million. As a result of the Camping World acquisition, the
Company has over 1.7 million paying members enrolled in its recreational
affinity clubs and has over 3.9 million names in its proprietary database
targeted to the recreational activities of the Company's club members,
including approximately 1.0 million new names from Camping World. As a
result of the Ehlert acquisition, the circulation of the Company's
publications exceeds 4.7 million
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired:
Audited consolidated financial statements of Camping World, Inc. for
the years ended September 30, 1996, 1995, and 1994.
Interim unaudited consolidated financial statements of Camping World,
Inc. for the three months ended December 31, 1996 and 1995.
(b) Pro forma Financial Information:
Pro forma financial information as of December 31, 1996. The pro forma
financial statements reflect purchase accounting adjustments for
the Camping World, Inc. and Ehlert Publishing Group, Inc. stock
acquired based on the terms of the Stock Purchase Agreements.
(c) Exhibits:
The following exhibits are furnished in accordance with Item 601 of
Regulation S-K:
EXHIBITS EXHIBIT NUMBER
Stock Purchase Agreement dated as of 2.1
February 25, 1997, by and among the
Shareholders of Camping World, Inc.
and Affinity Group, Inc.
Credit Agreement dated as of April 2, 2.2
1997 among Fleet National Bank, The
Provident Bank and Affinity Group, Inc.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Affinity Group, Inc.
--------------------
(Registrant)
By: /s/ Mark J. Boggess
-------------------------
Mark J. Boggess
Senior Vice President and
Chief Financial Officer
Date: April 16, 1997
--------------
3
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma combined financial statements presented below for
the year ended December 31, 1996, are derived from the Company's Consolidated
Financial Statements and the notes thereto, Camping World's Consolidated
Financial Statements and the notes thereto and Ehlert's Consolidated Financial
Statements and the notes thereto. This summary should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operation", the Company's Consolidated Financial Statements and the related
notes thereto, included in the Company's December 31, 1996 Form 10-K, and
Camping World's Consolidated Financial Statements and the notes thereto
included herein.
The unaudited pro forma combined statement of operations has been adjusted
to give pro forma effect to (i) the capital contribution to the Company
resulting from the issuance of the Affinity Group Holding, Inc.'s ("AGH") $130
million 11% senior notes due 2007 and issued April 2, 1997 (the "AGH Notes") and
the application of the net proceeds therefrom, (ii) the acquisitions of Camping
World and Ehlert (the "Acquisitions"), and (iii) identified cost savings, as if
they had occurred as of January 1, 1996.
The unaudited pro forma combined balance sheet has been adjusted to give
pro forma effect to (i) the capital contribution to the Company resulting
from the issuance of the AGH Notes and the application of the net proceeds
therefrom and (ii) the Acquisitions, as if they had occurred as of December 31,
1996.
The Acquisitions will be accounted for using the purchase method of
accounting. Under purchase accounting, the total purchase price and fair value
of liabilities assumed will be allocated to the tangible and intangible assets
and liabilities based on their respective fair values as of the closing of such
acquisitions. The pro forma combined balance sheet reflects preliminary
estimates, which are subject to final determinations of the allocation of the
purchase price. The pro forma adjustments represent management's preliminary
determination of purchase accounting adjustments and are based upon available
information and certain assumptions that the Company considers reasonable under
the circumstances. Consequently, the amounts reflected in the pro forma
combined balance sheet are subject to change. Management does not expect that
differences between the preliminary and final purchase price allocation will
have a material impact on the Company's financial position and/or results of
operations.
The unaudited pro forma combined financial statements do not purport to
be indicative of the results that would have obtained had the above-described
transactions been completed on the indicated dates or that may be obtained in
the future.
4
<PAGE>
AFFINITY GROUP, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------------
CAMPING PRO FORMA
COMPANY WORLD EHLERT ADJUSTMENTS COMBINED
---------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............................. $ 4,278 $ 3,107 $ 25 $ -- $ 7,410
Inventories............................................ 2,473 31,284 -- 189 (1) 33,946
Other current assets................................... 23,591 4,713 654 -- 28,958
---------- --------- --------- ----------- -----------
Total current assets................................... 30,342 39,104 679 189 70,314
Property and equipment................................. 10,550 31,687 208 10,000 (2) 52,445
Intangible assets...................................... 109,065 6,136 550 76,309 (3) 192,060
Other non-current assets............................... 34,171 2,308 -- (1,970)(4) 34,509
---------- --------- --------- ----------- -----------
Total assets........................................... $ 184,128 $ 79,235 $ 1,437 $ 84,528 $ 349,328
---------- --------- --------- ----------- -----------
---------- --------- --------- ----------- -----------
Short-term debt and current portion of long-term
debt................................................. $ 5,344 $ 12,522 $ -- $ (10,322)(5) $ 7,544
Other current liabilities.............................. 38,442 18,550 141 (350)(6) 56,783
---------- --------- --------- ----------- -----------
Total current liabilities.............................. 43,786 31,072 141 (10,672) 64,327
Deferred revenue, including current portion............ 70,113 2,695 2,290 -- 75,098
Long-term debt, net of current portion................. 142,031 24,646 -- (21,696)(5) 144,981
Other non-current liabilities.......................... 7,632 5,124 -- 4,000 (7) 16,756
Stockholder's equity (deficit)......................... (79,434) 15,698 (994) 112,896 (8) 48,166
---------- --------- --------- ----------- -----------
Total liabilities and stockholder's equity (deficit)... $ 184,128 $ 79,235 $ 1,437 $ 84,528 $ 349,328
---------- --------- --------- ----------- -----------
---------- --------- --------- ----------- -----------
</TABLE>
5
<PAGE>
AFFINITY GROUP, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996(9)
-------------------------------------------------------------
CAMPING PRO FORMA
COMPANY WORLD EHLERT ADJUSTMENTS COMBINED
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net revenues......................................... $ 139,979 $ 169,770 $ 14,249 $ -- $ 323,998
Cost applicable to net revenues...................... 86,574 108,769 7,209 (5,182)(10) 197,370
----------- ----------- --------- ----------- -----------
Gross profit......................................... 53,405 61,001 7,040 5,182 126,628
Selling, general and administrative expense.......... 16,326 48,795 4,797 (997)(11) 68,921
Depreciation and amortization........................ 8,340 2,380 178 3,113 (12) 14,011
----------- ----------- --------- ----------- -----------
Income from operations............................... 28,739 9,826 2,065 3,066 43,696
Interest expense, net................................ (16,518) (3,078) (15) 3,154(13) (16,457)
Other non-operating expense, net..................... (996) -- 48 -- (948)
----------- ----------- --------- ----------- -----------
Income from continuing operations before income
taxes.............................................. 11,225 6,748 2,098 6,220 26,291
Income tax expense................................... (6,144) (2,773) -- (4,228)(14) (13,145)
----------- ----------- --------- ----------- -----------
Income from continuing operations.................... $ 5,081 $ 3,975 $ 2,098 $ 1,992 $ 13,146
----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- -----------
</TABLE>
6
<PAGE>
AFFINITY GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
The aggregate purchase price of Camping World and Ehlert, including
related fees and expenses, is approximately $179.1 million. The purchase
price has been allocated on a preliminary basis to the assets acquired based
on estimated fair values at the date of acquisition with the excess of cost
over fair value allocated to goodwill. Certain amounts of the total purchase
price, specifically incentive management obligations of $10 million and
underwriting fees of $3.9 million, will be incurred by the Company's parent,
AGH, and, accordingly, have not been reflected below. The purchase price
allocation to property and equipment, excluding land, will be amortized over
the estimated useful lives ranging from 3 to 25 years. Goodwill will be
amortized on a straight line basis over 40 years. Noncompete and consulting
agreements will be amortized over the terms of the agreements, fifteen years.
Financing costs will be amortized over the life of the debt (5 to 10 years).
The preliminary allocation of the total purchase price to the assets
acquired is as follows:
<TABLE>
<CAPTION>
CAMPING
WORLD EHLERT COMBINED
---------- --------- ----------
<S> <C> <C> <C>
PURCHASE PRICE:
Cash paid at closing for stock and debt repayment............................ $ 89,000 $ 22,300 $ 111,300
Non-competition and/or consulting agreements................................. 19,000 200 19,200
Fees and expenses............................................................ 1,150 1,100 2,250
Liabilities, at fair value................................................... 30,019 2,431 32,450
---------- --------- ----------
Total...................................................................... $ 139,169 $ 26,031 $ 165,200
---------- --------- ----------
---------- --------- ----------
PRELIMINARY ALLOCATION OF PURCHASE PRICE:
Cash......................................................................... $ 3,107 $ 25 $ 3,132
Inventories.................................................................. 31,473 -- 31,473
Other current assets......................................................... 4,713 654 5,367
Property and equipment....................................................... 41,687 208 41,895
Other non-current assets..................................................... 338 -- 338
Intangible (including combined goodwill of $61,545).......................... 57,851 25,144 82,995
---------- --------- ----------
Total...................................................................... $ 139,169 $ 26,031 $ 165,200
---------- --------- ----------
---------- --------- ----------
</TABLE>
Pro forma adjustments reflect estimates which will be refined as additional
information is obtained, particularly in the areas of fair value of property and
equipment and related depreciation expense, and any adjustment to be made to the
purchase price in accordance with the purchase agreements.
Pro forma adjustments have been made to the Pro Forma Combined Balance Sheet
to reflect the following:
(1) Record write-up of Camping World inventory from LIFO cost to estimated fair
value in accordance with the purchase method of accounting.
(2) Record write-up in Camping World property and equipment acquired to
estimated fair market value in accordance with the purchase method of
accounting.
(3) Elimination of previously recorded Camping World and Ehlert goodwill ($6.2
million and $555,000, respectively) and the recording of goodwill,
noncompete, consulting and fees and expenses resulting from the Acquisitions
in accordance with the purchase method of accounting.
(4) Elimination of previously recorded Camping World deferred financing cost.
7
<PAGE>
AFFINITY GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
(5) Record issuance of new $75 million senior credit facility consisting
of $30 million term and $45 million revolver, net of repayment of
existing senior credit facility and Camping World debt to be paid
at closing.
(6) Elimination of Camping World liabilities to be paid at closing.
(7) Establishment of deferred income tax liability in accordance with the
purchase method accounting.
(8) Record capital contributions made by AGH principally from the net proceeds
of a $130 million senior note offering net of elimination of shareholders'
equity of Camping World and Ehlert in accordance with the purchase method
to accounting.
Pro forma adjustments have been made to the Pro Forma Combined Statement of
Operations to reflect the following:
(9) Amounts for Camping World are for its fiscal year ended September 30, 1996.
(10) Pro forma results include estimated cost savings which the Company expects
to realize through: specific headcount reductions undertaken at the Company
in anticipation of the Camping World acquisition; reductions in redundant
costs associated with member acquisition, retention and renewal efforts
principally related to reduced printing, paper, and fulfillment and mailing
expenses; consolidation of the emergency road service programs; and
consolidation of publishing operations. Although management intends to
implement its cost savings prudently, there can be no assurance that all of
the anticipated cost savings associated with these measures will be
realized.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Headcount reduction--salaries............................................................. $ 2,250(a)
Headcount reduction--benefits............................................................. 563(a)
Reduction in redundant cost associated with member acquisition, retention, renewals and
magazine production..................................................................... 2,369(b)
------
$ 5,182
------
------
</TABLE>
----------------------------
(a) In anticipation of the Camping World acquisition, the Company eliminated
58 employees in December 1996 resulting in annual pro forma savings of
$2,250 in salary expense and an estimated $563 of related benefits
expense savings.
(b) The Company estimates that it can achieve $2,369 in annual cost savings
from the following:
- As a result of the estimated 250,000 overlapping club members in the
Good Sam Club and the President's Club and through availability of
lower cost channels from which to solicit club members, the Company
expects to realize $1,474 in annual savings on printing, fulfillment
and mailing expenses.
- The Company expects to realize $387 in annual savings as a result of
the consolidation of its emergency road service program.
- Through the consolidation of publishing operations, the Company expects
to realize $508 in savings principally on paper costs.
8
<PAGE>
AFFINITY GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
(11) Elimination of Ehlert salaries, incentives, travel, entertainment,
insurance, automobile and 401(k) costs.
(12) Record incremental amortization of intangible assets over 5 to 40 years and
depreciation on write-up of property and equipment.
(13) Record incremental interest expense and elimination of interest expense
incurred on indebtedness repaid at closing
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Interest on acquired indebtedness repaid at closing................ $ 3,575
Offset by: Increase in senior secured indebtedness at 8.5%....... (421)
-------
$ 3,154
-------
-------
</TABLE>
(14) Record income tax effect on pro forma combined operations at an assumed
effective rate of 50%.
9
<PAGE>
AFFINITY GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CAMPING WORLD, INC.
Independent Auditors' Report.............................................. F-1
Consolidated Balance Sheets as of September 30, 1996 and 1995............. F-2
Consolidated Statements of Earnings for the years ended September 30,
1996, 1995 and 1994..................................................... F-3
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 1996, 1995 and 1994....................................... F-4
Consolidated Statements of Cash Flows for the years ended September 30,
1996, 1995 and 1994..................................................... F-5
Notes to Consolidated Financial Statements................................ F-6
Consolidated Balance Sheet as of December 31, 1996 (unaudited)............ F-17
Consolidated Statements of Operations for the three months ended December
31, 1996 and 1995 (unaudited)........................................... F-18
Consolidated Statements of Cash Flows for the three months ended December
31, 1996 and 1995 (unaudited)........................................... F-19
Notes to Consolidated Financial Statements (unaudited).................... F-20
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Camping World, Inc.
Bowling Green, Kentucky
We have audited the consolidated balance sheets of Camping World, Inc. and
subsidiaries as of September 30, 1996 and 1995, and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
three years in the period ended September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Camping World, Inc. and
subsidiaries as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
November 22, 1996 (April 2, 1997 with respect to Note 14)
Nashville, Tennessee
F-1
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1)............................................... $ 3,785,159 $ 2,572,876
Trade accounts receivable, no allowance for doubtful accounts considered
necessary (Note 2)............................................................. 655,369 1,286,623
Inventories (Notes 1 and 3)...................................................... 27,327,936 24,741,370
Vendor and other receivables..................................................... 3,252,447 2,041,837
Prepaid expenses, deferred catalog costs and other (Note 1)...................... 2,126,657 2,098,375
------------- -------------
Total current assets....................................................... 37,147,568 32,741,081
PROPERTY AND EQUIPMENT, net (Notes 1, 4 and 6)..................................... 32,005,469 29,117,567
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, net of accumulated
amortization of $1,547,323 and $1,354,027 (Note 1)............................... 6,184,465 6,377,761
OTHER ASSETS (Notes 1 and 5)....................................................... 2,360,702 2,935,762
------------- -------------
TOTAL.............................................................................. $ 77,698,204 $ 71,172,171
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................. $ 13,354,907 $ 12,862,633
Accrued expenses and other (Note 10)............................................. 5,078,742 4,984,291
Deferred income (Note 1)......................................................... 2,383,056 3,235,453
Income taxes payable (Notes 1 and 11)............................................ 922,671 987,000
Short-term borrowings (Note 6)................................................... 6,094,771 3,696,593
Current maturities of long-term debt (Note 6).................................... 3,203,158 2,733,224
------------- -------------
Total current liabilities.................................................. 31,037,305 28,499,194
DEFERRED INCOME TAXES (Notes 1 and 11)............................................. 5,124,245 4,825,245
DEFERRED INCOME (Note 1)........................................................... 542,421 705,222
LONG-TERM DEBT (Note 6)............................................................ 20,950,616 21,153,985
SUBORDINATED NOTES (Note 7)........................................................ 3,374,354 3,334,853
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY: (Notes 1, 9 and 12)
Common stock--Class A voting, $0.0l par value; authorized, 13,000,000 shares;
issued and outstanding, 1,236,880 shares and 1,233,880 shares, respectively.... 12,369 12,339
Common stock--Class B nonvoting, $0.0l par value; authorized, 2,000,000 shares;
issued and outstanding, 1,276,828 shares....................................... 12,768 12,768
Additional paid-in capital....................................................... 1,202,641 1,161,551
Retained earnings................................................................ 15,441,485 11,467,014
------------- -------------
Total shareholders' equity................................................. 16,669,263 12,653,672
------------- -------------
TOTAL.............................................................................. $ 77,698,204 $ 71,172,171
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Merchandise sales............................................... $ 147,254,869 $ 143,344,126 $ 137,711,646
Other revenues (Note 1)......................................... 22,514,926 19,079,029 16,321,237
-------------- -------------- --------------
Total revenues................................................ 169,769,795 162,423,155 154,032,883
COST RELATED TO MERCHANDISE SOLD AND OTHER REVENUES (Notes 1, 4
and 8)........................................................ 108,768,825 104,951,237 100,097,229
-------------- -------------- --------------
Gross profit.................................................. 61,000,970 57,471,918 53,935,654
OPERATING EXPENSES:
Selling, general and administrative expenses (Notes 1, 4, 8
and 10)..................................................... 51,175,164 49,667,616 44,754,811
-------------- -------------- --------------
Operating income.............................................. 9,825,806 7,804,302 9,180,843
-------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest income................................................. 523,377 438,063 380,221
Interest expense (Notes 1, 5, 6 and 7).......................... (3,601,712) (3,861,768) (4,342,138)
Other........................................................... -- -- (143,500)
-------------- -------------- --------------
Total other income (expense).................................. (3,078,335) (3,423,705) (4,105,417)
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM............... 6,747,471 4,380,597 5,075,426
PROVISION FOR INCOME TAX EXPENSE (Notes 1 and 11)............... 2,773,000 1,796,000 2,081,000
-------------- -------------- --------------
INCOME BEFORE EXTRAORDINARY ITEM................................ 3,974,471 2,584,597 2,994,426
EXTRAORDINARY ITEM--Loss on early extinguishment of debt, less
applicable income taxes of $240,000 (Note 6).................. -- -- 346,476
-------------- -------------- --------------
NET INCOME...................................................... $ 3,974,471 $ 2,584,597 $ 2,647,950
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
CLASS A VOTING COMMON CLASS B NONVOTING
STOCK COMMON STOCK ADDITIONAL TOTAL
---------------------- ---------------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- ----------- --------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1993............ 1,200,000 $ 12,000 1,200,000 $ 12,000 $1,667,455 $6,234,467 $ 7,925,922
Exercise of stock options.............. 21,000 210 -- -- 52,290 -- 52,500
Repurchase and retirement of common
stock................................ (9,000) (90) -- -- (61,380) -- (61,470)
Net income............................. -- -- -- -- -- 2,647,950 2,647,950
--------- ----------- --------- ----------- ----------- ---------- -------------
BALANCE, SEPTEMBER 30, 1994............ 1,212,000 12,120 1,200,000 12,000 1,658,365 8,882,417 10,564,902
Exercise of stock options and
warrants............................. 58,630 587 76,828 768 37,898 -- 39,253
Repurchase and retirement of common
stock................................ (36,750) (368) -- -- (534,712) -- (535,080)
Net income............................. -- -- -- -- -- 2,584,597 2,584,597
--------- ----------- --------- ----------- ----------- ---------- -------------
BALANCE, SEPTEMBER 30, 1995............ 1,233,880 12,339 1,276,828 12,768 1,161,551 11,467,014 12,653,672
Exercise of stock options.............. 3,000 30 -- -- 41,090 -- 41,120
Net income............................. -- -- -- -- -- 3,974,471 3,974,471
--------- ----------- --------- ----------- ----------- ---------- -------------
BALANCE, SEPTEMBER 30, 1996............ 1,236,880 $ 12,369 1,276,828 $ 12,768 $1,202,641 $15,441,485 $16,669,263
--------- ----------- --------- ----------- ----------- ---------- -------------
--------- ----------- --------- ----------- ----------- ---------- -------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................ $ 3,974,471 $ 2,584,597 $ 2,647,950
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................... 2,186,434 1,943,395 1,813,444
Amortization of debt related costs...................................... 368,615 443,374 414,067
Amortization of intangibles............................................. 193,296 193,296 193,296
Amortization of deferred income on sale/leaseback....................... (14,231) (2,811) --
(Gain) loss on sale of property and equipment and other assets.......... (609) 5,062 (152,430)
Extraordinary loss on debt extinguishment............................... -- -- 586,476
Deferred income taxes................................................... 299,000 (44,000) 60,000
(Increase) decrease in operating assets:
Trade accounts receivable............................................. 631,254 (1,148,706) 1,566,286
Inventories........................................................... (2,586,566) 517,049 (3,832,037)
Vendor and other receivables.......................................... (1,210,610) (1,035,393) 90,866
Prepaid expenses, deferred catalog costs and other.................... (28,282) 216,384 (952,706)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses................................. 586,725 2,061,280 2,596,024
Deferred income....................................................... (1,000,967) 1,691,939 271,482
Income taxes payable.................................................. (64,329) 112,014 670,359
----------- ----------- -----------
Net cash provided by operating activities........................... 3,334,201 7,537,480 5,973,077
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................................... (5,109,141) (3,265,825) (1,655,088)
Proceeds from sale of property and equipment.............................. 1,400 71,889 376,812
Decrease (increase) in other assets....................................... 245,946 (670,834) (233,091)
----------- ----------- -----------
Net cash used in investing activities............................... (4,861,795) (3,864,770) (1,511,367)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to property held for sale/leaseback............................. (2,715,986) (3,818,575) --
Proceeds from sale/leaseback of property.................................. 2,750,000 4,167,800 --
Deferred financing costs.................................................. -- -- (1,752,868)
Net increase (reduction) in short-term borrowings......................... 3,814,178 (866,606) 1,420,175
Proceeds from issuance of long-term debt.................................. 3,981,006 -- 24,000,000
Payments of long-term debt................................................ (5,130,441) (1,935,945) (28,366,415)
Exercise of stock options and warrants.................................... 41,120 39,253 52,500
Repurchase and retirement of common stock................................. -- (535,080) (61,470)
----------- ----------- -----------
Net cash provided by (used in) financing activities................. 2,739,877 (2,949,153) (4,708,078)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ 1,212,283 723,557 (246,368)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............................. 2,572,876 1,849,319 2,095,687
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................................... $ 3,785,159 $ 2,572,876 $ 1,849,319
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amounts capitalized)................................... $ 3,501,893 $ 3,427,384 $ 4,080,708
----------- ----------- -----------
----------- ----------- -----------
Income taxes............................................................ $ 2,537,218 $ 1,573,397 $ 1,110,922
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE CONSOLIDATED FINANCIAL STATEMENTS of Camping World, Inc. (the "Company")
include the accounts of the Company and its wholly-owned subsidiaries. All
material intercompany transactions have been eliminated. The Company operates 27
retail Supercenters and a mail order/telephone order catalog service offering a
variety of merchandise and services to the owners of recreational vehicles.
CASH AND CASH EQUIVALENTS principally consist of demand deposits and
repurchase agreements at banks with maturities less than three months.
INVENTORIES are generally valued at the lower of cost or net realizable
market value. Inventory costs are charged to cost of goods sold primarily by the
last-in, first-out (LIFO) method.
CATALOG COSTS associated with the production and mailing of the Company's
direct mail catalogs and national media offerings are deferred and amortized
over the periods in which the related revenues are generated, generally three
months or less.
PROPERTY AND EQUIPMENT are stated at cost, less accumulated depreciation and
amortization. Depreciation of property and equipment is calculated using the
straight-line method over the estimated useful lives of the assets (ranging from
three to twenty-five years). Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or the estimated useful
life of the asset (ranging from seven to fifteen years).
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED is amortized on the
straight-line basis over forty years.
LONG-LIVED ASSETS--The Company assesses the impairment of the value of
property and equipment, excess of cost over fair value of net assets acquired
and other long-lived assets from time to time utilizing valuation methodologies
that reflect the current fair market value of the assets. Effective October 1,
1996, the Company will adopt the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
FOR LONG-LIVED ASSETS TO BE DISPOSED OF. The Company does not expect the
adoption of SFAS No. 121 to result in an adjustment to the financial statements
at the date of adoption.
OTHER ASSETS include deferred financing costs which are carried at cost less
accumulated amortization. Deferred financing costs are amortized over the lives
of the related borrowings using the effective interest rate method.
THE PRESIDENT'S CLUB program consists of a program whereby customers pay a
membership fee and are entitled to special mailings, promotions and discounts.
Membership fees from the President's Club program are included in other
revenues. The membership fees are deferred and recognized as revenues in
proportion to the buying patterns of members.
INCOME TAXES are accounted for in accordance with SFAS No. 109, ACCOUNTING
FOR INCOME TAXES.
INTEREST is capitalized on borrowed funds used to construct qualifying
assets as part of the cost of the asset. Interest is capitalized using the
Company's incremental borrowing rate or, where appropriate, the rate on
borrowings specifically associated with a qualifying asset.
STOCK OPTIONS--SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, is
effective October 1, 1996 for the Company. The new standard encourages companies
to adopt a fair value method of accounting for
F-6
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
employee stock options but allows companies to continue to account for those
plans using the accounting prescribed by Accounting Principles Board (APB)
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The Company will adopt
the disclosure requirements of the new standard in fiscal 1997 and plans to
continue accounting for stock compensation using APB Opinion 25, making pro
forma disclosures of net income as if the fair value method had been applied.
MANAGEMENT ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CERTAIN RECLASSIFICATIONS of prior year amounts have been made to conform to
the current year presentation.
2. TRADE ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
The Company offers to its catalog customers various deferred installment
payment plans ranging from three to twelve months. At September 30, 1996 and
1995, the Company had installment plan receivables of approximately $655,000 and
$1,287,000, respectively. The Company also issues it own private label credit
card through an independent financial institution. All receivables and related
financing, credit approval, collection efforts, and supporting services on the
private label credit card are provided without recourse to the Company by the
independent financial institution.
Except for the above mentioned financing arrangements offered to its
customers, the Company accepts cash, checks, and major credit cards in full
payment for goods and services at the point of sale. The Company's credit risk
is minimal since no single customer accounts for a significant amount of
business. The Company's retail stores are located in 17 states with eight
locations in California and three in Florida. The retail market penetration
covers the continental United States, except for the northeastern portion. The
catalog operation ships to all fifty states and to a much lesser extent Canada,
Japan and Europe.
3. INVENTORIES
Inventories consist of finished goods purchased principally from
manufacturers and are primarily valued at the lower of last-in, first-out (LIFO)
cost or net realizable market value. If inventories had been stated at current
cost, inventories would have increased by approximately $189,000 and $403,000 at
September 30, 1996 and 1995, respectively.
F-7
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Land.......................................................... $ 9,840,907 $ 10,710,584
Buildings..................................................... 17,307,343 16,751,974
Furniture, fixtures and equipment............................. 14,659,390 10,464,128
Leasehold improvements........................................ 952,158 682,253
Capital projects-in-progress.................................. 2,427,551 1,529,903
-------------- --------------
45,187,349 40,138,842
Less accumulated depreciation and amortization................ (13,181,880) (11,021,275)
-------------- --------------
$ 32,005,469 $ 29,117,567
-------------- --------------
-------------- --------------
</TABLE>
Interest costs capitalized were $303,035, $212,068 and $0, respectively, for
the years ended September 30, 1996, 1995 and 1994. These costs related primarily
to Supercenters constructed and subsequently sold/leased back during the years
ended September 30, 1996 and 1995.
5. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Deferred financing costs (net of accumulated amortization of
$835,205 and $506,091).......................................... $ 1,969,565 $ 2,298,679
Long-term deposits and other...................................... 391,137 637,083
------------ ------------
$ 2,360,702 $ 2,935,762
------------ ------------
------------ ------------
</TABLE>
6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
On May 31, 1994, the Company refinanced a major portion of its debt
structure through an agreement (the "Credit Agreement") with a financial
institution. The new facility aggregated $44 million and is comprised of three
major loan arrangements. First, a new $24 million term loan was obtained to pay
off the existing term loan and revolving credit note with the Company's former
senior lending institution. Additionally, the remaining proceeds from the term
loan and a portion of the available line of credit from a $10 million revolving
loan with the new senior lending financial institution were used to pay off a
$7.5 million senior subordinated note and $1 million each of the acquisition and
junior subordinated notes (See Note 7). The third portion of the new facility is
a $10 million commitment from the new senior lender for expansion of the number
of the Company's retail Supercenters.
This refinancing resulted in an approximate $586,000 write-off of deferred
financing costs during 1994 related to the early retirement of existing debt
described above.
F-8
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT (CONTINUED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Term loan, interest on the first $19.5 million outstanding at the
London Interbank Offered Rate (LIBOR) one month rate plus 3% (8.5%
at September 30, 1996), interest on the remaining outstanding
balance at the prime rate of interest plus 1.5% (9.75% at
September 30, 1996) payable monthly, principal due in quarterly
installments of $500,000 beginning January 1, 1995; the quarterly
installments increase by $125,000 each year until the term loan
expires on September 30, 2001..................................... $ 20,125,000 $ 22,500,000
Revolving loan, interest at the prime rate of interest plus 1.5%
(9.75% at September 30, 1996) payable monthly..................... 6,094,771 2,280,593
Expansion loans, interest at the LIBOR one month rate plus 3.5% (9%
at September 30, 1996) payable monthly............................ 3,000,000 1,416,000
Mortgage payable, interest at the rate of 7.25% at September 30,
1996, monthly principal and interest payments of $20,470 through
1998, collateralized by property with a net book value of
approximately $1,064,000 at September 30, 1996.................... 847,779 1,024,722
Installment notes payable, interest rates ranging from 9.25% to
9.75% at September 30, 1996, monthly principal and interest
payments ranging from $4,121 to $6,155 through 1997,
collateralized by furniture, fixtures and equipment with a net
book value of approximately $393,000 at September 30, 1996........ 180,995 362,487
------------ ------------
30,248,545 27,583,802
Less short-term borrowings.......................................... (6,094,771) (3,696,593)
Less current maturities of long-term debt........................... (3,203,158) (2,733,224)
------------ ------------
$ 20,950,616 $ 21,153,985
------------ ------------
------------ ------------
</TABLE>
Borrowings under the revolving loan are limited to the lesser of $10,000,000
or 55% of eligible inventory as defined in the Credit Agreement. The revolving
loan expires September 30, 2001. As of September 30, 1996, $3,905,229 was
available under the revolving loan. Borrowings under the revolving loan are
expected to be repaid prior to September 30, 1997 and are classified as current
at September 30, 1996. Borrowings under the expansion loan facility are limited
to $10,000,000. The expansion loan facility expires October 1, 1999 at which
point any outstanding balance becomes payable quarterly beginning January 1,
2000. As of September 30, 1996, $7,000,000 was available under the expansion
loan facility. The weighted average interest rate on outstanding short-term
borrowings was 9.47% and 9.60% for the years ended September 30, 1996 and 1995,
respectively.
The Credit Agreement contains restrictive covenants, the more significant of
which require the Company to maintain certain interest coverage, fixed charge
coverage, and adjusted total debt coverage ratios; certain minimum levels of
earnings before interest, depreciation, amortization, and taxes; certain minimum
levels of net worth; and prohibits cash dividends. In addition, certain limits
are placed upon capital expenditures. At September 30, 1996, the Company was in
compliance with these covenants.
F-9
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT (CONTINUED)
Substantially all of the assets of the Company serve as collateral for loans
outstanding under the Credit Agreement.
The aggregate maturities of long-term debt subsequent to September 30, 1997
are as follows:
YEAR ENDING
SEPTEMBER 30, AMOUNT
- ---------------------------------------------------- -------------
1998................................................ $ 3,625,934
1999................................................ 4,095,263
2000................................................ 7,604,419
2001................................................ 5,625,000
-------------
$ 20,950,616
-------------
-------------
7. SUBORDINATED NOTES
Subordinated notes consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Acquisition subordinated notes.................................... $ 2,000,000 $ 2,000,000
Junior subordinated notes (net of discount of $125,646 and
$165,147)....................................................... 1,374,354 1,334,853
------------ ------------
$ 3,374,354 $ 3,334,853
------------ ------------
------------ ------------
</TABLE>
The acquisition subordinated notes as amended May 31, 1994 bear interest at
16.5%, payable quarterly until maturity. The notes are due in various quarterly
installments beginning September 2001 until maturity in June 2004.
The junior subordinated notes as amended May 31, 1994 bear interest at
16.5%, payable quarterly until maturity. Assuming the amortization of the
related discount to be additional interest, the stated rate of interest would be
increased by 2.92%. The notes are due in various quarterly installments
beginning September 2001 until maturity in August 2006.
The acquisition and junior subordinated notes incorporate covenants
applicable to the covenants in the Credit Agreement (See Note 6) and consist of
notes payable to certain shareholders of the Company. Interest expense
applicable to these subordinated notes was approximately $587,000 for each of
the years ended September 30, 1996 and 1995 and $808,000 for the year ended
September 30, 1994.
8. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its buildings under operating leases. Rental
expense under such lease agreements was approximately $5,670,000, $4,676,000 and
$4,470,000 for the years ended September 30, 1996, 1995 and 1994, respectively.
F-10
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease commitments at September 30, 1996 for all noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, AMOUNT
- ------------- -------------
<S> <C>
1997........................................................................... $ 6,183,000
1998........................................................................... 5,915,000
1999........................................................................... 5,976,000
2000........................................................................... 6,062,000
2001........................................................................... 5,949,000
Thereafter..................................................................... 33,957,000
-------------
$ 64,042,000
-------------
-------------
</TABLE>
Certain operating leases provide for five year renewal periods at the option
of the Company.
Certain operating leases result from sale/leaseback transactions. The terms
of these leases are not substantially different from terms that an independent
third-party lessor or lessee would accept. The Company has no continuing
involvement in the leases as contemplated by SFAS No. 98, ACCOUNTING FOR LEASES.
The Company leased seven, five and five facilities during the years ended
September 30, 1996, 1995 and 1994, respectively, from partnerships in which the
partners include shareholders of the Company in addition to unrelated parties.
These leases are classified as operating leases. Payments made under these
leases were approximately $2,103,000, $1,618,000 and $1,561,000 for the years
ended September 30, 1996, 1995 and 1994, respectively. During the year ended
September 30, 1996 the Company sold to and leased back one property from a
partnership considered to be a related party for a price of $2,750,000. During
the year ended September 30, 1995 the Company sold to and leased back one
property from a partnership considered to be a related party for a price of
$2,900,000. There were no sale/leaseback transactions during the year ended
September 30, 1994.
During the year ended September 30, 1996, the Company received notice of a
condemnation action from the State of California--Department of Transportation
indicating that the state was condemning one of the Company's Supercenters as a
result of interstate highway expansion. Although the state has remitted a
compensation award to the Company based upon an appraisal, the compensation
portion of the case is pending and awaiting a trial date which is expected to
occur during the fall of 1997. The carrying amount of the related property and
equipment, reflected in the accompanying consolidated balance sheet as of
September 30, 1996, exceeds the amount of the compensation award by
approximately $550,000 and there is the potential for a loss in that amount. The
Company has not recorded a provision for loss as of the date of the accompanying
consolidated financial statements. The Company plans to vigorously pursue
collection of the balance of the carrying value of the property. In the opinion
of management the likelihood of an unfavorable outcome is not probable as of the
date of the accompanying consolidated financial statements.
The Company is a party to other legal proceedings incidental to its
business. In the opinion of management, any ultimate liability with respect to
these actions will not materially affect the consolidated financial position or
results of operations of the Company.
F-11
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
9. SHAREHOLDERS' EQUITY AND REDEMPTION PROVISIONS
The Class B common stock contains provisions whereby the stock will be
converted into Class A common stock in the event of any one of the following
occurrences: 1) the consummation of a public offering of the Class A common
stock, 2) a sale of all of the Class A common stock, or 3) a merger or sale of
all or substantially all of the assets of the Company. Voting powers are
extended to Class B shareholders with regard to amending the corporate charter
and authorizing material changes in the nature or form of the Company's
business.
Included in additional paid-in capital is the allocated amount for the fair
value of detachable stock warrants issued in connection with the acquisition
subordinated notes. Also included in additional paid-in capital is the allocated
amount for the fair value of detachable stock warrants issued in connection with
the junior subordinated notes.
Outstanding warrants, issued in connection with the subordinated notes,
represented 210,735 and 207,183 shares of Class A common stock at September 30,
1996 and 1995, respectively. All warrants outstanding at September 30, 1996 and
1995 were exercisable at a nominal exercise price.
Under the terms of a Stockholder's Agreement, certain shareholders may
require the Company to repurchase their outstanding shares of common stock and
shares represented by the warrants issued with subordinated notes (representing
in the aggregate 677,136 shares of Class A common stock and 1,276,828 shares of
Class B common stock at September 30, 1996) for fair market value beginning on
or after the later of payment of obligations under the Credit Agreement (see
Note 6) or September 30, 2001. At the Company's option, the same shares of
common stock and shares represented by warrants may be repurchased at fair
market value beginning September 30, 1996. The repurchase provisions terminate
upon a firm commitment underwritten public offering, provided the underwriters
value the equity of the Company at no less than $25 million. Classification of
the related common stock and warrants associated with these repurchase rights is
reflected as equity in the consolidated balance sheets of the Company as the
repurchase rights have subsequently been eliminated through the acquisition
of the Company's outstanding shares by Affinity Group, Inc. (see Note 14).
10. PROFIT-SHARING PLAN
The Company has a profit sharing plan for substantially all employees. This
plan provides for annual contributions based on employee deferrals. The Company
may also make additional contributions as determined by the Board of Directors
in excess of the required matching amounts. The Company accrued contributions of
approximately $115,000, $99,000 and $75,000 to the plan for the years ended
September 30, 1996, 1995 and 1994, respectively.
F-12
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
11. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Currently payable:
Federal........................................... $ 2,059,000 $ 1,513,000 $ 1,677,000
State............................................. 415,000 327,000 344,000
------------ ------------ ------------
2,474,000 1,840,000 2,021,000
Deferred............................................ 299,000 (44,000) 60,000
------------ ------------ ------------
$ 2,773,000 $ 1,796,000 $ 2,081,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
A current income tax benefit of $240,000 was recognized during the year
ended September 30, 1994 as a result of a loss on the early extinguishment of
debt (see Note 6).
The difference between the provision for income taxes and the amount that
would be computed using statutory federal income tax rates is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income taxes computed using federal statutory
rates............................................. $ 2,294,000 $ 1,489,000 $ 1,726,000
State income taxes, net of federal income tax
benefit........................................... 314,000 217,000 221,000
Amortization of excess of cost over fair value of
net assets acquired............................... 79,000 79,000 79,000
Other............................................... 86,000 11,000 55,000
------------ ------------ ------------
$ 2,773,000 $ 1,796,000 $ 2,081,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-13
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
11. INCOME TAXES (CONTINUED)
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax basis of property............ $ (5,759,045) $ (5,648,245)
Deferred catalog costs........................................ (209,083) (232,680)
Pre-opening expenses.......................................... (115,431) (47,812)
Other......................................................... (80,143) (50,919)
------------- -------------
(6,163,702) (5,979,656)
Deferred tax assets:
Stock option compensation..................................... 434,231 451,149
Deferred income............................................... 109,515 200,612
Capitalized inventory costs................................... 197,731 170,645
Accruals without economic substance........................... 225,610 231,200
Other......................................................... 72,370 100,805
------------- -------------
1,039,457 1,154,411
------------- -------------
Net deferred tax liability...................................... $ (5,124,245) $ (4,825,245)
------------- -------------
------------- -------------
</TABLE>
The Company provided no valuation allowance against deferred tax assets
recorded as of September 30, 1996 and 1995 as the Company believes that all
deferred assets will more likely than not be fully realizable in future taxable
periods.
12. STOCK OPTIONS
Under the 1991 Stock Option Plan (the "Plan"), options may be granted to key
employees to purchase shares of Class A common stock at a price not less than
85% of the fair market value at date of grant, nor greater than 110%. The Plan
permits the grant of options for a term of up to ten years, except in the case
of an individual who, at the time of the grant, owns more than 10% of the
Company, in which case the term of options is limited to five years.
F-14
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
12. STOCK OPTIONS (CONTINUED)
A summary of the Plan activity follows:
<TABLE>
<CAPTION>
OUTSTANDING PRICE RANGE
----------- ---------------
<S> <C> <C>
September 30, 1993............................................. 142,040 $ 2.50-$9.70
Granted...................................................... 30,000 $ 6.83
Exercised.................................................... (21,000) $ 2.50
Cancelled.................................................... -- --
-----------
September 30, 1994............................................. 151,040 $ 2.50-$9.70
Granted...................................................... 50,200 $ 14.56
Exercised.................................................... (3,750) $ 9.70
Cancelled.................................................... (750) $ 9.70
-----------
September 30, 1995............................................. 196,740 $ 2.50-$14.56
Granted...................................................... 27,675 $ 13.28
Exercised.................................................... (3,000) $ 13.28
Cancelled.................................................... (1,750) $ 14.56
-----------
September 30, 1996............................................. 219,665 $ 2.50-$14.56
-----------
-----------
</TABLE>
All outstanding options at September 30, 1996 and 1995 were exercisable.
Exercisable options outstanding at September 30, 1994 were 150,290.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. Fair values of cash and
cash equivalents and short-term borrowings approximate cost due to the short
period of time to maturity. Fair values of long-term debt approximate face value
since the interest rate is floating with the market on a monthly basis. The
Company believes that since the subordinated debt is held by major shareholders,
the terms of this debt are unique, and the fact that there is no public market
for these debt instruments, fair value cannot be determined on a reasonable
basis.
14. SUBSEQUENT EVENTS
On February 25, 1997 the shareholders entered into an agreement to sell
the outstanding stock of the Company to Affinity Group, Inc. ("AGI"). The
stock sale transaction closed on April 2, 1997 simultaneously with the
closing of a note offering by the parent company of AGI. Additionally,
certain executives and members of management of the Company entered into
non-competition, consulting, and incentive compensation agreements with AGI.
On February 7, 1997 Affinity Group Plans, Inc. (an entity not affiliated
with AGI) and National Alliance Insurance Company filed a complaint in the
United States District Court for the Eastern District of Missouri against the
Company, a subsidiary of the Company, and two of the directors of the Company
seeking damages in excess of $125 million (and punitive damages of a like
amount) alleging breaches of contract, misrepresentations, misappropriation of
information and breaches of fiduciary duty in connection with the Company's
preliminary discussions with AGI to sell certain assets of the Company
(excluding
F-15
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
14. SUBSEQUENT EVENTS (CONTINUED)
insurance marketing arrangements and related assets in which the plaintiffs have
an interest). The shareholders of the Company and AGI have structured the sale
as a stock sale. Under the stock sale agreement, the insurance marketing
arrangements and related assets in dispute remain as assets of the Company. AGI
has advised the plaintiffs in this litigation that it recognizes the contractual
obligations of the Company relating to such marketing arrangements and that it
intends to comply (and cause the Company to comply) with the terms of such
insurance marketing arrangements. The Company and defendant directors believe
the complaint to be without merit and that such litigation will not have a
material adverse effect on the Company.
F-16
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................................ $ 3,107,408
Trade accounts receivable, no allowance for doubtful accounts considered necessary............... 239,719
Inventories...................................................................................... 31,284,247
Vendor and other receivables..................................................................... 2,620,851
Prepaid expenses, deferred catalog costs and other............................................... 1,851,614
-------------
Total current assets....................................................................... 39,103,839
PROPERTY AND EQUIPMENT, net........................................................................ 31,687,332
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, net of
accumulated amortization of $1,595,650.......................................................... 6,136,141
OTHER ASSETS....................................................................................... 2,307,818
-------------
TOTAL.............................................................................................. $ 79,235,130
-------------
-------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................................. $ 14,575,064
Accrued expenses and other....................................................................... 3,974,629
Deferred income.................................................................................. 2,149,600
Short-term borrowings............................................................................ 9,202,317
Current maturities of long-term debt............................................................. 3,319,871
-------------
Total current liabilities.................................................................. 33,221,481
DEFERRED INCOME TAXES.............................................................................. 5,124,180
DEFERRED INCOME.................................................................................... 545,605
LONG-TERM DEBT..................................................................................... 21,261,483
SUBORDINATED NOTES................................................................................. 3,384,410
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock--Class A voting, $0.0l par value; authorized, 13,000,000 shares; issued and
outstanding, 1,236,880 shares.................................................................. 12,369
Common stock--Class B nonvoting, $0.0l par value; authorized, 2,000,000 shares; issued and
outstanding, 1,276,828 shares.................................................................. 12,768
Additional paid-in capital....................................................................... 1,202,641
Retained earnings................................................................................ 14,470,193
-------------
Total shareholders' equity................................................................. 15,697,971
-------------
TOTAL.............................................................................................. $ 79,235,130
-------------
-------------
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER
31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
REVENUES:
Merchandise sales................................................................ $ 28,425,483 $ 25,110,010
Other revenues................................................................... 5,152,192 4,397,508
------------- -------------
Total revenues................................................................. 33,577,675 29,507,518
COST RELATED TO MERCHANDISE SOLD AND OTHER REVENUES................................ 21,570,360 18,635,579
------------- -------------
Gross profit............................................................... 12,007,315 10,871,939
OPERATING EXPENSES:
Selling, general and administrative expenses..................................... 12,826,676 11,169,235
------------- -------------
Operating loss............................................................. (819,361) (297,296)
OTHER INCOME (EXPENSE):
Interest income.................................................................. 171,462 95,508
Interest expense................................................................. (930,393) (948,157)
------------- -------------
Total other income (expense)................................................... (758,931) (852,649)
------------- -------------
LOSS BEFORE INCOME TAX BENEFIT..................................................... (1,578,292) (1,149,945)
INCOME TAX BENEFIT................................................................. 607,000 471,000
------------- -------------
NET LOSS........................................................................... $ (971,292) $ (678,945)
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................................................... $ (971,292) $ (678,945)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.................................................. 646,035 499,490
Amortization of debt related costs............................................. 88,932 87,869
Amortization of intangibles.................................................... 48,324 30,951
Amortization of deferred income on sale/leaseback.............................. (3,984) (2,109)
Loss on sale of property and equipment and other assets........................ -- 374
Deferred income taxes.......................................................... -- 53,241
(Increase) decrease in operating assets:
Trade accounts receivable.................................................... 415,650 769,085
Inventories.................................................................. (3,956,311) (2,562,418)
Vendor and other receivables................................................. 631,596 355,768
Prepaid expenses, deferred catalog costs and other........................... 846,115 411,226
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses...................................... (806,693) (2,185,266)
Deferred income............................................................ (226,288) (580,125)
------------- -------------
Net cash used in operating activities.................................... (3,287,916) (3,800,859)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.............................................. (921,858) (1,767,299)
Increase in other assets......................................................... (3,103) (140,123)
------------- -------------
Net cash used in investing activities.................................... (924,961) (1,907,422)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to property held for sale/leaseback.................................... -- (343,924)
Net increase in short-term borrowings............................................ 3,107,546 5,635,769
Proceeds from issuance of long-term debt......................................... 1,129,000 1,400,000
Payments of long-term debt....................................................... (701,420) (599,929)
------------- -------------
Net cash provided by financing activities................................ 3,535,126 6,091,916
------------- -------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............................... (677,751) 383,635
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 3,785,159 2,572,876
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 3,107,408 $ 2,956,511
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized).......................................... $ 818,865 $ 789,949
------------- -------------
------------- -------------
Income taxes................................................................... $ 850,700 $ 908,660
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein include the results of
Camping World, Inc. and subsidiaries (the "Company") in accordance with
generally accepted accounting principles. These consolidated financial
statements have not been audited, reviewed or compiled by the Company's
independent auditors and they assume no responsibility for such consolidated
financial statements. These interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes for the
year ended September 30, 1996. In the opinion of management of the Company,
these consolidated financial statements contain all adjustments of a normal
recurring nature necessary to present fairly the financial position, results of
operations and cash flows of the Company for the interim periods presented.
2. SUBSEQUENT EVENTS
On February 25, 1997 the shareholders entered into an agreement to sell
the outstanding stock of the Company to Affinity Group, Inc. ("AGI"). The
stock sale transaction closed April 2, 1997 simultaneously with the closing
of a note offering by the parent company of AGI. Additionally, certain
executives and members of management of the Company entered into
non-competition, consulting, and incentive compensation agreements with AGI.
On February 7, 1997 Affinity Group Plans, Inc. (an entity not affiliated
with AGI) and National Alliance Insurance Company filed a complaint in the
United States District Court for the Eastern District of Missouri against the
Company, a subsidiary of the Company, and two of the directors of the Company
seeking damages in excess of $125 million (and punitive damages of a like
amount) alleging breaches of contract, misrepresentations, misappropriation of
information and breaches of fiduciary duty in connection with the Company's
preliminary discussions with AGI to sell certain assets of the Company
(excluding insurance marketing arrangements and related assets in which the
plaintiffs have an interest). The shareholders of the Company and AGI have
structured the sale as a stock sale. Under the stock sale agreement, the
insurance marketing arrangements and related assets in dispute remain as assets
of the Company. AGI has advised the plaintiffs in this litigation that it
recognizes the contractual obligations of the Company relating to such marketing
arrangements and that it intends to comply (and cause the Company to comply)
with the terms of such insurance marketing arrangements. The Company and
defendant directors believe the complaint to be without merit and that such
litigation will not have a material adverse effect on the Company.
F-20
<PAGE>
STOCK PURCHASE AGREEMENT
AMONG
AFFINITY GROUP, INC. AS THE BUYER,
AND
THE SHAREHOLDERS OF CAMPING WORLD, INC.
AS THE SELLERS
DATED AS OF FEBRUARY 25, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. SALE AND TRANSFER OF SHARES; CLOSING . . . . . . . . . . . . . . . . . 12
2.1 SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 DETERMINATION OF PURCHASE PRICE.. . . . . . . . . . . . . . . . . . . . 12
2.4 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 ESCROW AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 CLOSING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 14
2.7 CLOSING LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS . . . . . . . . . . . . . 16
3.1 ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . . . . 17
3.2 AUTHORITY; NO CONFLICT. . . . . . . . . . . . . . . . . . . . . . 17
3.3 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . 19
3.5 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6 TITLE TO PROPERTIES; ENCUMBRANCES . . . . . . . . . . . . . . . . 20
3.7 CONDITION AND SUFFICIENCY OF ASSETS . . . . . . . . . . . . . . . 21
3.8 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.10 NO UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . . . . . 22
3.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.12 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 23
3.13 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 23
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS;
CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.15 LEGAL PROCEEDINGS; ORDERS . . . . . . . . . . . . . . . . . . . . 25
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS . . . . . . . . . . . . . . 26
3.17 CONTRACTS; NO DEFAULTS. . . . . . . . . . . . . . . . . . . . . . 28
3.18 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.19 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . 29
3.20 EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.21 LABOR RELATIONS; COMPLIANCE . . . . . . . . . . . . . . . . . . . 31
3.22 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . 32
3.23 CERTAIN PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 32
3.24 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-i-
<PAGE>
3.25 RELATIONSHIPS WITH RELATED PERSONS. . . . . . . . . . . . . . . . 33
3.26 BROKERS OR FINDERS. . . . . . . . . . . . . . . . . . . . . . . . 33
3.27 PROJECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.28 SC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.29 NON-MANAGEMENT SELLERS OTHER THAN SC. . . . . . . . . . . . . . . 34
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . . . . . . . . 34
4.1 ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . . . . 34
4.2 AUTHORITY; NO CONFLICT. . . . . . . . . . . . . . . . . . . . . . 34
4.3 CERTAIN PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 35
4.4 BROKERS OR FINDERS. . . . . . . . . . . . . . . . . . . . . . . . 35
4.5 INVESTMENT REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . 36
5. COVENANTS OF THE SELLERS PRIOR TO CLOSING DATE. . . . . . . . . . . . . 36
5.1 ACCESS AND INVESTIGATION. . . . . . . . . . . . . . . . . . . . . 36
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES . . . . . . 37
5.3 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 38
5.4 REQUIRED APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 38
5.5 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.6 NO NEGOTIATION. . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.7 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.8 AGREEMENTS FOR SAR OBLIGATIONS. . . . . . . . . . . . . . . . . . 39
5.9 CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 39
6. COVENANTS OF THE BUYER. . . . . . . . . . . . . . . . . . . . . . . . . 40
6.1 APPROVALS OF GOVERNMENTAL BODIES. . . . . . . . . . . . . . . . . 40
6.2 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.3 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO CLOSE. . . . . . . . . 40
7.1 ACCURACY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 40
7.2 THE SELLERS' PERFORMANCE. . . . . . . . . . . . . . . . . . . . . 41
7.3 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.4 ADDITIONAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . 41
7.5 NO PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.6 NO CLAIM REGARDING SHARE OWNERSHIP OR SALE PROCEEDS . . . . . . . 42
7.7 NO PROHIBITION. . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8 WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.9 TITLE INSURANCE COMMITMENTS . . . . . . . . . . . . . . . . . . . 42
8. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION TO CLOSE. . . . . . . . 42
8.1 ACCURACY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 42
8.2 THE BUYER'S PERFORMANCE . . . . . . . . . . . . . . . . . . . . . 43
-ii-
<PAGE>
8.3 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.4 ADDITIONAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . 43
8.5 NO PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.6 NO PROHIBITION. . . . . . . . . . . . . . . . . . . . . . . . . . 43
9. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1 TERMINATION EVENTS. . . . . . . . . . . . . . . . . . . . . . . . 44
9.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . 44
10. INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 44
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. . . 44
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE SELLERS . . . . . . 45
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE BUYER . . . . . . . 46
10.4 TIME LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 46
10.5 SATISFACTION OF CLAIMS BY THE BUYER SOLELY BY RIGHT OF SET-OFF. . 46
10.6 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS . . . . . . . 46
10.7 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS . . . . . . . . . . 48
10.8 LIMITED RECOURSE. . . . . . . . . . . . . . . . . . . . . . . . . 48
11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.1 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.2 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . . 48
11.3 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . 48
11.4 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.5 FURTHER ASSURANCES AND POST-CLOSING COOPERATION . . . . . . . . 50
11.6 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.7 ENTIRE AGREEMENT AND MODIFICATION . . . . . . . . . . . . . . . 51
11.8 ASSIGNMENTS SUCCESSORS, AND NO THIRD-PARTY RIGHTS . . . . . . . 51
11.9 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.10 SECTION HEADINGS, CONSTRUCTION. . . . . . . . . . . . . . . . . 51
11.11 TIME OF ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . 52
11.12 DELIVERY OF DISCLOSURE LETTER; RIGHT OF TERMINATION BY THE
BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.13 SC OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 52
11.14 ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . 52
11.15 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.16 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 52
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of February 25,
1997 by and among:
AFFINITY GROUP, INC., a Delaware corporation (the "Buyer"), and
3i Securities Corporation, a Massachusetts corporation ("SC"), David B.
Garvin, Thomas A. Donnelly, William L. Johnson, Stephen L. Snodgrass, Murray
Coker, Ron Chance, Dean Ewing, Rick Matar, James Schumm, and John Holland
(individually a "Seller" and collectively the "Sellers").
RECITAL
The Sellers desire to sell, and the Buyer desires to purchase all of the
issued and outstanding shares of capital stock (such stock being collectively
referred to herein as the "Shares") of Camping World, Inc., a Kentucky
corporation (the "Company") for the consideration and on the terms set forth in
this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUIRED COMPANIES" -- The Company and its Subsidiaries, collectively.
"AGH" -- Affinity Group Holding, Inc., a Delaware corporation, and the
owner of all of the outstanding shares of the Buyer.
"AGREEMENT" -- as defined in the preamble to this Agreement.
"ASSETS" -- the properties, assets and business, of every kind and
description, wherever located, constituting substantially all of the assets and
properties used or usable in the Business. The Assets include, but are not
limited to, the following:
(a) INVENTORY. All stock, raw materials, supplies, work-in-
process and other items used or useable in the Business.
(b) CURRENT ASSETS. Cash, accounts receivable, investments and
other current assets of the Business, including barter and trade
credits or
-1-
<PAGE>
receivables existing on the Closing Date, prepaid expenses and other
prepaid items relating to the Business.
(c) PERSONAL PROPERTY. All equipment, furniture, fixtures and
other tangible personal property used or useable in the Business
together with such additions, modifications and replacements thereto
(and subject to deletions therefrom in connection with any such
replacements) as may be made in the ordinary course of business
between the date hereof and the Closing Date.
(d) BUSINESS LEASES AND AGREEMENTS. All Contracts, including
all agreements, leases, commitments and orders that are identified on
Part 3.17 of the Disclosure Letter.
(e) INTANGIBLES. All copyrights and applications therefor,
trademarks, service marks, trade secret rights, patents, patent
rights, trade names, trade name rights or other similar rights used or
useable in the Business including, specifically, the name "Camping
World" and any logo or mark used in connection therewith and the good
will of the Business as a going concern, including lists of customers
and suppliers, correspondence, purchase orders and the general
intangibles of the Business and the licenses, permits and
authorizations used or useable in the operation of the Business.
(f) COMPUTER HARDWARE AND COMPUTER SOFTWARE. The computer
hardware and computer software used or useable in the Business,
together with copies of source code, instruction manuals and other
data for the effective use thereof.
(g) MEMBERSHIPS, MAILING LISTS AND PROPRIETARY INFORMATION. All
memberships, permits, mailing lists, subscriber and advertiser lists,
subscriptions, advertising contracts, processes, trade secrets, know-
how and other proprietary or confidential information used or useable
in or relating to the Business.
(h) REAL PROPERTY. The real property used in connection with
the Business, including the real property identified on Part 3.6 of
the Disclosure Letter and all improvements thereon (the "Owned Real
Estate").
(i) REAL ESTATE LEASES. The real estate leases used in
connection with the Business, including the real estate leases
identified in Part 3.6 of the Disclosure Letter (the "Real Estate
Leases") and all of the rights of the Acquired Companies thereunder
and to the properties described therein (the "Leased Real Estate").
(j) RECORDS. All logs, books, business and financial records
(or true copies thereof) in connection with or relating to the
Business.
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(k) TAX REFUNDS AND BENEFITS. All federal, state and local refunds,
credits and benefits, if any, (and the right to file claims for such
refunds, credits and benefits) arising from the losses of the Acquired
Companies with respect to periods through the Closing Date.
(l) CAUSES OF ACTION. All rights and claims of the Acquired
Companies against any person arising prior to Closing, including but not
limited to, causes of action.
"BALANCE SHEET" -- as defined in Section 3.4.
"BUSINESS" -- the business in which the Acquired Companies are engaged,
which consists principally of the retail and wholesale sale of specialized
merchandise and services for the owners of recreational vehicles, through retail
stores, mail order catalogs and direct mail solicitations, and the operation of
a membership club for owners and users of recreational vehicles called the
President's Club, together with the Assets used and usable in the operation
thereof.
"BUYER" -- as defined in the preamble to this Agreement.
"CLASS A SHARES" -- as defined in Section 3.3.
"CLASS B SHARES" -- as defined in Section 3.3.
"CLOSING" -- as defined in Section 2.3.
"CLOSING DATE" -- the date and time as of which the Closing actually takes
place.
"CLOSING LIABILITIES" -- as defined in Section 2.6.
"COMPANY" -- as defined in the preamble to this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSULTING AND NON-COMPETITION AGREEMENTS" -- as defined in Section
2.6(a)(iii).
"CONTRACT" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding, including rights under any insurance policy.
"DAMAGES" -- as defined in Section 10.2.
"DEPOSIT" -- as defined in Section 2.5.
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"DISCLOSURE LETTER" -- the disclosure letter to be delivered by the
Management Sellers to the Buyer pursuant to Section 11.12.
"ENCUMBRANCE" -- any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
responses, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or
other remediation or response actions required by applicable
Environmental Law or Occupational Safety and Health Law (whether or
not such cleanup has been required or requested by any Governmental
Body or any other Person) for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and
Health Law.
"ENVIRONMENTAL LAW" -- any applicable Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the public
of intended or actual releases of pollutants or hazardous substances
or materials, violations of discharge limits, or other prohibitions
and of the commencement of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
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(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human
health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGENT" -- as defined in Section 2.5.
"ESCROW AGREEMENT" -- as defined in Section 2.5.
"FACILITIES" -- any real property, leaseholds, or other interests currently
owned or operated by any Acquired Company and any buildings, plants, structures,
or equipment (including motor vehicles) currently owned or operated by any
Acquired Company.
"FINANCIAL STATEMENTS" -- as defined in Section 3.4.
"FREE CASH FLOW" -- means, for any period, (x) the sum, without
duplication, of (i) net income, (ii) interest expense, (iii) taxes (or provision
therefor) for such period, (iv) depreciation and (v) amortization, less (y) the
amount of Regularized Capital Expenditures, all calculated in accordance with
GAAP to the extent not otherwise expressly provided in this Agreement.
"FUNDED DEBT" means obligations for principal, interest, fees or premium in
respect of money borrowed including, without limitation, borrowings of the
Company from Heller
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Financial, Inc. and any other liabilities historically reflected on the
balance sheet of the Company in the following categories: "Revolving Credit
Agreement", "Other Current Notes Payable", "Current Portion of Term Loan",
"Current Portion of Mortgage Notes", "Long Term Portion of Mortgage Notes",
"Long Term Portion of Heller Expansion Loans", "Long Term Portion of Term
Loan", "Long Term Portion of Notes Payable", "Junior Subordinated Debt",
"Acquisition Subordinated Debt"; and all liabilities for borrowed money
arising from or in connection with instruments evidencing any of the above
referenced indebtedness. Any obligation of the Company for deferred income
taxes shall not constitute Funded Debt.
"GAAP" -- generally accepted United States accounting principles.
"GARVIN" -- David B. Garvin, one of the Sellers.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment.
"HAZARDOUS MATERIALS" -- any waste or other substance that is currently
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any mixture or solution thereof,
and specifically including petroleum and all
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derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
"HSR ACT" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"INCENTIVE MANAGEMENT AGREEMENTS" -- as defined in Section 2.6(a)(ii).
"INDEMNIFIED PERSONS" -- as defined in Section 10.2.
"IRC" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual would have discovered or otherwise
become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation (without engaging
professionals or making inquiry of third parties) concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual serving as a director,
officer, shareholder or partner of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
"LEASED REAL ESTATE" -- the Leased Real Estate as defined in subsection (i)
of the definition of Assets.
"LEGAL REQUIREMENT" -- any applicable federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty existing on the date of this Agreement.
"MANAGEMENT SELLERS" -- Thomas A. Donnelly, William L. Johnson, Stephen L.
Snodgrass, Murray Coker, Dean Ewing, James Schumm and Ron Chance.
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"NON-MANAGEMENT SELLERS" -- Rick Matar, John Holland and SC.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"OPTIONS" -- as defined in Section 3.3.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be newly authorized by the
board of directors of such Person (or by any Person or group of
Persons exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority),
in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) any
charter or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (e) any amendment to any of the
foregoing.
"OWNED REAL ESTATE" -- the Owned Real Estate as defined in subsection (h)
of the definition of Assets.
"OWNER" -- as defined in the definition of Subsidiary.
"PERMITTED ENCUMBRANCES" -- (a) mortgages or security interests shown on
the Balance Sheet in respect of Funded Debt, (b) mortgages or security interests
incurred in
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connection with the purchase of property or assets after the date of the
Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default)
exists, (c) liens for current taxes not yet delinquent, and (d) with respect
to the Real Property, (i) matters disclosed in the Disclosure Letter, (ii)
minor imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or materially impairs the use of the
property subject thereto, or materially impairs the operations of any
Acquired Company, and (iii) zoning laws and other land use restrictions that
do not materially impair the present or anticipated use of the property
subject thereto.
"PERSON"-- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLANS" -- as defined in Section 3.13.
"PORTFOLIO INVESTMENT" -- with respect to any Person, a financial or
investment interest in another Person in which the operations and management of
such other Person are not directed by the Owner or holder of the financial
interest or investment.
"PROCEEDING"-- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any third party, Governmental Body or arbitrator.
"PROJECTIONS" -- as defined in Section 3.27.
"PROPRIETARY RIGHTS AGREEMENT" -- as defined in Section 3.20(b).
"PURCHASE PRICE" -- as defined in Section 2.2.
"REAL ESTATE LEASES" -- as defined in subsection (i) of the definition of
Assets.
"REAL PROPERTY" -- the Owned Real Estate and the Leased Real Estate as
identified in Part 3.6 of the Disclosure Letter.
"REGULARIZED CAPITAL EXPENDITURES" -- means the sum of (i) one fourth of
all capital expenditures of the Company for its 1994, 1995 and 1996 Fiscal years
and budgeted for its 1997 Fiscal year other than capital expenditures reflected
in the Company's fixed asset ledgers in the following categories: "Land-WCDC,"
"Land-Rogers," "Land-Other," "Land-Las Vegas," "Land-Salt Lake," Rogers, MN
FFE," "POS," "Land-LaMirada," Henderson,NV FEE," "Bridgeport,NJ FFE," "Draper,UT
FFE," "WCDC-Expansion," "Bridgeport-Bldg," "Tampa-Building," "POS-NEW,"
"Computer Hardware and Software," "CIP 9-96 POS System," "CIP 9-96 LaMirada,"
"CIP 9-96 San Marcos," Completion of LaMirada Building," "LaMirada FF&E,"
"LaMirada RV Sales Lot" and "San Marcos FF&E," (ii) one sixth of all
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capital expenditures of the Company for its 1994, 1995 and 1996 Fiscal Years
and budgeted for its 1997 Fiscal year reflected in the Company's financial
statements in the following categories: "POS," "POS-NEW," "Computer Hardware
and Software" and "CIP 9-96 POS System," and (iii) one sixth of the
difference between (x) all capital expenditures of the Company for its 1994,
1995 and 1996 Fiscal Years and budgeted for its 1997 Fiscal year reflected in
the Company's financial statements in the following categories:
"Land-LaMirada," "CIP 9-96 LaMirada," "Completion of LaMirada Building,"
"LaMirada FF&E" and "LaMirada RV Sales Lot" and (y) amounts received or
reasonably expected to be received by the Company from condemning authorities
in respect of the Company's Anaheim facility. It is agreed that Regularized
Capital Expenditures are $2,028,000.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by any
one or more members of such individual's Family;
(c) any Person in which members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which one or more members of such
individual's Family serves as a director, officer, partner, executor,
or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in clause (b)
or (c).
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For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural
person who is related to the individual or the individual's spouse within the
first degree of sanguinity, and (iv) any other natural person who resides
with such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests representing at
least 35% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 35% of the outstanding equity
securities or equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SAR AGREEMENTS" -- as defined in Section 5.8.
"SAR OBLIGATIONS" -- the compensation (in case of the Options) and interest
(in the case of the Warrants) obligations of the Company to holders of Options
and Warrants arising in connection with the cancellation of the Options and
Warrants pursuant to the agreements with the holders thereof obtained by the
Company pursuant to Section 5.8 hereof.
"SC" -- as defined in the preamble to this Agreement.
"SCHEDULED CONTRACTS" -- as defined in Section 3.17.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" -- as defined in the preamble to this Agreement.
"SHARES" -- as defined in the Recital.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
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"TAX" -- any tax (including any income tax, capital gains tax, value-added
tax, sales tax, use tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
orally (on or after January 1, 1996) or in writing or any notice has been given
orally (on or after January 1, 1996) or in writing.
"WARRANTS" -- as defined in Section 3.3.
"WORKING CAPITAL" -- the current assets of the Company less current
liabilities of the Company (other than current liabilities in respect of Funded
Debt) as determined in accordance with GAAP on a consolidated basis.
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1 SHARES. Subject to the terms and conditions of this Agreement, at the
Closing, each Seller severally agrees (as to the Shares listed as owned by such
Seller on Part 3.3 of the Disclosure Letter) to sell and transfer such Shares to
the Buyer, and the Buyer will purchase such Shares from the Sellers. Each
Seller severally covenants and agrees that such Shares will be conveyed to the
Buyer and received by the Buyer on the Closing Date free and clear of all
Encumbrances.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares shall be $44,883,837.
2.3 DETERMINATION OF PURCHASE PRICE. The Purchase Price has been
determined on the assumption that (i) the Funded Debt of the Acquired Companies
on September 30, 1996 is $33,974,870 and (ii) the aggregate amount of the SAR
Obligations is $6,634,757. The Purchase Price shall be appropriately adjusted
if Funded Debt on September 30, 1996 or the aggregate amount of the SAR
Obligations is determined to be other than such amounts.
2.4 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Kaplan, Strangis and Kaplan, P.A. or
such other location mutually acceptable to the Buyer and the Seller, at 10:00
a.m. (local time) on the later of (i) March 31, 1997, and (ii) the twenty-first
business day following the satisfaction or waiver of the conditions precedent
set forth in Sections 7 and 8 hereof, or at such other
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time and place as the parties may agree. Subject to the provisions of
Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.4 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.5 ESCROW AGREEMENT. Contemporaneously with the execution of this
Agreement, the Sellers and the Buyer will enter into an escrow agreement in the
form of Exhibit 2.5 (the "Escrow Agreement") with Trans Financial Bancorp, Inc.
(the "Escrow Agent") pursuant to which the Buyer will deposit with Escrow Agent
$2,500,000 (the "Deposit"). IF THE BUYER IS IN MATERIAL BREACH OF THIS
AGREEMENT AND THE SELLERS ELECT TO TERMINATE THIS AGREEMENT, THE SELLERS SHALL
RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES AS THE SOLE REMEDY OF THE SELLERS. THE
BUYER AND THE SELLERS AGREE THAT, UNDER THE CIRCUMSTANCES EXISTING AS OF THE
DATE OF THIS AGREEMENT, ACTUAL DAMAGES WOULD BE DIFFICULT TO ASCERTAIN AND THAT
THE DEPOSIT AND ALL INTEREST THEREON IS A REASONABLE ESTIMATE OF THE DAMAGES
THAT WILL BE INCURRED BY THE SELLER IF THE BUYER IS IN MATERIAL BREACH OF THIS
AGREEMENT AND FAILS TO PURCHASE THE SHARES IN ACCORDANCE WITH THIS AGREEMENT.
SELLERS' INITIALS BUYER'S INITIALS
_______________ _______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
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2.6 CLOSING OBLIGATIONS. At the Closing:
(a) The Sellers will deliver or cause to be delivered to the Buyer:
(i) certificates representing the Shares (duly endorsed or
accompanied by duly executed stock powers) for transfer to the Buyer;
(ii) incentive management agreements, substantially in the form of
Exhibit 2.6(a)(ii), executed by the Management Sellers and other parties
thereto (collectively, the "Incentive Management Agreements");
(iii) consulting letter agreements and non-competition
agreements, substantially in the form of Exhibit 2.6(a)(iii), executed
by Garvin, the Management Sellers and certain employees of the
Acquired Companies (collectively, the "Consulting and Noncompetition
Agreements");
(iv) a certificate executed by the Management Sellers
representing and warranting to the Buyer that the Sellers'
representations and warranties in this Agreement were accurate in all
material respects as of the date of this Agreement and are accurate in
all material respects as of the Closing Date as if made on the Closing
Date (giving full effect to any supplements to the Disclosure Letter
that were delivered by the Management Sellers to the Buyer prior to
the Closing Date in accordance with Section 5.5) and that the Sellers
have performed in all material respects the covenants and obligations
of the Sellers hereunder to be performed at or prior to Closing; and
(v) the SAR Agreements executed by all of the holders of the
Options and Warrants.
(b) The Buyer will deliver to the Seller or Management, as applicable:
(i) $44,883,837 by immediately available wire transfer to an
account or accounts specified by the Sellers;
(ii) a certificate executed by the Buyer to the effect that,
except as otherwise stated in such certificate, each of the Buyer's
representations and warranties in this Agreement were accurate in all
material respects as of the date of this Agreement and are accurate in
all material respects as of the Closing Date as if made on the Closing
Date and that the Buyer has performed in all material respects the
covenants and obligations of the Buyer hereunder to be performed at or
prior to Closing;
(iii) the Incentive Management Agreements, executed by AGH; and
(iv) the Consulting and Noncompetition Agreements executed by the
Buyer.
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(c) Upon Closing, the Company will take such action as is necessary
to pay the Funded Debt and to satisfy the payment obligations of the
Company arising from satisfaction of the SAR Obligations as contemplated in
this Agreement.
(d) Escrow Agent will deliver to the Buyer the $2,500,000 deposit and
the balance of funds held under the Escrow Agreement as provided in the
Escrow Agreement.
2.7 CLOSING LIABILITIES. At the Closing, the Acquired Companies shall be
subject only to the following liabilities and obligations (the "Closing
Liabilities):
(a) the Funded Debt (including the current portion thereof) subject,
however, to the provisions of Section 2.8 hereof;
(b) the obligations arising after the Closing Date with respect to
the Real Estate Leases and the Scheduled Contracts;
(c) the current liabilities of the Acquired Companies in
connection with the operation of the Business arising in the Ordinary
Course of Business and in existence on the Closing Date (including the
payment obligations of the Company arising from satisfaction of the
SAR Obligations as set forth in Section 5.8 hereof), including,
without limitation, the current liabilities of the Acquired Companies
in respect of the Real Estate Leases and the Scheduled Contracts;
(d) the current obligations of the Acquired Companies to employees of
the Acquired Companies in respect of (i) compensation, (ii) accrued
vacation pay, (iii) sick pay and (iv) other benefits payable on the Closing
Date (or with respect to periods through the Closing Date) to such
employees pursuant to the Plans disclosed in the Disclosure Letter;
(e) the barter and trade liabilities existing on the Closing
Date to the extent that they do not exceed the realizable fair market
value of the barter and trade credits and receivables existing on the
Closing Date included in the Assets;
(f) the deferred income taxes or other taxes payable or tax
returns filed with respect to periods prior to the end of the 1996
fiscal year of the Acquired Companies, but only to the extent reserved
for in the Balance Sheet and not paid prior to the Closing Date;
(g) the taxes arising with respect to periods between
September 30, 1996 through the Closing Date;
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(h) the deferred income liability of the Acquired Companies
arising in the ordinary course of the Business and in existence on the
Closing Date;
(i) the liabilities arising from the Proceedings disclosed in Part
3.15 of the Disclosure Letter (as supplemented) that do not have a material
adverse effect on the Buyer, the Business or the Assets;
(j) the liabilities of the Company arising from the following
Proceeding: AFFINITY GROUP PLANS, INC. AND NATIONAL ALLIANCE INSURANCE
COMPANY V. THOMAS A. DONNELLY, WILLIAM L. JOHNSON, CAMPING WORLD, INC. AND
CWI, INC. (Civ. Action No. 4:97CV00209DDN); and
(k) the Company's obligation under the Company's Organizational
Documents to indemnity and defend Thomas A. Donnelly and William L. Johnson
for claims made against them in the Proceeding referenced in subparagraph
(j) above to the extent such claims arise from actions taken by them in
their capacity as members of the board of directors or officers of the
Company or, at the request of the Company, as members of the board of
directors or officers of another corporation.
It is expressly understood and agreed that the Acquired Companies shall not
be subject to any liabilities or obligations, whether direct or indirect and
whether contingent or otherwise, except for the Closing Liabilities.
2.8 ENCUMBRANCES. Notwithstanding anything herein to the contrary, in the
event that, on the Closing Date, (a) any of the Acquired Companies should be
liable for, or any of the Assets shall be subject to any Encumbrance in respect
of, indebtedness other than the Funded Debt, or (b) with respect to any
liability, including Funded Debt, the Acquired Companies are obligated to pay
any prepayment penalties, premiums, any other costs, including legal fees and
costs, incurred to obtain the discharge of any such liabilities or Encumbrance
with respect thereto, to cause the Assets to be free and clear of any such
Encumbrance (i) the Sellers shall undertake to pay such obligations and
discharge the obligations secured by such Encumbrance in accordance with their
respective terms and (ii) if such obligations are not so discharged by the
Sellers, the Purchase Price shall be reduced by the amount necessary, in the
reasonable determination of the Buyer, to remedy such failure by the Sellers.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. (a) The Management
Sellers, jointly and severally, as to Sections 3.1 through 3.27, (b) SC as to
Section 3.28, and (c) the Sellers, other than the Management Sellers and SC,
severally (but not jointly and severally) as to Section 3.29 represent and
warrant to the Buyer as follows:
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3.1 ORGANIZATION AND GOOD STANDING.
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list for each Acquired Company of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each shareholder and the number of
shares, options and warrants held by each). Each Acquired Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under all Contracts to which it is a party. Each Acquired Company
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which any of the
Assets are located or in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification. There is no state, country or territory wherein the absence
of licensing or qualification as a foreign corporation or partnership has had an
adverse effect upon the Business.
(b) The Management Sellers have delivered to the Buyer copies of the
Organizational Documents of each Acquired Company, as currently in effect.
(c) Since January 1, 1989, no Acquired Company has at any time had any
subsidiaries except as set forth in Part 3.1 of the Disclosure Letter. Since
January 1, 1989, except as set forth in Part 3.1 of the Disclosure Letter, no
Acquired Company has any equity investment or other interest or has made
advances to any corporation, association, partnership, joint venture or other
entity.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation of
the Sellers, enforceable against the Sellers in accordance with its terms. Upon
the execution and delivery by the applicable Sellers of the Escrow Agreement,
the Incentive Management Agreements, and the Consulting and Noncompetition
Agreements (collectively, the "Seller Closing Documents"), the Seller Closing
Documents will constitute the legal, valid, and binding obligations of the
applicable Sellers, enforceable against the Sellers that are parties thereto, in
accordance with their respective terms. The Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and, as applicable, the Seller Closing Documents and to perform their
obligations under this Agreement and the Seller Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the transactions contemplated hereby will, directly or indirectly (with
or without notice or lapse of time):
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(i) contravene, conflict with, or result in a violation of
(a) any provision of the Organizational Documents of the Acquired
Companies, or (b) any resolution adopted by the board of directors or
the shareholders of any Acquired Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any
of the transactions contemplated hereby or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which
any Acquired Company or any Seller, or any of the assets owned or used
by any Acquired Company or any Seller, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or any of the assets owned
or used by, any Acquired Company;
(iv) result in the imposition of any Tax for which Buyer is
liable or the imposition or creation of any Encumbrance upon or with
respect to the Shares;
(v) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Contract to which any Acquired
Company is a party; or
(vi) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by any
Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or Acquired
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the transactions contemplated hereby.
3.3 CAPITALIZATION. The authorized equity securities of the Company
consists of (a) 13,000,000 shares of Class A common stock, par value $0.01 per
share, of which 1,236,880 shares are issued and outstanding (the "Class A
Shares"), (b) 2,000,000 shares of Class B common stock, par value $0.01 per
share, of which 1,276,828 shares are issued and outstanding (the "Class B
Shares" and collectively with the Class A Shares referred to as the "Shares"),
(c) options to purchase 326,165 shares of Class A common stock and no shares of
Class B common stock (the "Options"), and (d) warrants for the purchase of
210,739 shares of Class A common stock and no shares of Class B common stock
(the "Warrants"). Part 3.3 of the Disclosure Letter lists all of the holders of
the Shares, Options and Warrants. The
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Sellers are and will be on the Closing Date, the record and beneficial owners
and holders of the Shares, free and clear of all Encumbrances. With the
exception of the Shares (which are owned by the Sellers), all of the
outstanding equity securities and other securities of each Acquired Company
are owned of record and beneficially by the Company or one or more of the
Acquired Companies, free and clear of all Encumbrances. Except for standard
state and federal securities registration legends and a legend disclosing the
shareholders agreement described in the Disclosure Letter, no legend or other
reference to any purported Encumbrance appears upon any certificate
representing equity securities of any Acquired Company. All of the
outstanding equity securities of each Acquired Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except
as described in Part 3.3 of the Disclosure Letter, there are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of any Acquired Company. None of the outstanding equity
securities or other securities of any Acquired Company was issued in
violation of the Securities Act or any other Legal Requirement. Except as
disclosed in the Disclosure Letter, no Acquired Company owns, or has any
Contract to acquire, any equity securities or other securities of any Person
(other than Acquired Companies) or any direct or indirect equity or ownership
interest in any other business.
3.4 FINANCIAL STATEMENTS. The Sellers have delivered to the Buyer and
included as Part 3.4 of the Disclosure Letter consolidated balance sheets of the
Acquired Companies as at September 30 in each of the years 1994 through 1996,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flow for each of the fiscal years then ended, together with the
report thereon of Deloitte & Touche, LLP, and the internally prepared, unaudited
consolidated balance sheets and statements of income, changes in shareholders'
equity, and cash flow for the quarters ended December 31, 1995 and 1996 (the
"Financial Statements"). The balance sheet of the Acquired Companies as at
September 30, 1996 (including the notes thereto) is herein called the "Balance
Sheet." The Financial Statements are true and correct, are in accordance with
the books and records of the Acquired Companies and fairly present the financial
condition and the results of operations, changes in shareholders' equity, and
cash flow of the Acquired Companies as at the respective dates of and for the
periods referred to in such Financial Statements, all in accordance with GAAP
(except that interim statements do not contain the footnotes required under GAAP
to be contained in the year-end statements); the Financial Statements reflect
the consistent application of such accounting principles throughout the periods
involved. No financial statements of any Person other than the Acquired
Companies are required by GAAP to be included in the consolidated financial
statements of the Company. None of the Acquired Companies now has, nor will
have on the Closing Date, any liabilities required to be reflected in financial
statements prepared in accordance with GAAP which are not fully reflected on or
reserved against in the Balance Sheet other than (i) such liabilities as are
disclosed herein or in the Disclosure Letter or (ii) liabilities incurred by the
Acquired Companies between the date of the Balance Sheet and the Closing Date in
the Ordinary Course of Business and consistent with the limitations and
restrictions contained in this Agreement. Promptly upon their being available
and, in any event, by the 25th day of the subsequent calendar month, the Sellers
will provide to the Buyer the internally prepared, unaudited monthly balance
sheets and profit and loss statements with respect to the Acquired
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Companies for each month following the date of the Balance Sheet through the
Closing Date and, with respect to each such balance sheet and profit and loss
statement (all of which shall constitute "Financial Statements" as used
herein), the representations heretofore set forth in this Section will be
applicable and true and correct.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Acquired Companies, all of which have been made
available to the Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Acquired
Companies contain accurate and complete records of all significant meetings held
of, and corporate action taken by, the shareholders, the Boards of Directors,
and committees of the Boards of Directors of the Acquired Companies, and no
significant meeting of any such shareholders, Board of Directors, or committee
of the Board of Directors has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be delivered to the Buyer.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the Disclosure Letter
contains a complete and accurate list of the Real Property, which includes all
real property, leaseholds, or other interests therein owned by any Acquired
Company or used in the operation of the Business. The Sellers have delivered or
made available to the Buyer copies of the deeds and other instruments (as
recorded) by which the Acquired Companies acquired the Real Property and copies
of the most recent title insurance policies, opinions, abstracts, and surveys in
the possession of the Sellers or the Acquired Companies and relating to the Real
Property (collectively, the "Real Estate Reports"). Except as described in
Part 3.6 of the Disclosure Letter, to the Knowledge of the Sellers and the
Acquired Companies, (i) none of the buildings, structures or improvements
constructed on any Real Property encroaches upon adjoining real estate and
(ii) all such buildings, structures and improvements are constructed in
accordance with all "set back lines," easements and other restrictions, or
rights of record, that have been established by any applicable building or
safety code. To the Knowledge of the Sellers and the Acquired Companies, no
utility lines serving the Real Property pass over the lands of others except
where appropriate easements have been obtained. Part 3.6 of the Disclosure
Letter contains a complete and accurate list of all Real Estate Leases. The
Sellers have delivered to the Buyer correct and complete copies of all of the
Real Estate Leases. All of the leasehold estates purported to be granted by
each Real Estate Lease is owned and held by an Acquired Company and such
Acquired Company is the owner of all equipment, machinery and other personal
property thereon or in the buildings and structures thereon, in each case free
and clear of all Encumbrances (other than Permitted Encumbrances). Except as
described in Part 3.6 of the Disclosure Letter, each Real Estate Lease is in
full force and effect and constitutes a legal, valid and binding obligation of,
and is legally enforceable against, the Acquired Company that is party thereto
and grants or purports to grant a leasehold estate, free and clear of all
Encumbrances (other than Permitted Encumbrances). Except as described in Part
3.6 of the Disclosure Letter, no lessor under any Real Estate Lease is a Related
Person to any Seller or Acquired Company. All necessary Governmental
Authorizations with respect to each Real Estate Lease have been obtained and all
necessary filings or registrations therefor have been made, and there have
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been no threatened cancellations thereof or outstanding disputes thereunder.
Except as described in Part 3.6 of the Disclosure Letter, each Acquired
Company has performed all of the obligations required to be performed by it
to date under each Real Estate Lease. Except as described in Part 3.6 of the
Disclosure Letter, no Acquired Company is in default under any Real Estate
Lease, and there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event)
would constitute such a default. All of the property subject to the Real
Estate Leases is in good operating condition and repair, ordinary wear and
tear excepted. The Acquired Companies own all the Assets and have good and
marketable title to the Owned Real Estate and to the tangible personal
property included within the Assets, including all of such properties and
assets reflected in the Financial Statements (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.6 of
the Disclosure Letter and personal property sold since the date of the
Balance Sheet, as the case may be, in the Ordinary Course of Business), and
all of the properties and assets purchased or otherwise acquired by the
Acquired Companies since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice). All Assets
are free and clear of all Encumbrances (other than Permitted Encumbrances)
and are not, in the case of the Real Property, subject to any rights of way,
building use restrictions, exceptions, variances, reservations, or
limitations of any nature except Permitted Encumbrances.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants and
structures of the Acquired Companies are structurally sound, are in good
operating condition and repair (ordinary wear and tear excepted), and are
adequate for the uses to which they are being put, and none of such
buildings, plants or structures is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature
or cost. The building, plants and structures of the Acquired Companies are
sufficient for the continued conduct of the Acquired Companies' businesses
after the Closing in substantially the same manner as conducted prior to the
Closing. Set forth in Part 3.7 of the Disclosure Letter is a complete and
accurate list, as of December 31, 1996, of all material items of tangible
personal property or interests therein used in the operation of the
businesses of the Acquired Companies. Such tangible personal property will,
on the Closing Date, be in good operating condition and repair, ordinary wear
and tear excepted, and constitute all material items of tangible assets used
in the operation and conduct of the businesses of the Acquired Companies as
conducted on the date hereof and on the Closing Date.
3.8 ACCOUNTS RECEIVABLE. The accounts receivable generated from and
after September 30, 1995 or reflected in the Financial Statements are
accounts which were generated by the Acquired Companies with genuine
expectation of collection thereof, and the revenues reflected in such
Financial Statements have been or will be collected in full except to the
extent reserved for in the Balance Sheet as an "allowance for bad debts".
3.9 INVENTORY. The "value" of the inventories of the Acquired Companies
as of the date of the last Financial Statement shall be no less than the book
value of such inventory as reflected on the last Financial Statement. For
purposes hereof, the "value" of
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such inventory shall mean the lower of the last in first out cost of the
Acquired Companies or "market" and, for purposes hereof, "market" shall mean
the price for which the Acquired Companies last purchased an item of
inventory (or an item of comparable quality if the same item is unavailable)
in stock at the place where such inventory is situated, due regard being
given any damage to or obsolescence of inventory in determining the
replacement cost thereof.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of the
Disclosure Letter and except for the Closing Liabilities, the Acquired Companies
have no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise).
3.11 TAXES. Except as described in Part 3.11 of the Disclosure Letter,
each of the Acquired Companies has filed and, on the Closing Date, will have
filed all federal, state, county and local income, excise, property,
withholding, workers unemployment compensation, sales, use, franchise or
doing business and other tax returns which are required to be filed by any of
them as of such dates; and such returns are true, correct and complete. Each
of the Acquired Companies has paid or will pay all Taxes, estimated Taxes,
interest, penalties, assessments and deficiencies which have become due prior
to such date, pursuant to such returns and no additional Taxes, interest,
penalties, assessments or deficiencies will be payable with respect thereto.
The accrual for Taxes in the Balance Sheet is sufficient and no Acquired
Company will have any liability for taxes in respect of periods ending on or
prior to the close of the Company 1996 fiscal year in excess of the amount
accrued therefor in the Balance Sheet.
The federal income, state income and state sales and use Tax returns of the
Acquired Companies have been examined by the applicable taxing authority for the
periods specified in Part 3.11 of the Disclosure Letter and all deficiencies
proposed as a result of such examinations have been paid or settled. Except as
specified in Part 3.11 of the Disclosure Letter, no unresolved claim for
assessment or collection of Taxes has been asserted against any of the Acquired
Companies. The Acquired Companies are not party to any pending action or
proceeding and, to the Knowledge of the Management Sellers, there is no action
or proceeding threatened by any government or authority against the Acquired
Companies which subjects or might subject the Acquired Companies to any claim or
lien relating to the payment of Taxes. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
return of the Acquired Companies for any period. Except as specified in Part
3.11 of the Disclosure Letter and except for consents or elections duly made in
federal tax returns of the Acquired Companies that have been provided to the
Buyer, there are no outstanding consents or elections made under the Code which
are binding upon the Acquired Companies. There are no liens outstanding for any
Taxes upon the assets of the Acquired Companies except with respect to Taxes not
yet delinquent. True and complete copies of all returns of Taxes and all
schedules thereto filed by, on behalf of, or with respect to the Acquired
Companies with the IRS or any other taxing authority for any of the last seven
taxable years, and all written communications with the IRS relating to all such
returns, have been made available to the Buyer.
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3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition (financial or otherwise) of the
Acquired Companies considered as a whole, and no event unique to the Acquired
Companies has occurred or circumstance or condition exists, or to the Knowledge
of any Seller or any Acquired Company, is contemplated or threatened, that may
result in such a material adverse change.
3.13 EMPLOYEE BENEFITS. Part 3.13 of the Disclosure Letter sets forth a
description of all of the existing employee benefit plans of the Acquired
Companies, personnel policies and a listing of all employee benefit brochures or
handbooks and personnel brochures or handbooks delivered to employees or in
effect during the past twelve months. There are no "employee benefit plans"
(the "Plans") as such term is defined in Section 3(3) of ERISA maintained by the
Acquired Companies or under which the Acquired Companies have any liability,
other than those described in Part 3.13 of the Disclosure Letter. No Plan
intended to be a qualified plan under Section 401(a) of the Code or trust
forming a part thereof has been completely terminated since September 1, 1974.
All Plans and any trusts forming a part thereof which are subject to ERISA are
and have been administered in all material respects in compliance with ERISA; no
"reportable event," as such term is used in ERISA, has heretofore occurred with
respect to any Plan; and to the Knowledge of the Sellers and the Acquired
Companies, there does not exist any fact or circumstance that might cause the
Pension Benefit Guaranty Corporation to seek to terminate any Plan pursuant to
Section 4042 of ERISA. Neither the Acquired Companies, the Sellers, trustees,
administrators, or fiduciaries of any plans has participated in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
that could subject the Acquired Companies or any trustee, administrator or other
fiduciary to any tax, penalty or liability. No liability to the Pension Benefit
Guaranty Corporation has been or is expected to be incurred with respect to any
Plan. Except as otherwise disclosed in the Disclosure Letter, all Plans which
are "employee pension benefit plans" (as such term is defined in Section 3(2) of
ERISA) and which are intended to be qualified plans under Section 401(a) of the
Code, have received, within the last three years, favorable determination
letters from the Internal Revenue Service regarding their qualification and the
tax-exempt status of their trusts under Section 501(a) of the Code. All Plans
and the trusts forming a part thereof have been administered and enforced in all
material respects in accordance with their terms and the applicable provisions
of the Code and ERISA, and no material disputes are pending or, to the Knowledge
of the Sellers or the Acquired Companies, threatened with respect thereto. The
present value of all vested accrued benefits under any Plan that is an "employee
pension benefit plan" subject to Title IV of ERISA did not, as of the latest
valuation date, exceed the value of the assets of any such Plan allocable to
such vested accrued benefits, based upon the actuarial assumptions which are set
forth in Part 3.13 of the Disclosure Letter. The present value of all accrued
benefits, whether vested or not, under any Plan that is an "employee pension
benefit plan" subject to Title IV of ERISA did not, as of the latest valuation
date, exceed the value of the assets of such Plan allocable to such vested and
non-vested accrued benefits. None of the Plans is a "multi- employer plan," as
defined in ERISA. The Acquired Companies have not suffered or otherwise caused a
"complete withdrawal" or "partial withdrawal," as such terms are respectively
defined in Section 4203
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and 4205 of ERISA. None of the Plans subject to Section 412 of the Code or
any trust established in connection therewith has incurred any "accumulated
funding deficiency," as such term is defined in Section 412 of the Code,
whether or not waived, since the effective date of Section 412. None of the
assets of any Plan has at any time included any stock or securities issued by
any Acquired Company since before 1989.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS;
CONSENTS.
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and since September 30, 1995 has
been, in material compliance with each Legal Requirement that is or
was applicable to it or to the conduct or operation of its business or
the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may constitute or result in a
violation by any Acquired Company of, or a failure on the part of any
Acquired Company to comply with, any Legal Requirement, or may give
rise to any obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) no Acquired Company has received any written notice or
other communication from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement, or any actual,
alleged, possible, or potential obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, any Acquired Company, and such Governmental Authorizations listed in Part
3.14 of the Disclosure Letter constitute all Governmental Authorizations which
are required for the operation of the Business as operated by the Acquired
Companies on the date hereof. Each Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter is valid and in full
force and effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and since September 30, 1995 has
been, in material compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter;
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(ii) no event has occurred or circumstance exists that may (with
or without notice or lapse of time) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter, or result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure Letter;
(iii) no Acquired Company has received any written notice or
other communication from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Part 3.14 of the Disclosure Letter have been duly filed on a
timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
(c) Except as set forth in Part 3.14 of the Disclosure Letter, no
Acquired Company is subject to any statute, law, ordinance, regulation, rule,
determination, order, judgment, writ, injunction, decree, charter, bylaw,
mortgage, deed of trust, indenture, note, agreement, commitment, lease,
contract, instrument or other restriction of any kind or character whatsoever
which would prevent the execution or delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby, or a
transfer of the Assets, or would result in any material penalty, forfeiture
or contract termination as a result thereof, without the consent of the
holders of or parties to such instruments or any other parties. Except as
set forth in Part 3.14 of the Disclosure Letter, all consents which are
necessary to permit the consummation of the transactions described above have
been obtained or will be obtained prior to Closing.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding:
(i) that has been commenced by or against any Acquired Company
or would materially and adversely affect the business of, or any of
the assets owned or used by, the Acquired Companies considered as a
whole; or
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(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby.
To the Knowledge of the Sellers and the Acquired Companies, no such Proceeding
has been Threatened. The Sellers have delivered to the Buyer copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 3.15 of the Disclosure Letter.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or
any of the assets owned or used by any Acquired Company, is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, any Acquired
Company; and
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company is, and has been, in material
compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which any Acquired Company, or any of the assets owned or
used by any Acquired Company, is subject; and
(iii) no Acquired Company has received any notice or other
communication (whether oral or written) from any Governmental Body or
any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of
any Order to which any Acquired Company, or any of the assets owned or
used by any Acquired Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Part
3.16 of the Disclosure Letter, since the date of the Balance Sheet, the Acquired
Companies have conducted their businesses only in the Ordinary Course of
Business and, without the written consent of the Buyer, there has not been any:
(a) change in any Acquired Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares
of capital stock of any Acquired Company; issuance of any security
convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or
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other acquisition by any Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director,
officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of any Acquired Company;
(e) damage to or destruction or loss of any asset or property of
any Acquired Company, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business, financial
condition, or prospects of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or
(ii) any Contract or transaction involving, in either case, a total
remaining commitment by or to any Acquired Company of at least $50,000
in the aggregate as to all such agreements and transactions;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of
any Acquired Company other than in the Ordinary Course of Business or
mortgage, pledge, or imposition of any lien or other encumbrance on
any asset or property of any Acquired Company other than Permitted
Encumbrances;
(h) cancellation or waiver of any claims or rights with a value
to any Acquired Company in excess of $50,000 in the aggregate as to
all such claims and rights;
(i) change in the accounting methods or accounting practices
used by any Acquired Company or any credit collection or payment
practice, or written down the value of the Assets or properties or
written-off as uncollectible any notes or accounts receivable, except
write-downs and write-offs in the Ordinary Course of Business, none of
which, individually or in the aggregate, are material;
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(j) agreement, whether oral or written, by any Acquired Company
to do any of the foregoing.
From the date hereof, neither the Sellers nor any Acquired Company will,
directly or indirectly, do or agree to do any of the foregoing without the
Buyer's written consent.
3.17 CONTRACTS; NO DEFAULTS.
Except for the contracts, agreements and commitments set forth in Part 3.17
of the Disclosure Letter (the "Scheduled Contracts"), none of the Acquired
Companies is a party to any oral or written (i) contract for the employment of
any officer, employee, consultant or independent contractor; (ii) license
agreement or distributor, dealer, manufacturer's representative, sales agency,
advertising, property management or brokerage contract requiring aggregate
payments in future in excess of $50,000 in the aggregate as to all such
contracts; (iii) contract with any labor organization or other collective
bargaining unit; (iv) contract for the future purchase of materials, supplies,
services, merchandise (excluding inventory) or equipment involving payments of
more than $50,000 in the aggregate as to all such contracts over its remaining
term (including periods covered by any option to renew by either party); (v)
contract for the purchase, sale or lease of any real estate; (vi)
profit-sharing, bonus, incentive compensation, deferred compensation, stock
option, severance pay, stock purchase, employee benefit, insurance,
hospitalization, pension, retirement or other similar plan or agreement; (vii)
agreement or arrangement for the sale of any of its assets or properties or the
grant of any preferential rights to purchase any of its assets, properties or
rights, other than in the Ordinary Course of Business involving payments of more
than $50,000 in the aggregate as to all such agreements or arrangements; (viii)
contract which contains any provisions requiring the Acquired Companies to
indemnify any other party thereto for an amount that might reasonably exceed
$50,000 in the aggregate as to all such contracts; (ix) joint venture agreement
or arrangement or other agreement involving the sharing of profits; (x)
outstanding loan to any person or entity or receivable due from any shareholder
of the Acquired Companies, the Sellers or persons or entities controlling,
controlled by or under common control with the Acquired Companies or the
Sellers; or (xi) other contract, commitment or agreement involving payments of
more than $50,000 in the aggregate as to all such contracts, commitments or
agreements which by its terms does not terminate or is not terminable within 30
days or upon 30 days' (or less) notice. Except as described in Part 3.17 of the
Disclosure Letter, each of the Contracts is in full force and effect and
constitutes a legal, valid and binding obligation of, and is legally enforceable
against, the Acquired Company party thereto. The Acquired Companies have in all
material respects performed all the obligations required to be performed by each
of them to date under the Contracts. To the Knowledge of the Sellers and the
Acquired Companies, no party is in default under any of the Contracts. Except
as specified in Part 3.17 of the Disclosure Letter, none of the Contracts is a
"capitalized" lease or a "financing" lease (as those terms are used in GAAP).
Except as specified in Part 3.17 of the Disclosure Letter, none of the other
parties to any of the Contracts is an affiliate of the Acquired Companies or the
Sellers.
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Part 3.17 of the Disclosure Letter also contains a true, correct and
complete list of all material trade or barter agreements of the Acquired
Companies (advertising exchanged for goods and services with third parties) as
of the date hereof, including the nature of the trade, the parties to the trade
and the positive or negative trade balance.
3.18 INSURANCE. Set forth in Part 3.18 of the Disclosure Letter is a list
and brief description of all policies of property, fire, casualty, liability,
life, worker's compensation and other forms of insurance of any kind owned or
held by the Acquired Companies. All such policies (a) are in full force and
effect; (b) are valid, outstanding and enforceable policies; and (c) provide
that they will remain in full force and effect through the respective dates set
forth in Part 3.18 of the Disclosure Letter.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.19 of the
Disclosure Letter:
(a) Each Acquired Company is, and at all times has been, in
material compliance with, and has not been and is not in violation of
or liable under, any Environmental Law. No Seller or Acquired Company
has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any
actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public
interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or Threatened obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which any
Acquired Company has had an interest, or with respect to any property
or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by
any Acquired Company, or any other Person for whose conduct they are
or may be held responsible, or from which Hazardous Materials have
been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(b) There are no pending or, to the Knowledge of the Sellers and
the Acquired Companies, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
or any other properties and assets (whether real, personal, or mixed)
in which any Acquired Company has or had an interest.
(c) No Seller or Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may
be held responsible, received, any citation, directive, inquiry,
notice, Order,
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summons, warning, or other communication that relates
to Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law,
or of any alleged, actual, or potential obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Acquired
Company had an interest, or with respect to any property or facility
to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by any Acquired Company, or
any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) No Seller or Acquired Company, or any other Person for whose
conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or, to
the Knowledge of the Sellers and the Acquired Companies, with respect
to any other properties and assets (whether real, personal, or mixed)
in which any Acquired Company (or any predecessor), has or had an
interest, or at any property geologically or hydrologically adjoining
the Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or, to the Knowledge of the Sellers and
the Acquired Companies, at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits,
dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land,
water, sumps, or any other part of the Facilities or such adjoining
property, or incorporated into any structure therein or thereon. No
Seller, Acquired Company, any other Person for whose conduct they are
or may be held responsible, or to the Knowledge of the Sellers and the
Acquired Companies, any other Person, has permitted or conducted, or
is aware of, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal,
or mixed) in which any Acquired Company has or had an interest.
(f) There has been no Release or, to the Knowledge of the
Sellers and the Acquired Companies, Threat of Release, of any
Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured,
refined, transferred, produced, imported, used, or processed from or
by the Facilities, or from or by any other properties and assets
(whether real, personal, or mixed) in which any Acquired Company has
or had an interest, or to the Knowledge of the Sellers and the
Acquired Companies any geologically or hydrologically adjoining
property, whether by the Sellers, any Acquired Company, or any other
Person.
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(g) The Sellers have delivered to the Buyer true and complete
copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Sellers or any Acquired
Company pertaining to Hazardous Materials or Hazardous Activities in,
on, or under the Facilities, or concerning compliance by the Sellers,
any Acquired Company, or any other Person for whose conduct they are
or may be held responsible, with Environmental Laws.
3.20 EMPLOYEES.
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list as of January 31, 1997 of the following information for each employee of
the Acquired Companies, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since the Balance Sheet Date; vacation accrued; and
service credited for purposes of vesting and eligibility to participate under
any Acquired Company's pension, retirement, profit-sharing, thrift-savings,
deferred compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership), severance
pay, insurance, medical, welfare, or vacation plan, other Employee Pension
Benefit Plan or Employee Welfare Benefit Plan, or any other employee benefit
plan or any Director Plan.
(b) To the Knowledge of the Sellers and the Acquired Companies, no
employee of any Acquired Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, non-competition, or
proprietary rights agreement, between such employee and any other Person (the
"Proprietary Rights Agreement") that in any way adversely affects or will
adversely affect (i) the performance of his duties as an employee of the
Acquired Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with any Seller or with any
Acquired Company by any such employee. To the Knowledge of the Sellers and the
Acquired Companies, no officer, or other key employee of any Acquired Company
intends to terminate his employment with such Acquired Company as a result of
consummation of the transactions contemplated hereby.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee of the
Acquired Companies, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage, and other
benefits.
3.21 LABOR RELATIONS; COMPLIANCE. Since September 30, 1993, no Acquired
Company has been or is a party to any collective bargaining or other labor
Contract. Except as set forth in Part 3.21 of the Disclosure Letter, since
September 30, 1993, there has not been, there is not presently pending or
existing, and to the Knowledge of the Sellers and the Acquired Companies, there
is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting any
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Acquired Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or employment
dispute against or affecting any of the Acquired Companies or their premises,
or (c) any application for certification of a collective bargaining agent.
To the Knowledge of the Sellers and the Acquired Companies, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by any
Acquired Company, and no such action is contemplated by any Acquired Company.
Each Acquired Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. No Acquired Company is liable for the
payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.22 INTELLECTUAL PROPERTY. Set forth in Part 3.22 of the Disclosure
Letter is a list of all material franchises, licenses, trademarks, trade names,
service marks, service names, copyrights, patents and applications therefor
owned or licensed by or registered in the name of the Acquired Companies or any
other person which is used in the operation of the businesses of the Acquired
Companies. The Acquired Companies own or license all of the franchises,
licenses, trademarks, trade names, service marks, service names, copyrights,
patents and applications therefor listed in Part 3.22 of the Disclosure Letter
and, except to the extent reflected in Part 3.22 of the Disclosure Letter, none
of the Acquired Companies previously paid any royalty or other amount to anyone
under any of them. On the Closing Date, the Acquired Companies will own or
possess the right to use all franchises, licenses, trademarks, trade names,
service marks, service names, copyrights, patents and applications therefor as
used in the conduct of the businesses of the Acquired Companies on the date
hereof and on the Closing Date. None of the Acquired Companies has received
written notice to the effect that any service or publication of the businesses
of the Acquired Companies may infringe any trademark, trade name, copyright or
patent, trade secret or legally protectable right of another.
3.23 CERTAIN PAYMENTS. Except as described in Part 3.23 of the Disclosure
Letter, since September 30, 1993, no Acquired Company or, to the Knowledge of
the Sellers and the Acquired Companies, any other Person associated with or
acting for or on behalf of any Acquired Company, has directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of any Acquired Company or any Affiliate of an Acquired
Company, or (iv) in violation of any Legal Requirement, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Acquired Companies.
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3.24 DISCLOSURE. No representation or warranty of the Sellers in this
Agreement and no statement in the Disclosure Letter omits to state a material
fact necessary to make such representation, warranty or statement herein or
therein, in light of the circumstances in which it was made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS. Except as disclosed in Part 3.25
of the Disclosure Letter, none of the Management Sellers, Garvin or any Related
Person of any Acquired Company, any Management Seller or Garvin has, or, since
September 30, 1995 has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Acquired Companies' businesses. Except as disclosed in the Disclosure
Letter, since September 30, 1995, none of the Management Sellers, Garvin or any
Related Person of any Management Seller or Garvin (i) has had any business
dealings or a material financial interest in any transaction with any Acquired
Company, or (ii) has engaged in competition with any Acquired Company with
respect to any line of products or services of such Acquired Company (a
"Competing Business") in any market presently served by such Acquired Company.
Except as disclosed in the Disclosure Letter, none of the Acquired Companies,
the Management Sellers, Garvin or any Related Person of any Acquired Company,
any Management Seller or Garvin is, or since September 30, 1995, has owned (of
record or as a beneficial owner), a material equity interest or any other
material financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with any Acquired
Company, or (ii) engaged in competition with any Acquired Company with respect
to a Competing Business in any markets presently served by such Acquired
Company. Except as set forth in Part 3.25 of the Disclosure Letter, no Acquired
Company, Seller or Related Person of any Acquired Company or any Seller is a
party to any Contract with, or has any claim or right against, any Acquired
Company. For purposes of this Section 3.25, Portfolio Investments of SC or SC's
affiliates shall not be deemed to be Related Persons of the Acquired Companies.
3.26 BROKERS OR FINDERS. Except as disclosed in Part 3.26 of the
Disclosure Letter, none of the Sellers, any Acquired Company or any of their
agents have incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
3.27 PROJECTIONS. Part 3.27 of the Disclosure Letter sets forth the
projections for the financial performance of the business of the Acquired
Companies for their 1997 and 1998 Fiscal Years (the "Projections"). The
Projections have been prepared in accordance with realistic estimates of the
financial performance achievable by the Acquired Companies for the periods
presented and none of the Acquired Companies or the Management Sellers has any
reason to believe that the Acquired Companies will be unable to achieve the
financial performance reflected therein, it being understood, however, (i) that
the Management Sellers make no warranty to the Buyer that the Acquired Companies
will achieve the financial performance presented in the Projections and (ii) the
Projections may be affected by general economic conditions and conditions
particular to the Business.
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3.28 SC.
(a) SC is a corporation duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts, with full
corporate power and authority to conduct its business as it is now being
conducted. This Agreement constitutes the legal, valid, and binding obligation
of SC, enforceable against SC in accordance with its terms. SC has the absolute
and unrestricted right, power, authority, and capacity to execute and deliver
this Agreement and to perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated hereby will,
directly or indirectly (with or without notice or lapse of time) contravene,
conflict with, or result in a violation of any provision of the Organizational
Documents of SC, or any resolution adopted by the board of directors or the
shareholders of SC;
(c) SC is and will be on the Closing Date the record and beneficial owner
and holder of the Shares identified in the Disclosure Letter as owned by SC,
free and clear of all Encumbrances and, upon delivery of the instruments
contemplated by Section 2.6(a), the Buyer will acquire good title to such
Shares, free and clear of all Encumbrances.
3.29 NON-MANAGEMENT SELLERS OTHER THAN SC.
(a) This Agreement constitutes the legal, valid, and binding obligation of
the Sellers other than the Management Sellers and SC, enforceable against them
in accordance with its terms. Each such Seller has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and to perform his obligations under this Agreement.
(b) The Non-Management Sellers are and will be on the Closing Date the
record and beneficial owner and holder of the Shares as identified in the
Disclosure Letter, free and clear of all Encumbrances and, upon delivery of the
instruments contemplated by Section 2.6(a), the Buyer will acquire good title to
such Shares, free and clear of all Encumbrances.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer is not a "foreign person" as defined in section 1445 of the
Internal Revenue Code of 1986, as amended.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation of
the Buyer, enforceable against the Buyer in accordance with its terms. Upon the
execution and
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delivery by the Buyer or AGH, as the case may be, of the instruments
contemplated to be executed pursuant to this Agreement by the Buyer and AGH
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing
Documents will constitute the legal, valid, and binding obligations of the
Buyer or AGH, as the case may be, enforceable against the Buyer or AGH, as
the case may be, in accordance with their respective terms. The Buyer has
the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the Buyer and AGH, as the case may be, has the
absolute and unrestricted right, power and authority to execute and deliver
the notes, documents and agreements referred to in Section 2.5(b)(i) and
(iii)-(v), the Buyer's Closing Documents and to perform their respective
obligations under this Agreement and the Buyer's Closing Documents once all
appropriate authorizations have been obtained.
(b) Neither the execution and delivery of this Agreement by the Buyer nor
the consummation or performance of any of the transactions contemplated hereby
by the Buyer or AGH will, directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of Organizational Documents of the Buyer or AGH, as the
case may be, or (B) any action adopted by the Buyer or AGH, as the
case may be;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any
of the transactions contemplated hereby or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which
the Buyer or AGH may be subject; or
(iii) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
conflict or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate or modify, any Contract to
which the Buyer or AGH is a party or by which the Buyer or AGH may be
bound.
Except as set forth in Schedule 4.2, neither the Buyer nor AGH is and will be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
transactions contemplated hereby.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against the Buyer or AGH and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the transactions contemplated hereby. To the Buyer's Knowledge, no such
Proceeding has been Threatened.
4.4 BROKERS OR FINDERS. The Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify
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and hold the Sellers harmless from any such payment alleged to be due by or
through the Buyer as a result of the action of the Buyer or its officers or
agents.
4.5 INVESTMENT REPRESENTATIONS.
The Buyer is capable of evaluating the risks and merits of an investment
in the Shares and of protecting its own interests in connection with such
investment. The Buyer has not seen, received, been presented with, or been
solicited by any leaflet, public promotional meeting, newspaper or magazine
article or advertisement, radio or television advertisement, or any other
form of advertising or general solicitation with respect to the sale of the
Shares. The Buyer is acquiring the Shares for its own account only not with a
view to or for sale in connection with any distribution of all or any part of
the Shares. Without limiting the representations and warranties of the
Sellers and damages as a result of the breach thereof, the Buyer acknowledges
that the Buyer is financially able to bear the economic risk of an investment
in the Shares, including the total loss thereof. The Buyer acknowledges that
the Shares have not been registered under the Securities Act in reliance, in
part, on its representations, warranties and agreement herein. The Buyer
understands that the Shares are a "restricted security" under the Securities
Act in that the Shares will be acquired in a transaction not involving a
public offering, and that the Shares may be resold without registration under
the Securities Act only in certain limited circumstances. The Buyer
represents, warrants, and agrees that the Sellers are under no obligation to
register or qualify the Shares under the Securities Act or under any state
securities law, or to assist the Buyer in complying with any exemption from
registration and qualification. The Buyer acknowledges that there are
substantial restrictions on the transferability of the Shares pursuant to
this Agreement, that there is no public market for the Shares and none is
expected to develop. Without limiting the representations and warranties of
the Sellers and damages as a result of the breach thereof, the Buyer
acknowledges that the Buyer (i)has had an opportunity to ask questions and
receive answers from the Sellers regarding the terms and conditions of
purchase of the Shares and regarding the business, financial affairs, and
other aspects of the Acquired Companies, (ii) has further had the opportunity
to obtain all information which its deems necessary to evaluate the
investment and to verify the accuracy of information otherwise provided to it
and (iii) has received and reviewed all information it considers necessary or
appropriate for deciding whether to purchase the Shares.
5. COVENANTS OF THE SELLERS PRIOR TO CLOSING DATE.
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, the Sellers will, and will cause each Acquired Company and
its Representatives to, (a) afford the Buyer and its Representatives and
prospective lenders and their Representatives (collectively, the "Buyer's
Advisors") full and free access (upon reasonable notice) to each Acquired
Company's personnel, properties (including subsurface testing), contracts,
books and records, and other documents and data, (b) furnish the Buyer and
the Buyer's Advisors with copies of all such contracts, books and records,
and other existing documents and data as the Buyer may reasonably request,
and (c) furnish the Buyer and the Buyer's Advisors with such additional
financial, operating, and other data and
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information as the Buyer may reasonably request. From the date hereof, at
the request of the Buyer, and provided that such action would not have an
adverse effect on the Acquired Companies if Closing does not occur, the
Sellers shall cause the Acquired Companies to take such actions as the Buyer
may reasonably request in respect of tax elections, accounting methodologies,
governmental filings and the adoption of other practices, policies or
procedures, in which event the implementation of any such practices, policies
or procedures and the taking of any such actions (i) shall not constitute a
breach of any representation, warranty or covenant hereof and (ii) shall be
deemed to have been made with the consent of the Buyer. The Sellers agree to
cause the Acquired Companies not to file the federal income tax returns of
the Acquired Companies for the fiscal year ending September 30, 1996 on or
before the Closing Date unless the Closing Date has not occurred prior to the
due date, as presently extended, for filing such return.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the
date of this Agreement and the Closing Date, the Management Sellers will, and
will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the
Ordinary Course of Business, in material conformity with (i) all
applicable laws, ordinances, regulations, rules, and orders, and
consistent with past practice, (ii) except for instances of force
majeure or other events outside of the control of the Acquired
Companies, amounts budgeted in the Projections in respect of
expenditures for capital improvements and expenditures for advertising
to promote the Business.
(b) use their best efforts to preserve the Business intact, keep
available the services of the current officers, employees, and agents
of such Acquired Company, and, to the extent commercially advisable,
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with such Acquired Company, and continue to conduct the
financial operations of the Business, including the credit, collection
and payment policies and practices of the Acquired Companies, with the
same effort, to the same extent and in the same manner as in the prior
conduct of the business of the Acquired Companies;
(c) maintain all Assets in their present good operating
conditions, repair and order, reasonable wear and tear in ordinary
usage expected, and maintain the inventories of the Business at levels
normally maintained for the Business (subject to normal seasonal
adjustment);
(d) maintain the books, accounts and records of the Business in
the usual and ordinary manner and deliver to the Buyer copies of
monthly internally prepared, unaudited operating statements and
balance sheets for the
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Business and any other information concerning the financial condition of
the Business as the Buyer may from time to time reasonably request;
(e) pay or caused to be paid or provided for all property,
sales, use, franchise, excise, social security, withholding, worker's
compensation and unemployment insurance taxes and all other Taxes of
or relating to the Business and employees of the Acquired Companies,
required to be paid to avoid penalties and interest to city, county,
state, federal or other governmental units up to the Closing Date;
(f) confer with the Buyer regarding changes to operational
matters of a material nature; and
(g) otherwise report periodically to the Buyer concerning the
status of the business, operations, and finances of such Acquired
Company.
5.3 NEGATIVE COVENANTS. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Sellers will not, and will cause each Acquired Company not to, without the
prior written consent of the Buyer, take any affirmative action, or fail to
take any reasonable action within their or its reasonable control, as a
result of which any of the changes or events listed in Section 3.16 is likely
to occur or which is likely to result in a material breach of any of the
representations and warranties contained in Section 3 hereof.
5.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, the Sellers will, and will cause each Acquired Company to,
make all filings required by Legal Requirements to be made by them in order
to consummate the transactions contemplated hereby (including all filings, if
any, required under the HSR Act). Between the date of this Agreement and the
Closing Date, the Sellers will, and will cause each Acquired Company to, (a)
cooperate with the Buyer with respect to all filings that the Buyer elects to
make or is required by Legal Requirements to make in connection with the
transactions contemplated hereby, and (b) cooperate with the Buyer in
obtaining all consents identified in Schedule 4.2.
5.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, the Sellers will promptly notify the Buyer in writing if any Seller or any
Acquired Company becomes aware of any fact or condition that causes or
constitutes a breach of any representations and warranties of the Sellers as of
the date of this Agreement, or if any Seller or any Acquired Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, the Sellers will promptly
deliver to the Buyer a supplement to the Disclosure
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Letter specifying such change. During the same period, each Seller will
promptly notify the Buyer of the occurrence of any breach of any covenant of
the Sellers in this Section 5 or of the occurrence of any event that may make
the satisfaction of the conditions in Section 7 impossible or unlikely. In
the case of SC, the notification requirements in this Section 5.5 shall apply
only to representations and warranties made by SC.
5.6 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, each Seller will not, and the Management
Sellers will cause each Acquired Company and each of their Representatives
not to, directly or indirectly solicit, initiate, or encourage any inquiries
or proposals from, discuss or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than the Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary
Course of Business) of any Acquired Company, or any of the capital stock of
any Acquired Company, or any merger, consolidation, business combination, or
similar transaction involving any Acquired Company.
5.7 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, each Seller will use its best efforts to cause the conditions in
Sections 7 and 8 to be satisfied, provided, however, that this obligation to
use best efforts will not require a Seller to take actions that would have a
material adverse effect on any of the Acquired Companies or that would result
in a material adverse change in the benefits to be obtained by such Seller as
a result of the transactions contemplated hereby.
5.8 AGREEMENTS FOR SAR OBLIGATIONS. The Sellers shall obtain from
each holder of the Options and Warrants an agreement with the Company to
cancel such holder's Options or Warrants (the "SAR Agreements"), and, prior
to the Closing, (i) the Company shall agree to pay such holders the payments
contemplated by the SAR Agreements and (ii) upon providing such agreement to
pay, the Options and Warrants shall immediately be cancelled, with the
Company having no further liability or obligation with respect thereto other
than the payment obligations of the Company described in subparagraph (i)
hereof to satisfy the SAR Obligations.
5.9 CAPITAL CONTRIBUTIONS. Unless such indebtedness, fees and liabilities
shall have been paid prior to or contemporaneously with the Closing Date from
funds other than funds of the Acquired Companies, prior to or contemporaneously
with the Closing the Sellers shall make capital contributions to the Company
equal to the aggregate of (i) all indebtedness (except Closing Liabilities) of
any Acquired Company on the Closing Date to any Seller or Related Person of any
Seller (except Funded Debt held by a Seller or Related Person), (ii) all
indebtedness of any Acquired Company on the Closing Date to any broker or other
Person for commissions or fees due in connection with the transactions
contemplated by this Agreement or any proposed transaction for the sale of the
Shares, the Assets or the Business, (iii) the fees and expenses of any attorney
of any of the Acquired Companies or any of the Sellers in connection with the
transactions contemplated by this Agreement or any other proposal or other
transaction (made within the past 180 days)
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relating to the sale of the Shares, the Assets, or the Business which have
been paid (or committed to be paid) by any Acquired Company prior to Closing,
and (iv) one half of the HSR filing fee. To the extent such contribution
shall not have been made prior to Closing, the Purchase Price shall be
reduced for the amount of any contribution to the capital of the Company to
be made as provided in this Section 5.9.
6. COVENANTS OF THE BUYER.
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after
the date of this Agreement, the Buyer will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be
made by them to consummate the transactions contemplated hereby (including
all filings under the HSR Act). Between the date of this Agreement and the
Closing Date, the Buyer will, and will cause each Related Person to, (i)
cooperate with the Sellers with respect to all filings that the Sellers are
required by Legal Requirements to make in connection with the transactions
contemplated hereby, and (ii) cooperate with the Sellers in obtaining all
consents identified in Part 3.2 of the Disclosure Letter; provided that this
Agreement will not require the Buyer to dispose of or make any change in any
portion of its business or to incur any other burden to obtain a Governmental
Authorization.
6.2 BEST EFFORTS. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, the Buyer will use
its best efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 NOTIFICATION. Between the date of this Agreement and the Closing
Date, the Buyer will promptly notify the Sellers in writing if the Buyer
becomes aware of any fact or condition that causes or constitutes a breach of
any of the Buyer's representations and warranties as of the date of this
Agreement, or if the Buyer becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty has such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. During the
same period, the Buyer will promptly notify the Sellers of the occurrence of
any breach of any covenant of the Buyer in this Section 6 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 8 impossible or unlikely.
7. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO CLOSE. The
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by the Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS.
(a) All of the Sellers' representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered
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individually), must have been accurate in all material respects as of the
date of this Agreement, and must be accurate in all material respects as of
the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
(b) Each of the Sellers' representations and warranties in Sections 3.3
and 3.4 must have been accurate in all respects as of the date of this
Agreement, and must be accurate in all respects as of the Closing Date as if
made on the Closing Date, without giving effect to any supplement to the
Disclosure Letter and the waiting period under the HSR Act shall have passed
or been terminated.
7.2 THE SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that the Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.6(a)
must have been delivered.
7.3 CONSENTS. Each Consent identified in Part 3.2 of the Disclosure
Letter must have been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to the Buyer:
(a) an opinion of Bass, Berry & Sims PLC, dated the Closing
Date, in substantially the form of Exhibit 7.4(a);
(b) resignations of all directors of the Acquired Companies;
(c) the corporate minute book and stock book for each Acquired
Company; and
(d) such other documents as the Buyer may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
the Sellers' representations and warranties, (iii) evidencing the
performance by the Sellers of, or the compliance by the Sellers with,
any covenant or obligation required to be performed or complied with
by the Sellers, (iv) evidencing the satisfaction of any condition
referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the transactions contemplated
hereby.
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7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against the Buyer, or against any Person
affiliated with the Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the transactions
contemplated hereby, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with any of the transactions
contemplated hereby.
7.6 NO CLAIM REGARDING SHARE OWNERSHIP OR SALE PROCEEDS. There must
not have been made or Threatened by any Person (that is not a Seller) any
claim asserting that such Person (a) is the holder or the beneficial owner
of, or has the right to acquire or to obtain beneficial ownership of any
stock of, or any other voting, equity, or ownership interest in, any of the
Acquired Companies, or (b) is entitled to all or any portion of the Purchase
Price.
7.7 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly
(with or without notice or lapse of time), materially contravene, or conflict
with, or result in a material violation of, or cause the Buyer or any Person
affiliated with the Buyer to suffer any material adverse consequence under,
(a) any applicable Legal Requirement or Order adopted or issued since the
date of this Agreement, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise formally proposed by or before any
Governmental Body since the date of this Agreement.
7.8 WORKING CAPITAL. The Working Capital of the Acquired Companies as
of the Closing Date must be a positive number and, at the Closing, the
Management Sellers will deliver to the Buyer a certificate executed by the
Management Sellers to that effect.
7.9 TITLE INSURANCE COMMITMENTS. If any title commitment, survey or
other report related to the Owned Real Estate that the Buyer may elect to
obtain prior to February 28, 1997, discloses any matter that is not a
Permitted Encumbrance, such matter must have been cured or removed within 30
days of the disclosure thereof to the Buyer.
8. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION TO CLOSE. The
Sellers' obligation to sell the Shares and to take the other actions required
to be taken by the Sellers at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which
may be waived by the Sellers, in whole or in part).
8.1 ACCURACY OF REPRESENTATIONS. All of the Buyer's representations
and warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must
be accurate in all material respects as of the Closing Date as if made on the
Closing Date.
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8.2 THE BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that the Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) The Buyer must have delivered each of the documents required to be
delivered by the Buyer pursuant to Section 2.6(b).
8.3 CONSENTS. Each of the Consents identified in Part 3.2 of the
Disclosure Letter must have been obtained and must be in full force and
effect and the waiting period under the HSR Act shall have passed or been
terminated.
8.4 ADDITIONAL DOCUMENTS. The Buyer must have caused the following
documents to be delivered to the Sellers:
(a) an opinion of Kaplan, Strangis and Kaplan, P.A. dated the
Closing Date, in the form of Exhibit 8.4(a);
(b) such other documents as the Sellers may reasonably request for
the purpose of (i) enabling their counsel to provide the opinion referred
to in Section 7.4(a), (ii) evidencing the accuracy of any representation or
warranty of the Buyer, (iii) evidencing the performance by the Buyer of, or
the compliance by the Buyer with, any covenant or obligation required to be
performed or complied with by the Buyer, (iv) evidencing the satisfaction
of any condition referred to in this Section 8, or (v) otherwise
facilitating the consummation of any of the transactions contemplated
hereby.
8.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against the Sellers, or against any Person
affiliated with the Sellers, any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the
transactions contemplated hereby, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of
the transactions contemplated hereby.
8.6 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly
(with or without notice or lapse of time), materially contravene, or conflict
with, or result in a material violation of, or cause the Sellers or any
Person affiliated with the Sellers to suffer any material adverse consequence
under, (a) any applicable Legal Requirement or Order adopted or issued since
the date of this Agreement, or introduced, or otherwise formally proposed by
or before any Governmental Body since the date of this Agreement.
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9. TERMINATION.
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either the Buyer or the Sellers if a material breach of
any material provision of this Agreement has been committed by the
other party and such breach has not been waived or cured within 30
days of notice from the other party hereto;
(b) (i) by the Buyer if any of the conditions in Section 7 has
not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
the Buyer to comply with its obligations under this Agreement) and the
Buyer has not waived such condition on or before the Closing Date; or
(ii) by the Sellers, if any of the conditions in Section 8 has not
been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
the Sellers to comply with their obligations under this Agreement) and
the Sellers have not waived such condition on or before the Closing
Date;
(c) by mutual consent of the Buyer and the Sellers; or
(d) by either the Buyer or the Sellers if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before April 30, 1997, or such later date as the
parties may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under Article 10
of this Agreement. If this Agreement is terminated pursuant to Section 9.1,
all further obligations of the parties under this Agreement will terminate,
except that the obligations in Sections 11.1 and 11.3 will survive; provided,
however, that if this Agreement is terminated by a party because of the
breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue its
remedies under Section 10 will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.4(a)(v), and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing. The right to indemnification will not be affected by any
investigation
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conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE SELLERS. Subject to
Sections 10.4 and 10.5 hereof, (a) the Management Sellers, jointly and
severally, as to all claims under this Section 10, SC, severally and not
jointly, as to representations and warranties made by it under Section 3,28
(but not as to any other claims made under Section 10, including this Section
10.2) and (c) Non-Management Sellers other than SC, severally (but not
jointly and severally) as to claims for breaches of representations and
warranties made by them under Section 3.29, will indemnify and hold harmless
the Buyer and its respective Representatives, shareholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and
will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees)
or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising from or in connection with:
(a) any breach of any representation or warranty made by the
Sellers in this Agreement, the Disclosure Letter, the supplements to
the Disclosure Letter, or any other certificate or document delivered
by the Sellers pursuant to this Agreement;
(b) any breach of any representation or warranty made by the Sellers
in this Agreement as if such representation or warranty were made on and as
of the Closing Date without giving effect to any supplement to the
Disclosure Letter, other than any such breach that is disclosed in a
supplement to the Disclosure Letter and is expressly identified in the
certificate delivered pursuant to Section 2.5(a)(iv) as having caused the
condition specified in Section 7.1 not to be satisfied;
(c) any breach by any Seller of any covenant or obligation of
such Seller in this Agreement that is not cured within 30 days of
notice from the Buyer;
(d) any Taxes in respect of the operation of the Business
through the end of 1996 fiscal year of the Acquired Companies except
to the extent provided for in the Balance Sheet;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with the
Sellers or any Acquired Company (or any Person acting on their behalf)
in connection with any of the transactions contemplated hereby; and
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(f) any and all actions, suits, proceedings, damages,
assessments, judgments, costs and expenses, including reasonable
attorneys' fees, incurred by the Buyer or any Acquired Company as a
result of the Sellers' failure or refusal to compromise or defend any
claim incident to, or otherwise comply with, any of the foregoing
provisions.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE BUYER. The Buyer will
indemnify and hold harmless the Sellers, and will pay to the Sellers the amount
of, any Damages arising from or in connection with (a) any breach of any
representation or warranty made by the Buyer in this Agreement or in any
certificate delivered by the Buyer pursuant to this Agreement, (b) any breach by
the Buyer of any covenant or obligation of the Buyer or AGH in this Agreement,
or (c) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by such Person with the Buyer (or any Person acting on its behalf) in
connection with any of the transactions contemplated hereby.
10.4 TIME LIMITATIONS. The Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date unless on or before (a) the applicable statute of limitations with respect
to claims for breaches of representations or warranties made under Sections 3.1,
3.2, 3.3, and 3.11, or (b) May 1, 1998 with respect to all other claims, the
Buyer notifies the Sellers of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by the Buyer. The Buyer will have
no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before May 1, 1998 the
Sellers notify the Buyer of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by the Sellers.
10.5 SATISFACTION OF CLAIMS BY THE BUYER SOLELY BY RIGHT OF SET-OFF.
Notwithstanding anything herein to the contrary, any liability of the Sellers
under this Section 10, upon notice to the Sellers specifying in reasonable
detail the basis for such set-off, shall be satisfied solely by the Buyer's or
AGH's setting off such amount against amounts otherwise payable under the
Incentive Management Agreements or the Consulting and Non-competition
Agreements. The Sellers shall have no liability for individual claims unless
the amount of any such claim is $10,000 or greater (regardless of the number of
such claims) and, as to all such claims of $10,000 or greater, until the
aggregate amount of such claims is $250,000 or greater, from and after which
time, subject to the limitations in the foregoing sentence, the Sellers having
such liability shall be liable for all such claims in excess of $10,000,
including the first $250,000 thereof.
10.6 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 10.2 or
10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the
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indemnifying party of the commencement of such claim, but the failure to
notify the indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnified party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.6(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i)
the indemnifying party is also a party to such Proceeding and the indemnified
party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding,
the indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of
such Proceeding, in each case subsequently incurred by the indemnified party
in connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense of a
Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the indemnified party's
consent unless there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against the indemnified party, and the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without
its consent. If notice is given to an indemnifying party of the commencement
of any Proceeding and the indemnifying party does not, within ten days after
the indemnified party's notice is given, give notice to the indemnified party
of its election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification by set-off under
this Agreement, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
proceeding, but the indemnifying party will not be bound by any determination
of a Proceeding so defended or any compromise or settlement effected without
its consent (which may not be unreasonably withheld).
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(d) The Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on the Sellers with respect to such a claim anywhere in
the world.
10.7 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
10.8 LIMITED RECOURSE. In the absence of fraud, the indemnification rights
described in this Article 10 shall be the exclusive remedy of the parties hereto
respecting this Agreement or the transactions contemplated hereby.
11. GENERAL PROVISIONS.
11.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel, and accountants. The Buyer will pay one-half
and the Sellers will pay one-half of the HSR Act filing fee. The Sellers will
cause the Acquired Companies not to incur any attorneys' fees, broker's fees or
other costs or expenses in connection with this Agreement and, unless such fees,
costs and expenses shall have been paid prior to or simultaneously with the
Closing from funds other than the funds of an Acquired Company, prior to the
Closing, the Sellers shall make a capital contribution in an amount equal to any
of such fees paid by any Acquired Company, all as provided in Section 5.9. In
the event of termination of this Agreement, the obligation of each party to pay
its own expenses will be subject to any rights of such party arising from a
breach of this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as the parties may agree.
Unless consented to by the parties hereto in advance or required by Legal
Requirements, prior to the Closing the parties hereto shall, and the Sellers
shall cause the Acquired Companies to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person. The Sellers
and the Buyer will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and others having
dealings with the Acquired Companies will be informed of the transactions
contemplated hereby, and the Buyer will have the right to be present for any
such communication.
11.3 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, the Buyer and each Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of the Buyer and the
Acquired Companies to maintain in confidence, any written, oral, or other
information obtained in confidence from another party
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<PAGE>
or an Acquired Company in connection with this Agreement or the transactions
contemplated hereby, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of
such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, or (c) the furnishing or use of such
information is required by or necessary or appropriate in connection with
legal proceedings. If the transactions contemplated hereby are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
11.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by telecopier (with written confirmation of receipt), provided that a
copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
if to any of the Sellers:
Thomas A. Donnelly
Camping World, Inc.
650 Three Springs Road
Bowling Green, KY 42104
Telecopy No. 502-745-7192
with a copy to (which copy shall not constitute notice):
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
Attention: T. Andrew Smith
Telecopy No. 615-742-6293
with a copy to (which copy shall not constitute notice):
3i Securities Corporation
c/o 3i Capital Partners
20 William Street
Suite 690
Wellesley, MA 02181
Attention: Peter Bollier
Telecopy No. 617-235-9832
-49-
<PAGE>
if to the Buyer:
Affinity Group, Inc.
64 Inverness Drive East
Englewood, CO 80112
Attention: Stephen Adams
Telecopy No. 303-792-7322
with a copy to (which copy shall not constitute notice):
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: Andris A. Baltins
Telecopy No. 612-375-1143
Any notice given to the Sellers in the manner hereinabove provided shall be
deemed sufficient notice to all the Sellers and any notice given by any of the
Sellers pursuant to the provisions hereof shall be deemed notice on behalf of
all the Sellers.
11.5 FURTHER ASSURANCES AND POST-CLOSING COOPERATION. The parties agree
(a) to furnish upon request to each other such further information, (b) to
execute and deliver to each other such other documents, (c) to make such
accounting and tax elections or changes (other than a Section 338(h)
election) and take such actions with respect thereto, and (d) to do such
other acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement. Each of the parties hereto agrees to make
available to the other (during normal business hours), at the expense of the
party making such request, such books and records (including tax books and
records) (with respect to SC, only with respect to the Acquired Companies,
the Assets or the Business) as such party may reasonably request for
reasonable business purposes it being understood, however, that neither
party shall have an obligation to preserve records beyond its customary
document retention practices and policies, as such practices and policies may
be modified from time to time. To the extent that any Contract requires the
consent of any other party to the Contract to the transactions contemplated
under this Agreement, and if such consent is not given, the Buyer shall not
assume or be liable for any obligations or liabilities thereunder. Without
in any way limiting the Seller's obligations to obtain all consents and
waivers necessary with respect to the Contracts, if any such consent is not
obtained and the Closing hereunder is consummated, the Sellers shall (i)
continue to use their reasonable efforts to obtain such consent, (ii)
cooperate with the Buyer in any reasonable arrangement designed to provide
the Buyer with the rights and benefits (subject to the assumption by the
Buyer hereunder of the obligations) under such Contracts, and (iii) fulfill
all of the Buyer's reasonable requests in connection with the transfer of
such Contracts.
11.6 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising
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<PAGE>
any right, power, or privilege under this Agreement or the documents referred
to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on one party
will be deemed to be a waiver of any obligation of such party or of the right
of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.8 ASSIGNMENTS SUCCESSORS, AND NO THIRD-PARTY RIGHTS. The Buyer may
assign any of its rights under this Agreement without the prior consent of the
Sellers and this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and assigns of the Buyer. Any such
assignment shall not relieve the Buyer of any of its obligations hereunder. The
Sellers may not assign any of their rights under this Agreement without the
prior consent of the Buyer except that SC may merge with, or assign any of its
rights hereunder to, another direct or indirect wholly owned subsidiary of 3i
Group plc. Any such assignment shall not relieve SC of any of its obligations
hereunder. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.9 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or
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<PAGE>
number as the circumstances require. Unless otherwise expressly provided,
the word "including" does not limit the preceding words or terms.
11.11 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.12 DELIVERY OF DISCLOSURE LETTER; RIGHT OF TERMINATION BY THE
BUYER. The parties hereto acknowledge that this Agreement has been entered
into without the Disclosure Letter and the documents referred to therein
having been delivered to the Buyer and that the Disclosure Letter and the
documents referred to therein have not been otherwise approved by the Buyer.
The Management Sellers agree to deliver to the Buyer, within five business
days of the date hereof, the Disclosure Letter and the documents referred to
therein. The Buyer shall have the right to terminate this Agreement by
giving written notice thereof to the Sellers within ten business days after
delivery of the complete Disclosure Letter and all documents referred to
therein if the Buyer determines, in the reasonable discretion of the Buyer
that any of the disclosures or documents referred to in the Disclosure Letter
is materially adverse to the conduct of the Business in the manner
contemplated by the Buyer or the Assets. Upon any termination of this
Agreement pursuant to this Section 11.12, no party hereto shall have any
further liability to the other party and this Agreement shall be deemed null
and void and of no further force and effect, except that the Buyer and the
Sellers shall issue the appropriate instructions for the Escrow Agent to
return to the Buyer all funds and other property which the Escrow Agent is
holding under the Escrow Agreement.
11.13 SC OBLIGATIONS. Notwithstanding any provision of this
Agreement to the contrary, any agreement, obligation or liability of SC under
this Agreement shall be several and not joint, and SC shall have no
obligation or liability for any action or omission of any other Seller.
11.14 ATTORNEYS' FEES. Except for claims with respect to which
indemnification is sought pursuant to Section 10 hereof, which shall be
governed by the provisions of Section 10, in the event of any dispute arising
from the transactions contemplated by this Agreement, the prevailing party in
any Proceedings instituted with respect to such transactions shall be
entitled to recover for the non-prevailing parties all of the costs and
expenses incurred by the prevailing party, including specifically its
reasonable attorneys fees and the costs of its expert witnesses.
11.15 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Delaware without regard to conflicts of laws principles.
11.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
AFFINITY GROUP, INC. 3i SECURITIES CORPORATION
By:_______________________________ By:__________________________________
Its: __________________________ Its: _____________________________
__________________________________ _____________________________________
DAVID B. GARVIN RON CHANCE
__________________________________ _____________________________________
THOMAS A. DONNELLY DEAN EWING
__________________________________ _____________________________________
WILLIAM L. JOHNSON RICK MATAR
__________________________________ _____________________________________
STEPHEN L. SNODGRASS JAMES SCHUMM
__________________________________ _____________________________________
MURRAY COKER JOHN HOLLAND
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<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
CREDIT AGREEMENT
dated as of
April 2, 1997
among
AFFINITY GROUP, INC.,
THE GUARANTORS PARTY HERETO,
THE LENDERS PARTY HERETO,
FLEET NATIONAL BANK,
as Agent
and
THE PROVIDENT BANK,
as Documentary Agent
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Classification of Loans and Borrowings. . . . . . . . . . . . 26
1.3 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . 26
1.4 Accounting Terms; GAAP. . . . . . . . . . . . . . . . . . . . 26
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.2 Loans and Borrowings. . . . . . . . . . . . . . . . . . . . . 27
2.3 Requests for Borrowings . . . . . . . . . . . . . . . . . . . 28
2.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 29
2.5 Funding of Borrowings . . . . . . . . . . . . . . . . . . . . 32
2.6 Interest Elections. . . . . . . . . . . . . . . . . . . . . . 33
2.7 Termination and Reduction of Commitments. . . . . . . . . . . 34
2.8 Repayment of Loans; Evidence of Debt. . . . . . . . . . . . . 35
2.9 Prepayment of Loans . . . . . . . . . . . . . . . . . . . . . 36
2.10 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.11 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.12 Alternate Rate of Interest. . . . . . . . . . . . . . . . . . 41
2.13 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 42
2.14 Break Funding Payments. . . . . . . . . . . . . . . . . . . . 43
2.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.16 Payments Generally: Pro Rata Treatment; Sharing of Set-Offs . 45
2.17 Mitigation Obligations; Replacement of Lenders. . . . . . . . 46
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Guarantee by Guarantors . . . . . . . . . . . . . . . . . . . . . . . . 47
3.1 The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 47
3.2 Obligations Unconditional . . . . . . . . . . . . . . . . . . 48
3.3 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 48
3.4 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.5 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.6 Instrument for the Payment of Money . . . . . . . . . . . . . 49
3.7 Continuing Guarantee. . . . . . . . . . . . . . . . . . . . . 49
3.8 Rights of Contribution. . . . . . . . . . . . . . . . . . . . 49
3.9 General Limitation on Guarantee Obligations . . . . . . . . . 50
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Representations and Warranties. . . . . . . . . . . . . . . . . . . . . 50
(i)
<PAGE>
4.1 Organization; Powers. . . . . . . . . . . . . . . . . . . . . 50
4.2 Authorization; Enforceability . . . . . . . . . . . . . . . . 50
4.3 Governmental Approvals; No Conflicts. . . . . . . . . . . . . 51
4.4 Financial Condition; No Material Adverse Change . . . . . . . 51
4.5 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.6 Litigation and Environmental Matters. . . . . . . . . . . . . 53
4.7 Compliance with Laws and Agreements . . . . . . . . . . . . . 53
4.8 Investment and Holding Company Status . . . . . . . . . . . . 53
4.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.11 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.12 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 54
4.13 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 55
4.14 Material Indebtedness, Liens and Agreements . . . . . . . . . 55
4.15 Senior Subordinated Notes Indenture; Holding Company Notes
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.16 Federal Reserve Regulations . . . . . . . . . . . . . . . . . 56
4.17 Burdensome Restrictions . . . . . . . . . . . . . . . . . . . 56
4.18 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.1 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . 56
5.2 Each Extension of Credit. . . . . . . . . . . . . . . . . . . 63
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.1 Financial Statements and Other Information. . . . . . . . . . 64
6.2 Notices of Material Events. . . . . . . . . . . . . . . . . . 66
6.3 Existence; Conduct of Business. . . . . . . . . . . . . . . . 67
6.4 Payment of Obligations. . . . . . . . . . . . . . . . . . . . 67
6.5 Maintenance of Properties; Insurance. . . . . . . . . . . . . 67
6.6 Books and Records; Inspection Rights. . . . . . . . . . . . . 68
6.7 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.8 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 68
6.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 68
6.10 Certain Obligations Respecting Restricted Subsidiaries and
Collateral Security . . . . . . . . . . . . . . . . . . . . . 69
6.12 Environmental Matters; Reporting. . . . . . . . . . . . . . . 70
6.13 Conforming Leasehold Interests; Matters Relating to
Additional Real Property Collateral . . . . . . . . . . . . . 70
6.14 Senior Subordinated Notes Indenture . . . . . . . . . . . . . 72
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 73
7.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(ii)
<PAGE>
7.3 Contingent Liabilities. . . . . . . . . . . . . . . . . . . . 75
7.4 Fundamental Changes . . . . . . . . . . . . . . . . . . . . . 76
7.5 Investments; Hedging Agreements . . . . . . . . . . . . . . . 77
7.6 Restricted Junior Payments and Cash Flow Distributions. . . . 78
7.7 Transactions with Affiliates. . . . . . . . . . . . . . . . . 79
7.8 Restrictive Agreements. . . . . . . . . . . . . . . . . . . . 80
7.9 Certain Financial Covenants . . . . . . . . . . . . . . . . . 80
7.10 Lines of Business . . . . . . . . . . . . . . . . . . . . . . 81
7.11 Management Compensation . . . . . . . . . . . . . . . . . . . 81
7.13 Modifications of Certain Documents. . . . . . . . . . . . . . 82
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . 82
8.2 Receivership. . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.1 Appointment and Authorization . . . . . . . . . . . . . . . . 86
9.2 Fleet's Rights as Lender. . . . . . . . . . . . . . . . . . . 86
9.3 Duties As Expressly Stated. . . . . . . . . . . . . . . . . . 86
9.4 Reliance By Agent . . . . . . . . . . . . . . . . . . . . . . 87
9.5 Action Through Sub-Agents . . . . . . . . . . . . . . . . . . 87
9.6 Resignation of Agent and Appointment of Successor Agent . . . 87
9.7 Lenders' Independent Decisions. . . . . . . . . . . . . . . . 88
ARTICLE X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
10.2 Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . 89
10.3 Expenses; Indemnity: Damage Waiver. . . . . . . . . . . . . . 91
10.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 92
10.5 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 94
10.6 Counterparts; Integration; References to Agreement;
Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . 95
10.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 95
10.8 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . 95
10.9 Governing Law; Jurisdiction; Consent to Service of Process. . 96
10.10 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 96
10.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.12 Release of Collateral and Guarantees . . . . . . . . . . . . 97
10.13 Successor Facility . . . . . . . . . . . . . . . . . . . . . 97
(iii)
<PAGE>
SCHEDULES & EXHIBITS
Schedule 2.1 List of Lenders and Revolving Credit and Term Loan
Commitments
Schedule 4.5 Real Property Assets
Schedule 4.6 Disclosed Matters
Schedule 4.11 Management Structure
Schedule 4.12 Capitalization
Schedule 4.13 Subsidiaries
Schedule 4.14 Material Indebtedness, Liens and Agreements
Schedule 7.5 Existing Investments
Schedule 7.7 Transactions with Affiliates
Schedule 7.8 Restrictive Agreements
Exhibit A Form of Nonrecourse Guaranty and Pledge Agreement
Exhibit B Form of Pledge Agreement
Exhibit C Form of Security Agreement, including Perfection Certificate
as Schedule I
Exhibit D Form of Trademark Security Agreement
Exhibit E Form of Hazardous Materials Indemnity Agreement
Exhibit F Form of Affiliate Subordination Agreement
Exhibit G Form of Opinion of Counsel to Credit Parties
Exhibit H Form of Assignment and Acceptance
(iv)
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of April 2, 1997 among AFFINITY GROUP, INC., THE
GUARANTORS PARTY HERETO, THE LENDERS PARTY HERETO, FLEET NATIONAL BANK, as Agent
and THE PROVIDENT BANK, as Documentary Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms have
the meanings specified below:
"ACQUISITION" means any transaction, or any series of related transactions,
consummated after the date hereof, by which (i) any Credit Party acquires the
business of, or all or substantially all of the assets of, any firm or
corporation which is not a Credit Party, or any division of such firm or
corporation, located in a specific geographic area or areas, whether through
purchase of assets, purchase of stock, merger or otherwise or (ii) any Person
that was not theretofore a Subsidiary of a Credit Party becomes a Subsidiary of
a Credit Party, PROVIDED THAT the acquisition by any Credit Party of an
Unrestricted Subsidiary (including any firm or corporation that becomes an
Unrestricted Subsidiary as a result of such acquisition) which satisfies all of
the conditions for designation as an Unrestricted Subsidiary set forth in this
Agreement shall not be deemed to be an "Acquisition."
"ADDITIONAL MORTGAGE" has the meaning assigned to such term in Section
6.13(b)(i).
"ADDITIONAL MORTGAGE POLICIES" has the meaning assigned to such term in
Section 6.13(b)(iv).
"ADDITIONAL MORTGAGED PROPERTY" has the meaning assigned to such term in
Section 6.13(b).
"ADJUSTED BASE RATE" means, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day PLUS 1/2 of 1%. Any change in the Adjusted
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
<PAGE>
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in a
form supplied by the Agent.
"AFFILIATE" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by
reason of his or her being a director, officer or employee of any Credit Party
and (b) none of the Credit Parties shall be Affiliates.
"AFFILIATE SUBORDINATION AGREEMENT" means the Affiliate Subordination
Agreement dated as of the Effective Date, among the Holding Company, the
Borrower, the Parent, and Stephen Adams substantially in the form of EXHIBIT F
annexed hereto, as such agreement may thereafter be amended, supplemented or
otherwise modified from time to time.
"AGENT" means Fleet National Bank in its capacity as agent for the Lenders
hereunder.
"APPLICABLE PERCENTAGE" means (a) with respect to any Revolving Credit
Lender for purposes of Section 2.4, the percentage of the total Revolving Credit
Commitments represented by such Lender's Revolving Credit Commitment, (b) with
respect to any Lender in respect of any indemnity claim under Section 10.3(c)
arising out of an action or omission of the Agent under this Agreement, the
percentage of the total Commitments or Loans of all Classes hereunder
represented by the aggregate amount of such Lender's Commitment or Loans of all
Classes hereunder.
"APPLICABLE MARGIN" means, for any Type of Loans for any Payment Period (as
defined below), the respective rates indicated below for Loans of such Type
opposite the applicable Consolidated Total Leverage Ratio indicated below for
such Payment Period (or as provided in the final paragraph of this definition,
for part of a Payment Period):
Range Applicable Margin (% per annum)
of ----------------------------------
Consolidated Total Leverage Ratio Base Rate Loans Eurodollar Loans
- --------------------------------- --------------- ----------------
Greater than or equal to 4.5 to 1 1.50% 2.75%
Greater than or equal to
4.0 to 1 but less than 4.5 to 1 1.25% 2.50%
Greater than or equal to
3.5 to 1 but less than 4.0 to 1 1.00% 2.25%
Less than 3.5 to 1 .75% 2.00%
For purposes hereof, a "PAYMENT PERIOD" means (i) initially, the period
commencing on the Effective Date to but not including the fifth Business Day
after the earlier of May 15, 1997 or the date of the actual receipt by the Agent
of the certificate required to be delivered by the
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Borrower on or before such date pursuant to Section 6.1(d) and (ii)
thereafter, the period commencing on the day immediately succeeding the last
day of the prior Payment Period to but not including the fifth Business Day
after the earlier of the due date of the next certificate required to be
delivered by the Borrower to the Agent pursuant to Section 6.1(d) or the date
of the actual receipt by the Agent of such certificate. Subject to and in
accordance with the final paragraph of this definition, the Applicable Margin
shall be effective for each Payment Period (or in the circumstances described
in the final paragraph of this definition, such portion of a Payment Period)
whether or not such Payment Period coincides with an Interest Period for
Eurodollar Borrowing. During the initial Payment Period, the Applicable
Margin shall be computed on the assumption that the Consolidated Total
Leverage Ratio is greater than or equal to 4.5 to 1.
The Consolidated Total Leverage Ratio for any Payment Period except the
initial Payment Period shall be determined on the basis of the certificate of a
Financial Officer of the Borrower required to be delivered to the Agent pursuant
to Section 6.1(d) setting forth, among other things, a calculation of the
Consolidated Total Leverage Ratio as at the last day of the fiscal quarter
immediately preceding such Payment Period (I.E. the Consolidated Total Leverage
Ratio for the Payment Period scheduled to commence on the fifth Business Day
after the earlier of May 15, 1997 or the date of the actual receipt by the Agent
of the certificate required to be delivered by the Borrower on or before such
date pursuant to Section 6.1(d), shall be determined on the basis of the
Consolidated Total Leverage Ratio as at March 31, 1997, the Consolidated Total
Leverage Ratio for the next succeeding Payment Period shall be determined on the
basis of the Consolidated Total Leverage Ratio as at June 30, 1997, and so
forth), each of which certificates shall be delivered together with the
financial statements for the fiscal quarter on which such calculation is based.
Anything in this Agreement to the contrary notwithstanding, the Applicable
Margin shall be the highest rates provided for above (i) during any period when
an Event of Default shall have occurred and be continuing, or (ii) if the
certificate of a Financial Officer of the Borrower shall not be delivered when
required by Section 6.1(d) (but only, in the case of this clause (ii), with
respect to the portion of such Payment Period prior to the delivery of such
certificate).
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.4), and accepted by the Agent, in the form of EXHIBIT H
annexed hereto or any other form approved by the Agent.
"BASE RATE" when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted Base Rate.
"BASIC DOCUMENTS" means the Loan Documents and the Senior Subordinated
Notes Indenture (or any applicable governing agreement for any Refunding
Indebtedness), the Holding Company Notes Indenture and any related agreement.
"BOARD" means the Board of Governors of the Federal Reserve System of the
United States of America.
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"BORROWER" means Affinity Group, Inc., a Delaware corporation.
"BORROWING" means Loans of a particular Class of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect.
"BORROWING REQUEST" means a request by the Borrower for a Borrowing in
accordance with Section 2.3.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts or New York City are authorized
or required by law to remain closed; PROVIDED that, when used in connection with
a Eurodollar Loan, the term "BUSINESS DAY" shall also exclude any day on which
banks are not open for dealings in U.S. dollar deposits in the London interbank
market.
"CAMPING WORLD" means Camping World, Inc, a Kentucky corporation, all of
whose capital stock will be acquired by the Borrower on the Effective Date.
"CAMPING WORLD ACQUISITION" means the acquisition by the Borrower of all
the outstanding shares of capital stock of Camping World and the other
transactions contemplated by the Camping World Acquisition Agreement.
"CAMPING WORLD ACQUISITION AGREEMENT" means that certain Stock Purchase
Agreement dated as of February 25, 1997 by and among the Borrower and the
shareholders of Camping World in the form delivered to the Agent and the Lenders
prior to the Effective Date.
"CAMPING WORLD INCENTIVE MANAGEMENT AGREEMENTS" means, collectively, the
Incentive Management Agreements dated as of the date hereof between the Holding
Company and each of Thomas A. Donnelly, William L. Johnson, Murray S. Coker,
Stephen L. Snodgrass, James J. Schumm, Dean S. Ewing, Steven L. Needham, Jane S.
Browning, Ronald D. Chance and William T. Walker as provided in the Camping
World Acquisition Agreement.
"CAMPING WORLD EXPENDITURES" means, for any period, all capital
expenditures made for the purpose of building out new retail Camping World
stores by the Borrower and its Restricted Subsidiaries, as determined in
accordance with GAAP.
"CAPITAL EXPENDITURES" means, for any period, (A) the sum for the Borrower
and its Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP of the aggregate amount of expenditures
(including the aggregate amount of Capital Lease Obligations incurred during
such period) made to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP; PROVIDED that such term
shall not include any such expenditures in connection with any replacement or
repair of Property affected by a Casualty Event MINUS (B) any Net Cash Proceeds
from a Disposition reinvested pursuant to Section 2.9(b)(iv) not in excess of
the aggregate amount of Capital Expenditures previously made in respect of
assets subject to such Disposition.
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"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CASUALTY EVENT" means, with respect to any Property of any Person, any
loss of or damage to, or any condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"CHANGE IN LAW" means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender or the Issuing Lender
(or, for purposes of Section 2.13(b), by any lending office of such Lender or by
such Lender's or the Issuing Lender's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"CLASS" when used in reference to any Loan, Borrowing or Commitment, refers
to whether such Loan, the Loans comprising such Borrowing or the Loans that a
Lender holding such Commitment is obligated to make, are Revolving Credit Loans
or Term Loans.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL" mean, collectively, all of the real, personal and mixed
property (including capital stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for all obligations of the
Credit Parties hereunder.
"COLLATERAL DOCUMENTS" means the Holding Company Collateral Documents, the
Pledge Agreements, the Security Agreements, the Trademark Security Agreements,
the Mortgages, the Affiliate Subordination Agreement and all other instruments
or documents delivered by any Credit Party pursuant to this Agreement or any of
the other Loan Documents in order to grant to the Agent, on behalf of the
Lenders, a Lien on any real, personal or mixed property of that Credit Party as
security for any of its obligations hereunder.
"COMMITMENTS" means the Revolving Credit Commitments and Term Loan
Commitments, as applicable.
"CONFORMING LEASEHOLD INTEREST" means any Recorded Leasehold Interest as
to which the lessor has agreed in writing for the benefit of Agent (which
writing has been delivered to Agent), whether under terms of the applicable
lease, under the terms of Landlord Consent and Estoppel, or otherwise, to the
matters described in the definition of "Landlord Consent and Estoppel," which
interest, if a subleasehold interest or sub-subleasehold interest, is not
subject to any contrary restrictions contained in a superior lease or sublease.
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"CONSOLIDATED FIXED CHARGES RATIO" means, as at any date, the ratio of (a)
Consolidated Operating Cash Flow for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date to (b) the sum for
the Borrower and its Consolidated Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP) of the following: (i) Debt
Service for such period PLUS (ii) the aggregate amount of all Capital
Expenditures made during such period after subtracting therefrom the aggregate
amount of Related Retail Sale-Leaseback Proceeds received during such period
PLUS (iii) the aggregate amount paid, or required to be paid (without
duplication as between fiscal periods), in cash in respect of income, franchise
and other like taxes (excluding real estate taxes) for such period (to the
extent not deducted in determining Consolidated Operating Cash Flow for such
period).
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as at any date, the ratio of
(a) Consolidated Operating Cash Flow for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date to (b) Consolidated
Interest Expense for such period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, (A) the sum, for the
Borrower and its Consolidated Subsidiaries (or the Holding Company, in the case
of amounts specified in clause (e)) (determined on a consolidated basis without
duplication in accordance with GAAP) of the following: (a) all interest in
respect of Indebtedness accrued or capitalized during such period (whether or
not actually paid during such period) PLUS (b) the net amounts payable (or MINUS
the net amounts receivable) under Hedging Agreements accrued during such period
(whether or not actually paid or received during such period) including, without
limitation, fees, but excluding (i) reimbursement of legal fees and other
similar transaction costs, and (ii) payments required by reason of the early
termination of Hedging Agreements in effect on the date hereof PLUS (c) all
fees, including letter of credit fees and expenses, incurred hereunder after the
Effective Date but excluding all fees, commissions and expenses (including
reimbursement of legal fees and similar transaction costs) paid or accrued on
the Effective Date in respect of the Camping World Acquisition, the Ehlert
Acquisition, the Holding Company Notes and the Credit Agreement PLUS (d) the
amount of Restricted Junior Payments made to the Holding Company pursuant to
Section 7.6(a)(i) PLUS (e) all amounts accrued or capitalized during such period
(whether or not paid during such period) and accounted for as interest by the
Holding Company in respect of the Ehlert Note and the Camping World Incentive
Management Agreements MINUS (B) (i) any amounts otherwise included therein and
accounted for as interest expense in respect of the payments relating to the SAR
Obligations made by the Borrower on the date hereof pursuant to Section 5.8 of
the Camping World Acquisition Agreement and (ii) any amounts otherwise included
therein and accounted for as interest expense in respect of obligations under
the Existing Credit Agreements paid on the Effective Date. Notwithstanding
anything contained in the foregoing which may be to the contrary, deferred
financing costs or intangible assets which are written off as a consequence of
the repayment and discharge of Indebtedness under the Existing Credit Agreements
shall not be included in Consolidated Interest Expense.
Notwithstanding the foregoing, if during any period for which Consolidated
Interest Expense is being determined, any Credit Party shall have consummated
any Acquisition permitted by Section 7.4(d) and (if such Acquisition is the
Acquisition of all of the capital stock, partnership, membership or other equity
interest in any Person) the company acquired in this Acquisition becomes a
Restricted Subsidiary in accordance with Section 6.10(a), then, for all
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purposes of this Agreement with the exception of the calculation of Excess
Cash Flow, any Indebtedness incurred in connection with such Acquisition
shall be deemed to have incurred on a pro-forma basis, as if such Acquisition
had been consummated on the first day of such period and under the assumption
that interest for such period had been equal to the actual weighted average
interest rate in effect for the Loans hereunder on the date of such
Acquisition.
"CONSOLIDATED OPERATING CASH FLOW" means, for any period, (A) the sum of
(i) EBITDA, PLUS (ii) any increase in Deferred Revenues PLUS (iii) the Pro-Forma
Employee Adjustment, MINUS(B) (i) any decrease in Deferred Revenues plus (ii)
cash payments made by the Borrower and its Restricted Subsidiaries under the
Phantom Stock Agreements, all as determined for such period on a consolidated
basis for the Borrower and its Consolidated Subsidiaries in accordance with
GAAP.
"CONSOLIDATED SUBSIDIARY" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired), the financial
statements of which shall be (or should have been) consolidated with the
financial statements of such Person in accordance with GAAP, but in any event
excluding Unrestricted Subsidiaries.
"CONSOLIDATED TOTAL LEVERAGE RATIO" means, as at any date, the ratio of (a)
the sum of (i) the Indebtedness of the Borrower and its Consolidated
Subsidiaries as described in clauses (a), (b) and (c) of the definition of
"Indebtedness" (determined on a consolidated basis without duplication in
accordance with GAAP, but in any event excluding any Unrestricted Subsidiary),
including Subordinated Indebtedness, PLUS (ii) the Indebtedness of the Holding
Company in respect of the Holding Company Notes, the Ehlert Note and the Camping
World Incentive Management Agreements, in each case on such date, to (b)
Consolidated Operating Cash Flow for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"CREDIT PARTIES" means the Borrower and the Restricted Subsidiaries.
"CUMULATIVE CAMPING WORLD NET EXPENDITURES" means, at any time of
determination, the aggregate amount of Camping World Expenditures made after the
Effective Date MINUS the aggregate amount of Related Retail Sale-Leaseback
Proceeds.
"CWI" means CWI, Inc., a Kentucky corporation and a Wholly Owned Subsidiary
of Camping World.
"DEBT SERVICE" means, for any period, the sum, for the Borrower and its
Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) of the following: (a) all regularly
scheduled payments or regularly scheduled mandatory prepayments of principal of
any Indebtedness (including the Term Loans and the principal component of any
payments in respect of Capital Lease Obligations, but excluding any
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prepayments pursuant to Section 2.9) made during such period PLUS (b) all
Consolidated Interest Expense for such period PLUS (c) the amount of
Restricted Junior Payments not included within Consolidated Interest Expense
made to the Holding Company pursuant to Sections 7.6(a)(iv) and (v), PROVIDED
THAT, an amount not in excess of $1,000,000 paid in respect of principal of
the Ehlert Note on or within 5 days after the Effective Date shall be
excluded from Debt Service.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DEFERRED REVENUES" means that portion of subscription and membership
revenues, product and services revenues and publication revenues carried as a
liability by any of the Credit Parties on the balance sheet of that Person,
which will be recognized as revenue on that Person's statement of operations in
future periods, all as determined in accordance with GAAP.
"DISCLOSED MATTERS" means the actions, suits and proceedings and the
environmental matters disclosed in SCHEDULE 4.6.
"DISPOSITION" means any sale, assignment, transfer or other disposition of
any property (whether now owned or hereafter acquired) by any Credit Party to
any other Person excluding (a) the granting of Liens to the Agent on behalf of
the Lenders pursuant to the Collateral Documents, (b) the NAFE Disposition, (c)
any sale, assignment, transfer or other disposition of (i) any property sold or
disposed of in the ordinary course of business and on ordinary business terms,
(ii) any property no longer used or useful in the business of the Credit Parties
and (iii) any Collateral under and as defined in the Collateral Documents
pursuant to an exercise of remedies by the Agent thereunder and (d) any Sale-
Leaseback Transaction involving a Camping World store sold by and leased back to
the Borrower or any of its Restricted Subsidiaries.
"DISPOSITION INVESTMENT" means, with respect to any Disposition, any
promissory notes or other evidences of indebtedness or Investments received by
any Credit Party in connection with such Disposition.
"DOCUMENTARY AGENT" means The Provident Bank, in its capacity as
documentary agent hereunder.
"EBITDA" means, for any period, operating income for the Borrower and its
Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) for such period (calculated after deduction
for real estate taxes but before deduction for income, franchise and other like
taxes accrued during such period, Consolidated Interest Expense, depreciation,
amortization and any other non-cash income or charges accrued for such period
(including such charges in respect of Phantom Stock Accruals) and (except to the
extent received or paid in cash by the Credit Parties) income or loss
attributable to equity in Affiliates for such period), excluding from the
calculation of such operating income any extraordinary and unusual gains or
losses (including, without limitation, losses in connection with the NAFE
Disposition) during such period and excluding from the calculation of such
operating income the proceeds of any Casualty Events and Dispositions.
Notwithstanding the foregoing, any amounts accrued or paid with respect to the
"SAR Obligations" referred to in Section 5.8 of the Camping
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World Acquisition Agreement and any deferred financing costs or tangible
assets which are written off as a result of the repayment and discharge of
Indebtedness under the Existing Credit Agreements shall not be deducted in
determining operating income.
Notwithstanding the foregoing, if during any period for which EBITDA is
being determined, any Credit Party shall have consummated any Acquisition
permitted by Section 7.4(d) and (if such acquisition is a stock or other equity
Acquisition) the company acquired in such Acquisition becomes a Restricted
Subsidiary in accordance with the provisions of Section 6.10(a) then, for all
purposes of this Agreement, with the exception of the calculation of Excess Cash
Flow, EBITDA shall be determined on a pro forma basis as if such Acquisition had
been made or consummated on the first day of such period.
"EFFECTIVE DATE" means the date on which the conditions specified in
Section 5.1 are satisfied (or waived in accordance with Section 10.2).
"EFFECTIVE DATE MORTGAGE" has the meaning assigned to such term in Section
5.1(f)(i).
"EFFECTIVE DATE MORTGAGE POLICIES" has the meaning assigned to such term in
Section 5.1(f)(vi).
"EFFECTIVE DATE MORTGAGED PROPERTY" has the meaning assigned to such term
in Section 5.1(f)(i).
"EHLERT" means, collectively, Ehlert Publishing Group, Inc. and Expositions
Group, Inc.
"EHLERT ACQUISITION" means the acquisition by the Borrower of all the
outstanding shares of capital stock of Ehlert and the other transactions
contemplated by the Ehlert Acquisition Agreement.
"EHLERT ACQUISITION AGREEMENT" means that certain Stock Purchase Agreement
dated as of August 28, 1996, as amended, by and among the Borrower and the
shareholders of Ehlert in the form delivered to the Agent and the Lenders prior
to the Effective Date.
"EHLERT NOTE" means, the promissory note of the Holding Company in the
original principal amount of $1,500,000 issued in connection with the Ehlert
Acquisition of which $1,000,000 in principal amount is to be paid with the
proceeds of the Holding Company Notes within five days of receipt thereof by the
Borrower and $500,000 in principal amount shall remain outstanding after such
payment.
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of any
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Credit Party directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the release or threatened
release of any Hazardous Materials into the environment or (e) any contract,
agreement or other consensual arrangement pursuant to which liability is
assumed or imposed with respect to any of the foregoing.
"EQUITY RIGHTS" means, with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including any stockholders' or voting trust agreements) for the issuance or
sale of, or securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under Section
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived), (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan, (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan,
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan, (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan, or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any f Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"EURODOLLAR" when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 8.1.
"EXCESS CASH FLOW" means, for the fiscal year ending December 31, 1997 and
for each fiscal quarter or year thereafter, EBITDA PLUS Related Retail Sale-
Leaseback Proceeds received in such period MINUS (to the extent not deducted in
computing EBITDA) (i) Debt Service for
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such period MINUS (ii) the aggregate amount of all Capital Expenditures made
during such period MINUS (iii) the aggregate amount paid, or required to be
paid, in cash in respect of income, franchise, and other like taxes
(excluding real estate taxes) for such period MINUS (iv) all Permitted Tax
Distributions made during such period MINUS (v) cash payments made by the
Borrower and its Restricted Subsidiaries during such period under the Phantom
Stock Agreements. The Borrower agrees that, solely for the purposes of
calculating any quarterly Permitted Cash Flow Distribution pursuant to
Section 7.6, all charges or debits to EBITDA and Excess Cash Flow in respect
of amounts paid or required to be paid under the Ehlert Note and the Camping
World Incentive Management Agreements shall be recognized in four equal
payments, one in each fiscal quarter of the fiscal year in which such charge
or debit is accrued or paid.
"EXCLUDED TAXES" means, with respect to the Agent, any Lender, the Issuing
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income, net worth or franchise taxes
or any like taxes imposed on (or measured by) its net income or net worth by the
United States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located or in
which it is taxable solely on account of some connection other than the
execution, delivery or performance of this Agreement or the receipt of income
hereunder, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which the Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 2.17(b)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement or is attributable to such Foreign
Lender's failure or inability to comply with Section 2.15(e), except to the
extent that such Foreign Lender's assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
withholding tax pursuant to Section 2.15(a).
"EXISTING CREDIT AGREEMENTS" means (a) the Credit Agreement dated as of
October 11, 1994, as amended, between the Borrower and certain of its
Subsidiaries, First Bank National Association as Agent and as a Bank and
Girocredit Bank, as a Bank, (b) the Credit Agreement dated as of May 31, 1994 as
amended on November 30, 1995, January 30, 1996 and November 30, 1996 among CWI,
and Heller Financial, Inc., The Provident Bank and First Source Financial, LLP,
(c) Commercial Promissory Notes dated April 8, 1992 and Commercial Promissory
Note dated October 1, 1993, respectively, made by Camping World and Commercial
Promissory Note dated February 17, 1993 made by CWI, in each case payable to the
order of TransFinancial Bank, (d) the Promissory Note dated February 12, 1993
made by Camping World payable to the order of National City Bank of Kentucky
(formerly known as American National Bank) (e) the Note Purchase Agreement dated
as of May 20, 1988, as amended August 28, 1991 and May 31, 1994 among Camping
World, David B. Garvin, Thomas A. Donnelly and Steven Snodgrass and (f) the Note
Purchase Agreement dated May 20, 1991 as amended August 28, 1991 and May 31,
1994 among Camping World, William L. Johnson, David B. Garvin, Thomas A.
Donnelly and Stephen L. Snodgrass.
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"FACILITIES" means any and all real property (including, without limitation
all buildings, fixtures or other improvements located thereon) now or hereafter
or heretofore owned, leased, operated or used by any Credit Party or any of
their respective predecessors.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"FINANCIAL OFFICER" means the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower.
"FIRST PRIORITY" means, with respect to any Lien purported to be created
in any Collateral pursuant to any Security Document, that such Lien is the most
senior Lien (other than Liens permitted pursuant to Section 7.2 to the extent
not perfected by filing of any UCC financing statements) to which such
Collateral is subject.
"FLEET" means Fleet National Bank, a national bank.
"FLOOD HAZARD PROPERTY" means a Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special flood or
mud slide hazards.
"FOREIGN LENDER" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"FOREIGN SUBSIDIARY" means any Subsidiary of a Credit Party organized in a
jurisdiction other than the United States of America, any State thereof, or the
District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTEE" means a guarantee, an endorsement, a contingent agreement to
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
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lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall have a
correlative meaning.
"GUARANTEED OBLIGATIONS" has the meaning assigned to such term in Section
3.1.
"GUARANTORS" means the Restricted Subsidiaries.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.
"HOLDING COMPANY" means Affinity Group Holding, Inc., a Delaware
corporation which holds all the outstanding capital stock of the Borrower.
"HOLDING COMPANY COLLATERAL DOCUMENTS" means the Nonrecourse Guaranty and
Pledge Agreement executed and delivered by the Holding Company on the Effective
Date substantially in the form of EXHIBIT A annexed hereto, as such agreement
may be amended, supplemented or otherwise modified from time to time.
"HOLDING COMPANY NOTES" means the Holding Company's 11% Senior Notes due
2007 issued pursuant to the Holding Company Notes Indenture.
"HOLDING COMPANY NOTES INDENTURE" means the Indenture dated as of the date
hereof between the Holding Company and United States Trust Company of New York,
as Trustee, as supplemented or amended from time to time but excluding any
supplement or amendment which increases the interest rate applicable to the
Holding Company Notes, increases the principal amount outstanding of the Holding
Company Notes or creates sinking fund or other principal payment requirements.
"INDEBTEDNESS" means, for any Person: (a) obligations created, issued or
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person) including the Ehlert Note and amounts payable under the
Camping World Incentive Management Agreements; (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services (other
than Phantom Stock Accruals), other than trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary course
of business so long as such trade accounts are
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payable within 120 days of the date the respective goods are delivered or the
respective services are rendered; (c) Capital Lease Obligations of such
Person; (d) obligations of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Indebtedness of others secured
by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; and (f) Indebtedness
of others Guaranteed by such Person. The Indebtedness of any Person shall
include the Indebtedness of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
"INDEMNIFIED TAXES" means all Taxes other than (a) Excluded Taxes and Other
Taxes and (b) amounts constituting penalties or interest imposed with respect to
Excluded Taxes or Other Taxes.
"INTEREST ELECTION REQUEST" means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.6.
"INTEREST PAYMENT DATE" means (a) with respect to any Base Rate Loan, each
Quarterly Date and (b) with respect to any Eurodollar Loan, the last Business
Day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurodollar Borrowing with an Interest Period of more
than three months' duration, each Business Day prior to the last day of such
Interest Period that would have been the last day of the Interest Period for
such Eurodollar Loan had successive three month Interest Periods been applicable
to such Eurodollar Loan.
"INTEREST PERIOD" means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, with the consent of each Lender of the relevant Class, nine or twelve
months) thereafter, as the Borrower may elect; PROVIDED, that (i) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (ii) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing. Notwithstanding the foregoing,
(x) if any Interest Period for any Revolving Credit Borrowing would
otherwise end after the Revolving Credit Maturity Date, such Interest
Period shall end on the Revolving Credit Maturity Date,
(y) no Interest Period for any Term Loan may commence before and end
after any Principal Payment Date unless, after giving effect thereto, the
aggregate principal amount of the Term Loans having Interest Periods that
end after such Principal Payment Date
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shall be equal to or less than the aggregate principal amount of the Term
Loans scheduled to be outstanding after giving effect to the payments of
principal required to be made on such Principal Payment Date, and
(z) notwithstanding the foregoing clauses (x) and (y), no Interest
Period shall have a duration of less than one month and, if the Interest
Period for any Eurodollar Loan would otherwise be a shorter period, such
Loan shall not be available hereunder as a Eurodollar Loan for such period.
"INVESTMENT" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of any
other Person or any agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or other extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to resell such
Property to such Person, but excluding any such advance, loan or extension of
credit having a term not exceeding 180 days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business);
or (c) the entering into of any Guarantee of, or other contingent obligation
with respect to, Indebtedness or other liability of any other Person and
(without duplication) any amount committed to be advanced, lent or extended to
such Person. Notwithstanding the foregoing, Capital Expenditures and
Acquisitions shall not be deemed "INVESTMENTS" for purposes hereof.
"IP COLLATERAL" means, collectively, the Collateral under the Trademark
Security Agreements.
"ISSUING LENDER" means Fleet National Bank, in its capacity as the issuer
of Letters of Credit hereunder.
"LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, in such form as may be approved by the Agent in its
sole discretion.
"LEASEHOLD PROPERTY" means any leasehold interest of any Credit Party as
lessee under any lease of real property, other than any such leasehold interest
designated from time to time by Agent in its sole discretion as not being
required to be included in the Collateral.
"LC DISBURSEMENT" means a payment made by the Issuing Lender pursuant to a
Letter of Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time PLUS (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Revolving Credit Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.
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"LENDERS" means the Persons listed on SCHEDULE 2.1 and any other Person
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance.
"LETTER OF CREDIT" means any letter of credit issued pursuant to this
Agreement.
"LIBO RATE" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Agent from
time to time for purposes of providing quotations of interest rates applicable
to U.S. dollar deposits in the London interbank market) at approximately 11:00
a.m., London time, two Business Days prior to the commencement of such Interest
Period, as the rate for U.S. dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the "LIBO RATE" with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate at which U.S. dollar deposits of
$5,000,000, and for a maturity comparable to such Interest Period, are offered
by the principal London office of the Agent in immediately available funds in
the London interbank market at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (other than an
operating lease) (or any financing lease having substantially the same economic
effect as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.
"LOAN DOCUMENTS" means this Agreement, any promissory notes evidencing
Loans hereunder, the Collateral Documents and any other instruments or documents
delivered or to be delivered from time to time pursuant to this Agreement.
"LOANS" means the loans made by the Lenders to the Borrower pursuant to
this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations or financial condition, of the Borrower and its
Restricted Subsidiaries taken as a whole, (b) the ability of any Credit Party to
perform any of their respective obligations under this Agreement or the other
Loan Documents or (c) the rights of or benefits available to the Lenders under
this Agreement and the other Loan Documents.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans or Letters
of Credit), or obligations in respect of one or more Hedging Agreements, of any
one or more of the Credit Parties in an aggregate principal amount exceeding
$1,000,000. For purposes of determining Material Indebtedness, the "principal
amount" of the obligations of any Person in respect of any Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any
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netting agreements) that such Person would be required to pay if such Hedging
Agreement were terminated at such time.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably
determined by the Agent to be of material value as Collateral or of material
importance to the operations of the Credit Parties; PROVIDED, HOWEVER that a
Leasehold Property with respect to which the aggregate amount of all rents
payable during any one fiscal year does not exceed $250,000 shall not be a
"Material Leasehold Property."
"MORTGAGE" means (i) a security instrument (whether designated as a deed of
trust or a mortgage, leasehold mortgage, collateral assignment of leases and
rents or by any similar title) executed and delivered by any Credit Party in
such form as may be approved by the Agent in its sole discretion, in each case
with such changes thereto as may be recommended by Agent's local counsel based
on local laws or customary local practices, (ii) or at Agent's option, in the
case of an Additional Mortgaged Property, an amendment to an existing Mortgage,
in form satisfactory to Agent, adding such Additional Mortgaged Property to the
Real Property Assets encumbered by such existing Mortgage, in either case as
such security instrument or amendment may be amended, supplemented or otherwise
modified from time to time. "MORTGAGES" means all such instruments, including
Effective Date Mortgages and any Additional Mortgages, collectively.
"MORTGAGED PROPERTY" means an Effective Date Mortgaged Property or an
Additional Mortgaged Property.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NAFE" means National Association for Female Executives, Inc., a Delaware
corporation and Subsidiary of the Borrower.
"NAFE DISPOSITION" means the sale or transfer of all the capital stock of,
or all or substantially all of the assets of, or the discontinuation of the
operations of, NAFE.
"NET CASH PAYMENTS" means,
(i) with respect to any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Borrower or any its Restricted Subsidiaries in respect of such
Casualty Event net of (A) reasonable expenses incurred by the Borrower or
any its Restricted Subsidiaries in connection therewith and (B)
contractually required repayments of Indebtedness to the extent secured by
a Lien on such property and any income and transfer taxes payable by the
Borrower or any its Restricted Subsidiaries in respect of such Casualty
Event;
(ii) with respect to any Disposition, the aggregate amount of all cash
payments received by the Borrower or any its Restricted Subsidiaries
directly or indirectly in connection with such Disposition, whether at the
time of such Disposition or after such Disposition under deferred payment
arrangements or Investments entered into or received
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in connection with such Disposition (including, without limitation,
Disposition Investments); PROVIDED that
(A) Net Cash Payments shall be net of (I) the amount of any
legal, title, transfer and recording tax expenses, commissions and
other fees and expenses payable by the Borrower or any of its
Restricted Subsidiaries in connection with such Disposition and (II)
any Federal, state and local income or other taxes estimated to be
payable by the Borrower or any of its Restricted Subsidiaries as a
result of such Disposition, but only to the extent that such estimated
taxes are in fact paid to the relevant Federal, state or local
governmental authority within twelve months of the date of such
Disposition; and
(B) Net Cash Payments shall be net of any repayments by Borrower
or any its of Restricted Subsidiaries of Indebtedness to the extent
that (I) such Indebtedness is secured by a Lien on the property that
is the subject of such Disposition and (II) the transferee of (or
holder of a Lien on) such property requires that such Indebtedness be
repaid as a condition to the purchase of such property; and
(iii) with respect to any offering of debt (other than Refunding
Indebtedness) or equity securities, the aggregate amount of all cash
proceeds received by Borrower or any of its Restricted Subsidiaries
therefrom less all legal, underwriting and similar fees and expenses
incurred in connection therewith.
"OFFERING MEMORANDUM" means the Offering Memorandum for the Holding Company
Notes dated March 27, 1997, as delivered to the Agent and the Lenders on or
prior to the date hereof.
"OTHER TAXES" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise v 1 with respect to, this Agreement and the other Loan
Documents, PROVIDED that there shall be excluded from "Other Taxes" all Excluded
Taxes.
"PARENT" means AGI Holding Corp., a Delaware corporation which holds all
the outstanding capital stock of the Holding Company.
"PERMITTED CASH FLOW DISTRIBUTION" means 50% of Excess Cash Flow in any
fiscal year.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
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(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard and Poor's Ratings Service
or from Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$250,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above.
"PERMITTED TAX DISTRIBUTIONS" means, for so long as the Borrower is an
"S corporation" or a substantially similar pass-through entity for federal
income tax purposes, distributions to the Holding Company (or any successor
entity or other entity that owns, directly or indirectly, all of the
outstanding common stock of the Borrower) based on reasonable estimates of
the amount of federal, state and local income taxes that the Borrower would
be required to pay with respect to a fiscal year calculated as if, for the
applicable fiscal year, the Borrower were treated as a "C corporation"
domiciled in the State of California rather than as an "S corporation".
"PERSON" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"PHANTOM STOCK ACCRUALS" means the amounts shown as liabilities in the
Borrower's general ledger account captions "Deferred Phantom Compensation" to
the extent (i) such general ledger account is kept and adjusted in the
ordinary course of business and in accordance with GAAP and the Borrower's
past practices, and (ii) such deferred compensation is payable under "phantom
stock agreements" between the Borrower or a Restricted Subsidiary and key
employees of the Borrower or such Restricted Subsidiary entered into in the
ordinary course of business and in accordance with the Borrower's practices
prior to the effective date thereof, in substantially the form of the phantom
stock agreements in existence on the Effective Date, or in such other form as
shall be approved by the Agent.
"PHANTOM STOCK AGREEMENTS" means the phantom stock agreements referred to
in the definition of Phantom Stock Accruals.
"PLAN" means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
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"PLEDGE AGREEMENTS" means the Pledge Agreements executed and delivered by
each of the Credit Parties on the Effective Date and thereafter in accordance
with Section 6.10, each substantially in the form of EXHIBIT B annexed
hereto, as such agreements may be amended, supplemented or otherwise modified
from time to time.
"POST-DEFAULT RATE" means, for Base Rate Loans, a rate per annum equal to
the Adjusted Base Rate PLUS the Applicable Margin PLUS 2%, and, for
Eurodollar Loans, a rate per annum equal to the Adjusted LIBO Rate PLUS the
Applicable Margin PLUS 2%.
"PRIME RATE" means the rate of interest per annum publicly announced from
time to time by Fleet National Bank, as its prime rate in effect at its
principal office in Boston, Massachusetts; each change in the Prime Rate
shall be effective from and including the date such change is publicly
announced as being effective.
"PRINCIPAL PAYMENT DATES" means the Quarterly Dates falling on or nearest
to March 31, June 30, September 31 and December 31 of each year, commencing
with June 30, 1997, through and including March 31, 2002.
"PRO FORMA EMPLOYEE ADJUSTMENT" means the amounts set forth below with
respect to the four most recently ended fiscal quarters of the Borrower and its
Consolidated Subsidiaries on the dates specified below:
DATES AMOUNT OF PRO FORMA EMPLOYEE ADJUSTMENT
March 31, 1997 $3,000,000
June 30, 1997 $2,100,000
September 30, 1997 $1,200,000
December 31, 1997 $ 225,000
"PROPERTY" means any interest of any kind in property or assets, whether
real, personal or mixed, and whether tangible or intangible.
"PTO" means the United States Patent and Trademark Office or any successor
or substitute office in which filings are necessary or, in the opinion of the
Agent, desirable in order to create or perfect Liens on any IP Collateral.
"QUARTERLY DATES" means the last Business Day of March, June, September
and December in each year, the first of which shall be the first such day
after the Effective Date of this Agreement.
"REAL PROPERTY ASSET" means, at any time of determination, any fee
ownership or leasehold interest then owned by any Credit Party in any real
property.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to
which a Recorded Document (as hereinafter defined) has been recorded in all
places necessary or desirable, in the Agent's reasonable judgment, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrancers of the affected real property. For
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purposes of this definition, the term "RECORDED DOCUMENT" means, with respect
to any Leasehold Property, (a) the lease evidencing such Leasehold Property
or a memorandum thereof, executed and acknowledged by the owner of the
affected real property, as lessor, or (b) of such Leasehold Property was
acquired or subleased form the holder of a Recorded Leasehold Interest, the
applicable assignment or sublease document, executed and acknowledged by such
holder, in each case in form sufficient to give such constructive notice upon
recordation and otherwise in form reasonably satisfactory to the Agent.
"REFUNDING INDEBTEDNESS" has the meaning assigned to such term in
Section 7.1(b).
"REGISTER" has the meaning assigned to such term in Section 10.4(d).
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"RELATED RETAIL SALE-LEASEBACK PROCEEDS" means the proceeds received after
the Effective Date by the Borrower and its Restricted Subsidiaries (net of all
transactional and related expenses) in any Sale-Leaseback Transaction involving
a Camping World retail store operated by any such party, which proceeds do not
exceed the aggregate amount of Camping World Expenditures made after the
Effective Date in respect of such retail store.
"RENTAL OBLIGATIONS" means the maximum fixed rentals paid or payable by a
lessee under any lease during a specified period, excluding amounts paid or
payable on account of maintenance, utilities, ordinary repairs, insurance,
taxes, assessments and other similar charges, whether or not designated as
rental or additional rental.
"REQUIRED LENDERS" means, at any time, Lenders having Loans, LC Exposure
and unused Commitments representing at least 66 2/3% of the sum of the total
Loans, LC Exposure and unused Commitments at such time.
"REQUIRED REVOLVING CREDIT LENDERS" means, at any time, Lenders having
Revolving Credit Loans, LC Exposure and unused Revolving Credit Commitments
representing at least 66 2/3% of the sum of the total Revolving Credit Loans,
LC Exposure and unused Revolving Credit Commitments at such time.
"REQUIRED TERM LOAN LENDERS" means Lenders having Term Loans representing
at least 66 2/3% of the sum of the total Term Loans at such time.
"RESERVED COMMITMENT AMOUNT" has the meaning assigned to such term in
Section 2.1(c).
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of any
Credit Party now or hereafter outstanding, except a dividend payable solely
in shares of that class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of
stock of any Credit Party
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now or hereafter outstanding, (iii) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of any Credit Party now or hereafter
outstanding, and (iv) any payment or prepayment of principal of, premium, if
any, or interest on, or redemption purchase, retirement, defeasance
(including in-substance or legal defeasance), sinking fund or similar payment
with respect to, the Senior Subordinated Notes (except to the extent paid
with the proceeds of Refunding Indebtedness permitted under this Agreement)
and any other Subordinated Indebtedness. Notwithstanding anything herein to
the contrary, payments in respect of the purchase price and the consulting
and non-compete agreements pursuant to the Camping World Acquisition
Agreement made on the Effective Date shall not be deemed to be Restricted
Junior Payments.
"RESTRICTED SUBSIDIARY" means each Subsidiary of the Borrower that is not
an Unrestricted Subsidiary.
"REVOLVING CREDIT AVAILABILITY PERIOD" means the period from and including
the Effective Date to but excluding the earlier of (a) the Revolving Credit
Maturity Date and (b) the date of termination of the Revolving Credit
Commitments.
"REVOLVING CREDIT COMMITMENT" means, with respect to each Lender, the
commitment of such Lender to make Revolving Credit Loans and to acquire
participations in Letters of Credit hereunder, as such commitment may be
(a) reduced from time to time pursuant to Sections 2.7 and 2.9 and
(b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 10.4. The initial amount of each Lender's
Revolving Credit Commitment is set forth on SCHEDULE 2.1, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed
its Revolving Credit Commitment, as applicable. The aggregate original
amount of the Revolving Credit Commitments is $45,000,000.
"REVOLVING CREDIT EXPOSURE" means, with respect to any Revolving Credit
Lender at any time, the sum of the outstanding principal amount of such
Lender's Revolving Credit Loans and its LC Exposure at such time.
"REVOLVING CREDIT LENDER" means (a) initially, a Lender that has a
Revolving Credit Commitment set forth opposite its name on SCHEDULE 2.1 and
(b) thereafter, the Lenders from time to time holding Revolving Credit Loans
and Revolving Credit Commitments, after giving effect to any assignments
thereof permitted by Section 10.4.
"REVOLVING CREDIT LOAN" means a Loan made pursuant to Section 2.1(a) that
utilizes the Revolving Credit Commitment.
"REVOLVING CREDIT MATURITY DATE" means the last Business Day in March,
2002.
"SALE-LEASEBACK TRANSACTIONS" means any sales or transfers of any real or
tangible personal property owned by any Person in order to lease such
property for substantially the same purpose as the property being sold or
transferred; PROVIDED that such sale or transfer is at fair market value and
such lease is at fair rental value.
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"SECURITY AGREEMENTS" means the Security Agreements executed and delivered
by each of the Credit Parties on the Effective Date and thereafter in
accordance with Section 6.10, each substantially in the form of EXHIBIT C
annexed hereto, as such agreements may be amended, supplemented or otherwise
modified from time to time.
"SENIOR SUBORDINATED NOTES" means the 11-1/2% Senior Subordinated Notes
due 2003 issued pursuant to the Senior Subordinated Notes Indenture.
"SENIOR SUBORDINATED NOTES INDENTURE" means the Indenture dated as of
October 29, 1993 among the Borrower, as issuer, the guarantors named therein
and United States Trust Company of New York, as Trustee, as amended by First
Supplemental Indenture dated as of May 17, 1994, by Second Supplemental
Indenture dated as of October 11, 1994, by Third Supplemental Indenture dated
as of December 21, 1995, by Fourth Supplemental Indenture dated as of
February 1, 1996, by Fifth Supplemental Indenture dated as of March 6, 1997
and by Sixth Supplemental Indenture dated as of the date hereof and as
further supplemented or amended from time to time.
"SPECIAL COUNSEL" means Palmer & Dodge LLP, in its capacity as special
counsel to Fleet National Bank, as Agent of the credit facilities contemplated
hereby.
"STATUTORY RESERVE RATE" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the
number one MINUS the aggregate of the maximum reserve percentages (including
any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board to which the Agent is Subject (a) with
respect to the Base CD Rate, for new negotiable personal time deposits in
dollars of over $100,000 with maturities approximately equal to three months
and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"SUBORDINATED INDEBTEDNESS" means (a) the Senior Subordinated Notes (and,
effective upon any extension, renewal, refunding or replacement of any of the
Senior Subordinated Notes as contemplated in Section 7.1(b), any Refunding
Indebtedness) and (b) any other Indebtedness of any Credit Party consented to
in writing by the Agent which matures in its entirety later than the Loans
and by its terms (or by the terms of the instrument under which it is
outstanding and to which appropriate reference is made in the instrument
evidencing such Subordinated Indebtedness) is made subordinate and junior in
right of payment to the Loans and to such Credit Party's other obligations to
the Lenders hereunder by provisions reasonably satisfactory in form and
substance to the Agent and Special Counsel.
"SUBSIDIARY" means, with respect to any Person (the "PARENT") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of
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which would be consolidated with those of the parent in the parent's
consolidated financial statements if such financial statements were prepared
in accordance with GAAP as of such date, as well as any other corporation,
limited liability company, partnership, association or other entity (a) of
which securities or other ownership interests representing more than 50% of
the ordinary voting power or, in the case of a partnership, more than 50% of
the general partnership interests are, as of such date, owned, controlled or
held, or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent. References herein to "SUBSIDIARIES" shall,
unless the context requires otherwise, be deemed to be references to
Subsidiaries of the Borrower.
"TAXES" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TERM LOAN" has the meaning assigned to such term in Section 2.1(b).
"TERM LOAN COMMITMENT" means, with respect to each Lender, the agreement
of each Lender to make a Term Loan to the Borrower on the Effective Date.
The initial amount of each Lender's Term Loan Commitment is set forth on
SCHEDULE 2.1. The aggregate original amount of the Term Loan Commitments is
$30,000,000.
"TERM LOAN LENDER" means, (a) initially, a Lender that has a Term Loan
Commitment set forth opposite its name on SCHEDULE 2.1 and who has made a
Term Loan to the Borrower on the Effective Date and (b) thereafter, the
Lenders from time to time holding Term Loans after giving effect to any
assignments thereof permitted by Section 10.4.
"TITLE COMPANY" means, collectively, Lawyer's Title Insurance Corporation,
and one or more other title insurance companies reasonably satisfactory to the
Agent.
"TRADEMARK SECURITY AGREEMENTS" means the Trademark Security Agreement
executed and delivered by each of Credit Parties on the Effective Date and
thereafter in accordance with Section 6.10, each substantially in the form of
EXHIBIT D annexed hereto, as such agreements may be amended, supplemented or
otherwise modified from time to time.
"TRANSACTIONS" means (a) with respect to the Borrower, the execution,
delivery and performance by the Borrower of the Loan Documents to which it is
a party, the borrowing of Loans and the use of the proceeds thereof, and the
issuance of Letters of Credit hereunder and (b) with respect to any Credit
Party (other than the Borrower), the execution, delivery and performance by
such Credit Party of the Loan Documents to which it is a party.
"TYPE" when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing,
is determined by reference to the Adjusted LIBO Rate or the Adjusted Base
Rate.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
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"UNRESTRICTED SUBSIDIARIES" means (a) any Subsidiary designated as such by
the Board of Directors of the Borrower as set forth below if, at the time of
such designation: (i) neither the Borrower nor any of its Restricted
Subsidiaries either (A) provides credit support for, or otherwise Guarantees,
any Indebtedness of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness, but excluding any credit support or
other Guarantee that would not be prohibited hereby to exist after giving
effect to such designation) or (B) is otherwise directly or indirectly liable
for any Indebtedness of such Subsidiary (excluding any liability that would
not be prohibited hereby to exist after giving effect to such designation)
and (ii) no default with respect to any Indebtedness of such Subsidiary
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) for which any Credit Party is not liable
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Credit Parties to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior
to its final scheduled maturity, (b) any Subsidiary of the Borrower (other
than a Subsidiary existing on the date hereof or any successor to any such
Subsidiary (including, without limitation, any Person that owns any Property
previously owned by any such Subsidiary)) which at the time of determination
shall have been designated an Unrestricted Subsidiary by the Board of
Directors of the Borrower as provided below, (c) any Subsidiary of an
Unrestricted Subsidiary and (d) each Subsidiary of the Borrower designated as
an Unrestricted Subsidiary in Part (a) of SCHEDULE 4.13 annexed hereto;
PROVIDED that no Subsidiary of the Borrower that is not an "Unrestricted
Subsidiary" as defined in the Senior Subordinated Notes Indenture (or in the
agreements establishing any Refunding Indebtedness related thereto) with
exception of Affinity Insurance Group, Inc. shall be an Unrestricted
Subsidiary hereunder. The Board of Directors of the Borrower may designate
any Subsidiary of the Borrower to be an Unrestricted Subsidiary unless
(i) such Subsidiary owns any capital stock of, or owns or holds any Lien on
any property of, any Credit Party, (ii) such Subsidiary has assets having an
aggregate fair market value of more than $10,000, (iii) immediately after
giving effect to such designation, the Borrower would be prohibited by
Section 4.10(a)(iii) of the Senior Subordinated Notes Indenture (or any
comparable section in any agreement establishing any Refunding Indebtedness
related thereto) from incurring more than $1.00 of additional Indebtedness or
(iv) at the time of such designation (either before or after giving effect
thereto), an Event of Default exists or would result therefrom and the Agent
acting upon the instructions of the Required Lenders shall have objected to
such designation on or before the tenth Business Day following the earlier of
the date it receives notice of such designation as provided in the following
sentence or the date it receives notice of such Event of Default as provided
in Section 6.2 (d) hereof. Any Unrestricted Subsidiary shall cease to be an
Unrestricted Subsidiary by designation of the Board of Directors of the
Borrower unless immediately after giving effect to such designation, the
Borrower would be prohibited by Section 4.10(a)(iii) of the Senior
Subordinated Notes Indenture (or in any comparable section in any agreement
establishing any Refunding Indebtedness related thereto) from incurring more
than $1.00 of additional Indebtedness. The Borrower shall furnish to the
Agent a certified copy of each resolution of its Board of Directors
evidencing each designation pursuant to this definition and a certificate of
a Financial Officer of the Borrower to the effect that such designation
complied with the conditions thereto set forth herein and (in the case of any
Subsidiary of the Borrower being designated an Unrestricted Subsidiary)
setting forth in reasonable detail the computations necessary to determine
whether the Borrower is in compliance with Section 7.9 hereof on the date of
such designation (both before and after giving effect thereto), and no such
designation shall be effective for purposes hereof until the Agent shall have
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received such resolution and certificate. As of the Effective Date, Affinity
Insurance Group, Inc., Affinity Group Thrift Holding Corp. and Affinity
Thrift and Loan are Unrestricted Subsidiaries.
"U.S. DOLLARS" or "$" refers to lawful money of the United States of
America.
"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person at any date,
any corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing 100% of
the equity or ordinary voting power (other than directors' qualifying shares)
or, in the case of a partnership, 100% of the general partnership interests
are, as of such date, directly or indirectly owned, controlled or held by
such Person or one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
1.2 CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of this
Agreement, Loans may be classified and referred to by Class (E.G., a "Revolving
Credit Loan" or "Term Loan") or by Type (E.G., a "Base Rate Loan" or a
"Eurodollar Loan") or by Class and Type (E.G., a "Eurodollar Revolving Credit
Loan" or a "Base Rate Revolving Credit Loan"). In similar fashion,
(i) Borrowings may be classified and referred to by Class, by Type and by
Class and Type, and (ii) Commitments may be classified and referred to by
Class.
1.3 TERMS GENERALLY. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to
any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified (subject to any restrictions
on such amendments, supplements or modifications set forth herein), (b) any
reference herein to any Person shall be construed to include such Person's
successors and assigns, (c) the words "herein", "hereof" and "hereunder", and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references
herein to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles and Sections of, and Exhibits and Schedules to, this
Agreement and (e) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
1.4 ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; PROVIDED that, if the
Borrower notifies the Agent that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring
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after the date hereof in GAAP or in the application thereof on the operation
of such provision (or if the Agent notifies the Borrower that the Required
Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted
on the basis of GAAP as in effect and applied immediately before such change
shall have become effective until such notice shall have been withdrawn or
such provision amended in accordance herewith.
ARTICLE II
THE CREDITS
2.1 COMMITMENTS.
(a) REVOLVING CREDIT LOANS. Subject to the terms and conditions set
forth herein, each Revolving Credit Lender agrees to make Revolving Credit
Loans to the Borrower from time to time during the Revolving Credit
Availability Period in an aggregate principal amount that will not result in
such Lender's Revolving Credit Loans exceeding such Lender's Revolving Credit
Commitment, PROVIDED that the total Revolving Credit Exposure shall not at
any time exceed the total Revolving Credit Commitments. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Revolving Credit Loans.
(b) TERM LOANS. In addition to Borrowings of Revolving Credit Loans
pursuant to paragraph (a) above, and subject to the terms and conditions set
forth herein, each Term Loan Lender agrees to make a Term Loan (each such
term loan being herein called a "TERM LOAN") to the Borrower in the full
amount of its Term Loan Commitment on the Effective Date. Principal amounts
of Term Loans which have been repaid or prepaid may not be reborrowed.
(c) RESERVED COMMITMENT AMOUNT. Proceeds of Revolving Credit Loans and
Term Loans shall be available for any use permitted under the applicable
provisions of Section 6.9, PROVIDED that, in the event that, as contemplated
by Section 2.9(b)(iii), the Borrower shall prepay Revolving Credit Loans and
Term Loans from the proceeds of a Disposition hereunder, then an amount of
Revolving Credit Commitments, as specified by the Borrower pursuant to the
next sentence, equal to the amount of such prepayment (herein the "RESERVED
COMMITMENT AMOUNT") shall be reserved and shall not be available for
borrowings hereunder except and to the extent that the proceeds of such
borrowings are to be applied to make Capital Expenditures or Acquisitions
permitted hereunder, or to make prepayments of Loans under Section
2.9(b)(iv)(z)(B). The Borrower agrees, upon the occasion of any Borrowing of
Revolving Credit Loans hereunder that is to constitute a utilization of any
Reserved Commitment Amount, to advise the Agent in writing of such fact at
the time of such Borrowing, identifying the amount of such Borrowing that is
to constitute such utilization, the Capital Expenditure or Acquisition in
respect of which the proceeds of such Borrowing are to be applied and the
reduced Reserved Commitment Amount to be in effect after giving effect to
such Borrowing.
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(d) ADDITIONAL LIMITATION ON LOANS. Notwithstanding anything herein to
the contrary, at no time shall the Revolving Credit Lenders be obligated to make
any Revolving Credit Loans if, in the reasonable judgment of the Required
Lenders, the Indebtedness so incurred by the Borrower and its Restricted
Subsidiaries would not constitute "Senior Indebtedness" under the Senior
Subordinated Notes Indenture.
2.2 LOANS AND BORROWINGS.
(a) Each Loan of a particular Class shall be made as part of a Borrowing
consisting of Loans of such Class made by the Lenders ratably in accordance with
their respective Commitments of such Class. The failure of any Lender to make
any Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; PROVIDED that the Commitments of the Lenders are several
and no Lender shall be responsible for any other Lender's failure to make Loans
as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised entirely of
Base Rate Loans or Eurodollar Loans as the Borrower may request in accordance
herewith. Each Lender at its option may make any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan;
PROVIDED that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for a Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount at least equal to
$250,000 or any greater multiple of $50,000. At the time that each Base Rate
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
aggregate amount at least equal to $250,000 or any greater multiple of $50,000;
PROVIDED that (i) a Base Rate Borrowing of Revolving Credit Loans may be in an
aggregate amount that is equal to the entire unused balance of the total
Revolving Credit Commitments, and (ii) a Revolving Credit Base Rate Borrowing
may be in an amount that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.4(e). Borrowings of more than one
Type and Class may be outstanding at the same time; PROVIDED that there shall
not at any time be more than a total of six Eurodollar Borrowings outstanding.
2.3 REQUESTS FOR BORROWINGS.
(a) To request a Revolving Credit Borrowing, the Borrower shall notify the
Agent of such request by telephone (i) in the case of a Eurodollar Borrowing,
not later than 11:00 a.m., Boston, Massachusetts time, three Business Days
before the date of the proposed Borrowing or (ii) in the case of a Base Rate
Borrowing not later than 11:00 a.m., Boston, Massachusetts time, one Business
Day before the date of the proposed Borrowing; PROVIDED that any such notice of
a Base Rate Borrowing to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.4(e) may be given not later than 10:00 a.m., Boston,
Massachusetts time, on the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Agent of a written Borrowing Request in a form
approved by the Agent and signed by the Borrower.
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(b) Each such telephonic and written Borrowing Request shall specify the
following information in compliance with Section 2.2:
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Base Rate Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.5.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be a Base Rate Borrowing. If no Interest Period is specified
with respect to any requested Eurodollar Borrowing, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section 2.3,
the Agent shall advise each Lender of the details thereof and of the amount of
such Lender's Loan to be made as part of the requested Borrowing.
2.4 LETTERS OF CREDIT.
(a) GENERAL. Subject to the terms and conditions set forth herein, in
addition to the Revolving Credit Loans provided for in Section 2.1(a), the
Borrower may request the issuance of Letters of Credit for its own account by
the Issuing Lender, in a form reasonably acceptable to the Issuing Lender, at
any time and from time to time during the Revolving Credit Availability Period.
Letters of Credit issued hereunder shall constitute utilization of the Revolving
Credit Commitments. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Issuing Lender relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS.
To request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Lender) to the Issuing Lender and the Agent
(reasonably in advance of the requested date of issuance, amendment, renewal or
extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section 2.4),
the amount of such Letter of Credit, the name and address of the beneficiary
thereof and such other information as shall be necessary
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to prepare, amend, renew or extend such Letter of Credit. If requested by
the Issuing Lender, the Borrower also shall submit a letter of credit
application on the Issuing Lender's standard form in connection with any
request for a Letter of Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent
and warrant that), after giving effect to such issuance, amendment, renewal
or extension (i) the aggregate LC Exposure of the Issuing Lender (determined
for these purposes without giving effect to the participations therein of the
Revolving Credit Lenders pursuant to paragraph (d) of this Section 2.4) shall
not exceed $5,000,000 and (ii) the total Revolving Credit Exposure shall not
exceed the total Revolving Credit Commitments.
(c) EXPIRATION DATE. Each Letter of Credit shall expire (without giving
effect to any extension thereof by reason of an interruption of business) at or
prior to the close of business on the earlier of (i) the date two years after
the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, two years after such renewal or extension)
PROVIDED that any such Letter of Credit may provide for automatic extensions
thereof to a date not later than one year beyond its current expiration date,
and (ii) the date that is five Business Days prior to the Revolving Credit
Maturity Date. No Letter of Credit may be extended beyond the date that is five
Business Days prior to the Revolving Credit Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) by the Issuing
Lender, and without any further action on the part of the Issuing Lender, the
Issuing Lender hereby grants to each Revolving Credit Lender, and each Revolving
Lender hereby acquires from the Issuing Lender, a participation in such Letter
of Credit equal to such Revolving Credit Lender's Applicable Percentage of the
aggregate amount available to be drawn under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Revolving Credit Lender
hereby absolutely and unconditionally agrees to pay to the Agent, for the
account of the Issuing Lender, such Revolving Credit Lender's Applicable
Percentage of each LC Disbursement made by the Issuing Lender and not reimbursed
by the Borrower on the date due as provided in paragraph (e) of this Section
2.4, or of any reimbursement payment required to be refunded to the Borrower for
any reason. Each Revolving Credit Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) REIMBURSEMENT. If the Issuing Lender shall make any LC Disbursement
in respect of a Letter of Credit, the Borrower shall reimburse the Issuing
Lender in respect of such LC Disbursement by paying to the Agent an amount equal
to such LC Disbursement not later than 12:00 noon, Boston, Massachusetts time,
on (i) the Business Day that the Borrower receives notice of such LC
Disbursement, if such notice is received prior to 10:00 a.m., Boston,
Massachusetts time, or (ii) the Business Day immediately following the day that
the Borrower receives such notice, if such notice is not received prior to such
time, PROVIDED that the Borrower may, subject to the conditions to borrowing set
forth herein, request in accordance with Section 2.3 that such payment be
financed with a Revolving Credit Base Rate Borrowing in an equivalent
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amount and, to the extent so financed, the Borrower's obligation to make such
payment shall be discharged and replaced by the resulting Revolving Credit
Base Rate Borrowing.
If the Borrower fails to make such payment when due, the Agent shall notify
each Revolving Credit Lender of the applicable LC Disbursement, the payment then
due from the Borrower in respect thereof and such Revolving Credit Lender's
Applicable Percentage thereof. Promptly following receipt of such notice, each
Revolving Credit Lender shall pay to the Agent its Applicable Percentage of the
payment then due from the Borrower, in the same manner as provided in Section
2.5 with respect to Revolving Credit Loans made by such Lender (and Section 2.5
shall apply to the payment obligations of the Revolving Credit Lenders, treating
each such payment as a Loan for this purpose), and the Agent shall promptly pay
to the Issuing Lender the amounts so received by it from the Revolving Credit
Lenders. Promptly following receipt by the Agent of any payment from the
Borrower pursuant to this paragraph, the Agent shall distribute such payment to
the Issuing Lender or, to the extent that the Revolving Credit Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Lender, then to
such Lenders and the Issuing Lender as their interests may appear. Any payment
made by a Revolving Credit Lender pursuant to this paragraph to reimburse the
Issuing Lender for any LC Disbursement shall not constitute a Loan and shall not
relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f) OBLIGATIONS ABSOLUTE. (i) The Borrower's obligation to reimburse
LC Disbursements as provided in paragraph (e) of this Section 2.4 shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (A) any lack of validity or enforceability of any
Letter of Credit, or any term or provision therein, (B) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (C) payment by the Issuing Lender under a Letter of Credit against
presentation of a draft or other document that does not comply strictly with the
terms of such Letter of Credit and (D) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section 2.4, constitute a legal or equitable discharge of
the Borrower's obligations hereunder.
(ii) Neither the Agent, the Lenders nor the Issuing Lender, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit by the
Issuing Lender or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of the Issuing Lender; PROVIDED that the foregoing
shall not be construed to excuse the Issuing Lender from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Issuing Lender's gross negligence or wilful misconduct when determining
whether drafts and other documents presented under a Letter of Credit comply
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with the terms thereof. Subject in all respects to the foregoing, the parties
hereto expressly agree that:
(A) the Issuing Lender may accept documents that appear on their face
to be in substantial compliance with the terms of a Letter of Credit
without responsibility for further investigation, regardless of any notice
or information to the contrary, and may make payment upon presentation of
documents that appear on their face to be in substantial compliance with
the terms of such Letter of Credit;
(B) the Issuing Lender shall have the right, in its sole discretion,
to decline to accept such documents and to make such payment if such
documents are not in strict compliance with the terms of such Letter of
Credit; and
(C) this sentence shall establish the standard of care to be
exercised by the Issuing Lender when determining whether drafts and other
documents presented under a Letter of Credit comply with the terms thereof
(and the parties hereto hereby waive, to the extent permitted by applicable
law, any standard of care inconsistent with the foregoing).
(g) DISBURSEMENT PROCEDURES. The Issuing Lender shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under any Letter of Credit. The Issuing Lender shall promptly notify
the Agent and the Borrower by telephone (confirmed by telecopy) of such demand
for payment and whether the Issuing Lender has made or will make an LC
Disbursement thereunder; PROVIDED that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Lender and the Revolving Credit Lenders with respect to any such LC
Disbursement.
(h) INTERIM INTEREST. If the Issuing Lender shall make any LC
Disbursement in respect of any Letter of Credit, then, unless the Borrower shall
reimburse such LC Disbursement in full on the date such LC Disbursement is made,
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to Revolving Credit Base Rate Loans; PROVIDED that, if the Borrower fails to
reimburse such LC Disbursement when due pursuant to paragraph (e) of this
Section 2.4, then Section 2.11(c) shall apply. Interest accrued pursuant to
this paragraph shall be for the account of the Issuing Lender, except that
interest accrued on and after the date of payment by any Revolving Credit Lender
pursuant to paragraph (e) of this Section 2.4 to reimburse the Issuing Lender
shall be for the account of such Lender to the extent of such payment.
(i) CASH COLLATERALIZATION. If either (i) an Event of Default shall occur
and be continuing and the Borrower receives notice from the Agent or the
Required Revolving Credit Lenders demanding the deposit of cash collateral
pursuant to this paragraph, or (ii) the Borrower shall be required to provide
cover for LC Exposure pursuant to Section 2.8 or 2.9(b), the Borrower shall
immediately deposit with the Issuing Lender an amount in cash equal to, in the
case of an Event of Default, the LC Exposure as of such date plus any accrued
and unpaid interest thereon and, in the case of cover pursuant to Section 2.8 or
2.9(b), the amount required under Section 2.8 or 2.9(b), as the case may be;
PROVIDED that the obligation to deposit such cash
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collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to any Credit Party
described in clause (g) or (h) of Section 8.1. Such deposit shall be held by
the Agent as collateral in the first instance for the LC Exposure under this
Agreement and thereafter for the payment of any other obligations of the
Credit Parties hereunder.
2.5 FUNDING OF BORROWINGS.
(a) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by 12:00
noon, Boston, Massachusetts time, to the account of the Agent most recently
designated by it for such purpose by notice to the Lenders. The Agent will make
such Loans available to the Borrower by promptly crediting the amounts so
received, in like funds, to an account of the Borrower maintained with the Agent
in Boston, Massachusetts and designated by the Borrower in the applicable
Borrowing Request; PROVIDED that Revolving Credit Base Rate Loans made to
finance the reimbursement of an LC Disbursement under any Letter of Credit as
provided in Section 2.4(e) shall be remitted by the Agent to the Issuing Lender.
(b) Unless the Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the
Agent such Lender's share of such Borrowing, the Agent may assume that such
Lender has made such share available on such date in accordance with paragraph
(a) of this Section 2.5 and may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. In such event, if a Lender
has not in fact made its share of the applicable Borrowing available to the
Agent, then the applicable Lender and the Borrower severally agree to pay to the
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Agent, at the Federal Funds
Effective Rate. If such Lender pays such amount to the Agent, then such amount
shall constitute such Lender's Loan included in such Borrowing.
2.6 INTEREST ELECTIONS.
(a) Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as provided in this Section 2.6. The
Borrower may elect different options for continuations and conversions with
respect to different portions of the affected Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.
(b) To make an election pursuant to this Section 2.6, the Borrower shall
notify the Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.3 if the Borrower were requesting a
Borrowing of the Type resulting from such election to be made on the effective
date of such election. Each such telephonic Interest Election
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Request shall be irrevocable and shall be confirmed promptly by hand delivery
or telecopy to the Agent of a written Interest Election Request in a form
approved by the Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.2:
(i) the Borrowing to which such Interest Election Request applies
and, if different options for continuations or conversions are being
elected with respect to different portions thereof, the portions thereof to
be allocated to each resulting Borrowing (in which case the information to
be specified pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be a Base Rate Borrowing or
a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the Agent
shall advise each affected Lender of the details thereof and of such Lender's
portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to a Base Rate
Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Agent, at the request of the
Required Lenders, so notifies the Borrower, then, so long as an Event of Default
is continuing (i) no outstanding Borrowing may be converted to or continued as a
Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to a Base Rate Borrowing at the end of the Interest Period applicable
thereto.
2.7 TERMINATION AND REDUCTION OF COMMITMENTS.
(a) Unless previously terminated, (i) the Revolving Credit Commitments
shall terminate at the close of business on the Revolving Credit Maturity Date
and (ii) the Term Loan Commitments shall terminate if the Term Loans are not
made on the Effective Date.
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(b) The Borrower may at any time terminate, or from time to time reduce,
the Revolving Credit Commitments; PROVIDED that (i) each reduction of the
Revolving Credit Commitments shall be in an amount that is at least equal to
$1,000,000 or any greater multiple of $500,000, and (ii) the Borrower shall not
terminate or reduce the Revolving Credit Commitments if, after giving effect to
any concurrent prepayment of the Loans in accordance with Section 2.9, the total
Revolving Credit Exposures would exceed the total Revolving Credit Commitments.
(c) The Borrower shall notify the Agent of any election to terminate or
reduce Commitments under paragraph (b) of this Section 2.7 at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly following
receipt of any notice, the Agent shall advise the Lenders of the contents
thereof. Each notice delivered by the Borrower pursuant to this Section 2.7
shall be irrevocable; PROVIDED that a notice of termination of Commitments
delivered by the Borrower may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrower (by notice to the Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination or
reduction of Revolving Credit Commitments shall be permanent. Each reduction of
Revolving Credit Commitments shall be made ratably among the Lenders in
accordance with their respective Revolving Credit Commitments.
2.8 REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) The Borrower hereby unconditionally promises to pay to the Agent for
the account of each Revolving Credit Lender the then unpaid principal amount of
such Lender's Revolving Credit Loans on the Revolving Credit Maturity Date. In
addition, if following any reduction in the Revolving Credit Commitments the
aggregate principal amount of the Revolving Credit Exposure shall exceed the
aggregate Revolving Credit Commitments, the Borrower shall pay Revolving Credit
Loans (and provide cover for LC Exposure as specified in Section 2.4(i)) in an
aggregate amount equal to such excess.
(b) The Borrower hereby unconditionally promises to pay to the Agent for
the account of the Term Loan Lenders twenty principal payments of $1,500,000 on
each Principal Payment Date commencing on June 30, 1997 with the final principal
payment of all outstanding principal on March 31, 2002.
(c) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(d) The Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Class and Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Agent hereunder for the account
of the Lenders and each Lender's share thereof.
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(e) The entries made in the accounts maintained pursuant to paragraph (c)
or (d) of this Section 2.8 shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; PROVIDED that the failure of any
Lender or the Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
(f) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Agent. Thereafter, the Loans evidenced by such promissory
note and interest thereon shall at all times (including after assignment
pursuant to Section 10.4) be represented by one or more promissory notes in such
form payable to the order of the payee named therein (or, if such promissory
note is a registered note, to such payee and its registered assigns).
2.9 PREPAYMENT OF LOANS.
(a) OPTIONAL PREPAYMENTS. The Borrower shall have the right at any time
and from time to time to prepay any Borrowing in whole or in part, subject to
prior notice in accordance with paragraph (c) of this Section 2.9. Each
prepayment of Term Loans shall be applied in inverse order of maturity.
(b) MANDATORY PREPAYMENTS. The Borrower shall make prepayments of the
Loans hereunder (and reduce the Commitments hereunder) as follows:
(i) CASUALTY EVENTS. Upon the date 90 days following the receipt by
any Credit Party of the proceeds of insurance, condemnation award or other
compensation in respect of any Casualty Event affecting any property of any
Credit Party (or upon such earlier date as such Credit Party, as the case
may be, shall have determined not to repair or replace the property
affected by such Casualty Event), the Borrower shall prepay the Loans (and
provide cover for LC Exposure as specified in Section 2.4(i)), and the
Commitments shall be subject to automatic reduction, in an aggregate
amount, if any, equal to 100% of the Net Cash Payments from such Casualty
Event not theretofore applied or committed to be applied to the repair or
replacement of such property (it being understood that if Net Cash Payments
committed to be applied are not in fact applied within twelve months of the
respective Casualty Event, then such Proceeds shall be applied to the
prepayment of Loans, cover for LC Exposure and reduction of Commitments as
provided in this clause (i) at the expiration of such twelve-month period),
such prepayment and reduction to be effected in each case in the manner and
to the extent specified in clause (vii) of this Section 2.9(b).
(ii) OFFERING OF DEBT OR EQUITY. Without limiting the obligation of
the Borrower to obtain the consent of the Required Lenders to any
incurrence of Indebtedness not otherwise permitted hereunder, the Borrower
agrees, on or prior to the closing of any sale of debt (except for the sale
of Refunding Indebtedness) or equity securities by any Credit Party in an
aggregate amount of $10,000,000 or more in any fiscal year, to deliver to
the Agent a statement certified by a Financial Officer of the
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Borrower, in form and detail reasonably satisfactory to the Agent, of the
estimated amount of the Net Cash Payments of such sale of securities that
will (on the date of such sale of securities) be received by any Credit
Party in cash and the Borrower will prepay the Loans hereunder (and
provide cover for LC Exposure as specified in Section 2.4(i)), and the
Commitments hereunder shall be subject to automatic reduction, upon the
date of such sale of securities, in an aggregate amount equal to 100% of
such estimated amount of the Net Cash Payments of such sale of securities
received by any Credit Party, such prepayment and reduction to be effected
in each case in the manner and to the extent specified in clause (vii) of
this Section 2.9(b).
(iii) SALE OF ASSETS. Without limiting the obligation of the
Borrower to obtain the consent of the Required Lenders to any Disposition
not otherwise permitted hereunder, the Borrower agrees, on or prior to the
occurrence of any Disposition by any Credit Party, to deliver to the Agent
a statement certified by a Financial Officer of the Borrower, in form and
detail reasonably satisfactory to the Agent, of the estimated amount of the
Net Cash Payments of such Disposition that will (on the date of such
Disposition) be received by any Credit Party in cash and, unless the
Borrower shall elect to reinvest such Net Cash Payments as provided below,
the Borrower will prepay the Loans hereunder (and provide cover for LC
Exposure as specified in Section 2.4(i)), and the Commitments hereunder
shall be subject to automatic reduction, as follows:
(w) upon the date of such Disposition, in an aggregate amount
equal to 100% of such estimated amount of the Net Cash Payments of
such Disposition, to the extent received by any Credit Party in cash
on the date of such Disposition; and
(x) thereafter, quarterly, on the date of the delivery by the
Borrower to the Agent pursuant to Section 6.1 of the financial
statements for any quarterly fiscal period or fiscal year, to the
extent any Credit Party shall receive Net Cash Payments during the
quarterly fiscal period ending on the date of such financial
statements in cash under deferred payment arrangements or Disposition
Investments entered into or received in connection with any
Disposition, an amount equal to (A) 100% of the aggregate amount of
such Net Cash Payments MINUS (B) any transaction expenses associated
with Dispositions and not previously deducted in the determination of
Net Cash Payments PLUS (or MINUS, as the case may be) (C) any other
adjustment received or paid by any Credit Party pursuant to the
respective agreements giving rise to Dispositions and not previously
taken into account in the determination of the Net Cash Payments,
PROVIDED that if prior to the date upon which the Borrower would
otherwise be required to make a prepayment under this clause (x) with
respect to any quarterly fiscal period the aggregate amount of such
Net Cash Payments (after giving effect to the adjustments provided for
in this clause (x)) shall exceed $3,000,000, then the Borrower shall
within three Business Days make a prepayment under this clause (x) in
an amount equal to such required prepayment subject to the last
paragraph of clause (iv) of this Section 2.9(b).
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Prepayments of Loans (and cover for LC Exposure) and reductions of
Commitments shall be effected in each case in the manner and to the extent
specified in clause (vii) of this Section 2.9(b).
(iv) REINVESTMENT. Notwithstanding the foregoing, the Borrower
shall not be required to make a prepayment (or provide cover) pursuant to
Section 2.9(b)(iii) with respect to the Net Cash Payments from any
Disposition in the event that the Borrower advises the Agent at the time a
prepayment is required to be made under clauses (w) or (x) of
Section 2.9(b)(iii) that it intends to reinvest such Net Cash Payments into
replacement assets pursuant to one or more Capital Expenditures permitted
hereunder, so long as:
(y) such Net Cash Payments are either (A) placed by the Borrower
into a segregated deposit account pending such reinvestment or (B)
applied by the Borrower to the prepayment of Revolving Credit Loans
hereunder (in which event the Borrower agrees to advise the Agent in
writing at the time of such prepayment of Revolving Credit Loans that
such prepayment is being made from the proceeds of a Disposition and
that, as contemplated by Section 2.1(c), a portion of the Revolving
Credit Commitments equal to the amount of such prepayment gives rise
to a Reserved Commitment Amount that shall be available hereunder only
for purposes of making Capital Expenditures permitted hereunder or to
make prepayments of Loans under clause (z)(B) below), and
(z) the Net Cash Payments from any Disposition are in fact so
reinvested within nine months of such Disposition (it being understood
that, in the event Net Cash Payments from more than one Disposition
are deposited into a segregated deposit account or applied to the
prepayment of Revolving Credit Loans as provided in clause (y) above,
such Net Cash Payments shall be deemed to be applied (or, as the case
may be, Revolving Credit Loans utilizing the Reserved Commitment
Amount shall be deemed to be made) in the same order in which such
Dispositions occurred and, accordingly, (A) any such Net Cash Payments
so held for more than nine months shall be forthwith applied to the
prepayment of Loans (and cover for LC Exposure) and reductions of
Commitments as provided in clause (vii) of this Section 2.9(b) and (B)
any Reserved Commitment Amount that remains so unutilized for nine
months shall be utilized through the borrowing by the Borrower of
Revolving Credit Loans the proceeds of which shall be applied to the
prepayment of Loans (and cover for LC Exposure) and reductions of
Commitments as provided in clause (vii) of this Section 2.9(b)).
In the event that any Reserved Commitment Amount with respect to any
Disposition shall remain unutilized for nine months and the Borrower shall
for any reason not borrow Revolving Credit Loans the proceeds of which are
applied to the prepayment of Loans (and cover for LC Exposure) and
reductions of Commitments as provided above in this clause (iv), the
Revolving Credit Lenders agree (which agreement shall be absolute and
unconditional, regardless of whether or not the conditions to a Borrowing
of Revolving Credit Loans hereunder shall have been satisfied and
regardless of the
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occurrence or continuance of any Event of Default, including any Event
of Default described in paragraphs (g) or (h) of Section 8.1) to purchase
participations in the Loans of the Term Loan Lenders in amounts equivalent
to the amount of the respective prepayments that each of such Lenders
would have received had such Borrowing of Revolving Credit Loans occurred
as provided above.
Anything herein to the contrary notwithstanding, the Borrower shall
not be required to make any prepayment pursuant to Section 2.9(b)(iii) with
respect to the first $10,000,000 of Net Cash Payments from any Disposition
which are not reinvested pursuant to this clause (iv).
(v) CHANGE OF CONTROL. Upon the occurrence of any "Change of
Control" under and as defined in the Senior Subordinated Notes Indenture
(or any similar provision in the applicable governing agreement for any
Refunding Indebtedness), the Borrower shall prepay the Loans hereunder (and
provide cover for LC Exposure as specified in Section 2.4(i)), and the
Commitments hereunder shall be automatically terminated.
(vi) EXCESS CASH FLOW. Simultaneously with the making of any
Restricted Junior Payment pursuant to Section 7.6(a)(vi) which, when added
to all such Restricted Junior Payments previously made with respect to any
fiscal year beginning with the fiscal year ending December 31, 1998
(whether such Restricted Junior Payments are made as interim quarterly
payments in such fiscal year and/or during the fiscal year ending December
31, 1999, with respect to the fiscal year ending December 31, 1998),
exceeds $5,000,000, the Borrower shall repay the Loans (and/or provide
cover for LC Exposure as specified in Section 2.04 (i)) in an amount equal
to the aggregate amount of such Restricted Junior Payment pursuant to
Section 7.6(a)(vi) in excess of $5,000,000 with respect to such fiscal
year.
(vii) APPLICATION. Upon the occurrence of any of the events
described in the above paragraphs of this Section 2.9(b), the amount of the
required prepayment shall be applied to the reduction of the Revolving
Credit Commitments and the prepayment of the Term Loans ratably in
accordance with the respective then-outstanding aggregate amounts of such
Commitments and Loans (and to the simultaneous prepayment of, first,
Revolving Credit Loans, and, second, cover for LC Exposure, in an amount
equal to such required reduction of Revolving Credit Commitments), PROVIDED
that to the extent any such required reduction of Revolving Credit
Commitments shall exceed the then-outstanding aggregate principal amount of
Revolving Credit Loans and LC Exposure, such excess shall be applied to the
prepayment of Term Loans. Each prepayment of Term Loans shall be applied
to the installments thereof in the inverse order of maturity.
(c) NOTIFICATION OF PREPAYMENTS. The Borrower shall notify the Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Boston,
Massachusetts time, three Business Days before the date of prepayment or (ii) in
the case of prepayment of a Base Rate Borrowing, not later than 11:00 a.m.,
Boston, Massachusetts time, one Business Day before the date of
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prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof
to be prepaid; PROVIDED that, if a notice of prepayment is given in connection
with a conditional notice of termination of Revolving Credit Commitments as
contemplated by Section 2.7, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.7. Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Revolving Credit Lenders of the contents thereof. Each
partial prepayment of any Borrowing under paragraph (a) of this Section 2.9
shall be in an amount that would be permitted in the case of an advance of a
Borrowing of the same Type as provided in Section 2.2.
(d) PREPAYMENTS ACCOMPANIED BY INTEREST. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.11.
2.10 FEES.
(a) The Borrower agrees to pay to the Agent for the account of each Lender
a commitment fee, which shall accrue at a rate per annum equal to 0.5% on the
daily average unused amount of the respective Revolving Credit Commitments of
such Lender during the period from and including the Effective Date to but
excluding the date on which such Revolving Credit Commitment terminates.
Accrued commitment fees shall be payable in arrears on each Quarterly Date and,
in respect of any Revolving Credit Commitments, on the date such Revolving
Credit Commitments terminate, commencing on the first such date to occur after
the Effective Date. All commitment fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
(b) The Borrower agrees to pay with respect to Letters of Credit
outstanding hereunder the following fees:
(i) to the Agent (x) for the account of each Revolving Credit
Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at a rate per annum equal to 2% on the average
daily amount of such Lender's LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date on
which such Lender's Revolving Credit Commitment terminates and the date on
which there shall no longer be any Letters of Credit outstanding hereunder
and (y) for the account of the Agent, an agent's fee in an amount
separately agreed in writing between the Borrower and the Agent, and
(ii) to the Issuing Lender (x) a fronting fee for its own account,
in an amount equal to .25% of the average daily amount of the aggregate LC
Exposure of all of the Lenders (excluding any portion thereof attributable
to unreimbursed LC Disbursements) payable in full annually in advance,
commencing on the date hereof and thereafter on each anniversary of such
date until the termination of this Agreement and (y) the Issuing Lender's
standard fees with respect to the issuance, amendment, renewal or extension
of any Letter of Credit or processing of drawings thereunder.
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Accrued participation fees shall be payable in arrears on each Quarterly Date
and on the date the Revolving Credit Commitments terminate, commencing on the
first such date to occur after the date hereof, PROVIDED that any such fees
accruing after the date on which the Revolving Credit Commitments terminate
shall be payable on demand. All participation fees and fronting fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Agent, for its own account, fees
payable in the amounts and at the times separately agreed in writing between the
Borrower and the Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds. Fees paid shall not be refundable under any
circumstances, absent manifest error in the determination thereof.
2.11 INTEREST.
(a) The Loans comprising each Base Rate Borrowing shall bear interest at a
rate per annum equal to the Adjusted Base Rate PLUS the Applicable Margin.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at
a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in
effect for such Borrowing PLUS the Applicable Margin.
(c) Notwithstanding the foregoing, (i) all amounts which are not paid when
due shall bear interest until paid in full at the Post-Default Rate and (ii)
during the period when any Event of Default shall have occurred and be
continuing for a period of 30 or more days (and the Agent, acting on the
instructions of the Required Lenders, shall have notified the Borrower that the
Post-Default Rate shall apply), the principal of all Loans hereunder shall bear
interest, after as well as before judgment, at the Post-Default Rate.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; PROVIDED that (i) interest accrued at the
Post-Default Rate shall be payable on demand, (ii) in the event of any repayment
or prepayment of any Eurodollar Loan (or the repayment or prepayment in full of
the Term Loans), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment, (iii) in the event
of any conversion of any Eurodollar Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion, (iv) all accrued interest on Revolving Credit
Loans shall be payable upon termination of the Revolving Credit Commitments.
(e) All interest hereunder shall be computed on the basis of a year of 360
days, except that interest computed by reference to the Adjusted Base Rate at
times when the Adjusted Base Rate is based on the Prime Rate shall be computed
on the basis of a year of 365 days (or 366 days in a leap year), and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Adjusted Base Rate, Adjusted
LIBO Rate or LIBO Rate shall be determined by the Agent, and such determination
shall be conclusive absent manifest error.
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2.12 ALTERNATE RATE OF INTEREST. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:
(a) the Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period; or
(b) if such Borrowing is of a particular Class of Loans, the Agent is
advised by the Required Revolving Credit Lenders or the Required Term Loan
Lenders, as the case may be, that the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period will not adequately and fairly reflect the
cost to such Lenders of making or maintaining their Loans of such Class included
in such Borrowing for such Interest Period;
then the Agent shall give notice thereof to the Borrower and the affected
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Agent notifies the Borrower and such Lenders that the circumstances
giving rise to such notice no longer exist, (i) any Interest Election Request
that requests the conversion of any such Borrowing to, or continuation of any
such Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any
Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made
as a Base Rate Borrowing.
2.13 INCREASED COSTS.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate) or the Issuing Lender; or
(ii) impose on any Lender or the Issuing Lender or the London
interbank market any other condition affecting this Agreement or Eurodollar
Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Lender of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Lender hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Lender, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Lender, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or the Issuing Lender reasonably determines that any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Lender's capital or
on the capital of such Lender's or the Issuing Lender's holding company, if any,
as a consequence of this Agreement or the Loans made by,
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or participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued the Issuing Lender, to a level below that which such Lender or
the Issuing Lender or such Lender's or the Issuing Lender's holding company
could have achieved but for such Change in Law (taking into consideration such
Lender's or the Issuing Lender's policies and the policies of such Lender's or
the Issuing Lender's holding company with respect to capital adequacy), then
from time to time the Borrower will pay to such Lender or the Issuing Lender,
as the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Lender, or such Lender's or the Issuing Lender's holding
company, for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Lender setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Lender or
its holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section 2.13 shall be delivered to the Borrower and shall be conclusive so
long as it reflects a reasonable basis for the calculation of the amounts set
forth therein and does not contain any manifest error. The Borrower shall pay
such Lender or the Issuing Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Lender to
demand compensation pursuant to this Section 2.13 shall not constitute a waiver
of such Lender's or the Issuing Lender's right to demand such compensation;
PROVIDED that the Borrower shall not be required to compensate a Lender or the
Issuing Lender pursuant to this Section 2.13 for any increased costs or
reductions incurred more than six months prior to the date that such Lender or
the Issuing Lender, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender's or
the Issuing Lender's intention to claim compensation therefor; PROVIDED FURTHER
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the six-month period referred to above shall be extended to
include the period of retroactive effect thereof.
2.14 BREAK FUNDING PAYMENTS.
(a) In the event of (i) the payment of any principal of any Eurodollar
Loan other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (ii) the conversion of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto, (iii) the failure to borrow, convert, continue or prepay any Loan on
the date specified in any notice delivered pursuant hereto (regardless of
whether such notice is permitted to be revocable and is revoked in accordance
herewith) or (iv) the assignment of any Eurodollar Loan other than on the last
day of the Interest Period applicable thereto as a result of a request by the
Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event.
(b) In the case of a Eurodollar Loan, the loss to any Lender attributable
to any such event shall be deemed to include an amount determined by such Lender
to be equal to the excess, if any, of
(i) the amount of interest that such Lender would pay for a deposit
equal to the principal amount of such Loan for the period from the date of
such payment, conversion, failure or assignment to the last day of the then
current Interest Period for
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such Loan (or, in the case of a failure to borrow, convert or continue,
the duration of the Interest Period that would have resulted from such
borrowing, conversion or continuation) if the interest rate payable on
such deposit were equal to the Adjusted LIBO Rate for such Interest Period,
OVER
(ii) the amount of interest that such Lender would earn on such
principal amount for such period if such Lender were to invest such
principal amount for such period at the interest rate that would be bid by
such Lender (or an affiliate of such Lender) for U.S. dollar deposits from
other banks in the eurodollar market at the commencement of such period.
(c) A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section 2.14 shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
2.15 TAXES.
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; PROVIDED that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.15) the Agent, Lender or the Issuing Lender (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Agent, each Lender and the Issuing
Lender, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section
2.15) paid by the Agent, such Lender or the Issuing Lender, as the case may be
(and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto during the period prior to the Borrower making the payment
demanded under this paragraph (c)), whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Lender, or by the
Agent on its own behalf or on behalf of a Lender or the Issuing Lender, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to
the Agent the
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original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Agent), at the time or times prescribed by applicable law or reasonably
requested by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate.
2.16 PAYMENTS GENERALLY: PRO RATA TREATMENT; SHARING OF SET-OFFS.
(a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00
noon, Boston, Massachusetts time, on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of the Agent, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to the Agent at such of its offices in Boston,
Massachusetts as shall be notified to the relevant parties from time to time,
except payments to be made directly to the Issuing Lender as expressly provided
herein and except that payments pursuant to Sections 2.13, 2.14, 2.15 and 10.3
shall be made directly to the Persons entitled thereto. The Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof, and the
Borrower shall have no liability in the event timely or correct distribution of
such payments is not so made. If any payment hereunder shall be due on a day
that is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All
payments hereunder shall be made in U.S. dollars.
(b) If at any time insufficient funds are received by and available to the
Agent to pay fully all amounts of principal, unreimbursed LC Disbursements,
interest and fees then due hereunder, such funds shall be applied (i) first, to
pay interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, to pay principal and unreimbursed LC Disbursements
then due hereunder, ratably among the parties entitled thereto in accordance
with the amounts of principal and unreimbursed LC Disbursements then due to such
parties.
(c) Except to the extent otherwise provided herein: (i) each borrowing of
Loans of a particular Class from the Lenders under Section 2.1 shall be made
from the relevant Lenders, each payment of commitment fee under Section 2.10 in
respect of Commitments of a particular Class shall be made for account of the
relevant Lenders, and each termination or reduction of the amount of the
Commitments of a particular Class under Section 2.3 shall be applied to the
respective Commitments of such Class of the relevant Lenders, pro rata according
to the amounts of their respective Commitments of such Class; (ii) Eurodollar
Loans of any Class
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having the same Interest Period shall be allocated pro rata among the relevant
Lenders according to the amounts of their Commitments or such Class (in the
case of the making of Loans) or their respective Loans of such Class (in the
case of conversions and continuations of Loans); (iii) each payment or
prepayment by the Borrower of principal of Loans of a particular Class shall
be made for account of the relevant Lenders pro rata in accordance with the
respective unpaid principal amounts of the Loans of such Class held by them;
(iv) each payment by the Borrower of interest on Loans of a particular Class
shall be made for account of the relevant Lenders pro rata in accordance with
the amounts of interest on such Loans then due and payable to the respective
Lenders; and (v) each payment by the Borrower of participation fees in respect
of Letters of Credit shall be made for the account of the Revolving Credit
Lenders pro rata in accordance with the amount of participation fees then due
and payable to the Revolving Credit Lenders.
(d) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans (or participations in LC Disbursements) resulting
in such Lender receiving payment of a greater proportion of the aggregate
principal amount of its Loans (and participations in LC Disbursements) and
accrued interest thereon than the proportion of such amounts received by any
other Lender, then the Lender receiving such greater proportion shall purchase
(for cash at face value) participations in the Loans (and LC Disbursements) of
the other Lenders to the extent necessary so that the benefit of such payments
shall be shared by all the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Loans (and
participations in LC Disbursements); PROVIDED that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans (or participations in LC Disbursements) to any
assignee or participant, other than to any Credit Party or any subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.
(e) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Agent for the account of the Lenders
or the Issuing Lender entitled thereto (the "APPLICABLE RECIPIENT") hereunder
that the Borrower will not make such payment, the Agent may assume that the
Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Applicable Recipient the amount
due. In such event, if the Borrower has not in fact made such payment, then
each Applicable Recipient severally agrees to repay to the Agent forthwith on
demand the amount so distributed to such Applicable Recipient with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Agent, at the Federal Funds
Effective Rate.
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(f) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.4(d), 2.4(e), 2.5(b) or 2.16(e), then the Agent may, in
its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Agent for the account of such Lender to
satisfy such Lender's obligations under such Section until all such unsatisfied
obligations are fully paid.
2.17 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.13, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations, hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.13, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 10.4), all
its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); PROVIDED that (i) the Borrower shall have received the
prior written consent of the Agent (and, if a Revolving Credit Commitment is
being assigned, the Issuing Lender), which consents shall not unreasonably be
withheld or delayed, (ii) such Lender shall have received payment of an amount
equal to the outstanding principal of its Loans (and participations in LC
Disbursements), accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.13 or payments required to be made
pursuant to Section 2.15, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
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ARTICLE III
GUARANTEE BY GUARANTORS
3.1 THE GUARANTEE. Each Guarantor hereby jointly and severally
guarantees to each Lender, the Issuing Lender and the Agent and their
respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal
of and interest on the Loans made by the Lenders to the Borrower, all LC
Disbursements and all other amounts from time to time owing to the Lenders,
the Issuing Lender or the Agent by the Borrower hereunder or under any other
Loan Document, and all obligations of the Borrower to any Lender under any
Hedging Agreement, in each case strictly in accordance with the terms thereof
(such obligations being herein collectively called the "GUARANTEED
OBLIGATIONS"). Each Guarantor hereby further agrees that if the Borrower
shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, each Guarantor
will promptly pay the same, without any demand or notice whatsoever, and that
in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance
with the terms of such extension or renewal.
3.2 OBLIGATIONS UNCONDITIONAL. The obligations of each Guarantor under
Section 3.1 are absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of this Agreement, the
other Loan Documents or any other agreement or instrument referred to herein
or therein, or any substitution, release or exchange of any other guarantee
of or security for any of the Guaranteed Obligations, and, to the fullest
extent permitted by applicable law, irrespective of any other circumstance
whatsoever that might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, it being the intent of this Section 3.2
that the obligations of the Guarantors hereunder shall be absolute and
unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not alter or impair the liability of the
Guarantors hereunder which shall remain absolute and unconditional as
described above:
(i) at any time or from time to time, without notice to such
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions hereof or of
the other Loan Documents or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right hereunder or under the
other Loan Documents or any other agreement or instrument referred to
herein or therein shall be waived or any other
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guarantee of any of the Guaranteed Obligations or any security therefor
shall be released or exchanged in whole or in part or otherwise dealt with;
or
(iv) any lien or security interest granted to, or in favor of, the
Agent, the Issuing Lender or any Lender or Lenders as security for any of
the Guaranteed Obligations shall fail to be perfected.
The Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the
Agent, the Issuing Lender or any Lender exhaust any right, power or remedy or
proceed against the Borrower hereunder or under the other Loan Documents or
any other agreement or instrument referred to herein or therein, or against
any other Person under other guarantee of, or security for, any of the
Guaranteed Obligations.
3.3 REINSTATEMENT. The obligations of each Guarantor under this
Article III shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and each of the
Guarantors agrees that it will indemnify the Agent, the Issuing Lender and
each Lender on demand for all reasonable costs and expenses (including fees
and expenses of counsel) incurred by the Agent, any Lender or the Issuing
Lender in connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment
under any bankruptcy, insolvency or similar law.
3.4 SUBROGATION. Each Guarantor hereby waives all rights of
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code of 1978, as amended) or otherwise by reason of any payment by
it pursuant to the provisions of this Article III and further agrees with the
Borrower for the benefit of each of its creditors (including, without
limitation, the Issuing Lender, each Lender and the Agent) that any such
payment by it shall constitute a contribution of capital by such Guarantor to
the Borrower.
3.5 REMEDIES. Each Guarantor agrees that, as between such Guarantor
and the Lenders, the obligations of the Borrower hereunder may be declared to
be forthwith due and payable as provided in Section 8.1 or Section 2.4(i), as
applicable (and shall be deemed to have become automatically due and payable
in the circumstances provided in Section 8.1 or Section 2.4(i), as
applicable) for purposes of Section 3.1 notwithstanding any stay, injunction
or other prohibition preventing such declaration (or such obligations from
becoming automatically due and payable) as against the Borrower and that, in
the event of such declaration (or such obligations being deemed to have
become automatically due and payable), such obligations (whether or not due
and payable by the Borrower) shall forthwith become due and payable by such
Guarantor for purposes of Section 3.1.
3.6 INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby
acknowledges that the guarantee in this Article III constitutes an instrument
for the payment of money, and
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consents and agrees that the Issuing Lender, any Lender or the Agent, at its
sole option, in the event of a dispute by the Guarantors in the payment of
any moneys due hereunder, shall have the right to summary judgment or such
other expedited procedure as may be available for a suit on a note or other
instrument for the payment of money.
3.7 CONTINUING GUARANTEE. The guarantee in this Article III is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
3.8 RIGHTS OF CONTRIBUTION. The Guarantors hereby agree, as between
themselves, that if any Guarantor shall become an Excess Funding Guarantor
(as defined below) by reason of the payment by such Guarantor of any
Guaranteed Obligations, each other Guarantor shall, on demand of such Excess
Funding Guarantor (but subject to the next sentence), pay to such Excess
Funding Guarantor an amount equal to such Guarantor's Pro Rata Share (as
defined below and determined, for this purpose, without reference to the
properties, debts and liabilities of such Excess Funding Guarantor) of the
Excess Payment (as defined below) in respect of such Guaranteed Obligations.
The payment obligation of a Guarantor to any Excess Funding Guarantor under
this Section 3.8 shall be subordinate and subject in right of payment to the
prior payment in full of the obligations of such Guarantor under the other
provisions of this Article III and such Excess Funding Guarantor shall not
exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations.
For purposes of this Section 3.8, (i) "EXCESS FUNDING GUARANTOR" means,
in respect of any Guaranteed Obligations, a Guarantor that has paid an amount
in excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "EXCESS
PAYMENT" means, in respect of any Guaranteed Obligations, the amount paid by
an Excess Funding Guarantor in excess of its Pro Rata Share of such
Guaranteed Obligations and (iii) "PRO RATA SHARE" means, for any Guarantor,
the ratio (expressed as a percentage) of (x) the amount by which the
aggregate present fair saleable value of all properties of such Guarantor
(excluding any shares of stock of, or ownership interest in, any other
Guarantor) exceeds the amount of all the debts and liabilities of such
Guarantor (including contingent, subordinated, unmatured and unliquidated
liabilities, but excluding the obligations of such Guarantor hereunder and
any obligations of any other Guarantor that have been Guaranteed by such
Guarantor) to (y) the amount by which the aggregate fair saleable value of
all properties of all of the Credit Parties exceeds the amount of all the
debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of the Borrower and
the Guarantors hereunder and under the other Loan Documents) of all of the
Credit Parties, determined (A) with respect to any Guarantor that is a party
hereto on the Effective Date, as of the Effective Date, and (B) with respect
to any other Guarantor, as of the date such Guarantor becomes a Guarantor
hereunder.
3.9 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under Section 3.1
would otherwise, taking into account the provisions of Section 3.8, be held
or determined to be void, invalid or unenforceable, or subordinated to the
claims of any other creditors, on account of the amount of its liability
under Section 3.1, then, notwithstanding any other provision hereof to the
contrary, the amount of such liability shall, without any further action by
such Guarantor, any Lender, the Agent or any other Person, be automatically
limited
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and reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the Credit Parties represents and warrants to the Lenders and
the Agent, as to itself and each other Credit Party, that:
4.1 ORGANIZATION; POWERS. Each Credit Party is duly organized, validly
existing and in good standing under the laws of its organization. Each
Credit Party has all requisite power and authority under its organizational
documents to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business
in, and is in good standing in, every jurisdiction where such qualification
is required.
4.2 AUTHORIZATION; ENFORCEABILITY. The Transactions are within the
corporate power of each Credit Party and have been duly authorized by all
necessary corporate and, if required, stockholder action on the part of such
Credit Party. This Agreement has been duly executed and delivered by each
Credit Party and constitutes a legal, valid and binding obligation of such
Credit Party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
4.3 GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, (b) will not violate any applicable
law, policy or regulation or the charter, by-laws or other organizational
documents of any Credit Party or any order of any Governmental Authority, (c)
will not violate or result in a default under any indenture, agreement or
other instrument binding upon any Credit Party, or any of its assets, or give
rise to a right thereunder to require any payment to be made by any Credit
Party, and (d) except for the Liens created by the Collateral Documents, will
not result in the creation or imposition of any Lien on any asset of the
Credit Parties.
4.4 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Borrower has heretofore delivered to the Lenders the following
financial statements:
(i) the audited consolidated balance sheet and statements of earnings
(loss), stockholders' deficit and cash flows of the Holding Company and its
Consolidated Subsidiaries as of and for the fiscal years ended December 31,
1995 and 1996,
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respectively, accompanied by an opinion of Deloitte & Touche LLP,
independent public accountants;
(ii) the audited consolidated balance sheet and statements of earnings
(loss), stockholders' deficit and cash flows of Camping World and its
Consolidated Subsidiaries as of and for the fiscal years ended September
30, 1995 and 1996, respectively, accompanied by an opinion of Deloitte &
Touche LLP, independent public accountants;
(iii) the unaudited consolidated balance sheet and statements of
earnings (loss), stockholders' deficit and cash flows of Camping World and
its Consolidated Subsidiaries as of and for the three-month period ended
December 31, 1996, certified by the chief financial officer of Camping
World that such financial statements fairly present (subject, in the case
of such balance sheet as at December 31, 1996 and such statements of income
and cash flows for the three months then ended, to normal year-end audit
adjustments) the consolidated financial condition of Camping World and its
Consolidated Subsidiaries as at such dates and the consolidated results of
the operations of Camping World and its Consolidated Subsidiaries for the
periods ended on such dates and that all such financial statements,
including the related schedules and notes thereto have been prepared in
accordance with GAAP applied consistently throughout the periods involved;
(iv) the audited consolidated balance sheet and statements of earnings
(loss), stockholders' deficit and cash flows of Ehlert and its Consolidated
Subsidiaries as of and for the fiscal years ended December 31, 1995 and
1996, respectively, accompanied by an opinion of Larson, Allen, Weishair &
Co., LLP, independent public accountants; and
(v) the pro forma unaudited consolidated balance sheet and statements
of operations for the fiscal year ended December 31, 1996, and prepared by
the Borrower under the assumption that the acquisitions of Camping World
and Ehlert had occurred at the beginning of the respective periods covered
by such statements and reflecting estimated purchase price accounting
adjustments are accurate and complete in all material respects.
Such financial statements present fairly, in all material respects, the
respective actual or pro forma consolidated financial position and results of
operations and cash flows of the respective entities as of such respective
dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of such unaudited or pro
forma statements.
(b) Since December 31, 1996, there has been no material adverse change
in the business, assets, operations or financial condition, of the Borrower
and the Restricted Subsidiaries taken as a whole from that set forth in the
pro forma consolidated financial statements referred to in clause (v) of
paragraph (a) above.
(c) None of the Credit Parties has on the date hereof any contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments
or unrealized or anticipated losses from any unfavorable commitments in each
case that are material, except as referred to or reflected or provided for in
the balance sheets as at December 31, 1996 referred to above or
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as otherwise expressly provided in this Agreement or the financial statements
described in this Section 4.4.
4.5 PROPERTIES.
(a) Each of the Credit Parties has good and marketable title to, or valid,
subsisting and enforceable leasehold interests in, all its real and personal
property material to its business.
(b) Each of the Credit Parties owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Credit Parties does not
infringe upon the rights of any other Person, except for any such infringements
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
(c) As of the date hereof, SCHEDULE 4.5 annexed hereto contains a true,
accurate and complete list of (i) all owned Real Property Assets and (ii) all
leases, subleases or assignments of leases (together with all amendments,
modifications, supplements, renewals or extensions of any thereof) affecting
each Real Property Asset of any Credit Party, regardless of whether such Credit
Party is the landlord or tenant (whether directly or as an assignee or successor
in interest) under such lease, sublease or assignment. Expect as specified in
SCHEDULE 4.5 annexed hereto, each agreement listed in clause (ii) of the
immediately preceding sentence is in full force and effect and the Borrower has
no knowledge of any default that has occurred and is continuing thereunder, and
each such agreement constitutes the legal, valid and binding obligation of each
applicable Credit Party, enforceable against such Credit Party in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles.
4.6 LITIGATION AND ENVIRONMENTAL MATTERS.
(a) There are no actions, suits or proceedings by or before any arbitrator
or Governmental Authority pending against or, to the knowledge of any of the
Credit Parties, threatened against or affecting the Credit Parties (i) as to
which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Basic Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, none of the Credit Parties (i) has
failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental Law,
(ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or any inquiry,
allegation, notice or other communication from any Governmental Authority
concerning its compliance with any Environmental Law or (iv) knows of any basis
for any Environmental Liability.
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(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
4.7 COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Credit Parties is in
compliance with all laws, regulations, policies and orders of any Governmental
Authority applicable to it or its property and all indentures, agreements and
other instruments binding upon it or its property, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
4.8 INVESTMENT AND HOLDING COMPANY STATUS. No Credit Party nor any of
their respective Subsidiaries is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended, (b)
a "holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935, as amended or (c) a "bank holding company"
as defined in, or subject to regulation under, the Bank Holding Company Act of
1956, as amended.
4.9 TAXES. Each of the Credit Parties and their respective Subsidiaries
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which such Credit Party has set aside on its
books adequate reserves with respect thereto in accordance with GAAP or (b) to
the extent that the failure to do so could not reasonably be expected to result
in a Material Adverse Effect.
4.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability
is reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect. The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $100,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $100,000 the fair market value of
the assets of all such underfunded Plans.
4.11 DISCLOSURE. The Offering Memorandum, a copy of which previously has
been delivered to each Lender and the Agent, completely and accurately describes
in all material respects the business, principal properties and assets of the
Credit Parties, including without limitation, Camping World and Ehlert. The
Credit Parties have disclosed to the Lenders all agreements, instruments and
corporate or other restrictions to which any Credit Party is subject, and all
other matters known to any Credit Party, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. The senior
management structure of the Borrower after giving effect to the Camping World
Acquisition and the Ehlert Acquisition are as set forth on SCHEDULE 4.11 annexed
hereto. The information, reports, financial statements, exhibits and schedules
furnished in writing by or on behalf of the Credit Parties to the Agent or any
Lender in connection with the negotiation, preparation or delivery of this
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Agreement and the other Basic Documents or included herein or therein or
delivered pursuant hereto or thereto, when taken as a whole do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished after
the date hereof by the Credit Parties to the Agent and the Lenders in connection
with this Agreement and the other Basic Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to the Borrower that could reasonably be expected to have a Material
Adverse Effect that has not been disclosed herein, in the other Basic Documents
or in a report, financial statement, exhibit, schedule, disclosure letter or
other writing furnished to the Lenders for use in connection with the
transactions contemplated hereby or thereby.
4.12 CAPITALIZATION. As of the date hereof, the capital structure and
ownership of the Borrower, both before and after giving effect to the Camping
World Acquisition, are correctly described in SCHEDULE 4.12. The authorized,
issued and outstanding capital stock of the Borrower consists, on the date
hereof, of the common stock described on SCHEDULE 4.12, all of which is duly and
validly issued and outstanding, fully paid and nonassessable. Except as set
forth in SCHEDULE 4.12 and with respect to the Phantom Stock Agreements, as of
the date hereof, (x) there are no outstanding Equity Rights with respect to the
Borrower and (y) there are no outstanding obligations of any Credit Party to
repurchase, redeem, or otherwise acquire any shares of capital stock of any
Credit Party nor are there any outstanding obligations of the any Credit Party
to make payments to any Person, such as "phantom stock" payments, where the
amount thereof is calculated with reference to the fair market value or equity
value of the any Credit Party.
4.13 SUBSIDIARIES.
(a) Set forth in SCHEDULE 4.13 is a complete and correct list of all of
the Subsidiaries of the Credit Parties as of the date hereof together with, for
each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary,
(ii) each Person holding ownership interests in such Subsidiary and (iii) the
nature of the ownership interests held by each such Person and the percentage of
ownership of such Subsidiary represented by such ownership interests. Except as
disclosed in SCHEDULE 4.13, (x) each Credit Party and its respective
Subsidiaries owns, free and clear of Liens (other than Liens created pursuant to
the Collateral Documents), and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it in
SCHEDULE 4.13, (y) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
(b) Except as set forth in SCHEDULE 4.13, as of the date of this
Agreement, none of the Subsidiaries of the Borrower is subject to any indenture,
agreement, instrument or other arrangement containing any provision of the type
described in Section 7.8, other than any such provision the effect of which has
been unconditionally, irrevocably and permanently waived.
4.14 MATERIAL INDEBTEDNESS, LIENS AND AGREEMENTS.
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(a) SCHEDULE 4.14 hereto is a complete and correct list, as of the date of
this Agreement, of all Material Indebtedness or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, any Credit Party
the aggregate principal or face amount of which equals or exceeds (or may equal
or exceed) $1,000,000, and the aggregate principal or face amount outstanding or
that may become outstanding with respect thereto is correctly described in
SCHEDULE 4.14.
(b) SCHEDULE 4.14 hereto is a complete and correct list, as of the date of
this Agreement, of each Lien securing Indebtedness of any Person the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$100,000 and covering any property of the Credit Parties, and the aggregate
Indebtedness secured (or which may be secured) by each such Lien and the
Property covered by each such Lien is correctly described in SCHEDULE 4.14.
(c) SCHEDULE 4.14 hereto is a complete and correct list, as of the date of
this Agreement, of each contract and arrangement to which any Credit Party is a
party for which breach, nonperformance, cancellation or failure to renew would
have a Material Adverse Effect.
4.15 SENIOR SUBORDINATED NOTES INDENTURE; HOLDING COMPANY NOTES INDENTURE.
Each of the Holding Company Notes Indenture and the Senior Subordinated Notes
Indenture is in full force and effect, without amendment (other than the
Supplemental Indentures described in the definition thereof). All of the
obligations of the Borrower and the Restricted Subsidiaries under this Agreement
constitute "Senior Indebtedness" as that term is defined in the Senior
Subordinated Notes Indenture and all of the obligations of the Holding Company
under the Holding Company Collateral Documents are "Permitted Senior
Indebtedness" as that term is defined in the Holding Company Notes Indenture.
4.16 FEDERAL RESERVE REGULATIONS. No Credit Party nor any of its
Subsidiaries is engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined in Regulation U of the Board). The value of all margin stock
owned by the Borrower does not constitute more than 25% of the value of the
assets of the Borrower.
4.17 BURDENSOME RESTRICTIONS. No Credit Party is a party to or otherwise
bound by any indenture, loan or credit agreement or any lease or other agreement
or instrument or subject to any charter, corporate or partnership restriction
which would foreseeably have a Material Adverse Effect.
4.18 FORCE MAJEURE. Since the date of the most recent financial statements
referred to in Section 4.4(a)(i) to the Effective Date, the business, properties
and other assets of the Credit Parties have not been materially and adversely
affected in any way as the result of any fire or other casualty, strike, lockout
or other labor trouble, embargo, sabotage, confiscation, contamination, riot,
civil disturbance, activity of armed forces or act of God.
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ARTICLE V
CONDITIONS
5.1 EFFECTIVE DATE. The obligations of the Lenders to make Loans, and of
the Issuing Lender to issue Letters of Credit, hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 10.2):
(a) COUNTERPARTS OF AGREEMENT. The Agent shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf of such
party or (ii) written evidence satisfactory to the Agent (which may include
telecopy transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) NOTES. The Agent shall have received for each Lender that shall have
requested a promissory note, a duly completed and executed promissory note for
such Lender.
(c) CORPORATE STRUCTURE. The corporate organizational structure, capital
structure and ownership of the Credit Parties, both before and after giving
effect to the Camping World Acquisition, shall be as set forth on SCHEDULES 4.12
and 4.13 annexed hereto.
(d) CORPORATE MATTERS. The Agent shall have received such documents and
certificates as the Agent or Special Counsel may reasonably request relating to
the organization, existence and good standing of each Credit Party, the
authorization of the Transactions and any other legal matters relating to the
Credit Parties, this Agreement, the other Loan Documents or the Transactions,
all in form and substance reasonably satisfactory to the Agent and its counsel.
(e) SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. To the extent not
otherwise satisfied pursuant to Section 5.1(f), the Agent shall have received
evidence satisfactory to it that the Credit Parties shall have taken or caused
to be taken all such actions, executed and delivered or caused to be executed
and delivered all such agreements, documents and instruments, and made or caused
to be made all such filings and recordings (other than the filing or recording
of items described in clauses (iii), (iv) and (v) below) that may be necessary
or, in the opinion of the Agent, desirable in order to create in favor of the
Agent, for the benefit of the Lenders, a valid and (upon such filing and
recording) perfected First Priority security interest in the entire personal and
mixed property Collateral. Such actions shall include, without limitation, the
following:
(i) COLLATERAL DOCUMENTS. Delivery to the Agent of all the
Collateral Documents, duly executed by the applicable Credit Party (or, in
the case of the Holding Company, the Holding Company Collateral Documents),
together with accurate and complete schedules to all such Collateral
Documents;
(ii) STOCK CERTIFICATES AND INSTRUMENTS. Delivery to the Agent of (A)
certificates (which certificates shall be accompanied by irrevocable
undated stock powers, duly endorsed in blank and otherwise satisfactory in
form and substance to the Agent) representing all capital stock pledged
pursuant to the Pledge Agreements and (B) all
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promissory notes or other instruments (duly endorsed, where appropriate, in
a manner satisfactory to the Agent) evidencing any Collateral;
(iii) LIEN SEARCHES AND UCC TERMINATION STATEMENTS. Delivery to
the Agent of (A) the results of a recent search, by a Person satisfactory
to the Agent, of all effective UCC financing statements and fixture filings
and all judgment and tax lien filings which may have been made with respect
to any personal or mixed property of any Credit Party, together with copies
of all such filings disclosed by such search, and (B) UCC termination
statements duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective UCC
financing statements or fixture filings disclosed in such search (other
than any such financing statements or fixture filings in respect of Liens
permitted to remain outstanding pursuant to the terms of this Agreement);
(iv) UCC FINANCING STATEMENTS AND FIXTURE FILINGS. Delivery to the
Agent of UCC financing statements and, where appropriate, fixture filings,
duly executed by each applicable Credit Party with respect to all personal
and mixed property Collateral of such Credit Party, for filing in all
jurisdictions as may be necessary or, in the opinion of the Agent,
desirable to perfect the security interests created in such Collateral
pursuant to the Collateral Documents;
(v) PTO COVER SHEETS, ETC. Delivery to the Agent of all cover sheets
or other documents or instruments required to be filed with the PTO in
order to create or perfect Liens in respect of any IP Collateral;
(vi) PERFECTION CERTIFICATE. Delivery to the Agent of a perfection
certificate dated the Effective Date substantially in the form of SCHEDULE
I to the form of Security Agreement annexed hereto duly executed by a
Financial Officer of the Borrower;
(vii) OPINIONS OF LOCAL COUNSEL. Delivery to the Agent of an
opinion of counsel (which counsel shall be reasonably satisfactory to the
Agent) under the laws of each jurisdiction in which any Credit Party or any
personal or mixed property Collateral is located with respect to the
creation and perfection of the security interests in favor of the Agent in
such Collateral and such other matters governed by the laws of such
jurisdiction regarding such security interests as the Agent may reasonably
request, in each case in form and substance reasonably satisfactory to the
Agent.
(f) EFFECTIVE DATE MORTGAGES; EFFECTIVE DATE MORTGAGE POLICIES; ETC.. The
Agent shall have received from each Credit Party:
(i) EFFECTIVE DATE MORTGAGES. Fully executed and notarized Mortgages
(each a "EFFECTIVE DATE MORTGAGE" and, collectively, the "EFFECTIVE DATE
MORTGAGES"), in proper form for recording in all appropriate places in all
applicable jurisdictions, encumbering each Real Property Asset listed in
SCHEDULE 4.5 (and so identified thereon) annexed hereto (each a "EFFECTIVE
DATE MORTGAGED PROPERTY" and, collectively, the "EFFECTIVE DATE MORTGAGED
PROPERTIES");
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(ii) SURVEYS. With respect to each Effective Date Mortgaged
Property, copies of all existing surveys, surveyors certificates and such
additional surveys or surveyor certificates as the Agent may reasonably
require;
(iii) RECORDED LEASEHOLD INTERESTS. In the case of each Real
Property Asset listed in clause (ii) of SCHEDULE 4.5 annexed hereto, copies
of all leases between any Credit Party and any landlord or tenant;
(iv) LANDLORD CONSENTS AND ESTOPPELS. In the case of each Real
Property Asset listed in clause (ii) of SCHEDULE 4.5, a Landlord Consent
and Estoppel with respect thereto and where required by the terms of any
lease, the consent of the mortgagee, ground lessor or other party;
(v) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (A) Evidence
reasonably acceptable to the Agent as to whether any Effective Date
Mortgaged Property is a Flood Hazard Property and (B) if there are any such
Flood Hazard Properties, evidence that the applicable Credit Party has
obtained flood insurance with respect to each Flood Hazard Property in
amounts approved by the Agent, or evidence acceptable to the Agent that
such insurance is not available;
(vi) ENVIRONMENTAL INDEMNITY. A hazardous materials indemnity
agreement, substantially in the form of EXHIBIT E annexed hereto, with
respect to the indemnification of the Agent and the Lenders for any
liabilities that may be imposed on or incurred by any of them as a result
of any Hazardous Materials;
(vii) TITLE INSURANCE. (A) ALTA mortgagee title insurance
policies or unconditional commitments therefor (the "EFFECTIVE DATE
MORTGAGE POLICIES") issued by the Title Company with respect to the
Effective Date Mortgaged Properties listed (AND MARKED WITH AN ASTERISK) in
SCHEDULE 4.5 annexed hereto, in amounts not less than the respective
amounts designated therein with respect to any particular Effective Date
Mortgaged Properties, insuring fee simple title to, or a valid leasehold
interest in, each such Effective Date Mortgaged Property vested in such
Credit Party and assuring the Agent that the applicable Effective Date
Mortgages create valid and enforceable [First Priority] mortgage Liens on
the respective Effective Date Mortgaged Properties encumbered thereby,
subject only to a standard exceptions as may be reasonably acceptable by
the Agent, which Effective Date Mortgage Policies (I) shall include all
endorsements for matters reasonably requested by the Agent and (II) shall
provide for affirmative insurance and such reinsurance as the Agent may
reasonably request, all of the foregoing in form and substance reasonably
satisfactory to the Agent; and (B) evidence satisfactory to the Agent that
such Credit Party has (I) delivered to the Title Company all certificates
and affidavits required by the Title Company in connection with the
issuance of the Effective Date Mortgage Policies and (II) paid to the Title
Company or to the appropriate Governmental Authorities all expenses and
premiums of the Title Company in connection with the issuance of the
Effective Date Mortgage Policies and all recording and stamp taxes
(including mortgage recording and intangible taxes) payable in connection
with recording the Effective Date Mortgages in the appropriate real estate
records;
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(viii) TITLE REPORTS. With respect to each Effective Date Mortgaged
Property listed (AND MARKED WITH AN ASTERISK) in SCHEDULE 4.5 annexed
hereto, a title report issued by the Title Company with respect thereto,
dated not more than 30 days prior to the Effective Date and satisfactory
in form and substance to the Agent;
(ix) COPIES OF DOCUMENTS RELATING TO TITLE EXCEPTIONS. Copies of all
recorded documents listed as exceptions to title or otherwise referred to
in the Effective Date Mortgage Policies or in the title reports delivered
pursuant to Section 5.1(f)(vii); and
(x) OPINIONS OF LOCAL COUNSEL. An opinion of counsel (which counsel
shall be reasonably satisfactory to the Agent) in each state in which a
Effective Date Mortgaged Property is located with respect to the
enforceability of the form(s) of Effective Date Mortgages to be recorded in
such state and such other matters as the Agent may reasonably request, in
each case in form and substance reasonably satisfactory to the Agent.
(g) REAL ESTATE APPRAISALS. If requested by the Agent, the Agent shall
have received appraisals from one or more independent real estate appraisers
satisfactory to the Agent, in form, scope and substance satisfactory to the
Agent and satisfying the requirements of any applicable laws and regulations,
concerning any Effective Date Mortgaged Properties listed in clause (i) of
SCHEDULE 4.5 annexed hereto, in each case to the extent required under such laws
and regulations as determined by the Agent in its sole discretion.
(h) ENVIRONMENTAL REPORTS. The Agent shall have received reports and
other information, in form, scope and substance satisfactory to the Agent,
regarding environmental matters relating to the Facilities, which reports shall
include a Phase I environmental assessment for each of the Facilities listed in
clause (i) of SCHEDULE 4.5 (and so identified thereon) annexed hereto which
conforms to the ASTM Standard Practice for Environmental Site Assessments: Phase
I Environmental Site Assessment Process E 1527-94 and a transaction screen for
each of the Facilities listed in clause (ii) of SCHEDULE 4.5 (and so identified
thereon) annexed hereto which conforms to the ASTM Standard Practice for
Environmental Site Assessments: Transaction Screen Process E 1528-96. Such
reports shall be conducted by one or more environmental consulting firms
reasonably satisfactory to the Agent.
(i) EVIDENCE OF INSURANCE. The Agent shall have received a certificate
from the Credit Parties' insurance broker or other evidence satisfactory to it
that all insurance required to be maintained pursuant to Section 6.5 is in full
force and effect and that the Agent on behalf of the Lenders has been named as
additional insured and loss payee thereunder to the extent required under
Section 6.5.
(j) MANAGEMENT; EMPLOYMENT CONTRACTS. The senior management structure of
the Borrower and its Subsidiaries after giving effect to the Camping World
Acquisition and the Ehlert Acquisition, shall be as set forth on SCHEDULE 4.11,
and the Agent shall have received copies of, and shall be satisfied with the
form and substance of (i) any and all employment contracts with and senior
management of the Borrower and its Subsidiaries, (ii) any and all shareholders
agreement among any of the shareholders of the Borrower and its Subsidiaries,
and
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(iii) any stock option plans, phantom stock incentive programs and similar
arrangements provided by the Borrower and its Subsidiaries to any Person.
(k) NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC.. The Borrower shall have obtained all permits, licenses,
authorizations or consents from all Governmental Authorities and all consents of
other Persons with respect to Material Indebtedness, Liens and agreements listed
on SCHEDULE 4.14 (and so identified thereon) annexed hereto, in each case that
are necessary or advisable in connection with the Camping World Acquisition and
the Ehlert Acquisition, the other transactions contemplated by the Basic
Documents, and the continued operation of the business conducted by Camping
World and Ehlert, in substantially the same manner as conducted prior to the
consummation of the Camping World Acquisition and the Ehlert Acquisition, and
each of the foregoing shall be in full force and effect, in each case other than
those the failure to obtain or maintain which, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
All applicable waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the Camping World Acquisition and the
Ehlert Acquisition or the financing thereof. No action, request for stay,
petition for review or rehearing, reconsideration or appeal with respect to any
of the foregoing shall be pending, and the time for any applicable Governmental
Authority to take action to set aside its consent on its own motion shall have
expired.
(l) SUPPLEMENTAL INDENTURE TO SENIOR SUBORDINATED NOTES INDENTURE. The
Agent shall have received a duly executed copy of the Senior Subordinated Notes
Indenture, as supplemented and amended to the date hereof, including the Sixth
Supplemental Indenture amending the Senior Subordinated Notes Indenture to
provide that the Borrower and the Restricted Subsidiaries may enter into this
Agreement and to confirm that the Credit Parties obligations under this
Agreement are "Senior Indebtedness" as that term is defined in the Senior
Subordinated Notes Indenture.
(m) CONSUMMATION OF THE CAMPING WORLD ACQUISITION AND THE EHLERT
ACQUISITION.
(i) All conditions to the Camping World Acquisition and the Ehlert
Acquisition, including those set forth in the Camping World Acquisition
Agreement and the Ehlert Acquisition Agreement, respectively, shall have
been satisfied or the fulfillment of any such conditions shall have been
waived with the consent of the Agent;
(ii) the Camping World Acquisition and the Ehlert Acquisition shall
have become effective in accordance with the terms of the Camping World
Acquisition Agreement and the Ehlert Acquisition Agreement, respectively;
(iii) the aggregate payments under the Camping World Incentive
Management Agreements shall not exceed $15,000,000 and the aggregate
consideration paid by the Borrower in connection with the Camping World
Acquisition shall not exceed $153,100,000 (including assumed liabilities
not in excess of $31,100,000);
(iv) the Ehlert Note shall have been issued to the shareholders of
Ehlert and the aggregate consideration (including the Ehlert Note) paid by
the Borrower in
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connection with the Ehlert Acquisition shall not exceed $26,500,000
(including assumed liabilities not in excess of $2,450,000);
(v) the Agent shall have received copies of all instruments and
agreements relating to the Camping World Acquisition and the Ehlert
Acquisition; and
(vi) the Agent shall have received an certificate of an officer of
the Borrower to the effect set forth in clauses (i)-(iv) above and stating
that the Borrower has consummated the Ehlert Acquisition and will proceed
to consummate the Camping World Acquisition immediately upon the making of
the initial Loans and receipt from the Holding Company of proceeds from the
issuance of the Holding Company Notes.
(n) HOLDING COMPANY NOTE OFFERING. The Holding Company shall have
received, on or before the Effective Date, in respect of the sale of the Holding
Company Notes cash consideration in an aggregate amount not less than
$130,000,000 (before giving effect to deductions for underwriting commissions
and related transactions expenses) and the terms of the Holding Company Notes
and the Holding Company Notes Indenture shall be acceptable to the Lenders.
(o) CAPITAL CONTRIBUTION. The Borrower shall have received, as a capital
contribution from the Holding Company, on or before the Effective Date, cash
contributions in an aggregate amount not less than $122,000,000 and a Financial
Officer of the Borrower shall have delivered to the Lenders a certificate to
such effect in form satisfactory to the Agent.
(p) EXISTING CREDIT AGREEMENTS. The Agent shall have received evidence
that the principal of and interest on, and all other amounts owing in respect
of, the Existing Credit Agreements shall have been, or shall simultaneously be,
repaid in full, that the "Commitments" thereunder shall have been terminated and
that all Guarantees in respect of, and all Liens securing, any such obligations
shall have been released (or arrangements for such release satisfactory to the
Agent shall have been made).
(q) CONSOLIDATED TOTAL LEVERAGE RATIO. The Agent shall have received a
certificate of a Financial Officer of the Borrower, in form and detail
satisfactory to the Agent, setting forth the Consolidated Total Leverage Ratio
as at the Effective Date.
(r) SOLVENCY ASSURANCES. The Agent shall have received a certificate from
a Financial Officer of the Borrower to the effect that, as of the Effective Date
and after giving effect to the initial Loans hereunder and to the other
Transactions:
(i) the aggregate value of all properties of the Credit Parties at
their present fair saleable value (I.E., the amount that may be realized
within a reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the
latter as the amount that could be obtained for the property in question
within such period by a capable and diligent businessman from an interested
buyer who is willing to purchase under ordinary selling conditions), exceed
the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of the Credit
Parties,
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(ii) the Credit Parties will not, on a consolidated basis, have an
unreasonably small capital with which to conduct their business operations
as heretofore conducted and
(iii) the Credit Parties will have, on a consolidated basis,
sufficient cash flow to enable them to pay their debts as they mature.
Such certificate shall include a statement to the effect that the financial
projections and underlying assumptions contained in such analysis are, fair and
reasonable and accurately computed.
(s) FINANCIAL OFFICER CERTIFICATE. The Agent shall have received a
certificate, dated the Effective Date and signed by the President, a Vice
President or a Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 5.2.
(t) NO MATERIAL ADVERSE EFFECT. There shall have occurred no Material
Adverse Effect (in the reasonable opinion of the Agent) since December 31, 1996
in the case of the Borrower, Camping World and Ehlert.
(u) OPINION OF COUNSEL TO CREDIT PARTIES. The Agent shall have received a
favorable written opinion (addressed to the Agent and the Lenders and dated the
Effective Date) of Kaplan, Strangis and Kaplan, P.A., counsel to the Credit
Parties, substantially in the form of EXHIBIT G annexed hereto and covering such
matters relating to the Credit Parties, this Agreement, the other Loan Documents
or the Transactions as the Required Lenders shall request (and each Credit Party
hereby requests such counsel to deliver such opinion).
(v) FEES AND EXPENSES. The Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Borrower hereunder.
(w) OTHER DOCUMENTS. The Agent shall have received such other documents
as the Agent or any Lender or Special Counsel shall have reasonably requested.
The Agent shall notify the Borrower and the Lenders of the Effective Date, and
such notice shall be conclusive and binding. Notwithstanding the foregoing, the
obligations of the Lenders to make Loans, and of the Issuing Lender to issue
Letters of Credit, hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or
prior to 12:00 p.m., Boston, Massachusetts time, on April 30, 1997 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).
5.2 EACH EXTENSION OF CREDIT. The obligation of each Lender to make a
Loan on the occasion of any Borrowing, and of the Issuing Lender to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each Credit Party set forth in this Agreement and the other Loan Documents shall
be true and correct
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on and as of the date of such Borrowing,or (as applicable) the date of issuance,
amendment, renewal or extension of such Letter of Credit, both before and after
giving effect thereto and to the use of the proceeds thereof (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, such representation or warranty shall be true and correct as of
such specific date).
(b) NO DEFAULTS. At the time of and immediately after giving effect to
such Borrowing, or (as applicable) the date of issuance, amendment, renewal or
extension of such Letter of Credit, no Default shall have occurred and be
continuing.
ARTICLE VI
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each of the Credit Parties covenants
and agrees with the Lenders that:
6.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower will furnish
to the Agent and each Lender:
(a) as soon as available and in any event within 90 days after the end of
each fiscal year of the Borrower:
(i) consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower and its Consolidated Subsidiaries
for such fiscal year and the related consolidated and consolidating balance
sheets of the Borrower and its Consolidated Subsidiaries as at the end of
such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year,
(ii) an opinion of independent certified public accountants of
recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as to
the scope of such audit) stating that said consolidated financial
statements referred to in the preceding clause (i) fairly present the
consolidated financial condition and results of operations of the Borrower
and its Consolidated Subsidiaries as at the end of, and for, such fiscal
year in accordance with GAAP, and a statement of such accountants to the
effect that, in making the examination necessary for their opinion, nothing
came to their attention that caused them to believe that the Borrower was
not in compliance with Section 7.9, insofar as such Section relates to
accounting matters, and
(iii) a certificate of a Financial Officer of the Borrower stating
that said consolidating financial statements referred to in the preceding
clause (i) fairly present the
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respective individual unconsolidated financial condition and results of
operations of the Borrower and of each of the Consolidated Subsidiaries, in
each case in accordance GAAP consistently applied, as at the end of, and
for, such fiscal year;
(b) as soon as available and in any event within 45 days after the end of
each of the first three quarterly fiscal periods of each fiscal year of the
Borrower:
(i) consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower and its Consolidated Subsidiaries
for such period and for the period from the beginning of the respective
fiscal year to the end of such period, and the related consolidated and
consolidating balance sheets of the Borrower and its Consolidated
Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated and consolidating figures
for the corresponding period in the preceding fiscal year (except that, in
the case of balance sheets, such comparison shall be to the last day of the
prior fiscal year),
(ii) a certificate of a Financial Officer of the Borrower, which
certificate shall state that said consolidated financial statements
referred to in the preceding clause (i) fairly present the consolidated
financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries and that said consolidating financial statements
referred to in the preceding clause (i) fairly present the respective
individual unconsolidated financial condition and results of operations of
the Borrower and of each of its Consolidated Subsidiaries, in each case in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such period (subject to normal year-end
audit adjustments and the omission of footnotes);
(c) as soon as available and in any event with 35 days after the end of
each month, internally prepared financial statements consisting of statements of
income, and cash flows of the Borrower and its Consolidated Subsidiaries for
such month and for the period from the beginning of the current fiscal year to
the end of such month, and the related consolidated balance sheets of the
Borrower and its Consolidated Subsidiaries as at the end of such month.
(d) concurrently with any delivery of financial statements under clauses
(a) and (b) above, a certificate of a Financial Officer of the Borrower (i)
certifying as to whether a Default has occurred and, if a Default has occurred,
specifying the details thereof and any action taken or proposed to be taken with
respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 7.9 (including a statement of the
Consolidated Total Leverage Ratio for purposes of the definition of Applicable
Margin), Section 7.6 (with respect to any Restricted Junior Payment proposed to
be made pursuant to Section 7.6(a)(vi)) and Section 2.9(b)(vi), and (iii)
stating whether any change in GAAP or in the application thereof has occurred
since the date of the audited financial statements referred to in Section 4.4
and, if any such change has occurred, specifying the effect of such change on
the financial statements accompanying such certificate;
(e) concurrently with any delivery of financial statements under clause
(a) above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any
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Default (which certificate may be limited to the extent required by accounting
rules or guidelines);
(f) as soon as available and in any event within 30 days after the
beginning of the fiscal year of the Borrower, statements of forecasted
consolidated income for the Borrower and its Consolidated Subsidiaries for each
fiscal month in such fiscal year and a forecasted consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries, together with supporting
assumptions which were reasonable when made, as at the end of each fiscal month,
all prepared in good faith in reasonable detail and consistent with the
Borrower's and the Borrower's past practices in preparing projections and
otherwise reasonably satisfactory in scope to the Agent;
(g) promptly after the same become publicly available, copies of all
registration statements, regular periodic reports and press releases filed by
the Holding Company, the Borrower or any Consolidated Subsidiary with the
Securities and Exchange Commission, or any Governmental Authority succeeding to
any or all of the functions of said Commission, or with any national securities
exchange;
(h) promptly upon the mailing thereof to the shareholders of the Borrower
generally or to the holders of the Senior Subordinated Notes (or any Refunding
Indebtedness) generally, copies of all financial statements, reports and proxy
statements so mailed;
(i) promptly as they become available, and in any event promptly upon the
Agent's request, for each publication for which audits are regularly prepared by
any Credit Party (i) audits of the magazine subscriptions for each of the
publications of the Credit Parties as of December 31 and June 30 each year
performed by either Audit Bureau of Circulations or Business Publications Audit
of Circulation, Inc. and (ii) audits of the membership subscriptions for the
Borrower and its Restricted Subsidiaries as of December 31 and June 30 each
year;
(j) promptly upon the Agent's request, the Borrower shall deliver to the
Agent tapes, disks or other storage media containing the then-current
subscription and membership lists and other data bases maintained by each of the
Credit Parties, together with the technical specifications for how to read such
information, all in form reasonably satisfactory to the Agent which may include
the requirement that the Borrower request that each of its and the Restricted
Subsidiaries' fulfillment houses furnish such information regarding the Credit
Parties' subscription lists as are maintained by such fulfillment houses;
PROVIDED, HOWEVER, that the Agent shall not divulge such information to any
Person prior to the occurrence of an Event of Default; PROVIDED, FURTHER
HOWEVER, that after the occurrence and during the continuation of an Event of
Default, the Agent may use that information for any lawful purpose (including a
sale of one or more data bases), provided that the Agent acts in a commercially
reasonable fashion in making such use, but the Agent shall have no obligation to
make any such use of such information unless directed to do so by the Required
Lenders; and
(k) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of any Credit
Party, or compliance with the terms of this Agreement, as the Agent or any
Lender may reasonably request.
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6.2 NOTICES OF MATERIAL EVENTS. The Borrower will furnish to the Agent
and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting any Credit
Party or any Affiliate thereof that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Credit Parties in an aggregate amount exceeding $100,000; and
(d) any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
Each notice delivered under this Section 6.2 shall be accompanied by a statement
of a Financial Officer or other executive officer of the Borrower setting forth
the details of the event or development requiring such notice and any action
taken or proposed to be taken with respect thereto.
6.3 EXISTENCE; CONDUCT OF BUSINESS. The Borrower will, and will cause
each of the Restricted Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; PROVIDED that the foregoing shall not prohibit
any merger, consolidation, liquidation, dissolution or any discontinuance or
sale of such business permitted under Section 7.4.
6.4 PAYMENT OF OBLIGATIONS.
(a) The Borrower will, and will cause each of the Restricted Subsidiaries
to, pay its obligations, including Tax liabilities, that, if not paid, could
result in a Material Adverse Effect before the same shall become delinquent or
in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) such Credit Party has set aside on
its books adequate reserves with respect thereto in accordance with GAAP and (c)
the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.
(b) No Credit Party will file any consolidated tax return with any
Unrestricted Subsidiary prior to having entered into a tax sharing agreement,
approved by the Required Lenders, that (i) obligates such Unrestricted
Subsidiary to reimburse the Credit Parties for the portion of any tax liability
equal to the proportionate contribution of such Unrestricted Subsidiary to the
taxable income of the Credit Parties and (ii) obligates the Credit Parties to
reimburse such Unrestricted Subsidiary for the portion of any tax savings or
benefits resulting exclusively from the operations of such Unrestricted
Subsidiary, on account of the filing of such consolidated tax return.
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6.5 MAINTENANCE OF PROPERTIES; INSURANCE. The Borrower will, and will
cause each of the Restricted Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially sound and
reputable insurance companies, as may be required by law and such other
insurance in such amounts and against such risks as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations, including, without limitation, media perils insurance.
Without limiting the generality of the foregoing, the Borrower will (i) maintain
or cause to be maintained flood insurance with respect to each Flood Hazard
Property in amounts approved by the Agent, or provide evidence acceptable to the
Agent that such insurance is not available, (ii) maintain or cause to be
maintained replacement value casualty insurance on the Collateral and media
perils insurance under such policies of insurance, in each case with such
insurance companies, in such amounts, with such deductibles, and covering such
terms and risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. Each such policy of insurance shall (x) name
the Agent for the benefit of the Lenders as an additional insured thereunder as
its interests may appear and (y) in the case of each business interruption and
casualty insurance policy, contain a loss payable clause or endorsement,
satisfactory in form and substance to the Agent that names the Agent for the
benefit of the Lenders as the loss payee thereunder for any covered loss in an
amount not less than $1,000,000 per occurrence, with "umbrella" coverage in an
aggregate amount not less than $25,000,000 and provides for at least 30 days
prior written notice to the Agent of any modifications or cancellation of such
policy.
6.6 BOOKS AND RECORDS; INSPECTION RIGHTS. The Borrower will, and will
cause each of the Restricted Subsidiaries to keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each Restricted Subsidiary to, permit any representatives designated
by the Agent or any Lender, upon reasonable prior notice, to visit and inspect
its properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
The Borrower, in consultation with the Agent, will arrange for a meeting to be
held at least once every year with the Lenders hereunder at which the business
and operations of the Credit Parties are discussed.
6.7 FISCAL YEAR. To enable the ready and consistent determination of
compliance with the covenants set forth in Section 7 hereof, the Credit Parties
will not change the last day of their fiscal year from December 31 of each year,
or the last day of the first three fiscal quarters in each of its fiscal years
from March 31, June 30 and September 30, respectively.
6.8 COMPLIANCE WITH LAWS. The Borrower will, and will cause each of the
Restricted Subsidiaries to, comply with all laws, rules, regulations and orders
including, without limitation, Environmental Laws, of any Governmental Authority
applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
6.9 USE OF PROCEEDS. The proceeds of the Loans will be used only for (i)
financing of Camping World Acquisition and the Ehlert Acquisition, (ii) the
refinancing of existing Indebtedness, (ii) Capital Expenditures and Acquisitions
permitted hereunder, and (iv) expenses
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incurred in connection with the foregoing transactions and for general
corporate purposes. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of
any of the Regulations of the Board, including Regulations G, U and X.
6.10 CERTAIN OBLIGATIONS RESPECTING RESTRICTED SUBSIDIARIES AND COLLATERAL
SECURITY.
(a) ADDITIONAL RESTRICTED SUBSIDIARIES. In the event that the Borrower
shall form or acquire any new Restricted Subsidiary after the date hereof, the
Borrower will, and will cause each of its Restricted Subsidiaries to, cause such
new Restricted Subsidiary within five Business Days of such formation or
acquisition:
(i) to execute and deliver to the Agent the following documents: (1)
a counterpart to this Agreement (and thereby to become a party to this
Agreement, as a "Guarantor" hereunder), (2) a Pledge Agreement, (3) a
Security Agreement, (4) a Trademark Security Agreement and (5) Mortgages
and such other instruments documents and agreements as may be required by
the Agent; and
(ii) to take such action (including delivering such shares of stock
and executing and delivering such UCC financing statements) as shall be
necessary to create and perfect valid and enforceable first priority Liens
consistent with the provisions of the applicable Collateral Documents; and
(iii) to deliver such proof of corporate action, incumbency of
officers and other documents as is consistent with those delivered by each
Restricted Subsidiary pursuant to Section 5.1 upon the Effective Date or as
the Agent shall have reasonably requested.
Anything herein to the contrary notwithstanding, the Borrower shall cause
any Subsidiary that becomes a guarantor under the Subordinated Notes Indenture
(or any applicable governing agreement for any related Refunding Indebtedness),
to immediately become a Guarantor hereunder in compliance with the provisions of
the preceding paragraph, whether or not such Subsidiary is otherwise required to
be a Restricted Subsidiary hereunder.
(b) OWNERSHIP OF RESTRICTED SUBSIDIARIES. Except as expressly permitted
by this Agreement, no Credit Party shall sell, transfer or otherwise dispose of
any shares of stock in any Restricted Subsidiary owned by it, nor permit any
Restricted Subsidiary to issue any shares of stock of any class whatsoever to
any Person other than to a Credit Party. The Borrower will, and will cause each
of the Restricted Subsidiaries to, take such action from time to time as shall
be necessary to ensure that the percentage of the equity capital of any class or
character owned by it in any Restricted Subsidiary on the date hereof (or, in
the case of any newly formed or newly acquired Restricted Subsidiary, on the
date of formation or acquisition) is not at any time decreased, other than by
reason of transfers to another Credit Party. In the event that any additional
shares of stock shall be issued by any Credit Party, the respective holder of
such shares of stock shall forthwith deliver to the Agent pursuant to a Pledge
Agreement the certificates evidencing such shares of stock, accompanied by
undated stock powers executed in
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blank and to take such other action as the Agent shall request to perfect the
security interest created therein pursuant to such Pledge Agreement.
6.11 ERISA. The Borrower will maintain, and cause each Restricted
Subsidiary to maintain, each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and will not
and not permit any of the ERISA Affiliates to (a) engage in any transaction in
connection with which the Borrower or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $50,000, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $50,000 or (c) fail to make any payments in an
aggregate amount exceeding $50,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
6.12 ENVIRONMENTAL MATTERS; REPORTING. The Borrower will observe and
comply with, and cause each Restricted Subsidiary to observe and comply with,
all laws, rules, regulations and orders of any government or government agency
relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability or otherwise have a material adverse effect on the Borrower and the
Restricted Subsidiaries taken as a whole. The Borrower will give the Agent
prompt written notice of any violation as to any environmental matter by any
Credit Party and of the commencement of any judicial or administrative
proceeding relating to health, safety or environmental matters (a) in which an
adverse effect on any operating permits, air emission permits, water discharge
permits, hazardous waste permits or other permits held by any Credit Party which
are material to the operations of such Credit Party, or (b) which will or
threatens to impose a material liability on such Credit Party to any Person or
which will require a material expenditure by such Credit Party to cure any
alleged problem or violation.
6.13 CONFORMING LEASEHOLD INTERESTS; MATTERS RELATING TO ADDITIONAL REAL
PROPERTY COLLATERAL.
(a) If any Credit Party acquires any Material Leasehold Property, the
Borrower shall, or shall cause such Restricted Subsidiary to, use its best
efforts (without requiring such Credit Party to relinquish any material rights
or incur any material obligations or to expend more than a nominal amount of
money over and above the reimbursement, if required, of the landlord's out-of-
pockets costs, including attorneys' fees) to cause such Leasehold Property to be
a Conforming Leasehold Interest.
(b) From and after the Effective Date, in the event that (i) any Credit
Party acquires any fee interest in real property having a fair market value in
excess of $1,000,000 or any Material Leasehold Property, or the Agent determines
in its sole discretion to place a Mortgage on any Real Property Asset having a
fair market value in excess of $1,000,000 owned on the Effective Date by any
Credit Party if a Mortgage was not placed on any such Real Property
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Asset as of the Effective Date, or (ii) at the time any Person becomes a
Restricted Subsidiary, such Person owns or holds any fee interest in real
property or any Material Leasehold Property, in either case excluding any
such Real Property Asset the encumbering of which requires the consent of any
applicable lessor or (in the case of clause (ii) above) any then-existing
senior lienholder, where the Credit Parties are unable to obtain such
lessor's or senior lienholder's consent (any such non-excluded Real Property
Asset described in the foregoing clause (i) or (ii) being a "ADDITIONAL
MORTGAGED PROPERTY"), such Credit Party shall deliver to the Agent, as soon
as practicable after such Person acquires such Additional Mortgaged Property,
the following:
(i) ADDITIONAL MORTGAGES. A fully executed and notarized Mortgage
(an "ADDITIONAL MORTGAGE"), in proper form for recording in all appropriate
places in all applicable jurisdictions, encumbering the interest of such
Credit Party in such Additional Mortgaged Property;
(ii) SURVEYS. With respect to each Additional Mortgaged Property,
copies of all existing surveys, surveyors certificates and such additional
surveys or surveyor certificates as the Agent may reasonably require;
(iii) RECORDED LEASEHOLD INTERESTS. In the case of any Additional
Mortgaged Property consisting of a Leasehold Property, copies of all leases
between any Credit Party and any landlord or tenant;
(iv) LANDLORD CONSENTS AND ESTOPPELS. In the case of any Additional
Mortgaged Property consisting of a Leasehold Property, (a) a Landlord
Consent and Estoppel with respect thereto and where required by the terms
of any lease, the consent of the mortgagee, ground lessor or other party
and (b) evidence that such Leasehold Property is a Recorded Leasehold
Interest;
(v) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (A) Evidence as to
whether any Additional Mortgaged Property is a Flood Hazard Property and
(B) if such Additional Mortgaged Property is a Flood Hazard Property,
evidence that the applicable Credit Party has obtained flood insurance with
respect to each Flood Hazard Property in amounts approved by the Agent, or
evidence acceptable to the Agent that such insurance is not available;
(vi) TITLE INSURANCE. (A) If required by the Agent, ALTA mortgagee
title insurance policies or unconditional commitments therefor (the
"ADDITIONAL MORTGAGE POLICIES") issued by the Title Company with respect to
the Additional Mortgaged Property, in an amount satisfactory to the Agent,
insuring fee simple title to, or a valid leasehold interest in, each such
Additional Mortgaged Property vested in such Credit Party and assuring the
Agent that such Additional Mortgage creates a valid and enforceable First
Priority mortgage Lien on such Additional Mortgaged Property, subject only
to a standard exceptions as may be reasonably acceptable to the Agent,
which Additional Mortgage Policy (I) shall include all endorsement for
matters reasonably requested by the Agent and (II) shall provide for
affirmative insurance and such reinsurance as the Agent may reasonably
request, all of the foregoing in form and substance reasonably satisfactory
to the Agent; and (B) evidence satisfactory to the Agent
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that such Credit Party has (I) delivered to the Title Company all
certificates and affidavits required by the Title Company in connection
with the issuance of the Additional Mortgage Policy and (II) paid to the
Title Company or to the appropriate Governmental Authorities all expenses
and premiums of the Title Company in connection with the issuance of the
Additional Mortgage Policy and all recording and stamp taxes (including
mortgage recording and intangible taxes) payable in connection with
recording the Additional Mortgage in the appropriate real estate records;
(vii) TITLE REPORTS. If no Additional Mortgage Policy is required
with respect to such Additional Mortgaged Property, a title report issued
by the Title Company with respect thereto, dated not more than 30 days
prior to the date such Additional Mortgage is to be recorded and
satisfactory in form and substance to the Agent;
(viii) COPIES OF DOCUMENTS RELATING TO TITLE EXCEPTIONS. Copies of
all recorded documents listed as exceptions to title or otherwise referred
to in the Additional Mortgage Policy or in the title reports delivered
pursuant to Section 6.13(b)(vii);
(ix) ENVIRONMENTAL AUDIT. If required by the Agent, reports and other
information in form, scope and substance satisfactory to the Agent and
prepared by environmental consultants satisfactory to the Agent, concerning
any environmental hazards or liabilities to which any Credit Party may be
subject with respect to such Additional Mortgaged Property; and
(x) OPINIONS OF COUNSEL. (1) An favorable opinion of counsel (which
counsel shall be satisfactory to the Agent and Special Counsel), as to the
due authorization, execution and delivery by such Credit Party of such
Additional Mortgage and such other matters as the Agent may reasonably
request, and (2) if required by the Agent, an opinion of counsel (which
counsel shall be satisfactory to the Agent and Special Counsel) in the
state in which such Additional Mortgaged Property is located with respect
to the enforceability of the form of Additional Mortgages to be recorded in
such state and such other matters (including without limitation any matters
governed by the laws of such state regarding personal property security
interests in respect of any Collateral) as the Agent may reasonably
request, in each case in form and substance reasonably satisfactory to the
Agent.
(c) The Borrower shall, and shall cause each Restricted Subsidiary to,
permit an independent real estate appraiser satisfactory to the Agent, upon
reasonable notice, to visit and inspect any Additional Mortgaged Property for
the purpose of preparing an appraisal of such Additional Mortgaged Property
satisfying the requirements of all applicable laws and regulations (in each case
to the extent required under such laws and regulations as determined by the
Agent in its sole discretion).
6.14 SENIOR SUBORDINATED NOTES INDENTURE. The Borrower will observe and
comply with, and cause each Restricted Subsidiary to observe and comply with,
each applicable provision of the Senior Subordinated Notes Indenture.
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ARTICLE VII
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit shall have expired or terminated and all LC Disbursements
shall have been reimbursed, the Credit Parties covenant and agree with the
Lenders that:
7.1 INDEBTEDNESS. The Borrower will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in SCHEDULE
4.14 (excluding, however, following the of making of the initial Loans
hereunder, the Indebtedness outstanding under the Existing Credit Agreements),
and any extension, renewal, refunding or replacement of any such Indebtedness
that does not increase the principal amount thereof, PROVIDED that any
extension, renewal, refunding or replacement of Senior Subordinated Notes (the
"REFUNDING INDEBTEDNESS") shall be permitted, only so long as
(i) no Default exists at the time of such extension, renewal,
refunding or replacement or would result therefrom;
(ii) in the case of any such extension, renewal, refunding or
replacement which occurs prior to the date which is six months prior to the
scheduled maturity date of the Senior Subordinated Notes, the interest rate
per annum (including, without limitation, the interest rate per annum
applicable after the occurrence of a default) on the Refunding Indebtedness
is not greater than the current interest rate per annum on such notes;
(iii) the scheduled amortization of the Refunding Indebtedness
(whether by sinking fund payments, mandatory redemptions or repurchases or
otherwise) shall not require any payment in respect of principal of the
Refunding Indebtedness before the scheduled maturity date of the Senior
Subordinated Notes;
(iv) in the case of any extension, renewal, refunding or replacement
which occurs prior to the date which is six months prior to the scheduled
maturity date of the Senior Subordinated Notes, the covenants, events of
default and mandatory prepayment requirements (whether by sinking fund
payments, mandatory redemptions or repurchases or otherwise) of the
Refunding Indebtedness are not more restrictive than the corresponding
provisions of the Senior Subordinated Notes Indenture;
(v) the terms of subordination applicable to the Refunding
Indebtedness are no less favorable (from the standpoint of the holders of
"Senior Indebtedness" under and
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as defined in the Senior Subordinated Notes Indenture) than the terms of
subordination set forth in the Senior Subordinated Notes Indenture;
(vi) the Refunding Indebtedness does not increase the principal
amount of the Indebtedness so extended, renewed, refunded or replaced; and
(vii) the Borrower furnishes to the Agent on the date of such
extension, renewal, refunding or replacement a certificate demonstrating in
reasonable detail compliance with the foregoing conditions;
(c) Indebtedness of the Borrower to any Restricted Subsidiary and of any
Restricted Subsidiary to any Credit Party;
(d) Guarantees by the Borrower of Indebtedness of any Restricted
Subsidiary and by any Restricted Subsidiary of Indebtedness of any other Credit
Party;
(e) Indebtedness of the Borrower or any Consolidated Subsidiary
(determined on a consolidated basis without duplication in accordance with GAAP
but excluding Unrestricted Subsidiaries) secured by Liens permitted under
Section 7.2(i) in an aggregate principal amount not in excess of $4,500,000 at
any one time outstanding; and
(f) additional Indebtedness of the Borrower or any Consolidated Subsidiary
(determined on a consolidated basis without duplication in accordance with GAAP
but excluding Unrestricted Subsidiaries) in an aggregate principal amount, which
when added to Indebtedness incurred pursuant to Section 7.1(e), does not exceed
$7,000,000 at any one time outstanding.
7.2 LIENS. The Borrower will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or permit to exist any Lien on any Property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Liens created under the Collateral Documents;
(b) any Lien on any property or asset of any Credit Party existing on the
date hereof and set forth in SCHEDULE 4.14 (excluding, however, following the
making of the initial Loans hereunder, the Liens securing Indebtedness under the
Existing Credit Agreements), PROVIDED that (i) such Lien shall not apply to any
other property or asset of any Credit Party and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and extensions, renewals
and replacements thereof that do not increase the outstanding principal amount
thereof;
(c) Liens imposed by any Governmental Authority for taxes, assessments or
charges not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of any Credit Party in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens, and vendors' Liens imposed by statute or common law not
securing the repayment of
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Indebtedness, arising in the ordinary course of business which are not overdue
for a period of more than 60 days or which are being contested in good faith and
by appropriate proceedings and Liens securing judgments (including, without
limitation, pre-judgment attachments) but only to the extent for an amount and
for a period not resulting in an Event of Default under Section 8.1(j) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, tenders, trade contracts
(other than for borrowed money), leases (other than capital leases), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of Property or
minor imperfections in title thereto which, in the aggregate, are not material
in amount, and which do not, in the aggregate, materially detract from the value
of the Property of any Credit Party or interfere with the ordinary conduct of
the business of any Credit Party;
(h) Liens consisting of bankers' liens and rights of setoff, in each case,
arising by operation of law, and Liens on documents presented in letters of
credit drawings; and
(i) Liens on fixed or capital assets, including real or personal property,
acquired, constructed or improved by any Credit Party, PROVIDED that (A) such
Liens secure Indebtedness (including Capital Lease Obligations) permitted by
Section 7.1(e) (B) such Liens and the Indebtedness secured thereby are incurred
prior to or within 90 days after such acquisition or the completion of such
construction or improvement, (C) the Indebtedness secured thereby does not
exceed the cost of acquiring, constructing or improving such fixed or capital
assets and (D) such security interests shall not apply to any other property or
assets of any Credit Party.
7.3 CONTINGENT LIABILITIES. The Borrower will not, and will not permit
any Restricted Subsidiary to, Guarantee the Indebtedness or other obligations of
any Person, or Guarantee the payment of dividends or other distributions upon
the stock of, or the earnings of, any Person, except:
(a) endorsements of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business,
(b) Guarantees of obligations of any Restricted Subsidiary by the Borrower
or any Restricted Subsidiary and, to the extent expressly permitted by Section
7.1, Guarantees of Indebtedness of the Borrower by any Restricted Subsidiary;
(c) Guarantees in effect on the date hereof which are disclosed in
SCHEDULES 4.14 or 7.7, any replacements thereof in amounts not exceeding such
Guarantees and any additions thereto, PROVIDED the additions thereto do not
exceed $500,000 outstanding in the aggregate; and
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(d) obligations in respect of Letters of Credit.
7.4 FUNDAMENTAL CHANGES. The Borrower will not, and will not permit any
Restricted Subsidiary to, enter into any transaction of merger or consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), except for the NAFE Disposition. The Borrower will
not, and will not permit any Restricted Subsidiary to, acquire any business or
property from, or capital stock of, or be a party to any acquisition of, any
Person except for purchases of inventory and other property to be sold or used
in the ordinary course of business, Investments permitted under Section 7.5 and
Capital Expenditures permitted under Section 7.9(e). The Borrower will not, and
will not permit any Restricted Subsidiary to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, any
material part of its business or property, whether now owned or hereafter
acquired (including, without limitation, receivables and leasehold interests,
but excluding (w) the NAFE Disposition, (x) obsolete or worn-out property,
including leasehold interests, no longer used or useful in its business, (y) any
inventory or other property sold or disposed of in the ordinary course of
business and on ordinary business terms) and (z) Sale-Leaseback Transactions by
Camping World permitted hereunder.
Notwithstanding the foregoing provisions of this Section 7.4:
(a) any Restricted Subsidiary may be merged or consolidated with or into
any other Restricted Subsidiary or into the Borrower; PROVIDED that if any such
transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the
Wholly Owned Subsidiary shall be the continuing or surviving corporation;
(b) any Restricted Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its property (upon voluntary liquidation or otherwise)
to any Subsidiary that is a Wholly Owned Subsidiary of the Borrower; PROVIDED
that if any such sale is by a Restricted Subsidiary to a Subsidiary of the
Borrower not a Restricted Subsidiary, then such Subsidiary shall have assumed
all of the obligations of such Restricted Subsidiary hereunder and under the
applicable Collateral Documents and (if not theretofore so pledged) all of the
issued and outstanding capital stock of such Subsidiary shall be pledged under
the Pledge Agreement executed by the applicable Credit Party and (if not
theretofore so encumbered) all the assets of such Subsidiary shall become
subject to a Lien in favor of the Agent pursuant to a Security Agreement and a
Trademark Security Agreement;
(c) the capital stock of any Restricted Subsidiary may be sold,
transferred or otherwise disposed of to the Borrower or any Subsidiary that is a
Wholly Owned Subsidiary of the Borrower; PROVIDED that if any such sale,
transfer or disposition is to a Subsidiary of the Borrower not a Restricted
Subsidiary, then such Subsidiary shall have become a Restricted Subsidiary
hereunder and all of the issued and outstanding capital stock of such Subsidiary
shall be pledged under the Pledge Agreement executed by the applicable Credit
Party and all the assets of such Subsidiary shall become subject to a Lien in
favor of the Agent pursuant to a Security Agreement and a Trademark Security
Agreement; and
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(d) any Credit Party may acquire any business, and the related assets, of
any other Person (whether by way of purchase of assets or stock, by merger or
consolidation or otherwise), so long as:
(i) the aggregate purchase price (including assumed liabilities and
any non-cash consideration valued at the fair market value thereof
determined in good faith by the Board of Directors of the Borrower) paid by
the Credit Parties for Acquisitions in any fiscal year shall not, without
the prior consent of the Required Lenders, exceed $20,000,000;
(ii) such Acquisition (if by purchase of assets, merger or
consolidation) shall be effected in such manner so that the acquired
business, and the related assets, are owned by a Credit Party and, if
effected by merger or consolidation involving a Credit Party, the Credit
Party shall be the continuing or surviving entity;
(iii) such Acquisition (if by purchase of stock) shall be effected
in such manner so that the acquired entity becomes a Wholly Owned
Subsidiary of a Credit Party;
(iv) after giving effect to such Acquisition the Credit Parties shall
be in compliance with Section 7.9 and the Borrower shall have delivered to
the Agent a certificate of a Financial Officer showing such calculations in
reasonable detail to demonstrate such compliance; and
(v) immediately prior to such Acquisition and after giving effect
thereto, no Default shall have occurred and be continuing.
7.5 INVESTMENTS; HEDGING AGREEMENTS.
(a) The Borrower will not, and will not permit any Restricted Subsidiary
to, make or permit to remain outstanding any Investment, except:
(i) Investments by the Borrower in Restricted Subsidiaries, advances
by any Credit Party to any other Credit Party in the ordinary course of
business and capital contributions by any Credit Party to any Restricted
Subsidiary of the Borrower;
(ii) Permitted Investments;
(iii) Operating deposit accounts with banks;
(iv) Investments represented by accounts receivable created or
acquired in the ordinary course of business;
(v) Advances to employees in the ordinary course of business not
exceeding $1,000,000 in the aggregate at any one time outstanding;
(vi) Investments in addition to the foregoing made prior to the date
hereof and set forth in SCHEDULE 7.5 annexed hereto; and
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(vii) Investments in Unrestricted Subsidiaries not exceeding
$15,000,000 MINUS the aggregate amount of Restricted Junior Payments made
pursuant to Section 7.6(a)(vii) in the aggregate made after the Effective
Date; and
(viii) Investments in Unrestricted Subsidiaries in addition to
those pursuant to clause (vii) not exceeding $5,000,000 MINUS the aggregate
amount of Restricted Junior Payments made pursuant to Section 7.6(a)(vii) in the
aggregate made after the Effective Date in excess of $15,000,000 provided that
at the time of such Investment, and after giving effect thereto, the
Consolidated Total Leverage Ratio is less than 4.25 to 1.00.
(b) The Borrower will not, and will not permit any Restricted Subsidiary
to, enter into any Hedging Agreement, other than Hedging Agreements entered into
in the ordinary course of business to hedge or mitigate risks to which the
Borrower or any Subsidiary is exposed in the conduct of its business or the
management of its liabilities.
7.6 RESTRICTED JUNIOR PAYMENTS AND CASH FLOW DISTRIBUTIONS. (a) The
Borrower will not, nor will it permit any Restricted Subsidiary to, declare or
make any Restricted Junior Payment at any time; PROVIDED, HOWEVER, that (i) so
long as no Default or Event of Default shall have occurred or be continuing or
shall be caused thereby the Borrower may declare and make Restricted Junior
Payments to the Holding Company in amounts equal to the cash interest payments
to the holders of the Holding Company Notes in accordance with, and only to the
extent required by the Holding Company Notes Indenture, (ii) so long as no
Default or Event of Default shall have occurred or be continuing or shall be
caused thereby the Borrower may declare and make Restricted Junior Payments to
the Holding Company in amounts equal to the Permitted Tax Distributions, (iii)
the Borrower may declare and make Restricted Junior Payments consisting of cash
interest payments to the holders of the Senior Subordinated Notes in accordance
with, and only to the extent required by the Senior Subordinated Notes Indenture
(and any Refunding Indebtedness), (iv) so long as no Default or Event of Default
shall have occurred or be continuing or shall be caused thereby the Borrower may
declare and make Restricted Junior Payments to the Holding Company in amounts
equal to payments in respect of and in accordance with the Camping World
Incentive Management Agreements not in exceeding $15,000,000 in the aggregate;
PROVIDED, that Restricted Junior Payments under this clause (iv) shall not
exceed $1,000,000 for each of the 1998, 1999, 2000 and 2001 fiscal years of the
Borrower and $11,000,000 for the 2002 fiscal year of the Borrower, (v) so long
as no Default or Event of Default shall have occurred or be continuing or shall
be caused thereby the Borrower may declare and make Restricted Junior Payments
to the Holding Company in amounts equal to the regularly scheduled payments of
principal and interest on the Ehlert Note, and (vi) so long as no Default or
Event of Default shall have occurred or be continuing or shall be caused thereby
the Borrower may declare and make Restricted Junior Payments to the Holding
Company, in an amount equal to the Permitted Cash Flow Distribution which shall
be payable only as provided in Section 7.6 (b) and (vii), the Borrower may
declare and make Restricted Junior Payments to the Holding Company for the
purpose of enabling the Holding Company to make Investments in Unrestricted
Subsidiaries of the Borrower to the extent such Investment would have been
permitted to be made directly by the Borrower or any Restricted Subsidiary under
Sections 7.5(a)(vii) and (viii) hereof; PROVIDED, however, that nothing herein
shall be deemed to prohibit the making of any dividend or distribution by any
Restricted Subsidiary to any other Credit Party.
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(b) Payments made pursuant to this Section 7.6(b) shall be subject in
all respects to the limitations set forth in Section 7.6(a), including,
without limitation, those contained in clause (vi) thereof, and shall not be
made except as expressly permitted by Section 7.6 (a). For the fiscal year
ending December 31, 1997, the Borrower shall be entitled to declare and make
one Restricted Junior Payment in the amount of the Permitted Cash Flow
Distribution in respect of such fiscal year, such Restricted Junior Payment
to be made at any time beginning on the date of the delivery by the Borrower
to the Lenders of the financial statements for such year required to be
delivered pursuant to Section 6.1(a), accompanied by the certificate of a
financial officer of the Borrower required to be delivered pursuant to
Section 6.1(d), and ending on the date which is 90 days thereafter. During
each year beginning with the fiscal year ending December 31, 1998, the
Borrower shall be entitled to declare and make interim Restricted Junior
Payments in an amount equal to 25% of the Excess Cash Flow in any fiscal
quarter, each such Restricted Junior Payment to be made at any time beginning
on the date of the delivery by the Borrower to the Lenders of the financial
statements for such quarter required to be delivered pursuant to Section
6.1(b), accompanied by the certificate of a financial officer of the Borrower
required to be delivered pursuant to Section 6.1(d) and demonstrating
compliance with this Section 7.6 and clause (vi) of Section 2.9(b) (with
respect to all fiscal quarters beginning with the fiscal quarter ending March
31, 1998), both with respect to such fiscal quarter and for all fiscal
quarters ended in the then current fiscal year, and ending on a date which is
30 days thereafter. Following each fiscal year specified in the immediately
preceding sentence the Borrower shall be entitled to declare and to make one
final Restricted Junior Payment in respect of such fiscal year in the amount
equal to the difference between the aggregate amount of Restricted Junior
Payments made on an interim quarterly basis during such year and the amount
of the Permitted Cash Flow Distribution in respect of such fiscal year, such
final Restricted Junior Payment to be subject to the same financial
statement, and certificate delivery and timing requirements applicable to the
Restricted Junior Payment permitted in respect of the fiscal year ending
December 31, 1997.
7.7 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this
Agreement, the Borrower will not, nor will it permit any Restricted Subsidiary
to, directly or indirectly (a) make any Investment in an Affiliate; (b)
transfer, sell, lease, assign or otherwise dispose of any property to an
Affiliate; (c) merge into or consolidate with an Affiliate, or purchase or
acquire property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, guarantees and assumptions of obligations of an Affiliate);
PROVIDED that:
(i) any Affiliate who is an individual may serve as a director,
officer, employee or consultant of any Credit Party and receive reasonable
compensation for his or her services in such capacity;
(ii) the Borrower and the Restricted Subsidiaries may engage in and
continue the transactions with or for the benefit of Affiliates which are
described in SCHEDULE 7.7 annexed hereto; and
(iii) the Credit Parties may engage in transactions with or for
the benefit of Affiliates not in excess of $1,000,000 in any fiscal year in
addition to payments and transactions referred to in clause (i) and (ii)
above.
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7.8 RESTRICTIVE AGREEMENTS. The Borrower will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of any Credit Party to create, incur
or permit to exist any Lien upon any of its property or assets, or (b) the
ability of any Restricted Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or
advances to any other Credit Party or to Guarantee Indebtedness of any other
Credit Party; PROVIDED that (i) the foregoing shall not apply to restrictions
and conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to restrictions and conditions existing on the date hereof identified on
SCHEDULE 7.8 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition except
with respect to Refunding Indebtedness), (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Restricted Subsidiary pending such sale, PROVIDED such restrictions
and conditions apply only to the Restricted Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.
7.9 CERTAIN FINANCIAL COVENANTS.
(a) CONSOLIDATED INTEREST COVERAGE RATIO. The Credit Parties will not
permit the Consolidated Interest Coverage Ratio at any time during the period
below to be less than the ratio set opposite such period below:
PERIOD RATIO
------ -----
From the Effective Date through September 29, 1998 1.75 to 1
From September 30, 1998 and at all times thereafter 2.00 to 1
(b) CONSOLIDATED FIXED CHARGES RATIO. The Credit Parties will not permit
the Consolidated Fixed Charges Ratio as at the last day of any fiscal quarter
ending during the period below to be less than the ratio set opposite such
period below:
PERIOD RATIO
------ -----
From the Effective Date through December 30, 1999 1.1 to 1
From December 31, 1999 through June 29, 2000 1.2 to 1
From June 30, 2000 and at all times thereafter 1.25 to 1
(c) CONSOLIDATED TOTAL LEVERAGE RATIO. The Credit Parties will not permit
the Consolidated Total Leverage Ratio at any time during the period below to
exceed the ratio set opposite such period below:
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PERIOD RATIO
------ -----
From the Effective Date through December 30, 1997 5.40 to 1
From December 31, 1997 through September 29, 1998 5.25 to 1
From September 30, 1998 through June 29, 1999 5.00 to 1
From June 30, 1999 through June 30, 2000 4.75 to 1
From July 1, 2000 and at all times thereafter 4.50 to 1
(d) CONSOLIDATED OPERATING CASH FLOW. The Credit Parties will not permit
Consolidated Operating Cash Flow for any fiscal year to be less than the amount
set opposite such fiscal year below:
FISCAL YEAR CONSOLIDATED OPERATING CASH FLOW
----------- --------------------------------
1997 $54 million
1998 $58 million
1999 $61 million
2000 $64 million
2001 $67 million
(e) CAPITAL EXPENDITURES.
(i) The Credit Parties will not permit the aggregate amount of
Capital Expenditures excluding Camping World Expenditures to exceed
$6,000,000 in any fiscal year.
(ii) The Credit Parties will not permit Cumulative Camping World Net
Expenditures at any one time to exceed $6,000,000.
7.10 LINES OF BUSINESS. No Credit Party shall engage to any substantial
extent in any line or lines of business activity other than (i) the types of
businesses engaged in by the Borrower and the Restricted Subsidiaries as of the
Effective Date, after giving effect to the Camping World Acquisition and
businesses directly related thereto, and (ii) such other lines of business as
may be consented to by the Required Lenders.
7.11 MANAGEMENT COMPENSATION. The aggregate amount of compensation
(including salary, bonuses, and any and all other cash compensation) paid by any
Credit Party in respect of any fiscal year to Stephen Adams or any of his
Affiliates shall not exceed the aggregate amount of annual compensation required
to be paid to him and them under the employment
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agreement dated as of the 1st day of August 1993, between the Borrower and
Mr. Adams as in effect on the date hereofincluding any extension of the team
thereof.
7.12 SUBORDINATED INDEBTEDNESS. The Borrower will not, nor will it permit
any Restricted Subsidiary to, purchase, redeem, retire or otherwise acquire for
value, or set apart any money for a sinking, defeasance or other analogous fund
for the purchase, redemption, retirement or other acquisition of, or make any
voluntary payment or prepayment of the principal of or interest on, or any other
amount owing in respect of, any Subordinated Indebtedness, except for regularly
scheduled payments or prepayments of principal and interest in respect thereof
required pursuant to the instruments evidencing such Subordinated Indebtedness.
7.13 MODIFICATIONS OF CERTAIN DOCUMENTS. The Borrower will not, and will
not permit any Restricted Subsidiary to, consent to any modification, supplement
or waiver of any of the provisions of any documents or agreements evidencing or
governing any Subordinated Indebtedness (or any Refunding Indebtedness) or the
Camping World Incentive Management Agreements without the prior consent of the
Required Lenders; PROVIDED that, subject to the last paragraph of
Section 6.10(a), the Borrower may supplement the Senior Subordinated Notes
Indenture in order to add or delete Subsidiaries as guarantors thereunder as
required or permitted by the terms thereof without the prior consent of the
Required Lenders. Without limiting the generality of the foregoing, except for
Guarantees by Subsidiaries of the Borrower required by the Senior Subordinated
Notes Indenture, the Borrower will not permit any Subsidiary to Guarantee any
other Subordinated Indebtedness without the prior consent of the Required
Lenders.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT.
If any of the following events ("EVENTS OF DEFAULT") shall occur:
(a) the Credit Parties shall fail to pay any principal of, or interest on,
any Loan or any reimbursement obligation in respect of any LC Disbursement, or
other amount payable under this Agreement or any fee payable under this
Agreement or any other agreement to the Agent or the Lenders, when and as the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;
(b) any representation or warranty made or deemed made by or on behalf any
Credit Party in or in connection with this Agreement, any of the other Basic
Documents or any amendment or modification hereof or thereof, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement, any of the other Basic Documents or any
amendment or modification hereof or thereof, shall prove to have been incorrect
when made or deemed made in any material respect;
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(c) the Credit Parties shall fail to observe or perform any covenant,
condition or agreement contained in Article VI with the exception of Sections
6.1 (g), (h) and (i) or in Article VII;
(d) any Credit Party shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clauses (a), (b) or (c) of this Article) or any other Loan Document, and such
failure shall continue unremedied for a period of 30 days after notice thereof
from the Agent (given at the request of the Required Lenders) to the Borrower;
(e) any Credit Party shall fail to make any payment (whether of principal
or interest and regardless of amount) in respect of any Material Indebtedness in
excess of $1,000,000, when and as the same shall become due and payable;
(f) any event or condition occurs that results in any Material
Indebtedness in excess of $1,000,000 becoming due prior to its scheduled
maturity or that enables or permits (with or without the giving of notice, the
lapse of time or both) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material Indebtedness to
become due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Parent or any Credit Party or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Parent or any Credit Party or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing shall be
entered;
(h) the Parent or any Credit Party shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (g) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Parent or any Credit Party or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;
(i) any Credit Party shall become unable, admit in writing or fail
generally to pay its debts as they become due;
(j) a final judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such judgment)
shall be rendered by a one or more courts,
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administrative tribunals or other bodies having jurisdiction against any
Credit Party and the same shall not be discharged (or provision shall not be
made for such discharge), or a stay of execution thereof shall not be
procured, within 60 days from the date of entry thereof and the relevant
Credit Party shall not, within said period of 60 days, or such longer period
during which execution of the same shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal;
(k) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that.have
occurred, could reasonably be expected to result in a Material Adverse Effect;
(l) a reasonable basis shall exist for the assertion against any Credit
Party (or there shall have been asserted against any Credit Party) claims or
liabilities, whether accrued, absolute or contingent, based on or arising from
the generation, storage, transport, handling or disposal of Hazardous Materials
by any Credit Party or any of its Subsidiaries or Affiliates, or any predecessor
in interest of any Credit Party or any of its Subsidiaries or Affiliates, or
relating to any site or facility owned, operated or leased by any Credit Party
or any of its Subsidiaries or Affiliates, which claims or liabilities (insofar
as they are payable by any Credit Party or any of its Subsidiaries but after
deducting any portion thereof which is reasonably expected to be paid by other
credit worthy Persons jointly and severally liable therefor), in the judgment of
the Required Lenders are reasonably likely to be determined adversely to any
Credit Party or any of its Subsidiaries, and the amount thereof is, singly or in
the aggregate, reasonably likely to have a Material Adverse Effect;
(m) any of the following events shall occur and be continuing:
(i) the capital stock of the Parent owned directly or indirectly by
Stephen Adams, his wife, his children, his grandchildren, trusts of which
he, his wife, his children and his grandchildren are the sole beneficiaries
and for which one or more of such individuals are the trustee(s) shall (on
a fully diluted basis after giving effect to the exercise of any
outstanding rights or options to acquire capital stock of the Borrower)
cease to constitute either (x) at least 51% of the aggregate equity capital
of the Parent or (y) at least such percentage of the aggregate voting stock
of the Parent as is sufficient at all to times elect a majority of the
Board of Directors of the Parent;
(ii) the Parent shall cease to own directly or indirectly all of the
outstanding capital stock of the Holding Company;
(iii) any Person or group (within the meaning of the Securities
Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder as in effect on the date hereof) other than Stephen
Adams and any of the other permitted holders referred to in clause (i)
above shall (x) acquire or own, directly or indirectly, beneficially or of
record, shares representing more than 20% of the aggregate equity capital
of the Parent or (y) acquire direct or indirect Control of the Parent; or
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(iv) a majority of the seats (other than vacant seats) on the board of
directors of the Borrower shall be occupied by Persons who were neither (x)
nominated by the board of directors of the Borrower nor (y) appointed by
directors so nominated;
(n) any of the following shall occur: (i) the Liens created by the
Collateral Documents shall at any time (other than by reason of the Agent
relinquishing such Lien) cease to constitute valid and perfected Liens on the
Collateral intended to be covered thereby; (ii) except for expiration in
accordance with its respective terms, any Collateral Document shall for whatever
reason be terminated, or shall cease to be in full force and effect; or (iii)
the enforceability of any Collateral Document shall be contested by any Credit
Party; or
(o) any Guarantor shall assert that its obligations hereunder or under the
Collateral Documents shall be invalid or unenforceable;
then, and in every such event (other than an event with respect to the Credit
Parties described in clause (g) or (h) of this Article), and at any time
thereafter during the continuance of such event, the Agent may, and at the
request of the Required Lenders shall, by notice to the Credit Parties, take
either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate
immediately, (ii) declare the Loans then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Credit Parties
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Credit Parties, and (iii) the Agent may exercise all of the
rights as secured party and mortgagee under the Collateral Documents; and in
case of any event with respect to the Credit Parties described in clause (g) or
(h) of this Article, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Credit Parties accrued hereunder,
shall automatically become due and payable, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Credit
Parties, and the Agent shall be permitted to exercise such rights as secured
party and mortgagee under the Collateral Documents to the extent permitted by
applicable law.
8.2 RECEIVERSHIP. Without limiting the generality of the foregoing or
limiting in any way the rights of the Lenders under the Collateral Documents or
otherwise under applicable law, at any time after (i) the entire principal
balance of any Loan shall have become due and payable (whether at maturity, by
acceleration or otherwise) and (ii) the Agent shall have provided to the Credit
Parties not less than ten (10) days prior written notice of its intention to
apply for a receiver, the Agent shall be entitled to apply for and have a
receiver appointed under state or federal law by a court of competent
jurisdiction in any action taken by the Agent to enforce the Lenders' rights and
remedies hereunder and under the Collateral Documents in order to manage,
protect, preserve, sell and otherwise dispose of all or any portion of the
Collateral and continue the operation of the business of the Credit Parties, and
to collect all revenues and profits thereof and apply the same to the payment of
all expenses and other charges of such receivership, including the compensation
of the receiver, and to the payment of the Loans and other fees and expenses due
hereunder and under the Collateral Documents as aforesaid until a sale or other
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disposition of such Collateral shall be finally made and consummated. THE
CREDIT PARTIES HEREBY IRREVOCABLY CONSENT TO AND WAIVE ANY RIGHT TO OBJECT TO
OR OTHERWISE CONTEST THE APPOINTMENT OF RECEIVER AS PROVIDED ABOVE. THE
CREDIT PARTIES (I) GRANT SUCH WAIVER AND CONSENT KNOWINGLY AFTER HAVING
DISCUSSED THE IMPLICATIONS THEREOF WITH COUNSEL, (II) ACKNOWLEDGE THAT (A)
THE UNCONTESTED RIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING PURPOSES
IS CONSIDERED ESSENTIAL BY THE AGENT IN CONNECTION WITH THE ENFORCEMENT OF
THE LENDERS' RIGHTS AND REMEDIES HEREUNDER AND UNDER THE COLLATERAL
DOCUMENTS, AND (B) THE AVAILABILITY OF SUCH APPOINTMENT AS A REMEDY UNDER THE
FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE LENDERS TO MAKE
THE LOANS TO THE BORROWER; AND (III) AGREE TO ENTER INTO ANY AND ALL
STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN
CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE AGENT AND THE
LENDERS IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE
RECEIVER OVER ALL OR ANY PORTION OF THE COLLATERAL. THE LENDERS ACKNOWLEDGE
AND AGREE THAT NOTHING IN THIS SECTION 8.2 SHALL BE DEEMED TO CONSTITUTE A
WAIVER OF THE CREDIT PARTIES' RIGHT TO FILE FOR PROTECTION UNDER TITLE 11 OF
THE UNITED STATES CODE AT ANY TIME PRIOR TO THE APPOINTMENT OF A RECEIVER.
ARTICLE IX
THE AGENT
9.1 APPOINTMENT AND AUTHORIZATION. Each of the Lenders and the Issuing
Lender hereby irrevocably appoints the Agent as its agent and authorizes the
Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.
9.2 FLEET'S RIGHTS AS LENDER. Fleet shall have the same rights and powers
in its capacity as a Lender hereunder as any other Lender and may exercise the
same as though Fleet were not the Agent, and Fleet and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
any Credit Party or any Subsidiary or other Affiliate of any thereof as if it
were not the Agent hereunder.
9.3 DUTIES AS EXPRESSLY STATED. The Agent shall not have any duties or
obligations except those expressly set forth in this Agreement and the other
Loan Documents. Without limiting the generality of the foregoing, (a) the Agent
shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing, (b) the Agent shall not have
any duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by this Agreement
and the other Loan Documents that the Agent is required to exercise in writing
by the Required
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Lenders, and (c) except as expressly set forth herein and in the other Loan
Documents, the Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to any Credit
Party or any of their respective Subsidiaries that is communicated to or
obtained by Fleet or any of its Affiliates in any capacity. The Agent shall
not be liable for any action taken or not taken by it with the consent or at
the request of the Required Lenders or, if provided herein, with the consent
or at the request of the Required Revolving Credit or the Required Term Loan
Lenders, or in the absence of its own gross negligence or wilful misconduct.
The Agent shall not be deemed to have knowledge of any Default unless and
until written notice thereof is given to the Agent by the Borrower or a
Lender, and the Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with this Agreement or the other Loan Documents, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any of the other Loan Documents or in connection herewith of therewith,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein or in any other Loan Document,
(iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, the other Loan Documents or any other agreement, instrument or
document, or (v) the satisfaction of any condition set forth in Article V or
elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to the Agent. The Agent shall not, except to the extent
expressly instructed by the Required Lenders with respect to collateral
security under the Collateral Documents, be required to initiate or conduct
any litigation or collection proceedings hereunder or under any other Loan
Document; PROVIDED, HOWEVER, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
the Loan Documents or applicable law.
9.4 RELIANCE BY AGENT. The Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon. The Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
9.5 ACTION THROUGH SUB-AGENTS. The Agent may perform any and all of its
duties, and exercise its rights and powers, by or through any one or more
sub-agents appointed by the Agent. The Agent and any such sub-agent may perform
any and all its duties and exercise its rights and powers through its Related
Parties. The exculpatory provisions of the preceding paragraphs shall apply to
any such sub-agent and to the Related Parties of the Agent and any such
sub-agent, and shall apply to its activities in connection with the syndication
of the credit facilities provided for herein as well as activities as the Agent.
9.6 RESIGNATION OF AGENT AND APPOINTMENT OF SUCCESSOR AGENT. Subject to
the appointment and acceptance of a successor Agent, as provided in this
paragraph, the Agent may resign at any time by notifying the Lenders, the
Issuing Lender and the Borrower. Upon any such resignation, the Required
Lenders shall have the right, in consultation with the Borrower,
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to appoint a successor Agent. If no successor shall have been so appointed
and shall have accepted such appointment within 30 days after such retiring
Agent gives notice of its resignation, then such retiring Agent may, on
behalf of the Lenders and the Issuing Lender, appoint a successor Agent,
which shall be a bank with an office in Boston, Massachusetts or New York,
New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Agent, by a successor, such successor shall succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents. The fees
payable by the Borrower to a successor Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrower and
such successor. After an Agent's resignation hereunder, the provisions of
this Article and Section 10.3 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
9.7 LENDERS' INDEPENDENT DECISIONS. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Issuing Lender or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent, the Issuing Lender or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement and the other Loan Documents, any related
agreement or any document furnished hereunder or thereunder. Except as
explicitly provided herein, the Agent has no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect to such operations, business, property, condition
or creditworthiness, whether such information comes into its possession on or
before the first Event of Default or at any time thereafter.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. Except in the case of notices and other communications
expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
(a) if to any Credit Party, to 64 Inverness Drive East, Englewood,
Colorado 80112 Attention of Mark J. Boggess (Telecopy No. (303) 792-7322);
(b) if to the Agent, to Fleet National Bank, One Federal Street, Mail Stop
MA OF SO3C, Boston, Massachusetts 02110, Attention of Mark A. Siegel (Telecopy
No. (617) 346-4806), with a copy to Fleet National Bank, 56 East 42nd Street,
Third Floor, New York, New York 10017, Attention of Alexander Sade, Sr.
(Telecopy No. (212) 907-5637), with
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an additional copy to Palmer & Dodge LLP, One Beacon Street, Boston,
Massachusetts 02108, Attention of George Ticknor (Telecopy No. 617-227-4420);
and
(c) if to any Lender (including to Fleet in its capacity as the Issuing
Lender), to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
10.2 WAIVERS; AMENDMENTS.
(a) No failure or delay by the Agent, the Issuing Lender or any Lender in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agent, the Issuing Lender and
the Lenders hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by any Credit Party therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this
Section 10.2, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Agent, any Lender or the Issuing Lender may have had notice or knowledge of
such Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrower and the Required Lenders or by the Borrower and the Agent
with the consent of the Required Lenders; PROVIDED that no such agreement shall:
(i) increase the Commitment of any Lender without the written consent
of such Lender;
(ii) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby;
(iii) postpone the scheduled date of payment of the principal
amount of any Loan or LC Disbursement, or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, or
postpone the ultimate expiration date of any Letter of Credit beyond the
Revolving Credit Maturity Date, without the written consent of each Lender
affected thereby;
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(iv) change Section 2.9 in a manner that would alter the application
of prepayments thereunder, or change Section 2.16(b), (c) or (d) in a
manner that would alter the pro rata sharing of payments required thereby,
without in each case the written consent of each Lender;
(v) alter the rights or obligations of the Borrower to prepay Loans
without the written consent of each Lender;
(vi) change any of the provisions of this Section 10.2 or the
definition of "Required Lenders", "Required Revolving Credit Lenders", or
"Required Term Loan Lenders", or any other provision hereof specifying the
number or percentage of Lenders required to waive, amend or modify any
rights hereunder or under any other Loan Document or make any determination
or grant any consent hereunder or thereunder, without the written consent
of each Lender;
(vii) release any of the Guarantors from their obligations in
respect of its Guarantee under Article III, without the written consent of
each Lender; or
(viii) waive any of the conditions precedent specified in Section 5.1;
PROVIDED FURTHER that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Agent or the Issuing Lender hereunder without the
prior written consent of the Agent or the Issuing Lender, as the case may be.
(c) Anything in this Agreement to the contrary notwithstanding, no waiver
or modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrower to satisfy a
condition precedent to the making of Revolving Credit Loans or Term Loans shall
be effective against the Revolving Credit Lenders or Term Loan Lenders,
respectively, unless the Required Revolving Credit Lenders or Required Term Loan
Lenders, respectively, shall have concurred with such waiver or modification.
(d) None of the Collateral Documents nor any provision thereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Credit Parties party thereto, and by the Agent with
the consent of the Required Lenders, PROVIDED that, without the prior consent of
each Lender, the Agent shall not (except as provided herein or in the Collateral
Documents) release any collateral or otherwise terminate any Lien under the
Collateral Documents, agree to additional obligations being secured by such
collateral (unless the Lien for such additional obligations shall be junior to
the Lien in favor of the other obligations secured by the Collateral Documents,
in which event the Agent may consent to such junior Lien PROVIDED that it
obtains the consent of the Required Lenders thereto), or alter the relative
priorities of the obligations entitled to the benefits of the Liens created
under the Collateral Documents, except that no such consent shall be required,
and the Agent is hereby authorized, to release any Lien covering property that
is the subject of either a disposition of property permitted hereunder or a
disposition to which the Required Lenders have consented.
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10.3 EXPENSES; INDEMNITY: DAMAGE WAIVER.
(a) The Credit Parties jointly and severally agree to pay, or reimburse
the Agent or Lenders for paying, (i) all reasonable out-of-pocket expenses
incurred by the Agent and its Affiliates, including the reasonable fees, charges
and disbursements of Special Counsel, in connection with the syndication of the
credit facilities provided for herein, the preparation of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket expenses
incurred by the Issuing Lender in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder, (iii) all out-of-pocket expenses incurred by the Agent, the Issuing
Lender or any Lender, including the fees, charges and disbursements of any
counsel for such Agent, Issuing Lender or Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement and
the other Loan Documents, including its rights under this Section 10.3, or in
connection with the Loans made or Letters of Credit issued hereunder, including
in connection with any workout, restructuring or negotiations in respect
thereof, and (iv) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein.
(b) The Credit Parties jointly and severally agree to indemnify the Agent,
the Issuing Lender and each Lender, and each Related Party of any of the
foregoing Persons (each such Person being called an "INDEMNITEE") against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, the other Loan Documents or any
agreement or instrument contemplated hereby, the performance by the parties
hereto and thereto of their respective obligations hereunder or thereunder or
the consummation of the Transactions or any other transactions contemplated
hereby or thereby, (ii) any Loan or Letter of Creditor the use of the proceeds
there from (including any refusal by the Issuing Lender to honor a demand for
payment under a Letter of Credit if the documents presented in connection with
such demand do not strictly comply with the terms of such Letter of Credit),
(iii) any actual or alleged presence or release of Hazardous Materials on or
from any property owned or operated by any Credit Party or any of their
subsidiaries, or any Environmental Liability related in any way to any Credit
Party or any of their subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; PROVIDED that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (are determined by a court of competent
jurisdiction by final and nonappealable judgment to have) resulted from the
gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Credit Parties fail to pay any amount required
to be paid by them to the Agent under paragraph (a) or (b) of this Section 10.3,
each Lender severally
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agrees to pay to the Agent such Lender's Applicable Percentage (determined as
of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount; PROVIDED that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Agent in its capacity as
such. To the extent that the Credit Parties fail to pay any amount required
to be paid by them to the Issuing Lender under paragraph (a) or (b) of this
Section 10.3, each Revolving Credit Lender severally agrees to pay to the
Issuing Lender such Lender's Applicable Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount; PROVIDED that the unreimbursed expense or indemnified
loss, claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against the Agent in its capacity as such.
(d) To the extent permitted by applicable law, none of the Credit
Parties shall assert, and each Credit Party hereby waives, any claim against
any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, the
other Loan Documents or any agreement or instrument contemplated hereby or
thereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section 10.3 shall be payable promptly
after written demand therefor.
10.4 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that no Credit Party may assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by any Credit Party
without such consent shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Agent, the Issuing Lender and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); PROVIDED that
(i) except in the case of an assignment to a Lender or an Affiliate
of a Lender, the Agent (and, in the case of an assignment of all or a
portion of a Commitment or any Lender's obligations in respect of its LC
Exposure, the Issuing Lender) must give its prior written consent to such
assignment (which consent shall not be unreasonably withheld), and the
respective assigning Lender must have consulted with the Borrower regarding
such assignment,
(ii) except in the case of an assignment to a Lender or an Affiliate
of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Commitment,
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the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Agent) shall not be less
than $5,000,000 unless each of the Borrower and the Agent otherwise
consent,
(iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations
under this Agreement,
(iv) the parties to each assignment shall execute and deliver to the
Agent an Assignment and Acceptance, together with a processing and
recordation fee of $3,500, and
(v) the assignee, if it shall not be a Lender, shall deliver to the
Agent an Administrative Questionnaire;
PROVIDED FURTHER that any consent of the Borrower otherwise required under this
paragraph shall not be required if an Event of Default under clause (g) or (h)
of Section 8.1 has occurred and is continuing.
(c) Upon acceptance and recording pursuant to paragraph (e) of this
Section 10.4, from and after the effective date specified in each Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the 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 2.13,
2.14, 2.15 and 10.3). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with paragraph (b) of this
Section 10.4 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (f) of this Section.
(d) The Agent, acting for this purpose as an agent of the Borrower, shall
maintain at one of its offices in Boston, Massachusetts a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans and LC Disbursements owing to, each Lender pursuant to the
terms hereof from time to time (the "REGISTER"). The entries in the Register
shall be conclusive, and the Borrower, the Agent, the Issuing Lender and the
Lenders may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower, the Issuing Lender and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section 10.4 and any written consent to such assignment required by
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paragraph (b) of this Section 10.4, the Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(f) Any Lender may, without the consent of the Borrower, the Agent or the
Issuing Lender, sell participations to one or more banks or other entities (a
"PARTICIPANT") in all or a portion of such Lender's rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans owing
to it); PROVIDED that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the Borrower,
the Agent, the Issuing Lender 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. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; PROVIDED that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 10.2(b), or the first proviso to
Section 10.2(c), that affects such Participant. Subject to paragraph (g) of
this Section 10.4, the Borrower agrees that each Participant shall be entitled
to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were
a Lender and had acquired its interest by assignment pursuant to paragraph (b)
of this Section 10.4.
(g) A Participant shall not be entitled to receive any greater payment
under Section 2.13 or 2.15 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were
a Lender shall not be entitled to the benefits of Section 2.15 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.15(e) as though it were a Lender.
(h) Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including any such pledge or assignment to a Federal Reserve Bank, and
this Section shall not apply to any such pledge or assignment of a security
interest; PROVIDED that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
(i) Anything in this Section 10.4 to the contrary notwithstanding, no
Lender may assign or participate any interest in any Loan held by it hereunder
to any Credit Party or any of its Affiliates or Subsidiaries without the prior
consent of each Lender.
10.5 SURVIVAL. All covenants, agreements, representations and warranties
made by the Credit Parties herein and in the other Loan Documents, and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement and the other Loan Documents, shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the other Loan Documents and the
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making of any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and
notwithstanding that the Agent, the Issuing Lender or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force
and effect so long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement or the other Loan
Documents is outstanding and unpaid or any Letter of Credit is outstanding
and so long as the Commitments have not expired or terminated. The
provisions of Sections 2.13, 2.14, 2.15 and 10.3 and Article IX shall survive
and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration
or termination of the Letters of Credit and the Commitments or the
termination of this Agreement or any other Loan Document or any provision
hereof or thereof.
10.6 COUNTERPARTS; INTEGRATION; REFERENCES TO AGREEMENT; EFFECTIVENESS.
This Agreement may be executed in counterparts (and by different parties hereto
on different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract. This Agreement
and any separate letter agreements with respect to fees payable to the Agent
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Whenever there is a reference
in any Collateral Document or UCC Financing Statement to the "Credit Agreement"
to which the Agent, the Lenders and the Credit Parties are parties, such
reference shall be deemed to be made to this Agreement among the parties hereto,
including the Documentary Agent. Except as provided in Section 5.1, this
Agreement shall become effective when it shall have been executed by the Agent
and when the Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
10.7 SEVERABILITY. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
10.8 RIGHT OF SETOFF. If an Event of Default shall have occurred and be
continuing, each Lender is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any of and all the obligations of
the Borrower now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each
Lender under this Section 10.8 are in addition to any other rights and remedies
(including other rights of setoff) which such Lender may have.
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10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) This Agreement shall be construed in accordance with and governed by
the law of the Commonwealth of Massachusetts.
(b) Each party hereto hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the courts of the
Commonwealth of Massachusetts and of the United States District Court for the
District of Massachusetts, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
Massachusetts court (or, to the extent permitted by law, in such Federal court).
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Agent, the Issuing Lender or any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement against any Credit Party or its properties in the courts of any
jurisdiction.
(c) Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any court referred to in paragraph (b) of this Section 10.9. Each
of the parties hereto hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
10.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEER
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10.
10.11 HEADINGS. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
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10.12 RELEASE OF COLLATERAL AND GUARANTEES. The Agent and the Lenders
agree that if all of the capital stock of any Restricted Subsidiary that is
owned by the Credit Parties is sold to any Person as permitted by the terms of
this Agreement and the Collateral Documents, or if any Restricted Subsidiary is
merged or consolidated with or into any other Person as permitted by the terms
of this Agreement and such Restricted Subsidiary is not the continuing or
surviving corporation, the Agent shall, upon request of the Borrower (and upon
the receipt by the Agent of such evidence as the Agent or any Lender may
reasonably request to establish that such sale, designation, merger or
consolidation is permitted by the terms of this Agreement), terminate the
Guarantee of such Restricted Subsidiary under Article III and authorize the
Agent to release the Lien created by the Collateral Documents on any capital
stock of such Restricted Subsidiary.
10.13 SUCCESSOR FACILITY. This Agreement is intended to be a successor
to the Existing Credit Agreements and to constitute the "Credit Facility" under
and for all purposes of the Senior Subordinated Notes Indenture and the "Senior
Credit Facility" under and for all purposes of the Holding Company Note
Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER
AFFINITY GROUP, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
RESTRICTED SUBSIDIARIES/GUARANTORS
A - B DEVELOPMENT CO.
By: AGI PROPERTIES OF COLORADO, INC., a
General Partner
By
------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
AFFINITY BROKERAGE, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
AFFINITY ROAD AND TRAVEL CLUB, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
AGI PROPERTIES OF COLORADO, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
S-1
<PAGE>
CAMP COAST TO COAST, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
CAMPING REALTY, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
CAMPING WORLD, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
CWI, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
CW MICHIGAN, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
CW TEXAS, LP
By: AFFINITY GROUP, INC., its General
Partner
By
------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
S-2
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EHLERT PUBLISHING GROUP, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
EXPOSITIONS GROUP, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
GOLF CARD HOLDING CORPORATION
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
GOLF CARD INTERNATIONAL CORP.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
GOLF CARD RESORT SERVICES, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
GSS ENTERPRISES, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
S-3
<PAGE>
NATIONAL ASSOCIATION FOR FEMALE
EXECUTIVES, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
TL ENTERPRISES, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
VBI, INC.
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
WOODALL PUBLICATIONS CORPORATION
By
--------------------------------------
Name: Mark J. Boggess
Title: Senior Vice President
AGENT
FLEET NATIONAL BANK,
as Agent
By
--------------------------------------
Name:
Title:
S-4
<PAGE>
DOCUMENTARY AGENT
THE PROVIDENT BANK,
as Documentary Agent
By
--------------------------------------
Name:
Title:
LENDERS
FLEET NATIONAL BANK
By
--------------------------------------
Name:
Title:
THE PROVIDENT BANK
By
--------------------------------------
Name:
Title:
The following have become parties to this Agreement as of the date set
forth next to their respective signatures:
ADDITIONAL RESTRICTED SUBSIDIARIES
/GUARANTORS
----------------------------------------
Dated: By
---------------------- --------------------------------------
Name:
Title:
S-5
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SCHEDULE 2.1
Commitments
REVOLVING CREDIT TERM LOAN
LENDER COMMITMENT COMMITMENT
- ------ ---------------- -----------
FLEET NATIONAL BANK $33,000,000 $22,000,000
THE PROVIDENT BANK $12,000,000 $ 8,000,000
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TOTAL: $45,000,000 $30,000,000
----------- -----------
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