<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-26742
GT BICYCLES, INC.
(Exact name of the registrant as specified in its charter)
Delaware 04-3210830
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 East Dyer Road, Santa Ana, California 92705
(Address of principal executive offices)
(714) 481-7100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class Outstanding at August 10, 1998
----- ------------------------------
Common Stock, $0.001 par value 9,856,463
<PAGE> 2
GT BICYCLES, INC.
INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
three and six month periods ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GT BICYCLES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS (NOTE 3) 1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
Current assets:
Cash $ 224 $ 588
Trade accounts receivable, net 53,260 52,418
Inventories (note 2) 72,447 80,985
Prepaid expenses and other current assets 4,137 3,098
Income taxes receivable 92 --
Deferred income taxes 1,646 1,646
--------- ---------
Total current assets 131,806 138,735
Property, plant and equipment, net 13,141 12,833
Goodwill and other intangibles, net 19,386 19,920
Other assets 933 1,161
Restricted cash from issuance of industrial development bonds 2,875 3,607
Deferred income taxes 25 25
--------- ---------
Total Assets $ 168,166 $ 176,281
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (note 3) $ 5,528 $ 92,883
Current portion of capital lease obligations 447 462
Accounts payable 8,651 11,915
Accrued liabilities 6,332 4,310
Income taxes payable -- 463
--------- ---------
Total current liabilities 20,958 110,033
Long-term debt, net of current portion (note 3) 84,537 4,438
Capital lease obligations, net of current portion 208 407
--------- ---------
Total liabilities 105,703 114,878
--------- ---------
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
none issued -- --
Common stock, $0.001 par value, 20,000,000 shares authorized,
9,847,221 and 9,820,152 shares issued and outstanding
at June 30, 1998 and December 31, 1997, respectively 10 10
Additional paid-in-capital 47,432 47,182
Retained earnings 15,091 14,608
Accumulated other comprehensive income (70) (397)
--------- ---------
Total stockholders' equity 62,463 61,403
--------- ---------
Total Liabilities and Stockholders' Equity $ 168,166 $ 176,281
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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GT BICYCLES, INC.
CONDENSED CONSLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 57,655 $ 50,769 $108,820 $101,939
Cost of sales 41,742 36,972 78,496 74,367
-------- -------- -------- --------
Gross profit 15,913 13,797 30,324 27,572
Selling, general and administrative expenses 13,044 11,948 25,399 22,943
-------- -------- -------- --------
Operating income 2,869 1,849 4,925 4,629
Interest expense 2,178 1,405 4,134 2,791
-------- -------- -------- --------
Income before taxes 691 444 791 1,838
Provision for income taxes 291 160 308 738
-------- -------- -------- --------
Net income $ 400 $ 284 $ 483 $ 1,100
======== ======== ======== ========
Earnings per share:
Basic $ 0.04 $ 0.03 $ 0.05 $ 0.11
======== ======== ======== ========
Diluted $ 0.04 $ 0.03 $ 0.05 $ 0.11
======== ======== ======== ========
Weighted average common and common equivalent shares:
Basic 9,840 9,797 9,833 9,793
======== ======== ======== ========
Diluted 9,925 9,909 9,919 9,922
======== ======== ======== ========
</TABLE>
4
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GT BICYCLES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 483 $ 1,100
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 1,723 1,080
Provision for doubtful accounts 392 120
Foreign currency translation adjustment 327 (308)
Changes in assets and liabilities:
Trade accounts receivable (1,234) 4,636
Inventories 8,538 7,179
Prepaid expenses and other current assets (1,039) (525)
Restricted cash and other assets 960 (231)
Accounts payable (3,264) 30
Accrued and other liabilities 2,022 282
Income taxes receivable/payable (555) (454)
-------- --------
Net cash provided by operating activities 8,353 12,909
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,497) (4,491)
Additional investment in subsidiary -- (713)
-------- --------
Net cash used in investing activities (1,497) (5,204)
-------- --------
Cash flows from financing activities:
Net repayments under revolving lines of credit (14,107) (5,548)
Borrowings under new term loan 20,000 --
Retirement of previous term loan (10,625) --
Principal payments on term loans and other debt (2,524) (2,125)
Principal payments on capital lease obligations (214) (182)
Proceeds from issuance of common stock and stock warrants 250 150
-------- --------
Net cash used in financing activities (7,220) (7,705)
-------- --------
Change in cash and cash equivalents (364) --
Cash and cash equivalents at beginning of period 588 --
-------- --------
Cash and cash equivalents at end of period $ 224 $ --
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 4,163 $ 2,823
======== ========
Income taxes $ 863 $ 1,219
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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GT BICYCLES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------
Principles of Consolidation
- ---------------------------
The condensed consolidated financial statements of GT Bicycles, Inc. (the
"Company") include the wholly-owned subsidiaries, GT Bicycles California, Inc.,
GT BMX Products, Inc., Riteway Distributors, Inc., Riteway Distributors Central,
Inc., Riteway Products East, Inc., Riteway Products North Central, Inc., Riteway
Products Japan K.K. ("Riteway Japan"), Riteway Products France S.A.R.L.
("Riteway France") and Caratti Sport Limited ("Caratti"), as well as the
majority-owned subsidiaries, Innovations in Composites, Inc. ("Innovations") and
Riteway Products Canada Limited ("Riteway Canada"). Investments in affiliates,
for which the Company has an ownership interest of at least 20% but not
exceeding 50%, are recorded under the equity method of accounting.
The Company held a 45% ownership interest in Innovations from 1993 through June
1997. In July 1997, the Company increased its ownership level in Innovations to
57% through the purchase of additional common shares. At that date, the Company
changed its method of accounting for Innovations from the equity method to
consolidation. Riteway Canada was formed in September 1997 as an 85%-owned
subsidiary of the Company. The interest of minority shareholders in the equity
of Innovations and Riteway Canada is included in accrued liabilities on the
accompanying balance sheets and their interest in the earnings of these entities
is included in selling, general and administrative expenses on the accompanying
statement of operations; such amounts were not material in the periods
presented.
All significant intercompany balances and transactions are eliminated in
consolidation.
Foreign Currency Translation
- ----------------------------
The Company uses the local currency of the respective country as the functional
currency for its overseas operations. Accordingly, assets and liabilities
outside the United States were translated into dollars at the rate of exchange
in effect at the balance sheet date. Income and expense items were translated at
the weighted average exchange rates prevailing during the period. The cumulative
translation gain or loss is included as a component of accumulated other
comprehensive income. There were no significant foreign currency transaction
gains or losses in the periods presented.
Earnings per Share
- ------------------
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"), which
replaces the former primary and fully-diluted earnings per share with basic and
diluted earnings per share. All earnings per share amounts have been restated to
conform with the SFAS No. 128 presentation. In each of the periods ended June
30, 1998 and 1997, the difference in weighted average shares used in the
calculation of basic and diluted earnings per share is solely attributable to
the incremental shares resulting from the assumed exercise of dilutive stock
options and warrants.
Reporting Comprehensive Income
- ------------------------------
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), which
establishes new rules for the reporting and display of comprehensive income and
its components. Annual financial statements will be reclassified as required.
6
<PAGE> 7
A summary of the Company's comprehensive income follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------- --------------------
1998 1997 1998 1997
------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 400 $ 284 $ 483 $ 1,100
Foreign currency translation adjustment 189 (193) 327 (308)
------- ------- ------- -------
Comprehensive income $ 589 $ 91 $ 810 $ 792
======= ======= ======= =======
</TABLE>
Unaudited Condensed Consolidated Financial Statements
- -----------------------------------------------------
The unaudited condensed consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All such
adjustments are, in the opinion of management, of a normal recurring nature.
Results for the three and six month periods ended June 30, 1998 are not
necessarily indicative of the operating results to be expected for the full
year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended December 31, 1997.
(2) INVENTORIES
- ---------------
A summary of the components of inventories follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- -------
(in thousands)
<S> <C> <C>
Raw materials $ 709 $ 678
Work in process 2,901 3,124
Finished goods and component parts 68,837 77,183
------- -------
$72,447 $80,985
======= =======
</TABLE>
7
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(3) LONG-TERM DEBT
- ------------------
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Domestic revolving credit facility with bank and
bank affiliate $ 46,234 $ 65,490
Other domestic revolving credit facility 3,000 --
Domestic term loan 18,750 11,688
Caratti revolving credit facility 10,213 10,149
Riteway France revolving credit facility 3,026 3,280
Riteway Japan revolving credit facility 1,285 1,761
Riteway Canada revolving credit facility 2,815 --
Industrial development bonds payable 4,677 4,888
Promissory note payable 65 65
-------- --------
90,065 97,321
Less current portion (5,528) (92,883)
-------- --------
$ 84,537 $ 4,438
======== ========
</TABLE>
During 1998, the Company refinanced its borrowings on a long-term basis, as
described below. Accordingly, the revolving credit facilities, the portion of
the term loan which does not mature within one year, and the promissory note
payable have been classified as noncurrent liabilities at June 30, 1998.
In April 1998, the Company entered into a new domestic revolving credit facility
with an affiliate of its existing bank. The facility expires in April 2001 and
is secured by substantially all of the Company's assets. The facility provides
for maximum borrowings and letters of credit equal to the lesser of $75.0
million or the Company's borrowing base associated with accounts receivable and
inventories, as defined by the agreement. The amount individually available
under commercial and standby letters of credit is $15.0 million. The Company has
the option to pay interest on borrowings at the bank's reference rate plus the
applicable margin (as defined in the agreement) or LIBOR plus the applicable
margin (as defined in the agreement); such interest rates may decrease in the
future if the Company meets certain financial ratio criteria. The weighted
average interest rate on the facility was 8.22% at June 30, 1998. The Company
must pay a monthly commitment fee equal to .25% per annum on the unused amount
of the $75.0 million maximum available credit. The agreement requires that the
Company maintain certain financial ratios and other covenants, which, among
other things, restrict other indebtedness, capital expenditures and certain
investments.
Also in April 1998, the Company entered into an unsecured revolving credit
facility with another financial institution. This facility, which expires in
October 1999, provides for maximum borrowings of $3.0 million. Interest is based
on specified commercial paper rates plus the applicable margin (as defined in
the agreement). The interest rate on the facility was 8.05% at June 30, 1998.
The previous domestic term loan was replaced by a $20.0 million term loan with
the Company's existing bank. The new loan requires quarterly principal payments
of $1.3 million through June 1999 with a final balloon payment of the remaining
principal in July 1999. The Company has the option to pay interest on borrowings
at the bank's reference rate plus the applicable margin (as defined in the
agreement) or LIBOR plus the applicable margin (as defined in the agreement).
The interest rate on the term loan was 9.63% at June 30, 1998. In addition, in
connection with the term loan, the Company issued a warrant which gives the bank
the right to purchase 525,765 shares of the Company's common stock at $6.58 per
share, which represented the average of the closing prices of the Company's
common stock on the Nasdaq market during a specified period in January 1998. The
warrant becomes exercisable based on the following schedule: one-third on
September 1, 1998, one-third on December 1, 1998 and one-third on March 1, 1999,
8
<PAGE> 9
provided that the Company has not yet repaid the term loan in full as of such
dates. During the second quarter, the Company accrued $0.1 million of expense to
reflect a pro rata portion of the estimated fair value of these warrants.
The Company also extended the Caratti facility with an affiliate of its existing
bank. This facility expires in April 2001 and provides for maximum borrowings
and letters of credit equal to the lesser of Pound Sterling 10.0 million
(approximately US$16.5 million) or Caratti's borrowing base associated with
accounts receivable and inventories, as defined in the agreement. The interest
rate on the facility was 9.31% at June 30, 1998.
In connection with the extension of the domestic facility, the Company's
separate revolving credit facilities for Riteway France and Riteway Japan were
also extended to April 2001 and the maximum borrowings under each facility were
increased to $4.0 million.
In February 1998, Riteway Canada entered into a revolving credit facility with a
Canadian bank. This facility, which expires in February 2000, provides for
maximum borrowings equal to the lesser of C$9.0 million (approximately US$6.3
million) or Riteway Canada's borrowing base associated with accounts receivable
and inventories, as defined in the agreement. Interest is payable monthly at the
bank's prime rate plus the applicable margin (as defined in the agreement). The
interest rate on the facility was 7.75% at June 30, 1998.
(4) PRODUCT RECALL
- ------------------
In March 1998, the Company voluntarily initiated a product recall which involves
approximately 10,000 aluminum juvenile BMX bicycles and frames manufactured and
sold during the years 1995 to 1998. The recall, which is being conducted in
cooperation with the Consumer Products Safety Commission, includes certain GT
Speed Series and Robinson bicycles and frames. The problem involves cracking in
the frames when the bicycles are subjected to the jumps and other stresses of
today's more aggressive BMX riding. The Company has discontinued the use of
these frames and has designed a significantly stronger frame for use on these
BMX bicycles. The Company has made public press announcements in order to make
consumers aware of the recall, and has also instituted a program whereby
independent bicycle dealers are instructed to contact affected consumers (as
required by their dealer agreements) and install upgraded replacement frames
provided by the Company. It is not possible to predict the actual number of
frames which will be returned, but of those returns which are to be received, it
is expected that the significant majority will occur by the end of 1998 and any
remaining returns will occur within two years. To date, approximately 3,500
frames have been returned. The total cost incurred with respect to this recall
is approximately $0.5 million and $0.7 million in the quarter and six months
ended June 30, 1998; such amounts are included in cost of sales in the
accompanying financial statements.
(5) AGREEMENT TO MERGE WITH SCHWINN HOLDINGS CORPORATION
- --------------------------------------------------------
On June 22, 1998, the Company entered into an Agreement and Plan of Merger by
and among the Company, Schwinn Holdings Corporation, a Delaware corporation, and
SPK Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Schwinn Holdings Corporation. Pursuant to the terms of the
Agreement and Plan of Merger, SPK Acquisition Corporation will merge with and
into the Company resulting in the Company becoming a wholly-owned subsidiary of
Schwinn Holdings Corporation. Upon the completion of the merger, the Company's
stockholders will receive $8.00 in cash for each share of the Company's common
stock they own. The Company currently anticipates that a stockholders' meeting
will be held in September 1998, and assuming the stockholders approve the
merger, the transaction will be consummated shortly thereafter.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
GENERAL
GT Bicycles, Inc. (the "Company") is a leading designer, manufacturer and
marketer of mid-to- premium-priced mountain and juvenile BMX bicycles sold under
the Company's brand names. The Company's Riteway Products and Caratti
distribution network is a leading distributor of the Company's bicycles, parts
and accessories, and parts and accessories of other manufacturers, to
independent bicycle dealers.
RESULTS OF OPERATIONS
Net Sales. Net sales for both the quarter and the six months ended June 30, 1998
increased $6.9 million over the corresponding prior-year periods. This
represents a 14% increase for the quarter and a 7% increase for the six months.
For the quarter, domestic sales increased $2.4 million and foreign sales
increased $4.5 million, while for the six months, domestic sales increased $3.2
million and foreign sales increased $3.7 million. The increases in domestic
sales resulted from higher shipments of adult and juvenile bicycles as well as
parts and accessories. The increase in foreign sales for the quarter was
attributable to both higher shipments by the Company's subsidiaries in Canada,
France, Japan and the United Kingdom as well as higher shipments to the
Company's independent foreign distributors. For the six months, the increase was
entirely attributable to higher shipments by the aforementioned Company
subsidiaries. Shipments to independent foreign distributors during the six-month
period ended June 30, 1998 were lower than in 1997 as the stronger U.S. dollar
adversely affected orders from Europe, where distributors could not pass on
currency-related higher prices to their customers.
Gross Profit. Gross profit, as a percentage of net sales, increased to 27.6% and
27.9%, respectively, in the quarter and six-month period ended June 30, 1998
compared with 27.2% and 27.0% in the corresponding periods of 1997. The
increases primarily reflected the favorable effect of Asian foreign currency
exchange rates on product costs, improved sourcing and a better business
environment which resulted in less pricing pressure. Partially offsetting these
factors were $0.5 million and $0.7 million, respectively, in the quarter and six
months ended June 30, 1998 of costs incurred in connection with the Company's
recall of certain aluminum juvenile BMX bicycles and frames.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses, including amortization of intangibles ("SG&A"), for the
quarter and six months ended June 30, 1998 increased by $1.1 million (9%) and
$2.5 million (11%), respectively, over the corresponding prior-year periods. As
a percentage of net sales, SG&A was 22.6% and 23.3% of net sales in the quarter
and six months, respectively, compared with 23.5% and 22.5% in the corresponding
prior year periods. For the quarter, the increase primarily consisted of $0.9
million of higher expenses associated with the Company's foreign subsidiaries in
France, Japan and the United Kingdom, $0.4 million of expenses incurred at
Riteway Canada and Innovations, which were not consolidated during the second
quarter last year, and $0.3 million of higher U.S. marketing and advertising
expenses to promote brand equity. For the six months, the increase consisted of
$1.3 million of higher expenses associated with the aforementioned foreign
subsidiaries, $0.8 million incurred at Riteway Canada and Innovations, $0.7
million of higher U.S. marketing and advertising expenses, and $0.7 million of
higher U.S. administrative and product development expenses. Partially
offsetting these increases were approximately $0.7 million and $1.0 million,
respectively, of relocation expenses incurred during the second quarter and
first six months of 1997 in connection with the Company's move to the new Santa
Ana facility.
Interest Expense. Interest expense for the quarter and six months ended June 30,
1998 increased by $0.8 million and $1.3 million, respectively, in comparison
with the corresponding 1997 periods. These increases were principally due to a
combination of higher borrowings under the Company's revolving bank credit
agreements and term loan and a higher effective interest rate on such
borrowings. Additionally, the Company recorded $0.1 million of expense during
the second quarter of 1998 in connection with the issuance of stock warrants to
its bank as part of the loan restructuring described in "Liquidity and Capital
10
<PAGE> 11
Resources" below. Based on expected borrowing levels and interest rates under
the Company's new bank facilities, the Company anticipates that interest expense
for the remainder of 1998 will exceed 1997 interest expense.
Income Taxes. The Company's effective tax rate was 42.1% and 38.9%,
respectively, in the quarter and six months ended June 30, 1998, compared with
36.1% and 40.2% in the corresponding 1997 periods. The fluctuations in these
rates primarily reflect differences in the mix of domestic and foreign earnings
in the respective periods.
LIQUIDITY AND CAPITAL RESOURCES
In April 1998, the Company entered into a new domestic revolving credit facility
with an affiliate of its existing bank. The facility expires in April 2001 and
is secured by substantially all of the Company's assets. The facility provides
for maximum borrowings and letters of credit equal to the lesser of $75.0
million or the Company's borrowing base associated with accounts receivable and
inventories, as defined by the agreement. The amount individually available
under commercial and standby letters of credit is $15.0 million. The Company has
the option to pay interest on borrowings at the bank's reference rate plus the
applicable margin (as defined in the agreement) or LIBOR plus the applicable
margin (as defined in the agreement); such interest rates may decrease in the
future if the Company meets certain financial ratio criteria. The weighted
average interest rate on the facility was 8.22% at June 30, 1998. The Company
must pay a monthly commitment fee equal to .25% per annum on the unused amount
of the $75.0 million maximum available credit. The agreement requires that the
Company maintain certain financial ratios and other covenants, which, among
other things, restrict other indebtedness, capital expenditures and certain
investments.
Also in April 1998, the Company entered into an unsecured revolving credit
facility with another financial institution. This facility, which expires in
October 1999, provides for maximum borrowings of $3.0 million. Interest is based
on specified commercial paper rates plus the applicable margin (as defined in
the agreement). The interest rate on the facility was 8.05% at June 30, 1998.
The previous domestic term loan was replaced by a $20.0 million term loan with
the Company's existing bank. The new loan requires quarterly principal payments
of $1.3 million through June 1999 with a final balloon payment of the remaining
principal in July 1999. The Company has the option to pay interest on borrowings
at the bank's reference rate plus the applicable margin (as defined in the
agreement) or LIBOR plus the applicable margin (as defined in the agreement).
The interest rate on the term loan was 9.63% at June 30, 1998. In addition, in
connection with the term loan, the Company issued a warrant which gives the bank
the right to purchase 525,765 shares of the Company's common stock at $6.58 per
share, which represented the average of the closing prices of the Company's
common stock on the Nasdaq market during a specified period in January 1998. The
warrant becomes exercisable based on the following schedule: one-third on
September 1, 1998, one-third on December 1, 1998 and one-third on March 1, 1999,
provided that the Company has not yet repaid the term loan in full as of such
dates. During the second quarter, the Company accrued $0.1 million of expense to
reflect a pro rata portion of the estimated fair value of these warrants.
The Company also extended the Caratti facility with an affiliate of its existing
bank. This facility expires in April 2001 and provides for maximum borrowings
and letters of credit equal to the lesser of Pound Sterling 10.0 million
(approximately US$16.5 million) or Caratti's borrowing base associated with
accounts receivable and inventories, as defined in the agreement. The interest
rate on the facility was 9.31% at June 30, 1998.
In connection with the extension of the domestic facility, the Company's
separate revolving credit facilities for Riteway France and Riteway Japan were
also extended to April 2001 and the maximum borrowings under each facility were
increased to $4.0 million.
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<PAGE> 12
In February 1998, Riteway Canada entered into a revolving credit facility with a
Canadian bank. This facility, which expires in February 2000, provides for
maximum borrowings equal to the lesser of C$9.0 million (approximately US$6.3
million) or Riteway Canada's borrowing base associated with accounts receivable
and inventories, as defined in the agreement. Interest is payable monthly at the
bank's prime rate plus the applicable margin (as defined in the agreement). The
interest rate on the facility was 7.75% at June 30, 1998.
The Company's operating activities provided cash of $8.4 million and $12.9
million in the six months ended June 30, 1998 and 1997, respectively. This $4.5
million decrease is primarily related to a difference in receivables, which
decreased by $4.6 million during the first six months of 1997 and increased by
$1.2 million during the first six months of 1998. The higher receivables balance
at June 30, 1998 is principally due to the $6.9 million increase in sales from
the second quarter of 1997 to the second quarter of 1998. The Company's capital
expenditures of $1.5 million in the six months ended June 30, 1998 were less
than the $5.2 million of capital expenditures in the corresponding 1997 period.
During the first six months of 1997, the Company acquired leasehold improvements
and equipment for the Company's new Santa Ana facility. In both 1998 and 1997,
excess cash was used to pay down the Company's borrowings under its revolving
bank lines of credit.
The Company anticipates that it will continue to rely on bank credit, vendor
credit and cash generated from operations in order to finance anticipated higher
inventory and accounts receivable levels. The Company believes that the
restructured financing described above will be sufficient to satisfy the
Company's working capital and capital expenditure requirements through
approximately the next 12 months.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which establishes
standards for reporting financial and descriptive information about an
enterprise's operating segments in its annual financial statements and selected
segment information in interim financial reports. SFAS No. 131 becomes effective
for the Company's 1998 annual financial statements and for its 1999 interim
financial statements. Restatement of comparative prior-year financial statements
will be required in the periods in which the Company first applies SFAS No. 131.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The Statement established accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. The Statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. Application of the Statement is not expected to have a material impact on
the Company's consolidated financial position, results of operations, or
liquidity.
YEAR 2000
The Company has performed a preliminary examination of its major software
applications to determine whether each system is prepared to accommodate the
year 2000. This examination included a review of program code which is
maintained by the Company as well as obtaining confirmation from outside
software vendors that their products are year 2000 compliant. The Company
believes that, based on its current examination, the year 2000 will not have a
material adverse impact on the Company's operations and that the costs to
accommodate the year 2000 will not be material. However, there can be no
assurance that software incompatibility with the year 2000 on the part of the
Company or any of its significant suppliers will not cause an interruption of
operations or other limitations of system functionality, or that the Company
will not incur substantial costs to avoid such occurrences. By the end of 1998,
the Company plans to complete an extensive assessment of the readiness of its
software applications with respect to year 2000 issues and any related
accommodation costs.
12
<PAGE> 13
FORWARD LOOKING STATEMENTS
This quarterly report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties. In addition, the Company may from time to time make oral
forward-looking statements. Actual results are uncertain and may be impacted by
the following factors. In particular, certain risks and uncertainties that may
impact the accuracy of the forward-looking statements with respect to revenues,
expenses and operating results include, without limitation, cycles of dealer
orders, general economic and competitive conditions and changing consumer
trends, technological advances and the number and timing of new product
introductions, shipments of products and componentry from foreign suppliers, the
timing of operating and advertising expenditures and changes in the mix products
ordered by independent bicycle dealers. As a result, the actual results may
differ materially from those projected in the forward -looking statements.
Because of these and other factors that may affect the Company's operating
results, past financial performance should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.
CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS AND FUTURE RESULTS
ECONOMIC CONDITIONS; SUSTAINABILITY OF GROWTH. The Company's business is subject
to economic cycles and changing consumer trends. Purchases of discretionary
sporting goods tend to decline in periods of economic uncertainty. Any
significant decline in general economic conditions or continued uncertainties
regarding future economic prospects that affect consumer spending could have a
material adverse effect on the Company's business, results of operations and
financial condition. While in the past ten years, there has been a renewed
public interest in bicycling and fitness activities, in the past two years,
there has been a decline in the demand for adult bicycles domestically. There
can be no assurance that the public interest in bicycling and fitness activities
will continue, or that the Company will continue to grow or be able to sustain
the level of bicycle sales that it has historically achieved. Any general
decline in the size of the bicycle market or in a segment of the bicycle market
in which the Company competes, whether from general economic conditions, a
decrease in the popularity of bicycling or otherwise, could have a material
adverse effect on the Company's business, results of operations and financial
condition.
TECHNOLOGICAL ADVANCEMENTS AND NEW PRODUCT INTRODUCTIONS. The bicycle industry,
in recent years, has been characterized by significant technological advances
and frequent new product introductions. The Company believes that the frequent
introduction of new, innovative bicycles, parts and accessories that respond
timely to changing consumer demands and trends will be critical to its future
success. In the past, the Company generally has been successful in the
introduction of its bicycles, parts and accessories. No assurance can be given,
however, that the Company will be able to continue to design and manufacture
products that will achieve commercial success.
INDEBTEDNESS; LIQUIDITY. The credit agreements relating to the Company's
outstanding indebtedness require the Company to maintain certain financial
ratios and profitability levels, as well as other affirmative and negative
covenants. While the Company expects to comply with these requirements, any
failure to comply with covenants or restrictions contained in one or more of the
credit agreements could result in a default thereunder, which in turn could
cause the Company's indebtedness to be declared immediately due and payable. The
Company has in the past renegotiated certain provisions of the credit agreements
to relax certain of the financial covenants to adapt to the Company's then
existing financial condition, although there can be no assurance that the
lenders will renegotiate provisions of the credit agreements in the future.
Although the Company believes that its cash from operations, its revolving
credit arrangements and vendor credit, and its existing working capital will be
sufficient to satisfy the Company's anticipated working capital and capital
expenditure requirements through approximately the next twelve months, the
Company
13
<PAGE> 14
may need to seek additional sources of capital as necessary or appropriate to
finance acquisitions or otherwise finance the Company's operations during such
period of time and thereafter. No assurance can be given that the Company would
be able to obtain such additional sources of capital on terms acceptable to the
Company.
QUARTERLY FLUCTUATIONS AND SEASONALITY. Operating results fluctuate on a
quarterly basis due to a variety of factors, including the cycles of dealer
orders, shipment of products from foreign suppliers, the number and timing of
new product introductions, the timing of operating and advertising expenditures
and changes in the mix of products ordered by dealers. Typically, the Company's
operating expenses are higher in the third quarter primarily due to annual
introductions of new bicycle models and participation in annual industry trade
shows. In addition, the Company's business has seasonal elements based on
bicycle model years, weather, the year-end shopping season and other factors.
The Company believes that factors such as fluctuations in the quarterly
operating results could cause the price of the common stock to fluctuate
substantially.
COMPETITION. The market for bicycles and related parts and accessories, both in
the United States and internationally, is highly competitive. In all of its
product categories, the Company competes with other manufacturers and
distributors, some of which have well-recognized brand names and substantial
financial, technological, distribution, advertising and marketing resources. In
addition, there are several bicycle manufacturers and component suppliers with
substantial resources that do not currently compete directly with the Company,
but which could pose significant competition to the Company in the future. There
can be no assurance that the Company will be able to compete successfully in the
future.
DEPENDENCE ON CERTAIN SUPPLIERS. As is common in the industry, a substantial
majority of the Company's multi-speed bicycles contain componentry supplied on a
purchase order basis by one Japanese manufacturer. Although this supplier has
not indicated any intention to limit or reduce sales of parts to the Company, if
it were to do so, the Company's business, results of operations and financial
condition could be adversely affected. In addition, the Company purchases
substantially all of its bicycles that are manufactured overseas from a limited
group of manufacturers, which varies from year to year. The Company has no
long-term contracts with these suppliers and competes with other companies for
their production capacities. Although the Company has established relationships
with its principal suppliers and manufacturing sources, the Company's future
success will depend on its ability to maintain such relationships and to develop
relationships with new suppliers and manufacturing sources for the production
and sale of bicycles, parts and accessories. In the event of a delay or
disruption in the supply or delivery of bicycles, parts and accessories, the
Company believes that suitable alternative suppliers and carriers could be
obtained, although the transition to other suppliers and delays in the delivery
of bicycle components could result in significant production delays. Any
significant delay or disruption in the supply of bicycles, parts and accessories
could have a material adverse effect on the Company's business, results of
operations and financial condition.
PRODUCT LIABILITY. Because of the nature of the Company's business, the Company
at any particular time is a defendant in a number of product liability lawsuits
and expects that this will continue to be the case in the future. These lawsuits
generally seek damages, sometimes in substantial amounts, for personal injuries
allegedly sustained as a result of defects in the Company's products. In
addition, from time to time, the Company may make recalls of certain of its
products in cooperation with the Consumer Products Safety Commission. Such
product recalls and any potential product defects related thereto may also
result in claims for personal injury. Although the Company maintains product
liability insurance, due to the uncertainty as to the nature and extent of
manufacturers' and distributors' liability for personal injuries, there is no
assurance that the product liability insurance maintained by the Company is or
will be adequate to cover product liability claims or that the applicable
insurer will be solvent at the time of any covered loss. In addition, due to
deductibles, self-retention levels and aggregate coverage amounts applicable
under the Company's insurance policies, the Company will bear responsibility for
a significant portion, if not all, of the defense costs (which include
attorneys' fees and expenses incurred in the defense of any claim), and the
related payments to satisfy any judgments associated with any claim asserted
against the Company in
14
<PAGE> 15
excess of any applicable coverage. The successful assertion or settlement of an
uninsured claim, the settlement of a significant number of insured claims, or a
claim exceeding the Company's insurance coverage could have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, there can be no assurance that insurance will remain available, or
if available, will not be prohibitively expensive.
CURRENCY FLUCTUATIONS. A portion of the Company's sales outside of North America
are denominated in local currencies. In addition, certain components purchased
by the Company are purchased in local currencies. Accordingly, the Company is
subject to the risks associated with fluctuations in currency rates. The Company
has not in the past experienced significant losses associated with currency
exchange fluctuations, but there can be no assurance that it will not experience
such losses in the future, particularly in light of the increasing portion of
net revenues resulting from sales outside North America and through its foreign
operating subsidiaries. From time to time, the Company has entered into forward
contracts against certain foreign currencies in an effort to minimize its
exposure on certain significant foreign currency receivables and component
purchases. Such hedging activities only partially address the Company's risks in
currency exchange transactions, and there can be no assurance that this strategy
will continue to be successful. Further there can be no assurance that the
Company's results of operations will not be adversely affected by currency
fluctuations.
15
<PAGE> 16
PART II. OTHER INFORMATION
- --------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
Exhibit Number
--------------
10.60 Loan and Security Agreement, Dated as of April 29, 1998,
Among BankAmerica Business Credit, Inc. and GT Bicycles
California, Inc., GT Bicycles, Inc., Riteway Products
East, Inc. Riteway Products North Central, Inc.,
Rite-Way Distributors Central, Inc. and Rite-Way
Distributors, Inc.
10.61 Third Amended and Restated Credit Agreement (Receivables
and Inventory) Entered into as of April 29, 1998 among
Bank of America National Trust and Savings Association
and GT Bicycles California, Inc., Riteway Products East,
Inc. Riteway Products North Central, Inc., Rite-Way
Distributors Central, Inc. Rite-Way Distributors, Inc.
and GT Bicycles, Inc.
10.62 Working Capital Management Account Agreement No.
230-07C17, Dated as of April 20, 1998, between GT
Bicycles, Inc. and Merrill Lynch Business Financial
Services Inc.
10.63 Amendment, Dated April 30, 1998, to Working Capital
Management Account Agreement No. 230-07C17, Dated as of
April 20, 1998, between GT Bicycles, Inc. and Merrill
Lynch Business Financial Services Inc.
10.64 First Supplemental Agreement made on June 30, 1998
between Caratti Sport Limited and Bank of America
National Trust and Savings Association, Amending and
Restating the Multicurrency Credit Facilities Agreement
Dated September 18, 1996.
27.1 Financial data schedule
(b) Reports on Form 8-K
-------------------
During the quarter ended June 30, 1998, the Company filed a Form 8-K
dated June 22, 1998 regarding the Company's agreement to be acquired by
Schwinn Holdings Corporation.
16
<PAGE> 17
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GT BICYCLES, INC.
Date: August 18, 1998 By: /s/ Charles Cimitile
--------------------
Charles Cimitile Vice President
Finance and Chief Financial
Officer (Principal Financial and
Accounting Officer and Duly
Authorized Officer)
17
<PAGE> 18
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
10.60 Loan and Security Agreement, Dated as of April 29, 1998,
Among BankAmerica Business Credit, Inc. and GT Bicycles
California, Inc., GT Bicycles, Inc., Riteway Products
East, Inc. Riteway Products North Central, Inc.,
Rite-Way Distributors Central, Inc. and Rite-Way
Distributors, Inc.
10.61 Third Amended and Restated Credit Agreement (Receivables
and Inventory) Entered into as of April 29, 1998 among
Bank of America National Trust and Savings Association
and GT Bicycles California, Inc., Riteway Products East,
Inc. Riteway Products North Central, Inc., Rite-Way
Distributors Central, Inc. Rite-Way Distributors, Inc.
and GT Bicycles, Inc.
10.62 Working Capital Management Account Agreement No.
230-07C17, Dated as of April 20, 1998, between GT
Bicycles, Inc. and Merrill Lynch Business Financial
Services Inc.
10.63 Amendment, Dated April 30, 1998, to Working Capital
Management Account Agreement No. 230-07C17, Dated as of
April 20, 1998, between GT Bicycles, Inc. and Merrill
Lynch Business Financial Services Inc.
10.64 First Supplemental Agreement made on June 30, 1998
between Caratti Sport Limited and Bank of America
National Trust and Savings Association, Amending and
Restating the Multicurrency Credit Facilities Agreement
Dated September 18, 1996.
27.1 Financial data schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.60
LOAN AND SECURITY AGREEMENT
Dated as of April 29, 1998
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
--------------
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
and
GT BICYCLES CALIFORNIA, INC.
as the Borrower
---------------
and
GT BICYCLES, INC.
RITEWAY PRODUCTS EAST, INC.
RITEWAY PRODUCTS NORTH CENTRAL, INC.
RITE-WAY DISTRIBUTORS CENTRAL, INC.
RITE-WAY DISTRIBUTORS, INC.
as other Loan Parties
---------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.3 Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE II LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.1 Total Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.2 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.4 ACH Transactions and Other Indemnified Transactions . . . . . . . . . . . . . . . . . . . 40
2.5 Loan Parties' Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE III INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.2 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.3 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.4 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.5 Unused Line Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.6 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IV PAYMENTS AND PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.2 Termination of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.3 Payments by the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.4 Payments as Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.5 Apportionment, Application and Reversal of Payments . . . . . . . . . . . . . . . . . . . 53
4.6 Indemnity for Returned Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.7 Agent's and Lenders' Books and Records; Monthly Statements . . . . . . . . . . . . . . . . 54
ARTICLE V TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . . . . . . . . . 54
5.1 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.3 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.5 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.6 Certificates of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.2 Perfection and Protection of Security Interest . . . . . . . . . . . . . . . . . . . . . . 58
6.3 Location of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.4 Title to, Liens on, and Sale and Use of Collateral . . . . . . . . . . . . . . . . . . . . 60
6.5 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.6 Access and Examination; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.7 Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.8 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.9 Collection of Accounts; Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.10 Inventory; Perpetual Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.11 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.12 Assigned Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.13 Documents, Instruments, and Chattel Paper . . . . . . . . . . . . . . . . . . . . . . . . 66
6.14 Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.15 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.16 The Agent's and Lenders' Rights, Duties and Liabilities . . . . . . . . . . . . . . . . . 67
ARTICLE VII BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES . . . . . . . . . . . . . . . 68
7.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.2 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.3 Notices to the Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE VIII GENERAL WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 73
8.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents . . . 73
8.2 Validity and Priority of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . 74
8.3 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.4 Corporate Name; Prior Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.5 Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.6 Financial Statements and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.8 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.10 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.11 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.12 Real Estate; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.13 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.14 Trade Names and Terms of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.16 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.17 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.18 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.19 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
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<TABLE>
<S> <C>
8.20 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.21 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.23 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.24 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.25 Copyrights, Patents, Trademarks and Licenses, etc . . . . . . . . . . . . . . . . . . . . 79
8.26 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.27 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.28 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.30 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.31 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE IX AFFIRMATIVE AND NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 80
9.1 Taxes and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
9.2 Corporate Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . 80
9.3 Compliance with Law and Agreements; Maintenance of Licenses . . . . . . . . . . . . . . . 80
9.4 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.6 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.7 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.8 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.9 Mergers, Consolidations or Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.10 Distributions; Capital Change; Restricted Investments . . . . . . . . . . . . . . . . . . 83
9.11 Transactions Affecting Collateral or Obligations . . . . . . . . . . . . . . . . . . . . . 83
9.12 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.13 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.14 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.16 Investment Banking and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.17 Business Conducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.18 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.19 Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.20 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.21 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.22 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.23 Adjusted Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.24 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.25 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.26 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE X CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.1 Conditions Precedent to Making of Loans on the Closing Date . . . . . . . . . . . . . . . 87
10.2 Conditions Precedent to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
</TABLE>
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<TABLE>
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ARTICLE XI DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE XII TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
12.1 Term and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
ARTICLE XIII AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS . . . . . . . . . . 94
13.1 No Waivers Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
13.2 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
13.3 Assignments; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE XIV THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
14.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
14.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
14.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
14.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
14.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
14.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
14.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
14.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
14.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
14.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
14.11 Collateral Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
14.12 Restrictions on Actions by Lenders; Sharing of Payments . . . . . . . . . . . . . . . . 103
14.13 Agency for Perfection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
14.14 Payments by Agent to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
14.15 Concerning the Collateral and the Related Loan Documents . . . . . . . . . . . . . . . . 104
14.16 Field Audit and Examination Reports; Disclaimer by Lenders . . . . . . . . . . . . . . . 104
14.17 Relation Among Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
ARTICLE XV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
15.1 Cumulative Remedies; No Prior Recourse to Collateral . . . . . . . . . . . . . . . . . . 105
15.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
15.3 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver . . . . . . . . . 105
15.4 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
15.5 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 108
15.6 Other Security and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
15.7 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
15.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
15.9 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
</TABLE>
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<TABLE>
<S> <C> <C>
15.10 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
15.11 Indemnity of the Agent and the Lenders by the Borrower . . . . . . . . . . . . . . . . . 110
15.12 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
15.13 Final Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
15.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
15.15 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
15.16 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
</TABLE>
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EXHIBITS AND SCHEDULES
----------------------
EXHIBIT A - FINANCIAL STATEMENTS
EXHIBIT B - FORM OF NOTICE OF BORROWING
EXHIBIT C - FORM OF NOTICE OF CONVERSION/CONTINUATION
EXHIBIT D - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
EXHIBIT E- FINANCIAL PROJECTIONS
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LOAN AND SECURITY AGREEMENT
Loan and Security Agreement, dated as of April 29, 1998, among the
financial institutions listed on the signature pages hereof (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), BankAmerica Business Credit, Inc., a Delaware corporation ("BABC")
with an office at 55 South Lake Avenue, Suite 900, Pasadena, California 91101,
as agent for the Lenders (in its capacity as agent, the "Agent"), and GT
Bicycles California, Inc., a California corporation, with offices at 2001 East
Dyer Road, Santa Ana, California 92705 (the "Borrower"), GT Bicycles, Inc.
(the "Parent"), Riteway Products East, Inc. ("Riteway East"), Riteway Products
North Central, Inc. ("Riteway North Central"), Rite-Way Distributors Central,
Inc. ("Riteway Distributors Central") and Rite-Way Distributors, Inc. ("Riteway
Distributors"), affiliates of the Borrower and, together with the Borrower,
sometimes called Loan Parties (as hereafter defined) hereunder.
W I T N E S S E T H
WHEREAS, the Borrower has requested the Lenders to make available to
the Borrower a revolving credit facility for loans and letters of credit in an
aggregate amount not to exceed $75,000,000, which extensions of credit the
Borrower will use for its working capital needs and general business purposes;
WHEREAS, the Lenders have agreed to make available to the Borrower
such revolving credit facility, upon the terms and conditions set forth in this
Agreement; and
WHEREAS, Riteway East, Riteway North Central, Riteway Distributors
Central, and Riteway Distributors are parties to this Agreement and certain
other agreements relating to such revolving credit facility in order to make
certain representations and warranties, and to incur certain guaranty and other
obligations in favor of the Lenders and the Agent.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Lenders, the
Agent, and the Loan Parties hereby agree as follows:
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of each of the Loan Parties' now owned or
hereafter acquired or arising accounts, and any other rights to payment for the
sale or lease of goods or rendition of services, whether or not they have been
earned by performance.
"Account Debtor" means each Person obligated in any way on or
in connection with an Account.
1
<PAGE> 9
"ACH Settlement Risk Reserve" means any and all reserves which
the Agent, after the Closing Date, from time to time establishes, in its
reasonable discretion, with respect to ACH Transactions.
"ACH Transactions" means all debts, liabilities, and other
obligations now or hereafter owing to Bank of America or its Affiliates from
any of the Loan Parties arising from or related to any cash management or
related services including the automatic clearing house transfer of funds by
the Bank of America or its Affiliates for the account of any of the Loan
Parties pursuant to agreement or overdrafts.
"Adjusted Net Earnings" means with respect to any fiscal
period of the Consolidated Domestic Companies, the Consolidated Domestic
Companies' Adjusted Net Earnings from Operations for such period plus the sum
of the following to the extent deducted in computing Adjusted Net Earnings from
Operations: (a) income tax expense, (b) total interest expense net of interest
income, (c) total amortization expense, (d) total depreciation expense, (e) the
foreign exchange loss net of the foreign exchange gain, and (f) other expenses
net of other income (except expenses relating to discontinued operations).
"Adjusted Net Earnings from Operations" means, with respect to
any fiscal period of the Consolidated Domestic Companies, the sum of each
Consolidated Domestic Company's net income after provision for income taxes for
such period, as determined in accordance with GAAP and reported on the
Financial Statements for such period, excluding, without duplication, any and
all of the following included in such net income: (a) gain or loss arising
from the sale of any capital assets; (b) gain arising from any write-up in the
book value of any asset; (c) earnings or operating losses of any corporation,
substantially all the assets of which have been acquired by such Consolidated
Domestic Company in any manner, to the extent realized by such other
corporation prior to the date of acquisition; (d) earnings or operating losses
of any business entity in which such Consolidated Domestic Company has an
ownership interest unless (i) such earnings shall actually have been received
by such Consolidated Domestic Company in the form of cash distributions and
(ii) such operating losses shall have been funded by such Consolidated Domestic
Company; (e) earnings or operating losses of any Person to which assets of such
Consolidated Domestic Company shall have been sold, transferred or disposed of,
or into which such Consolidated Domestic Company shall have been merged, or
which has been a party with such Consolidated Domestic Company to any
consolidation or other form of reorganization, which are realized by such
Person prior to the date of such sale, merger or other transaction; (f) gain
arising from the acquisition of debt or equity securities of such Consolidated
Domestic Company or from cancellation or forgiveness of Debt; and (g) gain
arising from extraordinary items, as determined in accordance with GAAP, or
from any other non-recurring transaction.
"Adjusted Tangible Assets" means all of the Parent's
consolidated assets (including foreign assets) as determined in accordance with
GAAP, except: (a) deferred assets, other than deferred tax assets; (b)
patents, copyrights, trademarks, trade names, franchises, goodwill, and other
similar intangibles; (c) Restricted Investments; (d) unamortized debt discount
and expense; (e) assets of the Parent constituting Intercompany Accounts; (f)
fixed assets to the extent of any write-up in the book value thereof resulting
from a revaluation effective after the Closing Date; and (g) any investments
pursuant to subsections (g) and (h) of the definition of Restricted
Investments.
2
<PAGE> 10
"Adjusted Tangible Net Worth" means, at any date: (a) the book
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves as determined in accordance with GAAP) at
which the Adjusted Tangible Assets would be shown on a consolidated balance
sheet of the Parent at such date prepared in accordance with GAAP; less (b) the
amount at which the Parent's liabilities would be shown on such balance sheet,
including as liabilities all reserves for contingencies and other potential
liabilities, as determined in accordance with GAAP, which would be required to
be shown on such consolidated balance sheet. Notwithstanding the foregoing,
any foreign currency translation adjustments will be excluded from the
calculations hereunder.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, five percent
(5%) or more of the outstanding equity interest of such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise.
"Agent" means BankAmerica Business Credit, Inc., solely in its
capacity as agent for the Lenders, and any successor agent.
"Agent Advances" has the meaning specified in Section 2.2(i).
"Agent's Liens" means the Liens in the Collateral granted to
the Agent, for the ratable benefit of the Lenders, BABC, and Agent pursuant to
this Agreement and the other Loan Documents.
"Agent-Related Persons" means the Agent and any successor
agent, together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Revolver Outstandings" means, at any time: the sum
of (a) the unpaid balance of Revolving Loans, (b) the aggregate amount of
Pending Revolving Loans, (c) one hundred percent (100%) of the aggregate
undrawn face amount of all outstanding Letters of Credit, and (d) the aggregate
amount of any unpaid reimbursement obligations in respect of Letters of Credit.
"Agreement" means this Loan and Security Agreement.
"Anniversary Date" means each anniversary of the Closing Date.
"Applicable Inventory Advance Rate" means (a) seventy percent
(70%) for Eligible Current Year Inventory and Eligible Imported Inventory and
(b) fifty percent (50%) for Eligible Year Old Inventory; provided, however,
that the Applicable Inventory Advance Rate for Eligible Current Year Inventory
and Eligible Imported Inventory will be reduced to sixty-five percent (65%) six
months after the Closing Date and will be further reduced to sixty percent
(60%) upon the earlier of (i) the repayment in full of the BofA Loan, and (ii)
the first Anniversary Date; provided, further, that the Applicable Inventory
Advance Rate for Eligible
3
<PAGE> 11
Year Old Inventory will be reduced to forty-five percent (45%) six months after
the Closing Date and will be further reduced to forty percent (40%) upon the
earlier of (i) the repayment in full by the Loan Parties of the BofA Loan, and
(ii) the first Anniversary Date.
"Applicable Margin" means
(a) with respect to Base Rate Revolving Loans and
all other Obligations (other than LIBOR Revolving Loans), 1.0% (or .75% upon
the payment in full of the BofA Loan);
(b) with respect to LIBOR Revolving Loans, 2.5%
(or 2.25% upon the payment in full of the BofA Loan);
provided, however, that the Applicable Margin set forth in (a) and (b) above
shall be reduced in accordance with the Financial Performance Test, as measured
semi-annually at the end of the first and third fiscal quarters of each Fiscal
Year (beginning with the release of the Parent's quarterly report on Form 10-Q
for the quarter ended September 30, 1998); and provided, further, that before
such reductions in the Applicable Margin will be instituted, the Applicable
Inventory Advance Rate in effect for Eligible Current Year Inventory and
Eligible Imported Inventory must be no greater than 60%.
"Assigned Contracts" means, collectively, all of the rights
and remedies of each of the Loan Parties under, and all moneys and claims for
money due or to become due to each of the Loan Parties under, those contracts
set forth on Schedule 1.1, and any other material contracts, and any and all
amendments, supplements, extensions, and renewals thereof including, without
limitation, all rights and claims of any Loan Party now or hereafter existing:
(i) under any insurance, indemnities, warranties, and guarantees provided for
or arising out of or in connection with any of the foregoing agreements; (ii)
for any damages arising out of or for breach or default under or in connection
with any of the foregoing contracts ; (iii) to all other amounts from time to
time paid or payable under or in connection with any of the foregoing
agreements; or (iv) to exercise or enforce any and all covenants, remedies,
powers and privileges thereunder.
"Assignee" has the meaning specified in Section 13.3(a).
"Assignment and Acceptance" has the meaning specified in
Section 13.3(a).
"Attorney Costs" means and includes all reasonable fees,
expenses and disbursements of any law firm or other external counsel engaged by
the Agent, the allocated cost of internal legal services of the Agent and all
expenses and disbursements of internal counsel of the Agent.
"Availability" means, at any time the lesser of:
(a) the Maximum Revolver Amount or
(b) the sum of eighty-five percent (85%) of the
Net Amount of Eligible Accounts; plus the Net Amount of Eligible Inventory
multiplied by the Applicable
4
<PAGE> 12
Inventory Advance Rate; provided, that at no time shall the sum of outstanding
Revolving Loans based upon the value of Eligible Inventory exceed $40,000,000
("Maximum Inventory Loan");
Less, in the case of each of (a) and (b) above, the sum of:
(A) the Aggregate Revolver Outstandings;
(B) reserves for accrued interest on the
Obligations;
(C) ACH Settlement Risk Reserve;
(D) the BofA Japan Reserve;
(E) the BofA France Reserve;
(F) the Foreign Exchange Reserve;
(G) the Receivable Dilution Reserve; and
(H) all other reserves (including the
Environmental Compliance Reserve) which the
Agent deems necessary in the exercise of its
reasonable credit judgment to maintain with
respect to the Borrower's account, including,
without limitation, reserves for any amounts
which the Agent or any Lender may be
obligated to pay in the future for the
account of the Borrower.
"Average Availability" means, with respect to the measurement
of Applicable Margin at the end of the first and third quarter of each Fiscal
Year, the arithmetic average of daily Availability (as calculated by the Agent
and reasonably agreed to by the Borrower) for each of the three months
immediately preceding the end of such first or third quarters, as applicable.
"BABC" means BankAmerica Business Credit, Inc.
"BABC Loan" and "BABC Loans" have the meanings specified in
Section 2.2(h).
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association, or any successor entity
thereto.
"Bankruptcy Code" means Title 11 of the United States Code
(11 U.S.C. Section 101 et seq.).
"Base Rate" means, for any day, the rate of interest per annum
in effect for such day as publicly announced from time to time by Bank of
America in San Francisco, California, as its "reference rate" (the "reference
rate" being a rate set by Bank of America based upon various factors including
Bank of America's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate). Any change in the
reference rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public
5
<PAGE> 13
announcement of such change. Each Interest Rate based upon the Base Rate shall
be adjusted simultaneously with any change in the Base Rate.
"Base Rate Revolving Loan" means a Revolving Loan during any
period in which it bears interest based on the Base Rate.
"Blocked Account Agreements" means those Blocked Account
Agreements required to be delivered pursuant to Section 6.9.
"BofA France Reserve" means up to $4,000,000, until such time
as that certain credit facility extended by Bank of America to the Loan Parties
(or their Affiliates) is paid in full. Upon the termination of such credit
facility, the BofA France Reserve will be $0.
"BofA Intercreditor Agreement" means that certain
Intercreditor Agreement of even date herewith between Agent and Bank of
America.
"BofA Japan Reserve" means up to $4,000,000, until such time
as that certain credit facility extended by Bank of America to the Loan Parties
(or their Affiliates) is paid in full. Upon the termination of such credit
facility, the BofA Japan Reserve will be $0.
"BofA Loan" means that $20,000,000 bridge term loan facility
dated as of April 29, 1998 between Bank of America and the Loan Parties.
"Borrower Group Companies" means the Consolidated Domestic
Companies and the Parent.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans made by the Lenders to the Borrower (or by BABC in the case of
a Borrowing funded by BABC Loans) or by the Agent in the case of a Borrowing
consisting of an Agent Advance.
"Borrowing Base Certificate" means a certificate by a
Responsible Officer of the Borrower, in form and substance satisfactory to the
Agent, setting forth the calculation of the Availability, including a
calculation of each component thereof, as of the close of business no more than
five (5) Business Days prior to the date of such certificate, all in such
detail as shall be satisfactory to the Agent. All calculations of Availability
in connection with the preparation of any Borrowing Base Certificate shall
originally be made by the Borrower and certified to the Agent; provided, that
the Agent shall have the right to review and adjust, in the exercise of its
reasonable credit judgment, any such calculation (1) to reflect its reasonable
estimate of declines in value of any of the Collateral described therein, and
(2) to the extent that such calculation is not in accordance with this
Agreement.
"Business Day" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in San Francisco, California, are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Revolving
Loans, any day that is a Business Day pursuant to clause (a) above and that is
also a day on which trading in Dollars is carried on by and between banks in
the London interbank market.
6
<PAGE> 14
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a
bank.
"Capital Expenditures" means all payments due (whether or not
paid) in respect of the cost of any fixed asset or improvement, or replacement,
substitution, or addition thereto, which has a useful life of more than one
year, including, without limitation, those costs arising in connection with the
direct or indirect acquisition of such asset by way of increased product or
service charges or offset items or in connection with a Capital Lease.
"Capital Lease" means any lease of property by the any of the
Consolidated Domestic Companies which, in accordance with GAAP, is or should be
reflected as a capital lease on the consolidated balance sheet of the Parent.
"Change of Control" means any event or series of events by
which (i) any Person or Persons and any Affiliates of such Person or Persons
acting in concert (including a "group" as such term is used in Section 13(d)(3)
of the Exchange Act) shall acquire, directly or indirectly, through a merger or
other transaction, outstanding shares of voting capital stock of the Parent,
enabling such Person or Persons to cast more than 50% of the votes necessary
for the election of directors of the Parent or possessing in excess of 50% of
the total combined voting power of the voting capital stock of the Parent,
provided, however, that the accumulation of any voting capital stock of Parent
by any Person or Persons listed on the Parent's Form 10-K filed with the
Securities and Exchange Commission for the Parent's Fiscal Year ending December
31, 1997 as owning five percent (5%) or more of the Parent's outstanding common
stock on such date (or by any Affiliates of such Person or Persons) shall not
be deemed a Change of Control; or (ii) during any period of two (2) consecutive
years, individuals who at the beginning of the period constituted the Board of
Directors of the Parent (or new directors whose election by the Parent's
directors (or whose nomination for election by the Parent's stockholders) was
approved by two-thirds (2/3) of the Parent's directors then still in office who
were either directors at the beginning of the period or were previously
approved under this procedure) cease to constitute a majority of the Board of
Directors of the Parent then in office.
"Change of Ownership" means (a) a sale by the Loan Parties of
substantially all of their respective assets; (b) a sale by the Parent of
substantially all of the stock of all of its Subsidiaries; or (c) any event or
series of events by which any Person or Persons and any Affiliates of such
Person or Persons acting in concert (including a "group" as such term is used
in Section 13(d)(3) of the Exchange Act) shall acquire, directly or indirectly,
through a merger or other transaction, outstanding shares of voting capital
stock of the Parent, enabling such Person or Persons to cast more than 50% of
the votes necessary for the election of directors of the Parent or possessing
in excess of 50% of the total combined voting power of the voting capital stock
of the Parent, provided, however, that the accumulation of any voting capital
stock of Parent by any Person or Persons listed on the Parent's Form 10-K filed
with the Securities and Exchange Commission for the Parent's Fiscal Year ending
December 31, 1997 as owning five percent (5%) or more of the Parent's
outstanding common stock on such date (or by any Affiliates of such Person or
Persons) shall not be deemed a Change of Ownership.
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<PAGE> 15
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute, and regulations promulgated
thereunder.
"Collateral" has the meaning specified in Section 6.1(a).
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on the signature pages of this Agreement or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.3, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
13.3, and "Commitments" means, collectively, the aggregate amount of the
commitments of all Lenders.
"Consolidated Domestic Companies" means the Loan Parties
(other than the Parent), GT BMX Products, Inc., Innovations in Composites, Inc.
and any other domestic consolidated Subsidiary of the Parent.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated
biphenyls ("PCBs"), or any constituent of any such substance or waste.
"Copyright, Patent and Trademark Agreements" means the
Supplemental Security Agreement (Copyrights), the Supplemental Security
Agreement (Patents) and the Supplemental Security Agreement (Trademarks), each
dated as of the date hereof, executed and delivered by the applicable Loan
Parties to the Agent to evidence and perfect the Agent's Lien in the Loan
Parties' respective present and future copyrights, patents, trademarks, and
related licenses and rights.
"Credit Support" has the meaning specified in Section 2.3(a).
"Current Model Year" means the specific and unique model year
(as such term is applied to Inventory by the Loan Parties in a manner
consistent with past practices) that is (i) the same as the current calendar
year, or (ii) the year immediately subsequent to the current calendar year.
"Dated Account" means an Account having a due date of 60 days
or greater but no more than 240 days from the date of the original invoice
therefor.
"Debt" means all liabilities, obligations and indebtedness of
any of the Borrower Group Companies to any Person, of any kind or nature, now
or hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise, and including, without in any way limiting the generality
of the foregoing: (i) any Borrower Group Company's liabilities and obligations
to trade creditors; (ii) all Obligations; (iii) all obligations and liabilities
of any Person secured by
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<PAGE> 16
any Lien on any Borrower Group Company's property, even though such Borrower
Group Company shall not have assumed or become liable for the payment thereof;
provided, however, that all such obligations and liabilities which are limited
in recourse to such property shall be included in Debt only to the extent of
the book value of such property as would be shown on a balance sheet of the
applicable Borrower Group Company prepared in accordance with GAAP; (iv) all
obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement with respect to property
used or acquired by any Borrower Group Company, even if the rights and remedies
of the lessor, seller or lender thereunder are limited to repossession of such
property; provided, however, that all such obligations and liabilities which
are limited in recourse to such property shall be included in Debt only to the
extent of the book value of such property as would be shown on a balance sheet
of the applicable Borrower Group Company prepared in accordance with GAAP; (v)
all accrued pension fund and other employee benefit plan obligations and
liabilities; (vi) all obligations and liabilities under any Guaranty; and (vii)
deferred taxes.
"Debt For Borrowed Money" means, as to any Person, Debt for
borrowed money or as evidenced by notes, bonds, debentures or similar evidences
of any such Debt of such Person, the deferred and unpaid purchase price of any
property or business (other than trade accounts payable incurred in the
ordinary course of business and constituting current liabilities) and all
obligations under Capital Leases.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Defaulting Lender" has the meaning specified in Section
2.2(g)(2).
"Default Rate" means a fluctuating per annum interest rate at
all times equal to the sum of (a) the otherwise applicable Interest Rate plus
(b) two percent (2%). Each Default Rate shall be adjusted simultaneously with
any change in the applicable Interest Rate. In addition, with respect to
Letters of Credit, the Default Rate shall mean an increase in the Letter of
Credit Fee by two percentage points .
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in respect
of capital stock (or any options, rights or warrants for such stock) of such
corporation, other than (i) dividends or other distributions in capital stock
(or any options or warrants for such stock) of such corporation of the same
class or (ii) issuances of equity interests upon exercise of outstanding
warrants, options or other rights; or (b) the redemption or other acquisition
by such corporation of any capital stock (or any options or warrants for such
stock) of such corporation.
"DOL" means the United States Department of Labor or any
successor department or agency.
"Dollar" and "$" means dollars in the lawful currency of the
United States.
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"Eligible Accounts" means all Accounts of the Borrower and of
other Loan Parties which the Agent in the exercise of its reasonable commercial
discretion determines to be Eligible Accounts. Without limiting the discretion
of the Agent to establish other criteria of ineligibility, Eligible Accounts
shall not, unless the Agent in its sole discretion elects, include any Account:
(a) other than Dated Accounts, which is more than
60 days past due;
(b) which is a Dated Account that is more than 30
days past due, provided however, that for the 18 month period following the
Closing Date, up to $2,000,000 of all Dated Accounts which are past due between
31 and 60 days (and which are otherwise Eligible Accounts) shall be considered
Eligible Accounts;
(c) with respect to which any of the
representations, warranties, covenants, and agreements contained in Section 6.8
are not or have ceased to be complete and correct or have been breached;
(d) with respect to which, in whole or in part, a
check, promissory note, draft, trade acceptance or other instrument for the
payment of money has been received, presented for payment and returned
uncollected for any reason;
(e) which represents a progress billing (as
hereinafter defined) or as to which the Borrower or other Loan Party (as
applicable) have extended the time for payment without the consent of the Agent;
for the purposes hereof, "progress billing" means any invoice for goods sold or
leased or services rendered under a contract or agreement pursuant to which the
Account Debtor's obligation to pay such invoice is conditioned upon the
Borrower's or such other Loan Party's (as applicable) completion of any further
performance under the contract or agreement;
(f) as to which any one or more of the following
events has occurred with respect to the Account Debtor on such Account: death or
judicial declaration of incompetency of an Account Debtor who is an individual;
the filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or
similar laws of the United States, any state or territory thereof, or any
foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment
of a receiver or trustee for the Account Debtor or for any of the assets of the
Account Debtor, including, without limitation, the appointment of or taking
possession by a "custodian," as defined in the Federal Bankruptcy Code; the
institution by or against the Account Debtor of any other type of insolvency
proceeding (under the bankruptcy laws of the United States or otherwise) or of
any formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of, the Account Debtor;
the sale, assignment, or transfer of all or any material part of the assets of
the Account Debtor; the nonpayment generally by the Account Debtor of its debts
as they become due; or the cessation of the business of the Account Debtor as a
going concern;
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(g) if fifty percent (50%) or more of the
aggregate Dollar amount of outstanding Accounts owed at such time by the Account
Debtor thereon is classified as ineligible under the other criteria set forth
herein or otherwise reasonably established by the Agent;
(h) owed by an Account Debtor which: (i) does not
maintain its chief executive office in the United States or Canada; or (ii) is
not organized under the laws of the United States or Canada or any state,
territory or province thereof; or (iii) is the government of any foreign country
or sovereign state other than Canada, or of any state, province, municipality,
or other political subdivision thereof, or any department, agency, public
corporation, or other instrumentality thereof; except to the extent that such
Account is secured or payable by a letter of credit acceptable to the Agent;
provided however, that Accounts that would be ineligible solely by reason of the
foregoing provisions of this paragraph (h), in an aggregate amount outstanding
at any one time not in excess of 5% of all Eligible Accounts, will be considered
Eligible Accounts;
(i) owed by an Account Debtor which is an
Affiliate, employee, sales representative or agent of the Borrower or any other
Loan Party;
(j) except as provided in (k) below, as to which
either the perfection, enforceability, or validity of the Agent's Lien in such
Account, or the Agent's right or ability to obtain direct payment to the Agent
of the proceeds of such Account, is governed by any federal, state, or local
statutory requirements other than those of the UCC;
(k) which is owed by an Account Debtor to which
the Borrower or any other Loan Party is indebted in any way, or which is subject
to any right of setoff or recoupment by the Account Debtor, unless the Account
Debtor has entered into an agreement reasonably acceptable to the Agent to waive
setoff rights; or if the Account Debtor thereon has disputed liability or made
any claim with respect to any other Account due from such Account Debtor; but in
each such case only to the extent of such indebtedness, setoff, recoupment,
dispute, or claim;
(l) which is owed by the government of the United
States of America, or any department, agency, public corporation, or other
instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as
amended (31 U.S.C. Section 3727 et seq.), and any other steps necessary to
perfect the Agent's Lien therein, have been complied with to the Agent's
reasonable satisfaction with respect to such Account;
(m) which is owed by any state, municipality, or
other political subdivision of the United States of America, or any department,
agency, public corporation, or other instrumentality thereof and as to which the
Agent determines that its Lien therein is not or cannot be perfected;
(n) which represents a sale on a bill-and-hold,
guaranteed sale, sale and return, sale on approval, consignment, or other
repurchase or return basis;
(o) which is evidenced by a promissory note or
other instrument or by chattel paper;
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(p) if the Agent believes, in the exercise of its
reasonable judgment, that the prospect of collection of such Account is impaired
or that the Account may not be paid by reason of the Account Debtor's financial
inability to pay;
(q) with respect to which the Account Debtor is
located in any state requiring the filing of a Notice of Business Activities
Report or similar report in order to permit the Borrower or other Loan party to
which such Account is payable, to seek judicial enforcement in such State of
payment of such Account, unless such Borrower or other Loan Party, as
applicable, has qualified to do business in such state or has filed a Notice of
Business Activities Report or equivalent report for the then current year; or
(r) which arises out of a sale not made in the
ordinary course of the Borrower's or other Loan Party's (as applicable)
business;
(s) as to which the goods giving rise to such
Account have not been shipped to the Account Debtor or the services giving rise
to such Account have not been performed by the Borrower or other Loan Party (as
applicable), and, if applicable, accepted by the Account Debtor, or the Account
Debtor revokes its acceptance of such goods or services; provided, however, that
the Loan Parties may render invoices upon shipment and Accounts relating thereto
will be included as Eligible Accounts on Borrowing Base Certificates, but any
such Accounts as to which delivery or acceptance fails to occur, or as to which
acceptance is revoked, shall promptly (but no less frequently than weekly) be
excluded from the calculation of Eligible Accounts;
(t) which arises out of an enforceable contract or
order which, by its terms, forbids, restricts or makes void or unenforceable the
granting of a Lien by the Borrower or other Loan Party (as applicable) to the
Agent with respect to such Account;
(u) which is not subject to a first priority and
perfected security interest in favor of the Agent for the benefit of the
Lenders; or
(v) which arises out of a cash on delivery sale;
provided, however, that Accounts that would be ineligible solely by reason of
this paragraph (v), in an aggregate amount outstanding at any time not in excess
of $100,000, will be considered Eligible Accounts.
If any Account at any time ceases to be an
Eligible Account by reason of any of the foregoing exclusions or any failure to
meet any other eligibility criteria established by the Agent in the exercise of
its reasonable discretion, then such Account shall promptly be excluded from
the calculation of Eligible Accounts.
"Eligible Current Year Inventory" means Eligible Inventory,
valued at the lower of cost (on a weighted average cost basis) or market,
consisting of Current Model Year bicycles and parts held for sale and
accessories relating thereto.
"Eligible Imported Inventory" means Imported Inventory (i)
which otherwise constitutes Eligible Current Year Inventory, (ii) with respect
to which the bills of lading or other negotiable or non-negotiable documents
name the Agent as the consignee or other Person to
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<PAGE> 20
whom or to whose order such document promises delivery, and (iii) which is
subject to a first perfected Agent's Lien; provided, however, any Imported
Inventory existing on the Closing Date does not have to meet the requirements
of subsections (ii) and (iii) above.
"Eligible Inventory" means Inventory that constitutes raw
materials and first quality finished goods (including parts held for sale, but
not spare parts) and that, unless the Agent in its reasonable discretion
elects: (a) is not, in the Agent's reasonable opinion, obsolete, slow moving,
unmerchantable, or subject to a product recall (unless the problem giving rise
to the recall has been corrected to the reasonable satisfaction of the Agent);
(b) other than Eligible Imported Inventory, is located at premises owned by the
Borrower or other Loan Party or on premises otherwise reasonably acceptable to
the Agent, provided, however, that Inventory located on premises leased to the
Borrower or other Loan Party shall not be Eligible Inventory unless the
Borrower or other Loan Party (as applicable) shall have delivered to the Agent
a written waiver or subordination agreement, duly executed on behalf of the
appropriate landlord and in form and substance reasonably acceptable to the
Agent, of all Liens which the landlord for such premises may be entitled to
assert against such Inventory; (c) is subject to a first priority perfected
Agent's Lien; (d) is not used Inventory, work-in-process, spare parts,
packaging and shipping materials, promotional Inventory, supplies,
bill-and-hold Inventory, returned or defective Inventory, or Inventory
delivered to the Borrower or other Loan Party (as applicable) on consignment;
(e) is not bicycle Inventory having a model year more than one calendar year
prior to the current calendar year; and (f) the Agent, in the exercise of its
reasonable commercial discretion, deems eligible as the basis for Revolving
Loans based on such collateral and credit criteria as the Agent may from time
to time establish. Notwithstanding the foregoing, Eligible Inventory shall not
include at any time: (i) Eligible Year Old Inventory in excess of $5,000,000,
except in the first quarter of each calendar year when the value may not exceed
$7,500,000; (ii) parts held for sale and accessories in excess of $35,000,000,
except in January through June of each calendar year when the value may not
exceed $40,000,000; and (iii) Eligible Imported Inventory in excess of
$15,000,000. If any Inventory at any time ceases to be Eligible Inventory,
such Inventory shall promptly be excluded from the calculation of Eligible
Inventory.
"Eligible Year Old Inventory" means Eligible Inventory, valued
at the lower of cost (on a weighted average cost basis) or market, that
consists of bicycles having a model year (as such term is applied to Inventory
by the Loan Parties in a manner consistent with past practices) that is the
same as the calendar year immediately prior to the current calendar year and
parts held for sale and accessories relating thereto.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Compliance Reserve" means any reserves which
the Agent, after the Closing Date, establishes from time to time for amounts
that are reasonably likely to be expended by the Borrower or other Loan Party
in order for the Borrower or such other Loan Party and their affected
operations and property (as the case may be) (a) to comply with any notice from
a Governmental Authority asserting material non-compliance with Environmental
Laws, which noncompliance may materially and adversely affect such operations
or property, or
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<PAGE> 21
(b) to correct any such material non-compliance identified in a report
delivered to the Agent and the Lenders pursuant to Section 9.7.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case relating to environmental, health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any
Governmental Authority for (1) any liability under any Environmental Laws, or
(2) damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"Equipment" means all of the Borrower's and other Loan
Parties' now owned and hereafter acquired machinery, equipment, furniture,
furnishings, fixtures, and other tangible personal property (except Inventory),
including motor vehicles with respect to which a certificate of title has been
issued, aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by the Borrower or other Loan Party (as
applicable) and all of the Borrower's or such Loan Party's rights and interests
with respect thereto under such leases (including, without limitation, options
to purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and rights with
respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower or the other Loan Parties
within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m)
and (o) of the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any
ERISA Affiliate from a Multi-employer Plan or notification that a
Multi-employer Plan is in reorganization; (d) the filing of a notice of intent
to terminate, the treatment of a Plan amendment
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<PAGE> 22
as a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multi- employer Plan;
(e) the occurrence of an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or Multi-employer
Plan; or (f) the imposition of any liability under Title IV of ERISA, other
than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Borrower or any ERISA Affiliate.
"Event of Default" has the meaning specified in Section 11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and regulations promulgated thereunder.
"Excluded Equipment" means all of the Borrower's and other
Loan Parties' machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (excluding Inventory) set forth on Schedule 1.1B.
"Facility Fee" has the meaning specified in Section 3.4.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York
City time) on that day by each of three leading brokers of Federal funds
transactions in New York City reasonably selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Financial Performance Test" means the following test for
purposes of reducing the Applicable Margin: (a) if the Leverage Ratio is less
than or equal to 3.0 to 1.0 and the Average Availability is at least
$5,000,000, then the Applicable Margin for Base Rate Revolving Loans is .50%
and the Applicable Margin for LIBOR Revolving Loans is 2.00%; (b) if the
Leverage Ratio is less than or equal to 2.75 to 1.0 and the Average
Availability is at least $7,500,000, then the Applicable Margin for Base Rate
Revolving Loans is .25% and the Applicable Margin for LIBOR Revolving Loans is
1.75%; (c) if the Leverage Ratio is less than or equal to 2.50 to 1.0 and the
Average Availability is at least $12,500,000, then the Applicable Margin for
Base Rate Revolving Loans is -0- and the Applicable Margin for LIBOR Revolving
Loans is 1.50%; and (d) if the Leverage Ratio is less than or equal to 2.25 to
1.0 and the Average Availability is at least $17,500,000, then the Applicable
Margin for Base Rate Revolving Loans is -.25% and the Applicable Margin for
LIBOR Revolving Loans is 1.25%.
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<PAGE> 23
"Financial Statements" means, according to the context in
which it is used, the financial statements referred to in Section 8.6 or any
other financial statements required to be given to the Lenders pursuant to this
Agreement.
"Fiscal Year" means the Borrower's fiscal year for financial
accounting purposes. The current Fiscal Year of the Borrower will end on
December 31, 1998.
"Fixed Assets" means Equipment and Real Estate of the Borrower
and the other Loan Parties.
"Foreign Exchange Reserve" means a reserve up to ten percent
(10%) of the notional amount of all foreign exchange contracts outstanding.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of
the Closing Date.
"General Intangibles" means all of the now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of the Borrower and the other Loan Parties
of every kind and nature (other than Accounts), including, without limitation,
all contract rights, Proprietary Rights, corporate or other business records,
inventions, designs, blueprints, plans, specifications, patents, patent
applications, trademarks, service marks, trade names, trade secrets, goodwill,
copyrights, computer software, customer lists, registrations, licenses,
franchises, tax refund claims, any funds which may become due to the Borrower
or other Loan Party (as applicable) in connection with the termination of any
Plan or other employee benefit plan or any rights thereto and any other amounts
payable to the Borrower or other Loan Party (as applicable) from any Plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds
thereof, property, casualty or any similar type of insurance and any proceeds
thereof, proceeds of insurance covering the lives of key employees on which the
Borrower or other Loan Party (as applicable) is beneficiary, and any letter of
credit, guarantee, claim, security interest or other security held by or
granted to the Borrower or other Loan Party (as applicable).
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty" means, with respect to any Person, all obligations
of such Person which in any manner directly or indirectly guarantee or assure,
or in effect guarantee or assure,
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<PAGE> 24
the payment or performance of any indebtedness, dividend or other obligations
of any other Person (the "guaranteed obligations"), or assure or in effect
assure the holder of the guaranteed obligations against loss in respect
thereof, including, without limitation, any such obligations incurred through
an agreement, contingent or otherwise: (a) to purchase the guaranteed
obligations or any property constituting security therefor; (b) to advance or
supply funds for the purchase or payment of the guaranteed obligations or to
maintain a working capital or other balance sheet condition; or (c) to lease
property or to purchase any debt or equity securities or other property or
services.
"Import Broker" means Carmichael and any additional or
replacement import brokers which may be used by the Borrower or the other Loan
Parties in the future.
"Imported Inventory" means Inventory that is in the process of
being imported into the United States which (i) has been purchased from a
foreign supplier, (ii) is in the process of being shipped, and (iii) has not
yet been delivered to the Borrower or any other Loan Party.
"Imported Inventory Agreements" means agreements relating to
Imported Inventory by and among the Borrower, the Agent and the Borrower's
Import Broker in form and substance satisfactory to the Agent.
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors, in each case undertaken under U.S. Federal, state or
foreign law, including the Bankruptcy Code.
"Intercompany Accounts" means all assets and liabilities,
however arising, which are due to any Loan Party from, which are due from any
Loan Party to, or which otherwise arise from any transaction by any Loan Party
with, any of its Affiliates.
"Interest Coverage Ratio" means, for any period, the ratio of
(a) Adjusted Net Earnings for such period over (b) total interest expense
during such period.
"Interest Period" means, as to any LIBOR Revolving Loan, the
period commencing on the Funding Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or continued
as a LIBOR Revolving Loan, and ending on the date twenty-eight (28) days, or
one, two, three, or six months thereafter as selected by the Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(a) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR
Revolving Loan that begins on the last Business Day of a calendar month (or on
a day for which there is no
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numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period; and
(c) no Interest Period shall extend beyond the
Stated Termination Date.
"Interest Rate" means each or any of the interest rates,
including the Default Rate, set forth in Section 3.1.
"Inventory" means all of the Borrower's and other Loan
Parties' now owned and hereafter acquired inventory, goods and merchandise,
wherever located, to be furnished under any contract of service or held for
sale or lease, all returned goods, raw materials, other materials and supplies
of any kind, nature or description which are or might be consumed in the
Borrower's or other Loan Party's (as applicable) business or used in connection
with the packing, shipping, advertising, selling or finishing of such goods,
merchandise and such other personal property, and all documents of title or
other documents representing them.
"Investment Property" has the meaning set forth in Section
9115 of the UCC.
"IRS" means the Internal Revenue Service and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Landlord Waivers" means an agreement, in form and substance
reasonably satisfactory to the Agent, executed by a landlord of any Premises
leased by the Borrower or other Loan Party (as applicable).
"Latest Projections" means: (a) on the Closing Date and
thereafter until the Agent receives new projections pursuant to Section 7.2(f),
the projections of the Loan Parties' financial condition, results of
operations, and cash flow, for the period commencing on January 1, 1998 and
ending on December 31, 2000 and delivered to the Agent prior to the Closing
Date; and (b) thereafter, the projections most recently received by the Agent
pursuant to Section 7.2(f).
"Lender" and "Lenders" have the meanings specified in the
introductory paragraph hereof and shall include the Agent to the extent of any
Agent Advance outstanding and BABC to the extent of any BABC Loan outstanding;
provided that no such Agent Advance or BABC Loan shall be taken into account in
determining any Lender's Pro Rata Share.
"Letter of Credit" means a letter of credit issued or caused
to be issued for the account of the Borrower pursuant to Section 2.3.
"Letter of Credit Fee" has the meaning specified in Section
3.6.
"Leverage Ratio" means, for any period, the ratio of (a)
Liabilities for such period over (b) Adjusted Tangible Net Worth.
"Liabilities" means the amount of the Parent's liabilities,
including as liabilities all reserves for contingencies and other potential
liabilities, which would be required to be shown in accordance with GAAP on the
Parent's consolidated balance sheet.
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"LIBOR Interest Payment Date" means, with respect to a LIBOR
Rate Loan, the last day of each Interest Period applicable to such Loan.
"LIBOR Rate" means, for any Interest Period, with respect to
LIBOR Revolving Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/1000th of 1.0%) determined by
the Agent as follows:
LIBOR Rate = LIBOR
-----------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next 1/100th of 1%) in
effect on such day (whether or not applicable to any Lender)
under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded
upward to the next 1/16th of 1%) notified to the Agent by Bank
of America as the rate of interest at which dollar deposits in
the approximate amount of the Loan to be made or continued as,
or converted into, a LIBOR Revolving Loan and having a
maturity comparable to such Interest Period would be offered
by Bank of America's applicable lending office to major banks
in the London eurodollar market at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of
such Interest Period.
"LIBOR Revolving Loan" means a Revolving Loan during any
period in which it bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including without limitation, a security interest, charge, claim,
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property.
"Loan Account" means the loan account of the Borrower, which
account shall be maintained by the Agent.
"Loan Documents" means this Agreement, the BofA Intercreditor
Agreement, the MLBFS Intercreditor Agreement, the Copyright, Patent and
Trademark Agreements, the Parent
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<PAGE> 27
Pledge Agreement, the Blocked Account Agreements, the Imported Inventory
Agreements, the Post-Closing Letter, and any other agreements, instruments, and
documents heretofore, now or hereafter evidencing, securing, guaranteeing or
otherwise relating to the Obligations, the Collateral, or any other aspect of
the transactions contemplated by this Agreement.
"Loan Parties" means, collectively, the Borrower, the Parent,
Riteway East, Riteway North Central, Riteway Distributors Central and Riteway
Distributors.
"Loans" means, collectively, all loans and advances provided
for in Article 2.
"Majority Lenders" means at anytime Lenders whose Pro Rata
Shares aggregate more than two-thirds (2/3) of the Commitments or, if no
Commitments shall then be in effect, Lenders who hold more than two-thirds
(2/3) of the aggregate principal amount of the Loans then outstanding.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Borrower or any other
Loan Party or the Collateral; (b) a material impairment of the ability of the
Borrower or any other Loan Party to perform under any Loan Document and to
avoid any Event of Default; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against the Borrower or any other
Loan Party of any Loan Document.
"Maximum Revolver Amount" means $75,000,000.
"MLBFS Intercreditor Agreement" means that certain
Intercreditor Agreement dated as of even date herewith between Agent and
Merrill Lynch Business Finance Services Inc.
"MLBFS Loan" means that $3,000,000 line of credit extended by
Merrill Lynch Business Financial Services, Inc. to the Parent.
"Multi-employer Plan" means a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by the Borrower
or any ERISA Affiliate.
"Net Amount of Eligible Accounts" means, at any time, the
gross amount of Eligible Accounts less sales, excise or similar taxes, and less
returns, charge-backs, service charges, finance charges, discounts, claims,
credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed.
"Net Amount of Eligible Inventory" means, at any time, the
Eligible Inventory, net of the excess and obsolete general ledger reserve,
valued at cost (on a weighted average cost basis), provided that, if amounts
under the excess and obsolete general ledger reserve are deemed inadequate by
the Agent in its reasonable discretion, the Agent may reserve additional
amounts necessary to value Inventory at the lower of cost or market.
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"Notice of Borrowing" has the meaning specified in Section
2.2(b).
"Notice of Conversion/Continuation" has the meaning specified
in Section 3.2(b).
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by the Borrower or
any other Loan Party to the Agent and/or any Lender, arising under or pursuant
to this Agreement or any of the other Loan Documents, whether or not evidenced
by any note, or other instrument or document, whether arising from an extension
of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Agent and/or any Lender in the Borrower's or other Loan Party's (as
applicable) debts owing to others), absolute or contingent, due or to become
due, primary or secondary, as principal or guarantor, and including, without
limitation, all principal, interest, charges, expenses, fees, attorneys' fees,
filing fees and any other sums chargeable to the Borrower or other Loan Party
(as applicable) hereunder or under any of the other Loan Documents.
"Obligations" includes, without limitation, (a) all debts, liabilities, and
obligations now or hereafter owing from the Borrower or other Loan Party (as
applicable) to the Agent and/or any Lender under or in connection with the
Letters of Credit and (b) all debts, liabilities and obligations now or
hereafter owing from the Borrower or other Loan Party (as applicable) to the
Agent and Lenders arising from or related to ACH Transactions and Other
Indemnified Transactions pursuant to the indemnity provided in Section 2.4
hereof.
"Other Indemnified Transactions" shall mean all Debts,
liabilities and other obligations now or hereafter owing from any of Loan
Parties (or their Affiliates) to Bank of America (or its Affiliates) arising
out of the following credit facilities or services:
(a) the up to $4,000,000 credit facility provided
by Bank of America (Japan);
(b) the up to $4,000,000 credit facility provided
by Bank of America (France);
(c) the VISA/Mastercard facility up to the amount
of $100,000;
(d) the foreign exchange contract line up to the
amount of $25,000,000 and settlement limits up to the amount of $5,000,000;
(e) the up to L.10,000,000/US$15,000,000 credit
facility extended to Carratti Sport Limited ("Caratti") (a wholly owned
subsidiary of the Parent);
(f) the up to $1,200,000 custom duty/VAT deferment
guaranty provided to Caratti; and
(g) the up to $500,000 ACH and cash management
services provided to Caratti.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made
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<PAGE> 29
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Documents.
"Parent" shall mean GT Bicycles, Inc., a Delaware corporation,
the sole shareholder of the Borrower.
"Parent Pledge Agreement" means the Pledge Agreement dated as
of the date hereof, in which the Parent pledges for the purpose of securing the
Obligations, all of the stock of the Consolidated Domestic Companies (in the
case of Innovations in Composites, Inc. all of the stock owned by Parent), all
of its ownership interest in Charger Bicycles, LLC, sixty-six percent (66%) of
the stock of each of its now existing or hereafter acquired foreign
Subsidiaries, and all ownership interest which it may acquire in any other
company, corporation, partnership or other entity.
"Participant Lender" means any Person who shall have been
granted the right by any Lender to participate in the financing provided by
such Lender under this Agreement, and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
"Payment Account" means each blocked bank account established
pursuant to Section 6.9, to which the funds of the Borrower and other Loan
Parties (including, without limitation, proceeds of Accounts and other
Collateral) are deposited or credited, and which is maintained in the name of
the Agent or the Borrower or other Loan Party, as the Agent may determine, on
terms reasonably acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
"Pending Revolving Loans" means, at any time, the aggregate
principal amount of all Revolving Loans requested in any Notice(s) of Borrowing
received by the Agent which have not yet been advanced.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Borrower or other Loan
Party sponsors, maintains, or to which it makes, is making, or is obligated to
make contributions, or in the case of a Multiple- employer Plan has made
contributions at any time during the immediately preceding five (5) plan years.
"Permitted Liens" means:
(a) Liens for taxes not delinquent or statutory
Liens for taxes in an amount not to exceed $1,000,000 provided that the payment
of such taxes which are due and payable is being contested in good faith and by
appropriate proceedings diligently pursued and as to which adequate financial
reserves have been established on Borrower's or other Loan Party's (as
applicable) books and records and a stay of enforcement of any such Lien is in
effect;
(b) the Agent's Liens;
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(c) deposits under worker's compensation,
unemployment insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or other similar bonds for
the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure statutory obligations (other than liens arising
under ERISA or Environmental Liens) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary course of
business;
(d) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons, provided that if any such Lien arises from the nonpayment of such
claims or demand when due, such claims or demands do not exceed $250,000 in the
aggregate;
(e) Reservations, exceptions, encroachments,
easements, rights of way, covenants running with the land, and other similar
title exceptions or encumbrances affecting any Real Estate; provided that they
do not in the aggregate materially detract from the value of the Real Estate or
materially interfere with its use in the ordinary conduct of the Borrower's or
other Loan Party's (as applicable) business;
(f) Judgment and other similar Liens arising in
connection with court proceedings to the extent the attachment or enforcement of
such Liens would not result in an Event of Default hereunder; and
(g) Liens securing the BofA Loan to the extent
such Liens on the Collateral amount to a second priority security interest
subordinate to the Agent's Liens; provided however, that a Lien by BofA on the
Loan Parties' Proprietary Rights pursuant to the BofA Loan may be senior to the
Agent's Liens.
(h) Existing Liens set forth on Schedule 8.9.
(i) Liens constituting purchase money security
interests and liens of lessors under capital leases to the extent that the
security interest or lien only encumbers the asset purchased or leased, and so
long as the security interest or Lien secures only the purchase price of the
asset.
(j) Liens constituting renewals, extensions or
replacements of any of the foregoing.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability partnerships or company, Governmental Authority,
or any other entity.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Borrower or other Loan Party sponsors or maintains or
to which the Borrower or other Loan Party (as applicable) makes, is making, or
is obligated to make contributions and includes any Pension Plan.
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"Post-Closing Letter" means a letter agreement dated as of the
Closing Date among Loan Parties, Agent and Lenders.
"Premises" means the land identified by addresses on Schedule
8.12, together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way
appertaining thereto, and which constitutes all of the real property in which
the Borrower or any other Loan Party has any interests on the Closing Date.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the sum of the amounts of
all of the Lenders' Commitments, or if no Commitments are outstanding, a
fraction (expressed as a percentage), the numerator of which is the amount of
Obligations owed to such Lender and the denominator of which is the aggregate
amount of the Obligations owed to the Lenders.
"Proprietary Rights" means all of the Borrower's and other
Loan Parties' respective now owned and hereafter arising or acquired:
licenses, franchises, permits, patents, patent rights, copyrights, works which
are the subject matter of copyrights, trade secrets, other proprietary
information or materials, trademarks, service marks, trade names, trade styles,
patent, trademark and service mark applications, and other intellectual
property or proprietary rights and all licenses and rights related to any of
the foregoing, including, without limitation, those patents, trademarks,
service marks, trade names and copyrights set forth on Schedule 8.13, and all
other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing,
and all rights to sue for past, present and future infringement of any of the
foregoing, in each case whether owned, licensed to, or otherwise held by such
Person, whether now held or hereafter arising or acquired.
"Real Estate" means all of the respective present and future
interests of the Borrower and other Loan Parties, as owner, lessee, or
otherwise, in the Premises, including, without limitation, any interest arising
from an option to purchase or lease the Premises or any portion thereof.
"Receivable Dilution Reserve" means a reserve equal to the
amount of any receivable dilution greater than seven and one-half percent
(7.5%) based on a rolling three month average.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
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"Required Lenders" means at any time Lenders whose Pro Rata
Shares aggregate more than 50% of the Commitments or, if no Commitments shall
then be in effect, Lenders who hold more than 50% of the aggregate principal
amount of the Loans then outstanding.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or
binding upon the Person or any of its property or to which the Person or any of
its property is subject.
"Responsible Officer" means the chief executive officer, the
president or the chief financial officer of the Borrower, or any other officer
or employee of the Borrower authorized to request and take action with respect
to Loans; or, with respect to compliance with financial covenants and the
preparation of the Borrowing Base Certificate, the chief financial officer,
controller or the treasurer of the Borrower, or any other officer or employee
listed on Schedule 1.1A (where such employees are assigned the necessary
authority and responsibility by an officer) of the Borrower.
"Restricted Investment" means, as to any Person, any
acquisition of property by such Person in exchange for cash or other property,
whether in the form of an acquisition of stock, debt, or other indebtedness or
obligation, or the purchase or acquisition of any other property, or a loan,
advance, capital contribution, or subscription, except acquisitions of the
following: (a) Equipment to be used in the business of the Loan Parties so
long as the acquisition costs thereof constitute Capital Expenditures permitted
hereunder; (b) Inventory in the ordinary course of business; (c) current assets
arising from the sale or lease of goods or the rendition of services in the
ordinary course of business of the Loan Parties; (d) direct obligations of the
United States of America, or any agency thereof, or obligations guaranteed by
the United States of America, provided that such obligations mature within one
year from the date of acquisition thereof; (e) certificates of deposit maturing
within one year from the date of acquisition, bankers' acceptances, Eurodollar
bank deposits, or overnight bank deposits, in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States
or any state thereof having capital and surplus aggregating at least
$100,000,000; (f) commercial paper given a rating of "A2" or better by Standard
& Poor's Corporation or "P2" or better by Moody's Investors Service, Inc. and
maturing not more than 90 days from the date of creation thereof; (g) any
investments in Innovations in Composites, Inc. already made or existing at the
time of the Closing Date; and (h) other investments not to exceed in the
aggregate in any Fiscal Year $250,000 (or $2,500,000 after repayment in full of
the BofA Loan).
"Revolving Loans" has the meaning specified in Section 2.2 and
includes each Agent Advance and BABC Loan.
"Settlement" and "Settlement Date" have the meanings specified
in Section 2.2(j)(l).
"Solvent" means when used with respect to any Person that at
the time of determination:
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(a) the assets of such Person, at a fair
valuation, are in excess of the total amount of its debts (including, without
limitation, contingent liabilities); and
(b) the present fair saleable value of its assets
is greater than its probable liability on its existing debts as such debts
become absolute and matured; and
(c) it is then able and expects to be able to pay
its debts (including, without limitation, contingent debts and other
commitments) as they mature; and
(d) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the
amount of any contingent liability shall be computed as the amount that, in
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
"Stated Termination Date" means April 29, 2001.
"Subordinating Loan Party" has the meaning set forth in
Section 2.5(m).
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Parent.
"Supporting Letter of Credit" has the meaning set forth in
Section 2.3(j).
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
each Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Lender or the Agent, as the case may be,
is organized or maintains a lending office.
"Termination Date" means the earliest to occur of (i) the
Stated Termination Date, (ii) the date the Total Facility is terminated either
by the Borrower pursuant to Section 4.2 or by the Majority Lenders pursuant to
Section 11.2, and (iii) the date this Agreement is otherwise terminated for any
reason whatsoever.
"Total Facility" has the meaning specified in Section 2.1.
"UCC" means the Uniform Commercial Code (or any successor
statute) of the State of California or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the issue of
perfection of security interests.
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"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
"Unused Letter of Credit Subfacility" means an amount equal to
$15,000,000 minus the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit plus (b) the aggregate unpaid reimbursement
obligations with respect to all Letters of Credit.
"Unused Line Fee" has the meaning specified in Section 3.5.
"Year 2000 Problem" means the risk that computer applications
may not be able to properly perform date sensitive functions after December 31,
1999.
1.2 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP consistently applied with prior periods and using the same
method for inventory valuation as used in the preparation of the Financial
Statements.
1.3 Interpretive Provisions.
(a) The meanings of defined terms are equally applicable
to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding" and the
word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
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(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative
and shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent,
the Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent
merely because of the Agent's or Lenders' involvement in their preparation.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Total Facility. Subject to all of the terms and conditions of
this Agreement, the Lenders severally agree to make available a total credit
facility of up to $75,000,000 (the "Total Facility") for the Borrower's use
from time to time during the term of this Agreement. The Total Facility shall
be comprised of a revolving line of credit consisting of revolving loans and
letters of credit up to the Maximum Revolver Amount, as described in Sections
2.2 and 2.3.
2.2 Revolving Loans.
(a) Amounts. Subject to the satisfaction of the
conditions precedent set forth in Article 10, each Lender severally agrees,
upon the Borrower's request from time to time on any Business Day during the
period from the Closing Date to the Termination Date, to make revolving loans
(the "Revolving Loans") to the Borrower, in amounts not to exceed (except for
BABC with respect to BABC Loans or Agent Advances) such Lender's Pro Rata Share
of the Availability. The Lenders, however, in their discretion, may elect to
make Revolving Loans or participate (as provided for in Section 2.3(f)) in the
credit support or enhancement provided through the Agent to the issuers of
Letters of Credit in excess of the Availability on one or more occasions, but
if they do so, neither the Agent nor the Lenders shall be deemed thereby to
have changed the limits of the Maximum Revolver Amount or the Availability or
to be obligated to exceed such limits on any other occasion. If the Aggregate
Revolver Outstanding exceeds the Availability (with the Availability for this
purpose calculated as if the Aggregate Revolver Outstandings were zero), the
Lenders may refuse to make or otherwise restrict the making of Revolving Loans
as the Lenders determine until such excess has been eliminated, subject to the
Agent's authority, in its sole discretion, to make Agent Advances pursuant to
the terms of Section 2.2(i).
(b) Procedure for Borrowing.
(1) Each Borrowing shall be made upon the
Borrower's irrevocable written notice delivered to the Agent in the
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form of a Notice of Borrowing substantially in the form of Exhibit B (each, a
"Notice of Borrowing") together with a Borrowing Base Certificate reflecting
sufficient Availability, (which must be received by the Agent prior to 10:00
a.m. (Pacific Time) (i) three Business Days prior to the requested Funding
Date, in the case of LIBOR Revolving Loans, except with respect to LIBOR
Revolving Loans that the Borrower requests to be made on the Closing Date, and
(ii) no later than 11:00 a.m. (Pacific Time) on the requested Funding Date, in
the case of Base Rate Revolving Loans and LIBOR Revolving Loans that the
Borrower requests to be made on the Closing Date, specifying:
(A) the amount of the Borrowing (which,
in the case of LIBOR Revolving Loans, shall be in an amount not less than
$1,000,000, and which shall be in an integral multiple of $1,000,000);
(B) the requested Funding Date, which
shall be a Business Day;
(C) whether the Revolving Loans
requested are to be Base Rate Revolving Loans or LIBOR Revolving Loans; and
(D) the duration of the Interest Period
if the requested Revolving Loans are to be LIBOR Revolving Loans. If the
Notice of Borrowing fails to specify the duration of the Interest Period for
any Borrowing comprised of LIBOR Revolving Loans, such Interest Period shall be
one month.
(2) With respect to any request for Base Rate
Revolving Loans, in lieu of delivering the above-described Notice of Borrowing
the Borrower may give the Agent telephonic notice of such request by the
required time, with such telephonic notice to be confirmed in writing within 24
hours of the giving of such notice but the Agent shall be entitled to rely on
the telephonic notice in making such Revolving Loans.
(3) With respect to any request for LIBOR
Revolving Loans, no more than five (5) LIBOR Revolving Loans may be outstanding
at any one time.
(c) Reliance upon Authority. On or prior to the Closing
Date and thereafter prior to any change with respect to any of the information
contained in the following clauses (i) and (ii), the Borrower shall deliver to
the Agent a writing setting forth (i) the account of the Borrower to which the
Agent is authorized to transfer the proceeds of the Revolving Loans requested
pursuant to this Section 2.2, and (ii) the names of the persons authorized to
request and take other actions with respect to Revolving Loans on behalf of the
Borrower, and shall provide the Agent with a specimen signature of each such
person. The Agent shall be entitled to rely conclusively on such person's
authority to request Revolving Loans on behalf of the Borrower (in the absence
of manifest error), the proceeds of which are to be transferred to any of the
accounts specified by the Borrower pursuant to the immediately preceding
sentence, until the Agent receives written notice to the contrary. The Agent
shall have no duty to verify the identity of any individual representing him or
herself as one of the officers authorized by the Borrower to make such requests
on its behalf.
(d) No Liability. The Agent shall not incur any
liability to the Borrower or any other Loan Party as a result of acting upon
any notice referred to in Sections 2.2(b) and (c),
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which notice the Agent believes in good faith to have been given by an officer
duly authorized by the Borrower to request Revolving Loans on its behalf or for
otherwise acting in good faith under this Section 2.2, and the crediting of
Revolving Loans to the Borrower's operating account specified in Section
2.2(g)(1) account, or transmittal to such Person as the Borrower shall direct,
shall conclusively establish the obligation of the Borrower and each other Loan
Party to repay such Revolving Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or
telephonic notice in lieu thereof) made pursuant to Section 2.2(b) shall be
irrevocable and the Borrower shall be bound to borrow the funds requested
therein in accordance therewith.
(f) Agent's Election. Promptly after receipt of a Notice
of Borrowing (or telephonic notice in lieu thereof) pursuant to Section 2.2(b),
the Agent shall elect, in its discretion, (i) to have the terms of Section
2.2(g) apply to such requested Borrowing, or (ii) to request BABC to make a
BABC Loan pursuant to the terms of Section 2.2(h) in the amount of the
requested Borrowing; provided, however, that if BABC declines in its sole
discretion to make a BABC Loan pursuant to Section 2.2(h), the Agent shall
elect to have the terms of Section 2.2(g) apply to such requested Borrowing.
(g) Making of Revolving Loans.
(1) In the event that the Agent shall elect to
have the terms of this Section 2.2(g) apply to a requested Borrowing as
described in Section 2.2(f), then promptly after receipt of a Notice of
Borrowing or telephonic notice pursuant to Section 2.2(b)(2), the Agent shall
notify the Lenders by telecopy, telephone or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender's Pro Rata Share of the requested Borrowing available to the Agent
in same day funds, to such account of the Agent as the Agent may designate, not
later than 12:00 p.m. (noon), (Pacific Time) on the Funding Date applicable
thereto. After the Agent's receipt of the proceeds of such Revolving Loans,
upon satisfaction of the applicable conditions precedent set forth in Article
10, the Agent shall make the proceeds of such Revolving Loans available to the
Borrower on the applicable Funding Date by transferring same day funds equal to
the proceeds of such Revolving Loans received by the Agent to the account of
the Borrower, designated in writing by the Borrower and acceptable to the
Agent; provided, however, that the amount of Revolving Loans so made on any
date shall in no event exceed the Availability on such date.
(2) Unless the Agent receives notice from a
Lender on or prior to the Closing Date or, with respect to any Borrowing after
the Closing Date, at least one Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to the Agent for the account of the Borrower the amount of that
Lender's Pro Rata Share of the Borrowing, the Agent may assume that each Lender
has made such amount available to the Agent in immediately available funds on
the Funding Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent any Lender shall not have made its
full amount available to the Agent in immediately available funds and the Agent
in such circumstances has made available to the Borrower such amount, that
Lender shall on the Business Day following such Funding Date make such amount
available to the Agent, together
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with interest at the Federal Funds Rate for each day during such period. A
notice from the Agent submitted to any Lender with respect to amounts owing
under this subsection shall be conclusive, absent manifest error. If such
amount is so made available, such payment to the Agent shall constitute such
Lender's Loan on the payment date for all purposes of this Agreement. If such
amount is not made available to the Agent on the Business Day following the
Funding Date, the Agent will notify the Borrower of such failure to fund and,
upon demand by the Agent, the Borrower shall pay such amount to the Agent for
the Agent's account, together with interest thereon for each day elapsed since
the date of such Borrowing, at a rate per annum equal to the Interest Rate
applicable at the time to the Loans comprising such Borrowing. The failure of
any Lender to make any Loan on any Funding Date (any such Lender, prior to the
cure of such failure, being hereinafter referred to as a "Defaulting Lender")
shall not relieve any other Lender of any obligation hereunder to make a Loan
on such Funding Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Funding
Date.
(3) The Agent shall not be obligated to transfer
to a Defaulting Lender any payments made by the Borrower to the Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting Lender
shall instead be paid to or retained by the Agent. The Agent may hold and, in
its discretion, re-lend to the Borrower the amount of all such payments
received or retained by it for the account of such Defaulting Lender. Any
amounts so re-lent to the Borrower shall bear interest at the rate applicable
to Base Rate Revolving Loans and for all other purposes of this Agreement shall
be treated as if they were Revolving Loans, provided, however, that for
purposes of voting or consenting to matters with respect to the Loan Documents
and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to
be a "Lender" and such Lender's Commitment shall be deemed to be zero (-0-).
Until a Defaulting Lender cures its failure to fund its Pro Rata Share of any
Borrowing, (1) such Defaulting Lender shall not be entitled to any portion of
the Unused Line Fee and (2) the Unused Line Fee shall accrue in favor of the
Lenders which have funded their respective Pro Rata Shares of such requested
Borrowing and shall be allocated among such performing Lenders ratably based
upon their relative Commitments. This section shall remain effective with
respect to such Defaulting Lender until such time as the Defaulting Lender
shall no longer be in default of any of its obligations under this Agreement.
The terms of this Section shall not be construed to increase or otherwise
affect the Commitment of any Lender, or relieve or excuse the performance by
the Borrower of its duties and obligations hereunder.
(h) Making of BABC Loans.
(1) In the event the Agent shall elect, with the
consent of BABC, to have the terms of this Section 2.2(h) apply to a requested
Borrowing as described in Section 2.2(f), BABC shall make a Revolving Loan in
the amount of such Borrowing (any such Revolving Loan made solely by BABC
pursuant to this Section 2.2(h) being referred to as a "BABC Loan" and such
Revolving Loans being referred to collectively as "BABC Loans") available to
the Borrower on the Funding Date applicable thereto by transferring same day
funds to an account of the Borrower, designated in writing by the Borrower and
reasonably acceptable to the Agent. Each BABC Loan is a Revolving Loan
hereunder and shall be subject to all the
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terms and conditions applicable to other Revolving Loans except that all
payments thereon shall be payable to BABC solely for its own account (and for
the account of the holder of any participation interest with respect to such
Revolving Loan). The Agent shall not request BABC to make any BABC Loan if (i)
the Agent shall have received written notice from any Lender, or otherwise has
actual knowledge, that one or more of the applicable conditions precedent set
forth in Article 10 will not be satisfied on the requested Funding Date for the
applicable Borrowing, or (ii) the requested Borrowing would exceed the
Availability on such Funding Date. BABC shall not otherwise be required to
determine whether the applicable conditions precedent set forth in Article 10
have been satisfied or the requested Borrowing would exceed the Availability on
the Funding Date applicable thereto prior to making, in its sole discretion,
any BABC Loan.
(2) The BABC Loans shall be secured by the
Collateral, shall constitute Revolving Loans and Obligations hereunder, and
shall bear interest at the rate applicable to the Revolving Loans from time to
time.
(i) Agent Advances.
(1) Subject to the limitations set forth in the
provisos contained in this Section 2.2(i), the Agent is hereby authorized by
the Borrower and the Lenders, from time to time in the Agent's sole discretion,
(1) after the occurrence of a Default or an Event of Default, or (2) at any
time that any of the other applicable conditions precedent set forth in Article
10 have not been satisfied, to make Revolving Loans to the Borrower on behalf
of the Lenders which the Agent, in its reasonable business judgment, deems
necessary or desirable (A) to preserve or protect the Collateral, or any
portion thereof, (B) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (C) to pay any other amount
chargeable to the Borrower pursuant to the terms of this Agreement, including,
without limitation, costs, fees and expenses as described in Section 15.7 (any
of the advances described in this Section 2.2(i) being hereinafter referred to
as "Agent Advances"); provided, that the Required Lenders may at any time
revoke the Agent's authorization contained in this Section 2.2(i) to make Agent
Advances, any such revocation to be in writing and to become effective
prospectively upon the Agent's receipt thereof;
(2) The Agent Advances shall be repayable on
demand and secured by the Collateral, shall constitute Revolving Loans and
Obligations hereunder, and shall bear interest at the rate applicable to the
Revolving Loans from time to time. The Agent shall notify each Lender in
writing of each such Agent Advance.
(j) Settlement. It is agreed that each Lender's funded
portion of the Revolving Loan is intended by the Lenders to be equal at all
times to such Lender's Pro Rata Share of the outstanding Revolving Loans.
Notwithstanding such agreement, the Agent, BABC, and the other Lenders agree
(which agreement shall not be for the benefit of or enforceable by the
Borrower) that in order to facilitate the administration of this Agreement and
the other Loan Documents, settlement among them as to the Revolving Loans, the
BABC Loans and the Agent Advances shall take place on a periodic basis in
accordance with the following provisions:
(1) The Agent shall request settlement
("Settlement") with the Lenders on a weekly basis, or on a more frequent basis
if so determined by the Agent, (1) on behalf of
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BABC, with respect to each outstanding BABC Loan, (2) for itself, with respect
to each Agent Advance, and (3) with respect to collections received, in each
case, by notifying the Lenders of such requested Settlement by telecopy,
telephone or other similar form of transmission, of such requested Settlement,
no later than 11:00 a.m. (Pacific Time) on the date of such requested
Settlement (the "Settlement Date"). Each Lender (other than BABC, in the case
of BABC Loans) shall make the amount of such Lender's Pro Rata Share of the
outstanding principal amount of the BABC Loans and Agent Advances with respect
to which Settlement is requested available to the Agent, for itself or for the
account of BABC, in same day funds, to such account of the Agent as the Agent
may designate, not later than 11:00 a.m. (Pacific Time), on the Settlement Date
applicable thereto, regardless of whether the applicable conditions precedent
set forth in Article 10 have then been satisfied. Such amounts made available
to the Agent shall be applied against the amounts of the applicable BABC Loan
or Agent Advance and, together with the portion of such BABC Loan or Agent
Advance representing BABC's Pro Rata Share thereof, shall constitute Revolving
Loans of such Lenders. If any such amount is not made available to the Agent
by any Lender on the Settlement Date applicable thereto, the Agent shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the Federal Funds Rate for the first three (3) days from
and after the Settlement Date and thereafter at the Interest Rate then
applicable to the Revolving Loans.
(2) Notwithstanding the foregoing, not more than
one (1) Business Day after demand is made by the Agent (whether before or after
the occurrence of a Default or an Event of Default and regardless of whether
the Agent has requested a Settlement with respect to a BABC Loan or Agent
Advance), each other Lender shall irrevocably and unconditionally purchase and
receive from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share thereof by paying to the Agent, in same
day funds, an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance. If such amount is not in fact made available to the Agent by
any Lender, the Agent shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the Federal Funds Rate for the
first three (3) days from and after such demand and thereafter at the Interest
Rate then applicable to the Revolving Loans.
(3) From and after the date, if any, on which any
Lender purchases an undivided interest and participation in any BABC Loan or
Agent Advance pursuant to the immediately preceding subsection (2), the Agent
shall promptly distribute to such Lender at such address as such Lender may
request in writing, such Lender's Pro Rata Share of all payments of principal
and interest and all proceeds of Collateral received by the Agent in respect of
such BABC Loan or Agent Advance.
(4) Between Settlement Dates, the Agent, to the
extent no Agent Advances or BABC Loans are outstanding, may pay over to BABC
any payments received by the Agent, which in accordance with the terms of this
Agreement would be applied to the reduction of the Revolving Loans, for
application to BABC's other outstanding Revolving Loans. If, as of any
Settlement Date, collections received since the then immediately preceding
Settlement Date have been applied to BABC's other outstanding Revolving Loans
other than to BABC Loans or Agent Advances, as provided for in the previous
sentence, BABC shall pay to
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the Agent for the accounts of the Lenders, to be applied to the outstanding
Revolving Loans of such Lenders, an amount such that each Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of
the Revolving Loans. During the period between Settlement Dates, BABC with
respect to BABC Loans, the Agent with respect to Agent Advances, and each
Lender with respect to the Revolving Loans other than BABC Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the actual average daily amount of funds employed by
BABC, the Agent and the other Lenders.
(k) Notation. The Agent shall record on its books the
principal amount of the Revolving Loans owing to each Lender, including the
BABC Loans owing to BABC, and the Agent Advances owing to the Agent, from time
to time. In addition, each Lender is authorized, at such Lender's option, to
note the date and amount of each payment or prepayment of principal of such
Lender's Revolving Loans in its books and records, including computer records,
such books and records constituting rebuttably presumptive evidence, absent
manifest error, of the accuracy of the information contained therein.
(l) Lenders' Failure to Perform. All Loans (other than
BABC Loans and Agent Advances) shall be made by the Lenders simultaneously and
in accordance with their Pro Rata Shares. It is understood that (a) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Loans hereunder, nor shall any Commitment of any Lender
be increased or decreased as a result of any failure by any other Lender to
perform its obligation to make any Loans hereunder, (b) no failure by any
Lender to perform its obligation to make any Loans hereunder shall excuse any
other Lender from its obligation to make any Loans hereunder, and (c) the
obligations of each Lender hereunder shall be several, not joint and several.
2.3 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms
and conditions of this Agreement, and in reliance upon the representations and
warranties of the Borrower and the other Loan Parties herein set forth, the
Agent agrees (i) to cause to be issued on a timely basis for the account of the
Borrower or the other Loan Parties one or more merchandise or standby letters
of credit (the "Letters of Credit"), and (ii) to provide credit support or
other enhancement to banks acceptable to Agent, which issue Letters of Credit
for the account of the Borrower or the other Loan Parties (any such credit
support or enhancement being herein referred to as a "Credit Support") in
accordance with this Section 2.3 from time to time during the term of this
Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall
not have any obligation to cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit at any time if: (1) the maximum
undrawn amount of the requested Letter of Credit is greater than the Unused
Letter of Credit Subfacility at such time; (2) the maximum undrawn amount of
the requested Letter of Credit and all commissions, fees, and charges due from
the Borrower in connection with the opening thereof exceed the Availability at
such time; or (3) such Letter of Credit has an expiration date later than
thirty (30) days prior to the Stated Termination Date or more than twelve (12)
months from the date of issuance.
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(c) Other Conditions. In addition to being subject to
the satisfaction of the applicable conditions precedent contained in Article
10, the obligation of the Agent to cause to be issued any Letter of Credit or
to provide Credit Support for any Letter of Credit is subject to the following
conditions precedent having been satisfied in a manner satisfactory to the
Agent:
(1) The Borrower or other Loan Party (as
applicable) shall have delivered to the proposed issuer of such Letter of
Credit, at such times and in such manner as such proposed issuer may prescribe,
an application in form and substance satisfactory to such proposed issuer and
the Agent for the issuance of the Letter of Credit and such other documents as
may be required pursuant to the terms thereof, and the form and terms of the
proposed Letter of Credit shall be satisfactory to the Agent and such proposed
issuer; and
(2) As of the date of issuance, no order of any
court, arbitrator or Governmental Authority shall purport by its terms to
enjoin or restrain money center banks generally from issuing letters of credit
of the type and in the amount of the proposed Letter of Credit, and no law,
rule or regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit,
or request that the proposed issuer of such Letter of Credit refrain from, the
issuance of letters of credit generally or the issuance of such Letters of
Credit.
(d) Issuance of Letters of Credit.
(1) Request for Issuance. The Borrower and the
other Loan Parties shall give the Agent three (3) Business Days' written notice
prior to the requested issuance date of the Borrower's or such other Loan
Party's (as applicable) request for the issuance of a Letter of Credit. Such
notice shall be irrevocable and shall specify the original face amount of the
Letter of Credit requested, the effective date (which date shall be a Business
Day) of issuance of such requested Letter of Credit, whether such Letter of
Credit may be drawn in a single or in partial draws, the date on which such
requested Letter of Credit is to expire (which date shall be a Business Day),
the purpose for which such Letter of Credit is to be issued, and the
beneficiary of the requested Letter of Credit. The Borrower and the other Loan
Parties shall attach to such notice the proposed form of the Letter of Credit.
(2) Responsibilities of the Agent; Issuance. The
Agent shall determine, as of the Business Day immediately preceding the
requested effective date of issuance of the Letter of Credit set forth in the
notice from the Borrower pursuant to Section 2.3(d)(1), (i) the amount of the
applicable Unused Letter of Credit Subfacility and (ii) the Availability as of
such date. If (i) the undrawn amount of the requested Letter of Credit is not
greater than the applicable Unused Letter of Credit Subfacility and (ii) the
issuance of such requested Letter of Credit and all commissions, fees, and
charges due from the Borrower and the other Loan Parties in connection with the
opening thereof would not exceed the Availability, the Agent shall take
reasonable steps to cause such issuer to issue the requested Letter of Credit
on such requested effective date of issuance.
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(3) Notice of Issuance. On each Settlement Date
the Agent shall give notice to each Lender of the issuance of all Letters of
Credit issued since the last Settlement Date.
(4) No Extensions or Amendment. The Agent shall
not be obligated to cause any Letter of Credit to be extended or amended unless
the requirements of this Section 2.3(d) are met as though a new Letter of
Credit were being requested and issued. With respect to any Letter of Credit
which contains any "evergreen" or automatic renewal provision, each Lender
shall be deemed to have consented to any such extension or renewal unless any
such Lender shall have provided to the Agent, not less than 30 days prior to
the last date on which the applicable issuer can in accordance with the terms
of the applicable Letter of Credit decline to extend or renew such Letter of
Credit, written notice that it declines to consent to any such extension or
renewal, provided, that if all of the requirements of this Section 2.3 are met
and no Default or Event of Default exists, no Lender shall decline to consent
to any such extension or renewal.
(e) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. The
Borrower and the other Loan Parties agree to reimburse the issuer of any Letter
of Credit for any draw under such Letter of Credit and the Agent for the
account of the Lenders upon any payment pursuant to any Credit Support
immediately upon demand, and to pay the issuer of the Letter of Credit the
amount of all other obligations and other amounts payable to such issuer under
or in connection with any Letter of Credit immediately when due, irrespective
of any claim, setoff, defense or other right which the Borrower and the other
Loan Parties may have at any time against such issuer or any other Person.
(2) Revolving Loans to Satisfy Reimbursement
Obligations. In the event that the issuer of any Letter of Credit honors a
draw under such Letter of Credit or the Agent shall have made any payment
pursuant to any Credit Support and the Borrower and the other Loan Parties
shall not have repaid such amount to the issuer of such Letter of Credit or the
Agent, as applicable, pursuant to Section 2.3(e)(1), the Agent shall, upon
receiving notice of such failure, notify each Lender of such failure, and each
Lender shall unconditionally pay to the Agent, for the account of such issuer
or the Agent, as applicable, as and when provided hereinbelow, an amount equal
to such Lender's Pro Rata Share of the amount of such payment in Dollars and in
same day funds. If the Agent so notifies the Lenders prior to 11:00 a.m.
(Pacific Time) on any Business Day, each Lender shall make available to the
Agent the amount of such payment, as provided in the immediately preceding
sentence, on such Business Day. Such amounts paid by the Lenders to the Agent
shall constitute Revolving Loans which shall be deemed to have been requested
by the Borrower and the other Loan Parties pursuant to Section 2.2 as set forth
in Section 4.4.
(f) Participations.
(1) Purchase of Participations. Immediately upon
issuance of any Letter of Credit in accordance with Section 2.3(d), each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and participation
in the Letter of Credit or the Credit Support provided
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through the Agent to such issuer in connection with the issuance of such Letter
of Credit, equal to such Lender's Pro Rata Share of the face amount of such
Letter of Credit or the amount of such Credit Support (including, without
limitation, all obligations of the Borrower and the other Loan Parties with
respect thereto, and any security therefor or guaranty pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments.
Whenever the Agent receives a payment from the Borrower and the other Loan
Parties on account of reimbursement obligations in respect of a Letter of
Credit or Credit Support as to which the Agent has previously received for the
account of the issuer thereof payment from a Lender pursuant to Section
2.3(e)(2), the Agent shall promptly pay to such Lender such Lender's Pro Rata
Share of such payment from the Borrower and the other Loan Parties in Dollars.
Each such payment shall be made by the Agent on the Business Day on which the
Agent receives immediately available funds paid to such Person pursuant to the
immediately preceding sentence, if received prior to 10:00 a.m. (Pacific Time)
on such Business Day and otherwise on the next succeeding Business Day.
(3) Documentation. Upon the request of any
Lender, the Agent shall furnish to such Lender copies of any Letter of Credit,
reimbursement agreements executed in connection therewith, application for any
Letter of Credit and credit support or enhancement provided through the Agent
in connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably be requested by such Lender.
(4) Obligations Irrevocable. The obligations of
each Lender to make payments to the Agent with respect to any Letter of Credit
or with respect to any Credit Support provided through the Agent with respect
to a Letter of Credit, and the obligations of the Borrower and the other Loan
Parties to make payments to the Agent, for the account of the Lenders, shall be
irrevocable, not subject to any qualification or exception whatsoever,
including, without limitation, any of the following circumstances:
(i) any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff,
defense or other right which the Borrower and the other Loan Parties may have
at any time against a beneficiary named in a Letter of Credit or any transferee
of any Letter of Credit (or any Person for whom any such transferee may be
acting), any Lender, the Agent, the issuer of such Letter of Credit, or any
other Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions (including
any underlying transactions between the Borrower, and the other Loan Parties,
or any other Person and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents; or
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(v) the occurrence of any Default or
Event of Default.
(g) Recovery or Avoidance of Payments. In the event any
payment by or on behalf of the Borrower or the other Loan Parties received by
the Agent with respect to any Letter of Credit or Credit Support provided for
any Letter of Credit (or any guaranty by the Borrower and the other Loan
Parties or reimbursement obligation of the Borrower and the other Loan Parties
relating thereto) and distributed by the Agent to the Lenders on account of
their respective participations therein is thereafter set aside, avoided or
recovered from the Agent in connection with any receivership, liquidation or
bankruptcy proceeding, the Lenders shall, upon demand by the Agent, pay to the
Agent their respective Pro Rata Shares of such amount set aside, avoided or
recovered, together with interest at the rate required to be paid by the Agent
upon the amount required to be repaid by it.
(h) Compensation for Letters of Credit.
(1) Letter of Credit Fee. The Borrower agrees to
pay to the Agent with respect to each Letter of Credit, for the account of the
Lenders, the Letter of Credit Fee specified in, and in accordance with the
terms of, Section 3.6.
(2) Issuer Fees and Charges. The Borrower shall
pay to the issuer of any Letter of Credit, or to the Agent, for the account of
the issuer of any such Letter of Credit, solely for such issuer's account, such
fees and other charges as are charged by such issuer for letters of credit
issued by it, including, without limitation, its standard fees for issuing,
administering, amending, renewing, paying and canceling letters of credit and
all other fees associated with issuing or servicing letters of credit, as and
when assessed.
(i) Indemnification; Exoneration; Power of Attorney
(1) Indemnification. In addition to amounts
payable as elsewhere provided in this Section 2.3, the Borrower and the other
Loan Parties hereby agree to protect, indemnify, pay and save the Lenders and
the Agent harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys'
fees) which any Lender or the Agent may reasonably incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit or the
provision of any credit support or enhancement in connection therewith. The
agreement in this Section 2.3(i)(1) shall survive payment of all Obligations.
(2) Assumption of Risk by the Borrower. As among
the Borrower, the other Loan Parties, the Lenders, and the Agent, the Borrower
and the other Loan Parties assume all risks of the acts and omissions of, or
misuse of any of the Letters of Credit by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing, the
Lenders and the Agent shall not be responsible for: (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any Person in connection with the application for and issuance of and
presentation of drafts with respect to any of the Letters of Credit, even if it
should prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or
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proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) the failure of the beneficiary of any Letter of
Credit to comply duly with conditions required in order to draw upon such
Letter of Credit; (D) errors, omissions, interruptions, or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) errors in interpretation of
technical terms; (F) any loss or delay in the transmission or otherwise of any
document required in order make a drawing under any Letter of Credit or of the
proceeds thereof; (G) the misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or (H) any
consequences arising from causes beyond the control of the Lenders or the
Agent, including, without limitation, any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Authority.
None of the foregoing shall affect, impair or prevent the vesting of any rights
or powers of the Agent or any Lender under this Section 2.3(i).
(3) Exoneration. In furtherance and extension,
and not in limitation, of the specific provisions set forth above, any action
taken or omitted to be taken by the Agent or any Lender under or in connection
with any of the Letters of Credit or any related certificates, if taken or
omitted to be taken in the absence of gross negligence or willful misconduct,
shall not put the Agent or any Lender under any resulting liability to the
Borrower or the other Loan Parties or relieve the Borrower and the other Loan
Parties of any of its obligations hereunder to any such Person.
(4) Power of Attorney. In connection with all
Inventory financed by Letters of Credit, the Borrower and the other Loan
Parties hereby appoint the Agent, or the Agent's designee, as their attorney,
with full power and authority after the occurrence and during the continuance
of an Event of Default: (a) to sign and/or endorse the Borrower's and such
other Loan Party's name (as applicable) upon any warehouse or other receipts;
(b) to sign the Borrower's and such other Loan Party's name (as applicable) on
bills of lading and other negotiable and non-negotiable documents; (c) to clear
Inventory through customs in the Agent's or the Borrower's and such other Loan
Party's name (as applicable), and to sign and deliver to customs officials
powers of attorney in the Borrower's and such other Loan Party's name (as
applicable) for such purpose; (d) to complete in the Borrower's, such the other
Loan Party's, or the Agent's name, any order, sale, or transaction, obtain the
necessary documents in connection therewith, and collect the proceeds thereof;
and (e) to do such other acts and things as are necessary in order to enable
the Agent to obtain possession of the Inventory and to obtain payment of the
Obligations. Neither the Agent nor its designee, as the Borrower's and the
other Loan Parties' attorney, will be liable for any acts or omissions, nor for
any error of judgement or mistakes of fact or law, except for such as may be
caused by Agent's gross negligence or willful misconduct. This power, being
coupled with an interest, is irrevocable until all Obligations have been paid
and satisfied.
(5) Account Party. The Borrower hereby
authorizes and directs any issuer of a Letter of Credit to name the Borrower as
the "Account Party" therein and to deliver to the Agent all instruments,
documents and other writings and property received by the issuer pursuant to
the Letter of Credit, and to accept and rely upon the Agent's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit or the application therefor.
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(6) Control of Inventory. In connection with all
Inventory financed by Letters of Credit, if an Event of Default has occurred
and is continuing, the Borrower and the other Loan Parties will, at the Agent's
request, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
the Agent holds a security interest to deliver them to the Agent and/or subject
to the Agent's order, and if they shall come into the Borrower's or the other
Loan Parties' possession, to deliver them, upon request, to the Agent in their
original form. The Borrower and the other Loan Parties shall, at the Agent's
request at any time, designate the Agent as the consignee on all bills of
lading and other negotiable and non-negotiable documents.
(j) Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of Section 2.3(b) and Section 12.1 any Letter of
Credit is outstanding upon the termination of this Agreement, then upon such
termination the Borrower and the other Loan Parties shall deposit with the
Agent, for the ratable benefit of the Agent and the Lenders, with respect to
each Letter of Credit then outstanding, as the Majority Lenders, in their
reasonable discretion shall specify, either (A) a standby letter of credit (a
"Supporting Letter of Credit") in form and substance reasonably satisfactory to
the Agent, issued by an issuer reasonably satisfactory to the Agent in an
amount equal to the greatest amount for which such Letter of Credit may be
drawn plus any fees and expenses associated with such Letter of Credit, under
which Supporting Letter of Credit the Agent is entitled to draw amounts
necessary to reimburse the Agent and the Lenders for payments made by the Agent
and the Lenders under such Letter of Credit or under any credit support or
enhancement provided through the Agent with respect thereto and any fees and
expenses associated with such Letter of Credit, or (B) cash in amounts
necessary to reimburse the Agent and the Lenders for payments made by the Agent
or the Lenders under such Letter of Credit or under any credit support or
enhancement provided through the Agent with respect thereto and any fees and
expenses associated with such Letter of Credit. Such Supporting Letter of
Credit or deposit of cash shall be held by the Agent, for the ratable benefit
of the Agent and the Lenders, as security for, and to provide for the payment
of, the aggregate undrawn amount of such Letters of Credit remaining
outstanding.
2.4 ACH Transactions and Other Indemnified Transactions.
(a) Incurrence of Indemnity Obligations. The Borrower or
the other Loan Parties may request and the Agent may, in its sole and absolute
discretion, arrange for the Borrower and the other Loan Parties to obtain from
Bank of America or its Affiliates ACH Transactions and Other Indemnified
Transactions. The Borrower and the other Loan Parties each agree to indemnify
and hold the Agent and Lenders harmless from any and all obligations now or
hereafter owing by the Agent or any of the Lenders to Bank of America or its
Affiliates arising from or related to such ACH Transactions and Other
Indemnified Transactions pursuant to any indemnity referred to in clause (iii)
of the penultimate sentence of this Section 2.4(a). Immediately upon the Agent
issuing any indemnity to Bank of America or its Affiliates in connection with
ACH Transactions and Other Indemnified Transactions, each Lender shall be
deemed to have irrevocably and unconditionally purchased an undivided interest
and participation in the indemnity provided by the Agent to Bank of America or
its Affiliates equal to such Lender's Pro Rata Share of such indemnity
(including, without limitation, all obligations of the Borrower and the other
Loan
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Parties with respect thereto). The Borrower and the other Loan Parties each
agree to pay to Bank of America or its Affiliates (as applicable), all amounts
owing to Bank of America or its Affiliates pursuant to ACH Transactions or
Other Indemnified Transactions. In the event the Borrower and the other Loan
Parties shall not have paid to Bank of America or its Affiliates such amounts,
the Agent and the Lenders shall pay Bank of America or its Affiliates (as
applicable) irrespective of any claim, set-off, defense or other right which
any Loan Party or Affiliate thereof may have or assert with respect to any of
the ACH Transactions or Other Indemnified Transactions; and such amounts when
paid by the Agent and the Lenders shall constitute a Revolving Loan which shall
be deemed to have been requested by the Borrower. The Borrower and the other
Loan Parties acknowledge and agree that the obtaining of ACH Transactions and
Other Indemnified Transaction from Bank of America (i) is in the sole and
absolute discretion of Bank of America or its Affiliates, (ii) is subject to
all rules and regulations of Bank of America or its Affiliates, and (iii) is
due to reliance by Bank of America and its Affiliates (as applicable) on the
indemnity of the Agent and the Lenders to Bank of America with respect to
obligations of the Borrower, and other Loan Parties, or their Affiliates to
Bank of America or its Affiliates in connection with the ACH Transactions and
Other Indemnified Transactions. The agreements in this Section 2.4(a) shall
survive payment of all Obligations.
(b) Cash Collateral; Supporting Letter of Credit. If,
notwithstanding the provisions of Section 12.1, obligations are owing or
outstanding under or otherwise with respect to any indemnity referred to in
clause (iii) of Section 2.4(a) at the time of the termination of this
agreement, then upon such termination the Borrower and the other Loan Parties
shall deposit with the Agent, for the ratable benefit of the Agent and the
Lenders, as the Majority Lenders in their reasonable discretion shall specify,
either (A) cash in amounts necessary to reimburse the Agent and the Lenders for
any payments that may be required to be made on account of such obligations, or
(B) a standby letter of credit in such amounts, which shall be in form and
substance reasonably satisfactory to the Agent and issued by an issuer
reasonably satisfactory to the Agent.
2.5 Loan Parties' Liability.
(a) Integrated Group. The Borrower and the other
Loan Parties represent to the Agent and Lenders that they are integral parts of
a consolidated enterprise, that they will receive direct and indirect benefits
from the availability of the credit facility provided for herein, and from the
ability to access the collective credit resources of the consolidated
enterprise that is represented by the Loan Parties, that their integrated
operations require the credit facility provided by the Loan Documents, and
that each Loan Party expects to derive its direct and indirect benefits from
such credit facility because the success of the integrated operations of the
Loan Parties is dependent on the performance of the functions of the integrated
enterprise as a group. Each of such other Loan Parties hereby irrevocably
authorizes all of Borrower's actions in requesting, authorizing, and directing
the use of the proceeds of Loans made hereunder, and each Loan Party agrees to
be bound by the acts of each of the others in connection with the Loan
Documents. It is expressly understood by each Loan Party that the Agent and
Lenders shall have no responsibility to inquire into the apportionment,
allocation or disposition of any advances or other credit accommodations made
to the Borrower; that all advances or other credit accommodations made to the
Borrower are made for the collective
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account of the Loan Parties on the basis of their respective interests in the
Collateral; that the making and handling of the credit facility on such basis
is solely as an accommodation to the Loan Parties; and that the Agent and the
Lenders shall not incur any liability to any Loan Party as a result thereof.
(b) Unconditional Obligations. Each Loan Party
hereby unconditionally and irrevocably agrees to pay, and guarantees to the
Agent and Lenders the prompt payment of, all Obligations in full in cash when
due, whether at maturity, by optional or mandatory prepayment, upon
acceleration, pursuant to a permitted demand, upon commencement of bankruptcy
or insolvency proceedings or otherwise (including without limitation, the
payment of (i) amounts that would become due but for the operation of the
automatic stay under Section 362(a) of Bankruptcy Code), absolute or
contingent, liquidated or unliquidated, determined or undetermined,
Obligations, and all costs of enforcement or preservation and protection of any
and all Collateral and of all interest which, but for the commencement of a
proceeding under the Bankruptcy Code, would accrue). All payments made by any
Loan Party pursuant to this Section 2.5 shall be made without set-off or
counterclaim and free and clear of and without deductions for any present or
future taxes, fees, withholdings or conditions of any nature.
(c) Joint and Several Liability. The Loan
Parties each are, and at all times shall be, jointly and severally liable for
each and every one of the Obligations hereunder and under the other Loan
Documents, regardless of which Loan Party directly or indirectly received,
used, or enjoyed the benefit of, the extensions of credit hereunder. Unless
otherwise expressly set forth to the contrary in any of the Loan Documents, all
of the Collateral shall secure all of the Obligations. Each Loan Party's
Obligations under this Agreement are independent Obligations and are absolute
and unconditional. Each Loan Party, to the extent permitted by law, hereby
waives any defense to such Obligations that may arise by reason of the
disability or other defense or cessation of liability of any other Loan Party
for any reason other than payment in full. Each Loan Party also waives
deferral of such Obligations arising by reason of the institution of
proceedings by or against another Loan Party under or pursuant to any
Insolvency Proceeding, and waives any defense to such Obligations that it may
have as a result of any holder's election of or failure to exercise any right,
power, or remedy, including, without limitation, the failure to proceed first
against such other Loan Party or any security it holds for such other Loan
Party's Obligations under any Loan Document, if any. Without limiting the
generality of the foregoing, each Loan Party expressly waives all demands and
notices whatsoever (except for any demands or notices, if any, that such Loan
Party expressly is entitled to receive pursuant to the terms of any Loan
Document), and agrees that the Agent may, without notice (except for such
notice, if any, as such Loan Party expressly is entitled to receive pursuant to
the terms of any Loan Document) and without releasing the liability of such
Loan Party, extend for the benefit of any other Loan Party the time for making
any payment, waive or extend the performance of any agreement or make any
settlement of any agreement for the benefit of any other Loan Party, and may
proceed against each Loan Party, directly and independently of any of the other
Loan Parties, as such obligee may elect in accordance with this Agreement or
other Loan Document.
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(d) Consents. Each Loan Party other than the
Borrower consents and agrees that the Agent may, at any time and from time to
time (without notice or demand to, or any consent of, such Loan Party, whether
before or after any actual or purported termination, repudiation or revocation
of this Agreement by any one or more Loan Parties, and without affecting the
enforceability or continuing effectiveness hereof as to such Loan Party, in
accordance with the terms of the Loan Documents: (i) supplement, restate,
modify, amend, increase, decrease, extend, renew, accelerate or otherwise
change the time for payment or the terms of the Obligations or any part
thereof, including any increase or decrease of the rate(s) of interest thereon;
(ii) supplement, restate, modify or amend the Loan Documents; (iii) increase,
decrease or waive, or enter into or give any agreement, approval or consent
with respect to, the Obligations or any part thereof, or any of the Loan
Documents or any security or guarantees granted or entered into by any
Person(s) other than such Loan Party, or any condition, covenant, default,
remedy, right, representation or term thereof or thereunder; (iv) accept new or
additional instruments, documents or agreements in exchange for or relative to
any of the Loan Documents or the Obligations or any part thereof; (v) accept
partial payments on the Obligations; (vi) receive and hold additional security
or guarantees for the Obligations or any part thereof; (vii) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute,
transfer or enforce any security or guarantees, and apply any security and
direct the order or manner of sale thereof as the Agent in its sole and
absolute discretion may determine; (viii) release any other Person (including,
without limitation, any other Loan Party) from any personal liability with
respect to the Obligations or any part thereof; (ix) with respect to any Person
other than such Loan Party (including without limitation, any other Loan
Party), settle, release on terms satisfactory to the Agent or by operation of
applicable laws or otherwise liquidate or enforce any Obligations and any
security therefor or guaranty thereof in any manner, consent to the transfer of
any security and bid and purchase at any sale; or (x) consent to the merger,
change or any other restructuring or termination of the corporate or
partnership existence of any other Loan Party or any other Person, and
correspondingly agree, in accordance with all applicable provisions of the Loan
Documents, to the restructure of the Obligations, and any such merger, change,
restructuring or termination shall not affect the liability of such Loan Party
or the continuing effectiveness hereof, or the enforceability hereof with
respect to all or any part of the Obligations.
(e) No Marshalling. Upon the occurrence and
during the continuance of any Event of Default, the Agent may enforce the Loan
Documents independently as to each Loan Party and independently of any other
remedy or security the Agent at any time may have or hold in connection with
the Obligations, and it shall not be necessary for the Agent to marshal assets
in favor of any Loan Party or any other Person or to proceed upon or against or
exhaust any security or remedy before proceeding to enforce this Agreement.
Each Loan Party expressly waives any right to require the Lender to marshal
assets in favor of any Loan Party or any other Person or to proceed against any
other Loan Party or any collateral provided by any Person, and agrees that the
Agent may proceed against the Loan Parties or any Collateral in such order as
it shall determine in its sole and absolute discretion.
(f) Separate Actions. The Agent may file a
separate action or action against any Loan Party, whether action is brought or
prosecuted with respect to any security or against any other Person, or whether
any other Person is joined in any such action or actions.
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Each Loan Party agrees, for itself, that the Agent and any other Loan Party, or
any Affiliate of any other Loan Party (other than such Loan Party itself), may
deal with each other in connection with the Obligations or otherwise, or alter
any contracts or agreements now or hereafter existing between any of them, in
any manner whatsoever, all without in any way altering or affecting the
continuing efficacy as to such Loan Party of the Loan Documents. Each Loan
Party expressly waives the benefit of any statute of limitations affecting its
liability hereunder or the enforcement of the Obligations or any rights of the
Lender created or granted herein.
(g) Returned Payments. The Agent's and the
Lenders' rights under this Agreement and the other Loan Documents shall be
reinstated and revived, and the enforceability of this Agreement and the other
Loan Documents shall continue, with respect to any amount at any time paid on
account of the Obligations which thereafter shall be required to be restored or
returned by the Agent or any Lenders (including, without limitation, the
restoration or return of any amount pursuant to a court order or judgment
(whether or not final or non- appealable), or pursuant to a good faith
settlement of a pending or threatened avoidance or recovery action, or pursuant
to good faith compliance with a demand made by a Person believed to be entitled
to pursue an avoidance or recovery action (such as a bankruptcy trustee or a
Person having the avoiding powers of a bankruptcy trustee, or similar avoiding
powers), and without requiring the Agent or any Lender to oppose or litigate
avoidance or recovery demands or actions that it believes in good faith to be
meritorious or worthy of settlement or compliance, or pursue or exhaust
appeals), all as though such amount had not been paid. The rights of the Agent
and the Lenders created or granted in the Loan Documents and the enforceability
of the Loan Documents at all times shall remain effective to cover the full
amount of all the Obligations even though the Obligations, including any part
thereof or any other security or guaranty therefor, may be or hereafter may
become invalid or otherwise unenforceable as against any other Loan Party and
whether or not any other Loan Party shall have any personal liability with
respect thereto.
(h) Waivers. To the maximum extent permitted by
applicable law, each Loan Party, for itself, expressly waives any and all
defenses now or hereafter arising or that otherwise might be asserted by reason
of (i) any disability or other defense of any other Loan Party with respect to
the Obligations, or with respect to the enforceability of the Agent's security
interest in or lien on any collateral securing any of the Obligations
(including, without limitation, the Collateral), (ii) the unenforceability or
invalidity of any security or guaranty for the Obligations or the lack of
perfection or continuing perfection or failure of priority of any security for
the Obligations, (iii) the cessation for any cause whatsoever of the liability
of any other Loan Party (other than by reason of the full payment and
performance of all Obligations), (iv) any failure of the Agent to marshal
assets in favor of any Loan Party or any other Person, (v) any failure of the
Agent to give notice of sale or other disposition of collateral to any other
Loan Party or any other Person other than such waiving Loan Party, or any
default in any notice that may be given to any other Loan Party or any other
Person other than such waiving Loan Party, in connection with any sale or
disposition of any collateral securing the Obligations or any of them
(including, without limitation, the Collateral), (vi) any failure of the Agent
to comply with applicable law in connection with the sale or other disposition
of any collateral or other security for any Obligation that is owned by another
Loan Party or by any other Person other than such waiving Loan Party, including
any failure of the Agent to conduct a commercially reasonable sale or other
disposition of any such collateral or other security for any Obligation, (vii)
any act
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or omission of the Agent or others that directly or indirectly results in or
aids the discharge or release of any other Loan Party, or the Obligations of
any other Loan Party, or any security or guaranty therefor, by operation of law
or otherwise, (viii) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation, (ix) any
failure of the Agent to file or enforce a claim in any bankruptcy or other
proceeding with respect to any Person other than such waiving Loan Party, (x)
the election by the Agent of the application or non-application of Section
1111(b)(2) of the Bankruptcy Code in any bankruptcy case where the debtor is a
Person other than such waiving Loan Party, (xi) any extension of credit or the
grant of any lien under Section 364 of the Bankruptcy Code in any bankruptcy
case where the debtor is a Person other than such waiving Loan Party, (xii) any
use of cash collateral under Section 363 of the Bankruptcy Code in any
bankruptcy case where the debtor is a Person other than such waiving Loan Party
(xiii) any agreement or stipulation with respect to the provision of adequate
protection in any bankruptcy case where the debtor is a Person other than such
waiving Loan Party, (xiv) the avoidance of any lien in favor of the Agent for
any reason, or (xv) any action taken by the Agent that is authorized by this
section or any other provision of any Loan Document. Until such time, if any,
as all of the Obligations have been paid and performed in full and no portion
of any commitment of the Agent to any Loan Party under any Loan Document
remains in effect, no Loan Party shall have any right of subrogation,
contribution, reimbursement or indemnity, and each Loan Party expressly waives
any right to enforce any remedy that the Agent now has or hereafter may have
against any other Person and waives the benefit of, or any right to participate
in, any collateral now or hereafter held by the Agent. Except to the extent
expressly provided for in any Loan Document, each Loan Party expressly waives,
to the maximum extent permitted by applicable law, all rights or entitlements
to presentments, demands for payment or performance, notices of nonpayment or
nonperformance, protests, notices of protest, notices of dishonor and all other
notices or demands of any kind or nature whatsoever with respect to the
Obligations, and all notices of acceptance of the Loan Documents or of the
existence, creation or incurring of new or additional Obligations.
(i) Mortgage Foreclosure. In the event that all
or any part of the Obligations at any time should be or become secured by any
one or more deeds of trust or mortgages or other instruments creating or
granting Liens on any interests in real property, each Loan Party authorizes
the Agent, upon the occurrence of and during the continuance of any Event of
Default, at its sole option, without notice or demand except as is or may be
expressly required by the terms of any Loan Document or by the provisions of
any applicable law, to foreclose any or all of such deeds of trust or mortgages
or other instruments by judicial or nonjudicial sale, without affecting or
diminishing, except to the extent of the effect of the application of the
proceeds realized therefrom, and except to the extent mandated by any
non-waivable provision of applicable law, the Obligations of any Loan Party
(other than the Obligations of a grantor of a foreclosed deed of trust,
mortgage, or other instrument, to the extent, if any, that applicable law
affects or diminishes the Obligations of such grantor), the enforceability of
this Agreement or any other Loan Document, or the validity or enforceability of
any remaining security interests or liens of, or for the benefit of, the Lender
on any collateral.
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(j) Liability for Deficiencies. To the fullest
extent permitted by applicable law, each Loan Party expressly waives any
defenses to the enforcement of this Agreement, or to the enforcement of this
Agreement, or to the enforcement of any other Loan Document, or to any rights
of the Lender created or granted hereby or thereby, or to the recovery by the
Lender against any Loan Party or any other Person liable therefor of any
deficiency after a judicial or nonjudicial foreclosure or sale of any
collateral, whether real or personal, from time to time securing any of the
Obligations, even though such a foreclosure or sale may impair the subrogation
rights of one or more of the Loan Parties and may preclude one or more of the
Loan Parties and may preclude one or more of the Loan Parties from obtaining
reimbursement or contribution from other Loan Parties. To the fullest extent
permitted by applicable law, each Loan Party expressly waives any defenses or
benefits that may be derived from California Civil Code Section Section 2809,
2810, 2819, 2839, 2849, 2899 or 3433, or from California Code of Civil
Procedure Section Section 580a, 580b, 580d or 726, or from comparable
provisions of the laws of any other jurisdiction, and all other suretyship
defenses it otherwise might or would have under California law or other
applicable law. To the fullest extent permitted by applicable law, each Loan
Party, for itself, expressly waives any right to receive notice of any judicial
or nonjudicial foreclosure or sale of any real property or interest therein of
another Loan Party that is subject to any such deeds of trust or mortgages or
other instruments, and any Loan Party's failure to receive any such notice
shall not impair or affect such Loan Party's obligations or the enforceability
of the Loan Documents or any rights of the Agent created or granted hereby or
thereby.
(k) Condition of Loan Parties. Each Loan Party
hereby agrees to keep each other Loan Party fully apprised at all times as to
the status of its business, affairs, finances, and financial condition, and its
ability to perform its Obligations under the Loan Documents, and in particular
as to any adverse developments with respect thereto. Each Loan Party hereby
agrees to undertake to keep itself apprised at all times as to the status of
the business, affairs, finances, and financial condition of each other Loan
Party, and of the ability of each other Loan Party to perform its Obligations
under the Loan Documents, and in particular as to any adverse developments with
respect to any thereof. Each Loan Party hereby agrees, in light of the
foregoing mutual covenants to inform each other, and to keep themselves and
each other informed as to such matters, that neither the Agent nor any Lender
shall have any duty to inform any Loan Party of any information pertaining to
the business, affairs, finances, or financial condition of any other Loan
Party, or pertaining to the ability of any other Loan Party to perform its
Obligations under the Loan Documents, even if such information is adverse, and
even if such information might influence the decision of one or more of the
Loan Party(s) to continue to be jointly and severally liable for, or to provide
Collateral for, Obligations of one or more of the other Loan Parties. To the
fullest extent permitted by applicable law, each Loan Party hereby expressly
waives any duty of the Agent to inform any Loan Party of any such information.
(l) Consultation with Counsel. The Loan Parties
and each of them warrant and agree that each of the waivers and consents set
forth herein are made after consultation with legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, destroy, or
otherwise adversely affect rights that any Loan Party otherwise may have
against any other Loan Party, the Agent, any Lender, or others, or against
Collateral, and that, under the circumstances, the waivers and consents herein
given are reasonable and not contrary to public
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policy or law. If any of the waivers or consents herein are determined to be
contrary to any applicable law or public policy, such waivers and consents
shall be effective to the maximum extent permitted by law.
(m) Subordination. Without limiting the rights
of the Agent or the Lenders under any of the Loan Documents, any Debt
(including interest accruing at the agreed-to rate after the commencement of
any bankruptcy, reorganization or similar proceeding) that may be now or
hereafter extended by any Loan Party (the "Subordinating Loan Party") to or for
the account of any other Loan Party or any other surety or guarantor of the
Obligations, or in respect of which such other Loan Party or any such other
surety or guarantor may be liable to the Subordinating Loan Party (including
statutory rights of subrogation, in any capacity) is hereby subordinated to all
obligations of such other Loan Party or any such other surety or guarantor to
the Agent or any Lender; and such Debt (including with limitation all
Obligations), if the Agent so requests after the occurrence and during the
continuation of any Event of Default, shall be collected, enforced and received
by the Subordinating Loan Party as trustee for the Agent and be paid over to
the Agent on account of the Obligations but without reducing or affecting in
any manner the liability of the Subordinating Loan Party under any other
provisions of this Agreement or any other Loan Document. The Subordinating
Loan Party will file all claims against such other Loan Party or any such other
surety or guarantor in any bankruptcy or other proceeding in which the filing
of claims is required or permitted by law upon any Debt of such other Loan
Party or such other surety or guarantor to the Subordinating Loan Party or
claim against such other Loan Party or such other surety or guarantor by the
Subordinating Loan Party and will assign to the Agent all rights of the
Subordinating Loan Party thereunder. If the Subordinating Loan Party does not
file any such claim at least 30 days prior to any applicable claims bar date,
the Agent, as attorney-in-fact for the Subordinating Loan Party, is hereby
irrevocably authorized to do so in the name of the Subordinating Loan Party or,
in the Agent's discretion, to assign the claim and to cause a proof of claim to
be filed in the name of the Agent's nominee. The Agent or its nominee shall
have the sole right, but not obligation, to accept or reject any plan proposed
in such proceeding and to cast any votes and to take any other action with
respect to all claims which the Subordinating Loan Party may have against such
other Loan Party or any such other surety or guarantor. In all such cases,
whether in administration, bankruptcy or otherwise, the Person authorized to
pay claims shall pay to the Agent the full amount payable on the Subordinating
Loan Party's claims, and, to the full extent necessary for that purpose, the
Subordinating Loan Party hereby assigns to the Agent all of the Subordinating
Loan Party's rights to any such payments or distributions to which the
Subordinating Loan Party would otherwise be entitled; provided, however, that
the Subordinating Loan Party's obligations under this Section 2.5(m) shall not
be satisfied except to the extent that the Agent receives cash by reason of any
such payment or distribution, which cash the Agent shall apply to the
Obligations. If the Agent receives anything hereunder other than cash, the
same shall be held as collateral for the Obligations.
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ARTICLE 3
INTEREST AND FEES
3.1 Interest.
(a) Interest Rates. All outstanding Obligations shall
bear interest on the unpaid principal amount thereof (including, to the extent
permitted by law, on interest thereon not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Base Rate
or the LIBOR Rate and Sections 3.1(a)(i) or (ii), as applicable, but not to
exceed the Maximum Rate described in Section 3.3. Subject to the provisions of
Section 3.2, any of the Loans may be converted into, or continued as, Base Rate
Revolving Loans or LIBOR Revolving Loans in the manner provided in Section 3.2.
If at any time Loans are outstanding with respect to which notice has not been
delivered to the Agent in accordance with the terms of this Agreement
specifying the basis for determining the interest rate applicable thereto, then
those Loans shall be Base Rate Revolving Loans and shall bear interest at a
rate determined by reference to the Base Rate until notice to the contrary has
been given to the Agent in accordance with this Agreement and such notice has
become effective. Except as otherwise provided herein, the outstanding
Obligations shall bear interest as follows:
(i) For all Base Rate Revolving Loans and other
Obligations (other than LIBOR Revolving Loans), at a fluctuating per annum rate
equal to the Base Rate plus the Applicable Margin; and
(ii) For all LIBOR Revolving Loans, at a per annum
rate equal to the LIBOR Rate plus the Applicable Margin.
Each change in the Base Rate shall be reflected in the interest rate described
in clause (i) above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of 360 days and actual days
elapsed (which results in more interest being paid than if computed on the
basis of a 365-day year). Interest accrued on all Loans will be payable in
arrears on the first day of each month hereafter.
(b) Default Rate. If any Default or Event of Default
occurs and is continuing and the Majority Lenders in their discretion so elect,
then, while any such Default or Event of Default is outstanding, all of the
Obligations shall bear interest at the Default Rate applicable thereto.
3.2 Conversion and Continuation Elections.
(a) The Borrower may, upon irrevocable written notice to
the Agent in accordance with Subsection 3.2(b):
(i) elect, as of any Business Day, in the case of
Base Rate Revolving Loans to convert any such Loans (or any part thereof in an
amount not less than $1,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof) into LIBOR Revolving Loans,
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provided that such election would not result in there existing at any time more
than five (5) outstanding LIBOR Revolving Loans; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Revolving Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
$1,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof); further provided, that if at any time the aggregate amount of LIBOR
Revolving Loans in respect of any Borrowing is reduced, by payment, prepayment,
or conversion of part thereof to be less than $1,000,000, such LIBOR Revolving
Loans shall automatically convert into Base Rate Revolving Loans, and on and
after such date the right of the Borrower to continue such Loans as, and
convert such Loans into, LIBOR Revolving Loans, as the case may be, shall
terminate.
(b) The Borrower shall deliver a notice of
conversion/continuation ("Notice of Conversion/Continuation") substantially in
the form of Exhibit C attached hereto to be received by the Agent not later
than 10:00 a.m. (Pacific Time) at least three (3) Business Days in advance of
the Conversion/Continuation Date, if the Loans are to be converted into or
continued as LIBOR Revolving Loans and specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans to be converted
or renewed;
(iii) the type of Loans resulting from the proposed
conversion or continuation; and
(iv) the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period
applicable to LIBOR Revolving Loans, the Borrower has failed to select timely
(or decides not to select) a new Interest Period to be applicable to LIBOR
Revolving Loans or if any Default or Event of Default then exists, the Borrower
shall be deemed to have elected to convert such LIBOR Revolving Loans into Base
Rate Revolving Loans effective as of the expiration date of such Interest
Period.
(d) The Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Lender.
(e) During the existence of an Event of Default, the
Borrower may not elect to have a Loan converted into or continued as a LIBOR
Revolving Loan without the written approval of the Agent.
3.3 Maximum Interest Rate. In no event shall any interest rate
provided for hereunder exceed the maximum rate legally chargeable by any Lender
under applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would
have exceeded the Maximum Rate, then the interest rate for that month
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shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain
at the Maximum Rate until such time as the amount of interest paid hereunder
equals the amount of interest which would have been paid if the same had not
been limited by the Maximum Rate. In the event that, upon payment in full of
the Obligations, the total amount of interest paid or accrued under the terms
of this Agreement is less than the total amount of interest which would, but
for this Section 3.3, have been paid or accrued if the interest rates otherwise
set forth in this Agreement had at all times been in effect, then the Borrower
shall, to the extent permitted by applicable law, pay the Agent, for the
account of the Lenders, an amount equal to the excess of (a) the lesser of (i)
the amount of interest which would have been charged if the Maximum Rate had,
at all times, been in effect over (ii) the amount of interest which would have
accrued had the interest rates otherwise set forth in this Agreement, at all
times, been in effect over (b) the amount of interest actually paid or accrued
under this Agreement. In the event that a court determines that the Agent
and/or any Lender has received interest and other charges hereunder in excess
of the Maximum Rate, such excess shall be deemed received on account of, and
shall automatically be applied to reduce, the Obligations other than interest,
in the inverse order of maturity, and if there are no Obligations outstanding,
the Agent and/or such Lender shall refund to the Borrower such excess.
3.4 Facility Fee. The Borrower agrees to pay the Agent, for its
own account, a facility fee (the "Facility Fee") in the amount of $312,500,
which Facility Fee shall be fully earned by the Agent on the Closing Date. The
Borrower shall pay the Facility Fee to the Agent in the following manner: (i)
$62,500 on the Closing Date; (ii) $125,000 on the first Anniversary Date; and
(iii) $125,000 on the second Anniversary Date.
3.5 Unused Line Fee. Until the Obligations have been paid in full
and the Agreement terminated, the Borrower agrees to pay, on the first day of
each month and on the Termination Date, to the Agent, for the ratable account
of the Lenders, an unused line fee equal to one-quarter of one percent (1/4%)
per annum on the average daily amount by which the Maximum Revolver Amount
exceeded the sum of the average daily outstanding amount of Revolving Loans and
the undrawn face amount of all outstanding Letters of Credit, during the
immediately preceding month or shorter period if calculated on the Termination
Date. The unused line fee shall be computed on the basis of a 360-day year
for the actual number of days elapsed. All payments received by the Agent on
account of Accounts or as proceeds of other Collateral shall be deemed to be
credited to the Borrower's Loan Account immediately upon receipt for purposes
of calculating the unused line fee pursuant to this Section 3.5.
3.6 Letter of Credit Fee. The Borrower agrees to pay to the
Agent, for the ratable account of the Lenders, for each Letter of Credit, a fee
(the "Letter of Credit Fee") equal to one and one-quarter percent (1 1/4%) per
annum of the face amount of each Letter of Credit issued for the Borrower's or
such other Loan Party's account at the Borrower's or such other Loan Party's
request, plus all out-of-pocket costs, fees and expenses incurred by the Agent
in connection with the application for, issuance of, or amendment to such
Letter of Credit, which costs, fees and expenses could include a "fronting fee"
required to be paid by the Agent to such issuer for the assumption of the
settlement risk in connection with the issuance of such Letter of Credit. The
Letter of Credit Fee shall be payable monthly in arrears on the first day of
each month following any month in which such Letter of Credit was issued and/or
in which a Letter of
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Credit remains outstanding. The Letter of Credit Fee shall be computed on the
basis of a 360-day year for the actual number of days elapsed.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans. The Borrower shall repay the outstanding
principal balance of the Revolving Loans, plus all accrued but unpaid interest
thereon, on the Termination Date. The Borrower may prepay Revolving Loans at
any time without premium or penalty, and reborrow subject to the terms of this
Agreement; provided, however, that with respect to any LIBOR Revolving Loans
prepaid by the Borrower prior to the expiration date of the Interest Period
applicable thereto, the Borrower promises to pay to the Agent for account of
the Lenders the amounts described in Section 5.4. In addition, and without
limiting the generality of the foregoing, upon demand the Borrower promises to
pay to the Agent, for account of the Lenders, the amount, without duplication,
by which the Aggregate Revolver Outstandings exceed the Availability (with
Availability for this purpose calculated as if the Aggregate Revolver
Outstandings were zero).
4.2 Termination of Facility. The Borrower may terminate this
Agreement upon at least twenty (20) Business Days' notice to the Agent and the
Lenders, with such termination being effective upon (a) the payment in full of
all outstanding Revolving Loans, together with accrued interest thereon, and
the cancellation of all outstanding Letters of Credit, (b) the payment of the
early termination fee set forth in the next sentence, (c) the payment in full
in cash of all other Obligations (other than those Obligations which by their
terms are intended to survive the termination of this Agreement) together with
accrued interest thereon, and (d) with respect to any LIBOR Revolving Loans
prepaid in connection with such termination prior to the expiration date of the
Interest Period applicable thereto, the payment of the amounts described in
Section 5.4. If this Agreement is terminated at any time prior to the Stated
Termination Date, whether pursuant to this Section or pursuant to Section 11.2,
the Borrower shall pay to the Agent, for the account of the Lenders, an early
termination fee determined in accordance with the following table:
<TABLE>
<CAPTION>
PERIOD DURING WHICH EARLY
EARLY TERMINATION TERMINATION
IS EFFECTIVE FEE
------------ -----------
<S> <C>
On or prior to the first 3.0% of the average daily balance
Anniversary Date of Loans and Letters of Credit
outstanding during the 180
days (or lesser period
if within 180 days of the
Closing Date) immediately prior to
the effective date of termination.
</TABLE>
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<TABLE>
<S> <C>
After the first 2.0% of the average daily balance
Anniversary Date but of Loans and Letters of Credit
on or prior to the second outstanding during the second
Anniversary Date 180 days immediately prior to the
effective date of termination.
After the second 1.0% of the average daily balance
Anniversary Date but of Loans and Letters of Credit
on or prior to the outstanding during the
Stated Termination Date 180 days immediately prior to the
effective date of termination.
</TABLE>
Notwithstanding the foregoing, in the event that all Obligations under this
Agreement are refinanced pursuant to a credit facility agented by BofA or any
of its Affiliates after the first Anniversary Date, then no termination fee
shall be charged on the portion of the Loans held by BABC. In the event the
Parent is subject to a Change of Ownership and this Agreement is terminated as
a result thereof, the early termination fee shall be reduced to no more than
$250,000 if such Change of Ownership occurs in on or before December 31, 1998,
and the early termination fee shall be $0 if such Change of Ownership occurs
thereafter.
4.3 Payments by the Borrower.
(a) All payments to be made by the Borrower shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Borrower shall be made to the Agent for
the account of the Lenders at the Agent's address set forth in Section 15.8,
and shall be made in Dollars and in immediately available funds, no later than
10:00 a.m. (Pacific Time) on the date when due. Any payment received by the
Agent later than 10:00 a.m. (Pacific Time) on such date shall be deemed to have
been received on the following Business Day and any applicable interest or fee
shall continue to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Borrower
prior to the date on which any payment is due to the Agent, for the ratable
account of the Lenders, that the Borrower will not make such payment in full as
and when required, the Agent may assume that the Borrower has made such payment
in full to the Agent on such date in immediately available funds and the Agent
may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent the Borrower has not made such payment
in full to the Agent, each Lender shall repay to the Agent on demand such
amount distributed to such Lender, together with interest thereon at the
Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
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4.4 Payments as Revolving Loans. All payments of principal,
interest, reimbursement obligations in connection with Letters of Credit, fees,
premiums and other sums payable hereunder, including all reimbursement for
expenses pursuant to Section 15.7, may, at the option of the Agent, in its sole
discretion, subject only to the terms of this Section 4.4, be paid from the
proceeds of Revolving Loans made hereunder, whether made following a request by
the Borrower pursuant to Section 2.2 or a deemed request as provided in this
Section 4.4. The Borrower hereby irrevocably authorizes the Agent to charge
the Loan Account for the purpose of paying principal, interest, reimbursement
obligations in connection with Letters of Credit, fees, premiums and other sums
payable hereunder, including reimbursing expenses pursuant to Section 15.7, and
agrees that all such amounts charged shall constitute Revolving Loans
(including BABC Loans and Agent Advances) and that all such Revolving Loans so
made shall be deemed to have been requested by Borrower pursuant to Section
2.2.
4.5 Apportionment, Application and Reversal of Payments.
Aggregate principal and interest payments shall be apportioned ratably among
the Lenders (according to the unpaid principal balance of the Loans to which
such payments relate held by each Lender) and payments of the fees shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to the Agent and all such payments not relating to principal or
interest of specific Loans, or not constituting payment of specific fees, and
all proceeds of Accounts or other Collateral received by the Agent, shall be
applied, ratably, subject to the provisions of this Agreement, first, to pay
any fees, indemnities or expense reimbursements including any amounts relating
to ACH Transactions and Other Indemnified Transactions then due to the Agent
from the Borrower; second, to pay any fees or expense reimbursements then due
to the Lenders from the Borrower; third, to pay interest due in respect of all
Revolving Loans, including BABC Loans and Agent Advances; fourth, to pay or
prepay principal of the BABC Loans and Agent Advances; fifth, to pay or prepay
principal of the Revolving Loans (other than BABC Loans and Agent Advances) and
unpaid reimbursement obligations in respect of Letters of Credit; and sixth, to
the payment of any other Obligation due to the Agent or any Lender by the
Borrower. Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrower, or unless an Event of Default
has occurred and is continuing, neither the Agent nor any Lender shall apply
any payments which it receives to any LIBOR Revolving Loan, except (a) on the
expiration date of the Interest Period applicable to any such LIBOR Rate Loan,
or (b) in the event, and only to the extent, that there are no outstanding Base
Rate Revolving Loans. The Agent shall promptly distribute to each Lender,
pursuant to the applicable wire transfer instructions received from each Lender
in writing, such funds as it may be entitled to receive, subject to a
Settlement delay as provided for in Section 2.2(j). The Agent and the Lenders
shall have the continuing and exclusive right to apply and reverse and reapply
any and all such proceeds and payments to any portion of the Obligations.
4.6 Indemnity for Returned Payments. If, after receipt of any
payment of, or proceeds applied to the payment of, all or any part of the
Obligations, the Agent or any Lender is for any reason compelled to surrender
such payment or proceeds to any Person, because such payment or application of
proceeds is invalidated, declared fraudulent, set aside, determined to be void
or voidable as a preference, impermissible setoff, or a diversion of trust
funds, or for any other reason, then the Obligations or part thereof intended
to be satisfied shall be revived and continue and this Agreement shall continue
in full force as if such payment or proceeds had not been
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received by the Agent or such Lender, and the Borrower shall be liable to pay
to the Agent, and hereby does indemnify the Agent and the Lenders and hold the
Agent and the Lenders harmless for, the amount of such payment or proceeds
surrendered. The provisions of this Section 4.6 shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agent or
any Lender in reliance upon such payment or application of proceeds, and any
such contrary action so taken shall be without prejudice to the Agent's and the
Lenders' rights under this Agreement and shall be deemed to have been
conditioned upon such payment or application of proceeds having become final
and irrevocable. The provisions of this Section 4.6 shall survive the
termination of this Agreement.
4.7 Agent's and Lenders' Books and Records; Monthly Statements.
Each Loan Party agrees that the Agent's and each Lender's books and records
showing the Obligations and the transactions pursuant to this Agreement and the
other Loan Documents shall be admissible in any action or proceeding arising
therefrom, and shall constitute rebuttably presumptive proof thereof,
irrespective of whether any Obligation is also evidenced by a promissory note
or other instrument. The Agent will provide to the Borrower a monthly
statement of Loans, payments, and other transactions pursuant to this
Agreement. Such statement shall be deemed correct, accurate, and binding on
the Borrower and the other Loan Parties and an account stated (except for
reversals and reapplications of payments made as provided in Section 4.5 and
corrections of errors discovered by the Agent), unless the Borrower notifies
the Agent in writing to the contrary within thirty (30) days after such
statement is rendered. In the event a timely written notice of objections is
given by the Borrower, only the items to which exception is expressly made will
be considered to be disputed by the Borrower.
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes.
(a) Any and all payments by the Borrower or the other
Loan Parties to each Lender or the Agent under this Agreement and any other
Loan Document shall be made free and clear of, and without deduction or
withholding for any Taxes. In addition, the Borrower shall pay all Other
Taxes.
(b) The Borrower and the other Loan Parties agree to
indemnify and hold harmless each Lender and the Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Lender or the
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Lender or the
Agent makes written demand therefor.
(c) If the Borrower or the other Loan Parties shall be
required by law to deduct or withhold any Taxes or Other Taxes from or in
respect of any sum payable hereunder to any Lender or the Agent, then:
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(i) the sum payable shall be increased as
necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section) such Lender or the Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) the Borrower and the other Loan Parties shall
make such deductions and withholdings;
(iii) the Borrower and the other Loan Parties shall
pay the full amount deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law; and
(iv) the Borrower and the other Loan Parties shall
also pay to each Lender or the Agent for the account of such Lender, at the
time interest is paid, all additional amounts which the respective Lender
specifies as necessary to preserve the after-tax yield the Lender would have
received if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower and the other Loan Parties shall
furnish the Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to the Agent.
(e) If the Borrower and the other Loan Parties are
required to pay additional amounts to any Lender or the Agent pursuant to
subsection (c) of this Section, then such Lender shall use reasonable efforts
(consistent with legal and regulatory restrictions) to change the jurisdiction
of its lending office so as to eliminate any such additional payment by the
Borrower and the other Loan Parties which may thereafter accrue, if such change
in the judgment of such Lender is not otherwise disadvantageous to such Lender.
5.2 Illegality.
(a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable lending office to make
LIBOR Revolving Loans, then, on notice thereof by the Lender to the Borrower
through the Agent, any obligation of that Lender to make LIBOR Revolving Loans
shall be suspended until the Lender notifies the Agent and the Borrower that
the circumstances giving rise to such determination no longer exist.
(b) If a Lender determines that it is unlawful to
maintain any LIBOR Revolving Loan, the Borrower and the other Loan Parties
shall, upon its receipt of notice of such fact and demand from such Lender
(with a copy to the Agent), prepay in full such LIBOR Revolving Loans of that
Lender then outstanding, together with interest accrued thereon and amounts
required under Section 5.4, either on the last day of the Interest Period
thereof, if the Lender may lawfully continue to maintain such LIBOR Revolving
Loans to such day, or
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immediately, if the Lender may not lawfully continue to maintain such LIBOR
Revolving Loan. If the Borrower and the other Loan Parties are required to so
prepay any LIBOR Revolving Loan, then concurrently with such prepayment, the
Borrower and the other Loan Parties shall borrow from the affected Lender, in
the amount of such repayment, a Base Rate Revolving Loan.
5.3 Increased Costs and Reduction of Return.
(a) If any Lender determines that, due to either (i) the
introduction of or any change in the interpretation of any law or regulation or
(ii) the compliance by that Lender with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force
of law), there shall be any increase in the cost to such Lender of agreeing to
make or making, funding or maintaining any LIBOR Revolving Loans, then the
Borrower and the other Loan Parties shall be liable for, and shall from time to
time, upon demand (and any supporting documentation reasonably requested by
such Lender, with a copy of such demand and documentation to be sent to the
Agent), pay to the Agent for the account of such Lender, additional amounts as
are sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender or any corporation or other entity controlling the
Lender with any Capital Adequacy Regulation, affects or would affect the amount
of capital required or expected to be maintained by the Lender or any
corporation or other entity controlling the Lender and (taking into
consideration such Lender's or such corporation's or other entity's policies
with respect to capital adequacy and such Lender's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations under this Agreement, then, upon
demand of such Lender to the Borrower and the other Loan Parties through the
Agent, the Borrower and the other Loan Parties shall pay to the Lender, from
time to time as specified by the Lender, additional amounts sufficient to
compensate the Lender for such increase.
5.4 Funding Losses. The Borrower and the other Loan Parties shall
reimburse each Lender and hold each Lender harmless from any loss or expense
which the Lender may sustain or incur as a consequence of:
(a) the failure of the Borrower and the other Loan
Parties to make on a timely basis any payment of principal of any LIBOR
Revolving Loan;
(b) the failure of the Borrower or the other Loan Parties
to borrow, continue or convert a Loan after the Borrower has given (or is
deemed to have given) a Notice of Borrowing or a Notice of Conversion/
Continuation;
(c) the prepayment or other payment (including after
acceleration thereof) of a LIBOR Revolving Loan on a day that is not the last
day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or redeployment
of funds obtained
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by it to maintain its LIBOR Revolving Loans or from fees payable to terminate
the deposits from which such funds were obtained.
5.5 Inability to Determine Rates. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR
Revolving Loan, or that the LIBOR Rate for any requested Interest Period with
respect to a proposed LIBOR Revolving Loan does not adequately and fairly
reflect the cost to the Lenders of funding such Loan, the Agent will promptly
so notify the Borrower and each Lender. Thereafter, the obligation of the
Lenders to make or maintain LIBOR Revolving Loans hereunder shall be suspended
until the Agent revokes such notice in writing. Upon receipt of such notice,
the Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Lenders shall make, convert or continue the Loans, as proposed
by the Borrower, in the amount specified in the applicable notice submitted by
the Borrower, but such Loans shall be made, converted or continued as Base Rate
Revolving Loans instead of LIBOR Revolving Loans.
5.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article 5 shall deliver to the Borrower (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Lender hereunder and such certificate shall be conclusive and binding on
the Borrower and the other Loan Parties in the absence of manifest error.
5.7 Survival. The agreements and obligations of the Borrower and
the other Loan Parties in this Article 5 shall survive the payment of all other
Obligations.
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest. (a) As security for all present
and future Obligations, each Loan Party hereby grants to the Agent, for the
ratable benefit of the Agent and the Lenders, a continuing security interest
in, lien on, assignment of, and right of set-off against, all of the following
property of the such Loan Party, whether now owned or existing or hereafter
acquired or arising, regardless of where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights, letters of credit, Assigned
Contracts, chattel paper, instruments, notes, documents, and documents of
title;
(iv) all General Intangibles;
(v) all Equipment (except the Excluded Equipment);
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(vi) all money, Investment Property, securities and other
property of any kind of such Loan Party in the possession or under the control
of the Agent or any Lender, any assignee of or participant in the Obligations,
or a bailee of any such party or such party's affiliates;
(vii) all of the such Loan Party's deposit accounts,
credits and balances with and other claims against the Agent or any Lender or
any of its affiliates or any other financial institution with which the
Borrower maintains deposits;
(viii) all books, records and other property related to or
referring to any of the foregoing, including, without limitation, books,
records, account ledgers, data processing records, computer software and other
property and General Intangibles at any time evidencing or relating to any of
the foregoing; and
(ix) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing, including, but not
limited to, proceeds of any insurance policies, claims against third parties,
and condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, and all other property of any of the Loan Parties in
which the Agent or any Lender may at any time be granted a Lien, is herein
collectively referred to as the "Collateral."
(b) All of the Obligations shall be secured by all of the
Collateral.
6.2 Perfection and Protection of Security Interest.
(a) Each Loan Party shall, at its expense, promptly
perform all steps requested by the Agent at any time to perfect, maintain,
protect, and enforce the Agent's Liens, including, without limitation: (i)
executing, delivering and/or filing and recording of the Copyright, Patent and
Trademark Agreements and executing and filing financing or continuation
statements, and amendments thereof, in form and substance reasonably
satisfactory to the Agent; (ii) delivering to the Agent the originals of all
instruments, documents, and chattel paper, and all other Collateral of which
the Agent determines it should have physical possession in order to perfect and
protect the Agent's security interest therein, duly pledged, endorsed or
assigned to the Agent without restriction; (iii) delivering to the Agent
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued and certificates of title covering
any portion of the Collateral for which certificates of title have been issued;
(iv) when an Event of Default exists, transferring Inventory to warehouses
reasonably designated by the Agent; (v) placing notations on such Loan Party's
books of account to disclose the Agent's security interest; (vii) delivering to
the Agent all letters of credit on which such Loan Party is named beneficiary;
and (viii) taking such other steps as are deemed reasonably necessary or
desirable by the Agent to maintain and protect the Agent's Liens. To the
extent permitted by applicable law, the Agent may file, without such Loan
Party's signature, one or more financing statements disclosing the Agent's
Liens. Each Loan Party agrees that a carbon, photographic, photostatic, or
other reproduction of this Agreement or of a financing statement is sufficient
as a financing statement.
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(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of the agents or processors of any
Loan Party, then such Loan Party shall notify the Agent thereof and shall, at
the request of Agent, notify such Person of the Agent's security interest in
such Collateral and instruct such Person to hold all such Collateral for the
Agent's account subject to the Agent's instructions. If at any time any
Collateral is located on any operating facility of any Loan Party which is not
owned by such Loan Party, then such Loan Party shall, at the request of the
Agent, obtain written waivers, in form and substance satisfactory to the Agent,
of all present and future Liens to which the owner or lessor of such premises
may be entitled to assert against the Collateral.
(c) In order to perfect, preserve and protect its
security interest in, and other rights and powers provided herein with respect
to, Imported Inventory (including without limitation those set forth in Section
6.15): (i) the Borrower and the other Loan Parties shall cause the Agent to be
designated in all bills of lading and other negotiable and non-negotiable
documents as the consignee or other Person to whom or to whose order such
documents promise delivery; and (ii) the Borrower, on its own behalf and on
behalf of the other Loan Parties, the Import Broker, and the Agent on behalf of
the Lenders have entered into an Imported Inventory Agreement which sets forth
certain procedures relating to the importation of Imported Inventory and the
handling of documents relating thereto.
(d) From time to time, each Loan Party shall, upon the
Agent's request, execute and deliver confirmatory written instruments pledging
to the Agent, for the ratable benefit of the Agent and the Lenders, the
Collateral with respect to such Loan Party, but such Loan Party's failure to do
so shall not affect or limit any security interest or any other rights of the
Agent or any Lender in and to the Collateral with respect to such Loan Party.
So long as this Agreement is in effect and until all Obligations have been
fully satisfied, the Agent's Liens shall continue in full force and effect in
all Collateral (whether or not deemed eligible for the purpose of calculating
the Availability or as the basis for any advance, loan, extension of credit, or
other financial accommodation).
6.3 Location of Collateral. Each Loan Party represents and
warrants to the Agent and the Lenders that: (a) Schedule 6.3 is a correct and
complete list of such Loan Party's chief executive office, the location of its
books and records, the locations of the Collateral with respect to such Loan
Party, and the locations of all of its other places of business; and (b)
Schedule 6.3 correctly identifies any of such facilities and locations that are
not owned by such Loan Party and sets forth the names of the owners and lessors
or sublessors of and, to the best of such Loan Party's knowledge, the holders
of any mortgages on, such facilities and locations. Each Loan Party covenants
and agrees that it will not (i) maintain any Collateral at any location other
than those locations listed for such Loan Party on Schedule 6.3, (ii) otherwise
change or add to any of such locations, or (iii) change the location of its
chief executive office from the location identified in Schedule 6.3, unless it
gives the Agent at least thirty (30) days' prior written notice thereof and
executes any and all financing statements and other documents that the Agent
requests in connection therewith. Without limiting the foregoing, each Loan
Party represents that all of its Inventory (other than Inventory in transit)
is, and covenants that all of its Inventory will be, located either (a) on
premises owned by such Loan Party, (b) on premises leased by such Loan Party,
provided that the Agent has, if requested by the Agent, received an executed
landlord
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waiver from the landlord of such premises in form and substance satisfactory to
the Agent, or (c) in a public warehouse, provided that the Agent has, if
requested by the Agent, received an executed bailee letter from the applicable
public warehouseman in form and substance satisfactory to the Agent.
6.4 Title to, Liens on, and Sale and Use of Collateral. Each Loan
Party represents and warrants to the Agent and the Lenders and agrees with the
Agent and the Lenders that: (a) all of the Collateral with respect to such Loan
Party is and will continue to be owned by such Loan Party free and clear of all
Liens whatsoever, except for Permitted Liens and sales of Inventory in ordinary
course of business; (b) the Agent's Liens in such Collateral will not be
subject to any prior Lien, except for those certain Liens in favor of Bank of
America described in subsection (g) of the definition of "Permitted Liens"; (c)
such Loan Party will use, store, and maintain such Collateral with the same
degree of care as it currently uses, stores and maintains such Collateral and
will use such Collateral for lawful purposes only; and (d) the Borrower will
not, without the Agent's prior written approval, sell, or dispose of or permit
the sale or disposition of any of such Collateral except for sales of Inventory
in the ordinary course of business and sales of Equipment as permitted by
Section 6.11. The inclusion of proceeds in such Collateral shall not be deemed
to constitute the Agent's or any Lender's consent to any sale or other
disposition of such Collateral except as expressly permitted herein.
6.5 Appraisals. Whenever a Default or Event of Default exists,
each Loan Party shall, at its expense and upon the Agent's request, provide the
Agent with appraisals or updates thereof of any or all of the Collateral with
respect to such Loan Party from an appraiser, acceptable to the Agent, and
prepared on a basis, reasonably satisfactory to the Agent, such appraisals and
updates to include, without limitation, information required by applicable law
and regulation and by the internal policies of the Agent.
6.6 Access and Examination; Confidentiality.
(a) The Agent, accompanied by any Lender which so elects,
may at all reasonable times during regular business hours (and at any time when
a Default or Event of Default exists and is continuing) have access to,
examine, audit, make extracts from or copies of and inspect any or all of any
Loan Party's records, files, and books of account and the Collateral with
respect to such Loan Party, and discuss each Loan Party's affairs with each
Loan Party's officers and management. Each Loan Party will deliver to the
Agent any instrument reasonably necessary for the Agent to obtain records from
any service bureau maintaining records for such Loan Party. The Agent may, and
at the direction of the Majority Lenders shall, at any time when a Default or
Event of Default exists, and at any Loan Party's expense, make copies of all of
such Loan Party's books and records, or require such Loan Party to deliver such
copies to the Agent. The Loan Parties, at no cost or expense to the Agent,
shall render such assistance to the Agent (including use of personnel,
supplies, and premises) as may be reasonably necessary for maintaining or
enforcing the Agent's Liens. The Agent shall have the right, at any time, in
the Agent's name or in the name of a nominee of the Agent, to verify the
validity, amount or any other matter relating to the Accounts, Inventory, or
other Collateral, by mail, telephone, or otherwise.
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(b) Each Loan Party agrees that, subject to such Loan
Party's prior consent for uses other than in a traditional tombstone, which
consent shall not be unreasonably withheld or delayed, the Agent and each
Lender may use such Loan Party's name in advertising and promotional material
and in conjunction therewith disclose the general terms of this Agreement;
provided, however, that no such tombstone shall be released or disclosed prior
to the issuance of a press release by the Borrower or any other Loan Party.
The Agent and each Lender agree to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all confidential
information provided to the Agent or such Lender by or on behalf of any Loan
Party, under this Agreement or any other Loan Document, and neither the Agent,
nor such Lender nor any of their respective Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents, except to the extent that such information (i)
was or becomes generally available to the public other than as a result of
disclosure by the Agent or such Lender, or (ii) was or becomes available on a
nonconfidential basis from a source other than any Loan Party, provided that
such source is not bound by a confidentiality agreement with any Loan Party
known to the Agent or such Lender; provided, however, that the Agent and any
Lender may disclose such information (1) at the request or pursuant to any
requirement of any Governmental Authority to which the Agent or such Lender is
subject or in connection with an examination of the Agent or such Lender by any
such Governmental Authority; (2) pursuant to subpoena or other court process;
(3) when required to do so in accordance with the provisions of any applicable
requirement of law; (4) to the extent reasonably required in connection with
any litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Agent, any Lender or their respective Affiliates may
be party; (5) to the extent reasonably required in connection with the exercise
of any remedy hereunder or under any other Loan Document; (6) to the Agent's or
such Lender's independent auditors, accountants, attorneys and other
professional advisors; (7) to any prospective Participant or assignee under any
Assignment and Acceptance, actual or potential, provided that such prospective
Participant or assignee agrees to keep such information confidential to the
same extent required of the Agent and the Lenders hereunder; (8) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which any Loan Party is party or is deemed party with the
Agent or such Lender, and (9) to its Affiliates, and provided, further, that in
the case of disclosures permitted under clauses (2), (3) and (4) of the
preceding proviso, the Loan Parties shall have the right to seek an appropriate
protective order or other assurance that such information might be kept
confidential.
6.7 Collateral Reporting. The Borrower shall provide the Agent
with the following documents at the following times in form satisfactory to the
Agent: (a) on a weekly basis (or more frequently if desired by the Borrower or
if requested by the Agent upon the occurrence and during the continuance of an
Event of Default), (i) a roll-forward of Accounts including a schedule of the
Loan Parties' Accounts which have been collected, created and as to which
credits have been issued since the last such schedule and (ii) a Borrowing Base
Certificate; (b) on a monthly basis, as of the end of each month, and received
by the Agent the 15th day of the following month (or more frequently if
requested by the Agent upon the occurrence and during the continuance of an
Event of Default), an aging of the Loan Parties' Accounts, together with a
reconciliation to the Loan Parties' general ledgers and a calculation of the
ineligible Accounts; (c) on a monthly basis, as of the end of each month, and
received by the Agent the 20th day of the following month (or more frequently
if requested by the Agent upon the occurrence and
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during the continuance of an Event of Default), an aging of the Loan Parties'
accounts payable; (d) on a monthly basis, as of the end of each month, and
received by the Agent the 20th day of the following month, or, at the
Borrower's option, on a weekly basis, as of the end of each week, and received
by the Agent the third Business Day of the following week, provided that if the
Loan Parties report on a weekly basis, then they will continue to do so for the
remainder of the month in which such weekly reporting commenced (or more
frequently if requested by the Agent upon the occurrence and during the
continuance of an Event of Default), Inventory reports by category and
location, with additional detail showing additions to and deletions from the
Inventory, a reconciliation to the Loan Parties' general ledgers and a
calculation of the ineligible inventory; (e) on a weekly basis, beginning 120
days from the Closing Date, a report of the dollar value of Eligible Imported
Inventory; (f) upon request, copies of invoices in connection with the Loan
Parties' Accounts, customer statements, credit memos, remittance advices and
reports, deposit slips, shipping and delivery documents in connection with the
Loan Parties' Accounts and for Inventory and Equipment acquired by the Loan
Parties, purchase orders and invoices; (g) upon request, a statement of the
balance of each of the Intercompany Accounts; (h) such other reports as to the
Collateral as the Agent shall reasonably request from time to time; and (i)
with the delivery of each of the foregoing, a certificate of the Borrower
executed by an officer thereof certifying as to the accuracy and completeness
of the foregoing. If any of the Loan Parties' records or reports of the
Collateral are prepared by an accounting service or other agent, the Loan
Parties hereby authorize such service or agent to deliver such records,
reports, and related documents to the Agent, for distribution to the Lenders.
6.8 Accounts.
(a) Each Loan Party hereby represents and warrants to and
agrees with the Agent and the Lenders, with respect to such Loan Party's
Accounts, that: (i) each existing Account represents, and each future Account
will represent, a bona fide sale or lease and delivery of goods by such Loan
Party, or rendition of services by such Loan Party, in the ordinary course of
such Loan Party's business; (ii) each existing Account is, and each future
Account will be, for a liquidated amount payable by the Account Debtor thereon
on the terms set forth in the invoice therefor or in the schedule thereof
delivered to the Agent, without any offset, deduction, defense, or counterclaim
except those known to such Loan Party and disclosed to the Agent and the
Lenders pursuant to this Agreement and except for those which are excluded from
the calculation of Eligible Accounts in Borrower Base Certificates or as is
otherwise required hereunder; (iii) no payment will be received with respect to
any such Account, and no credit, discount, or extension, or agreement therefor
will be granted on any such Account, except as reported to the Agent and the
Lenders in accordance with this Agreement; (iv) each copy of an invoice
delivered to the Agent by such Loan Party will be a genuine copy of the
original invoice sent to the Account Debtor named therein; and (v) all goods
described in any invoice representing a sale of goods will have been shipped or
delivered to the Account Debtor and all services of such Loan Party described
in each invoice will have been performed, except for those invoices which are
excluded from the calculation of Eligible Accounts in Borrowing Base
Certificates or as is otherwise required hereunder.
(b) Each Loan Party shall not re-date any invoice or sale
or make sales on extended dating beyond that customary in such Loan Party's
business or extend or modify any
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Account, without immediately notifying the Agent of each re-dating, extended
dating or modification of any Account which is for an amount greater than
$35,000.
(c) If any credit manager or other appropriate or
responsible officer of any Loan Party becomes aware of any matter which could
be reasonably expected to adversely affect the collectability of any Accounts
or Account Debtor involving an amount greater than $50,000, including
information regarding the Account Debtor's creditworthiness, such Loan Party
will promptly (but not less often than on a weekly basis) so advise the Agent.
(d) Each Loan Party shall not accept any note or other
instrument (except a check or other instrument for the immediate payment of
money) with respect to any Account involving an amount greater than $35,000,
without promptly so notifying the Agent. If the Agent consents to the
acceptance of any such instrument (and in the case of any instrument in the
amount of $35,000 or less), it shall be considered as evidence of the Account
and not payment thereof and such Loan Party will promptly deliver such
instrument to the Agent, endorsed by such Loan Party to the Agent in a manner
satisfactory in form and substance to the Agent. Regardless of the form of
presentment, demand, notice of protest with respect thereto, such Loan Party
shall remain liable thereon until such instrument is paid in full.
(e) Each Loan Party shall notify the Agent promptly of
all disputes and claims in excess of $50,000 with any Account Debtor, and
agrees to settle, contest, or adjust such dispute or claim at no expense to the
Agent or any Lender. No discount, credit or allowance shall be granted to any
such Account Debtor without the Agent's prior written consent, except for
discounts, credits and allowances made or given in the ordinary course of such
Loan Party's business when no Event of Default exists hereunder. Each Loan
Party shall send the Agent a copy of each credit memorandum in excess of
$50,000 as soon as issued (but not less often than on a weekly basis). The
Agent may, and at the direction of the Majority Lenders shall, at all times
when an Event of Default exists hereunder, settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms which the Agent or the
Majority Lenders, as applicable, shall consider advisable and, in all cases,
the Agent will credit the Borrower's Loan Account with only the net amounts
received by the Agent in payment of any Accounts.
(f) If an Account Debtor returns any Inventory to any
Loan party when no Event of Default exists, then such Loan Party shall promptly
determine the reason for such return and shall issue a credit memorandum to the
Account Debtor in the appropriate amount. Such Loan Party shall immediately
report to the Agent any return involving an amount in excess of $100,000. Each
such report shall indicate the reasons for the returns and the locations and
condition of the returned Inventory. In the event any Account Debtor returns
Inventory to any Loan Party when an Event of Default exists, such Loan Party,
upon request of the Agent, shall: (i) hold the returned Inventory in trust for
the Agent; (ii) segregate all returned Inventory from all of its other
property; (iii) dispose of the returned Inventory solely according to the
Agent's written instructions; and (iv) not issue any credits or allowances with
respect thereto without the Agent's prior written consent. All returned
Inventory shall be subject to the Agent's Liens thereon. Whenever any
Inventory is returned, the related Account shall be deemed ineligible to the
extent of the amount owing by the Account Debtor with respect to such returned
Inventory and will be so reflected on subsequent Borrowing Base Certificates
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6.9 Collection of Accounts; Payments.
(a) Until the Agent notifies the Borrower to the
contrary, each Loan Party shall make collection of all Accounts and other
Collateral relating to such Loan Party for the Agent, shall receive all
payments as the Agent's trustee, and shall immediately deliver all payments in
their original form duly endorsed in blank into a Payment Account established
for the account of the Borrower at a bank acceptable to Agent and subject to
documentation acceptable to Agent. All funds deposited into a Payment Account
shall be transferred daily to the Agent in accordance with the Payment Account
agreement for application against outstanding Revolving Loans. If the Agent
requests, each Loan Party shall establish a lock-box service for collections of
its Accounts at a bank acceptable to the Agent and pursuant to documentation
reasonably satisfactory to the Agent. If such lock-box service is established,
such Loan Party shall instruct all Account Debtors to make all payments
directly to the address established for such service. If, notwithstanding such
instructions, such Loan Party receives any proceeds of Accounts, it shall
receive such payments as the Agent's trustee, and shall immediately deposit
such payments into a Payment Account. All collections received in any such
lock-box or Payment Account or directly by such Loan Party or the Agent, and
all funds in any Payment Account or other account to which such collections are
deposited shall be subject to the Agent's sole control. The Agent or the
Agent's designee may, at any time after the occurrence of an Event of Default,
notify Account Debtors that the Accounts have been assigned to the Agent and of
the Agent's security interest therein, and may collect them directly and charge
the collection costs and expenses to each Loan Party's Loan Account as a
Revolving Loan. So long as an Event of Default has occurred and is continuing,
each Loan Party, at the Agent's request, shall execute and deliver to the Agent
such documents as the Agent shall require to grant the Agent access to any post
office box in which collections of Accounts are received.
(b) If sales of Inventory are made or services are
rendered for cash, each Loan Party shall immediately deposit into a Payment
Account the cash which such Loan Party receives.
(c) All payments, including immediately available funds
received by the Agent at a bank designated by it, received by the Agent on
account of Accounts or as proceeds of other Collateral will be the Agent's sole
property for its benefit and the benefit of the Lenders and will be credited to
the Borrower's Loan Account (conditional upon final collection).
(d) In the event the Borrower repays all of the
Obligations upon the termination of this Agreement or upon acceleration of the
Obligations, other than through the Agent's receipt of payments on account of
the Accounts or proceeds of the other Collateral, such payment will be credited
(conditional upon final collection) to the Borrower's Loan Account.
6.10 Inventory; Perpetual Inventory. Each Loan Party represents
and warrants to the Agent and the Lenders and agrees with the Agent and the
Lenders that all of the Inventory owned by such Loan Party is and will be held
for sale or lease, or to be furnished in connection with the rendition of
services, in the ordinary course of such Loan Party's business, and is and will
be fit for such purposes. Each Loan Party will keep its Inventory in good and
marketable condition, at its own expense. Each Loan Party will not, without
the prior written consent of the Agent, acquire or accept any Inventory on
consignment or approval (except for such Inventory having
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an aggregate value at any time of not more than $50,000), but all consigned or
approved Inventory permitted hereunder shall be segregated from other Inventory
and reported to the Agent on the Inventory Reports provided to the Agent under
Section 6.9. Each Loan party agrees that all of its Inventory produced in the
United States will be produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. Each Loan Party will conduct a physical count of its bicycle
Inventory at least once per Fiscal Year (and conduct periodic counts of its
parts, accessories and manufacturing inventories consistent with past practices
and in accordance with GAAP), and after and during the continuation of an Event
of Default, at such other times as the Agent requests. Each Loan Party will
maintain a perpetual inventory reporting system at all times. Each Loan Party
will not, without the Agent's written consent, sell any Inventory on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis (except for such Inventory having an
aggregate value at any time of not more than $50,000).
6.11 Equipment.
(a) Each Loan Party represents and warrants to the Agent
and the Lenders and agrees with the Agent and the Lenders that all of the
Equipment owned by such Loan Party is and will be used or held for use in such
Loan Party's business, and is and will be fit for such purposes. Each Loan
Party shall keep and maintain its Equipment in good operating condition and
repair (ordinary wear and tear excepted) and shall make all necessary repairs
thereof.
(b) Each Loan Party shall promptly inform the Agent of
any material additions to or deletions from its Equipment. Each Loan Party
shall not permit any Equipment to become a fixture with respect to real
property or to become an accession with respect to other personal property with
respect to which real or personal property the Agent does not have a Lien.
Each Loan Party will not, without the Agent's prior written consent, alter or
remove any identifying symbol or number on any of such Loan Party's Equipment
consisting of Collateral.
(c) Each Loan Party shall not, without the Agent's prior
written consent, sell, lease as a lessor, or otherwise dispose of any of such
Loan Party's Equipment; provided, however, that such Loan Party may dispose of
obsolete or unusable Equipment having an orderly liquidation value no greater
than $350,000 in the aggregate in any Fiscal Year, or $1,050,000 in the
aggregate during the term of this Agreement, without the Lender's consent,
subject to the conditions set forth in the next sentence. In the event any of
such Equipment is sold, transferred or otherwise disposed of pursuant to the
proviso contained in the immediately preceding sentence, (1) if such sale,
transfer or disposition is effected without replacement of such Equipment, or
such Equipment is replaced by Equipment leased by such Loan Party or by
Equipment purchased by such Loan Party subject to a Lien, then such Loan Party
shall deliver all of the cash proceeds of any such sale, transfer or
disposition to the Agent, which proceeds shall be applied as a repayment of
Revolving Loans, or (2) if such sale, transfer or disposition is made in
connection with the purchase by such Loan Party of replacement Equipment, then
such Loan Party shall use the proceeds of such sale, transfer or disposition to
purchase such replacement Equipment and shall deliver to the Agent written
evidence of the use of the proceeds for such purchase. All replacement
Equipment purchased by any Loan Party shall be free and clear of all Liens
except Permitted Liens.
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6.12 Assigned Contracts. Each Loan Party shall perform in all
material respects all of its obligations under each of the Assigned Contracts,
and shall enforce all of its rights and remedies thereunder, in each case, as
it deems appropriate in its reasonable business judgment; provided, however,
that such Loan Party shall not take any action or fail to take any action with
respect to its Assigned Contracts which would cause the termination of a
material Assigned Contract. Without limiting the generality of the foregoing,
each Loan Party shall take all action necessary or appropriate to permit, and
shall not take any action which would have any materially adverse effect upon,
the full enforcement of all indemnification rights under its Assigned
Contracts. Each Loan Party shall not, without the Agent's and the Majority
Lenders' prior written consent, modify, amend, supplement, compromise, satisfy,
release, or discharge any of its Assigned Contracts, any collateral securing
the same, any Person liable directly or indirectly with respect thereto, or any
agreement relating to any of its Assigned Contracts or the collateral therefor
if any modification or other action would materially affect the business,
operations or condition of such Loan Party. Each Loan Party shall notify the
Agent and the Lenders in writing, promptly after such Loan Party becomes aware
thereof, of any event or fact which could give rise to a claim by it for
indemnification under any of its Assigned Contracts, and shall diligently
pursue such right and report to the Agent on all further developments with
respect thereto. Each Loan Party shall remit directly to the Payment Account,
all amounts received by the Borrower as indemnification or otherwise pursuant
to its Assigned Contracts. If any Loan Party shall fail after the Agent's
demand to pursue diligently any right under its Assigned Contracts, or if an
Event of Default then exists, the Agent may, and at the direction of the
Majority Lenders shall, directly enforce such right in its own or such Loan
Party's name and may enter into such settlements or other agreements with
respect thereto as the Agent or the Majority Lenders, as applicable, shall
determine. In any suit, proceeding or action brought by the Agent for the
benefit of the Lenders under any Assigned Contract for any sum owing thereunder
or to enforce any provision thereof, the affected Loan Party shall indemnify
and hold the Agent and Lenders harmless from and against all expense, loss or
damage suffered by reason of any defense, setoff, counterclaims, recoupment, or
reduction of liability whatsoever of the obligor thereunder arising out of a
breach by such Loan Party of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing from such Loan
Party to or in favor of such obligor or its successors. All such obligations
of such Loan Party shall be and remain enforceable only against such Loan Party
and shall not be enforceable against the Agent. Notwithstanding any provision
hereof to the contrary, each Loan Party shall at all times remain liable to
observe and perform in all material respects all of its duties and obligations
under its Assigned Contracts, and the Agent's or any Lender's exercise of any
of their respective rights with respect to the Collateral shall not release
such Loan Party from any of such duties and obligations. Neither the Agent nor
any Lender shall be obligated to perform or fulfill any of the duties or
obligations of any Loan Party under its Assigned Contracts or to make any
payment thereunder, or to make any inquiry as to the nature or sufficiency of
any payment or property received by it thereunder or the sufficiency of
performance by any party thereunder, or to present or file any claim, or to
take any action to collect or enforce any performance, any payment of any
amounts, or any delivery of any property.
6.13 Documents, Instruments, and Chattel Paper. Each Loan Party
represents and warrants to and agrees with the Agent and the Lenders that (a)
all of its documents, instruments, and chattel paper describing, evidencing, or
constituting Collateral, and all signatures and
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endorsements thereon, are and will be complete, valid, and genuine, and (b) all
goods evidenced by such documents, instruments, and chattel paper are and will
be owned by such Loan Party, free and clear of all Liens other than Permitted
Liens.
6.14 Right to Cure. The Agent may, in its reasonable discretion,
and shall, at the direction of the Majority Lenders, pay any amount or do any
act required of any Loan Party hereunder or under any other Loan Document in
order to preserve, protect, maintain or enforce the Obligations, the Collateral
or the Agent's Liens therein, and which such Loan Party fails to pay or do on
or prior to the date due, including, without limitation, payment of any
judgment against such Loan Party, any insurance premium, any warehouse charge,
any finishing or processing charge, any landlord's claim, and any other Lien
upon or with respect to Collateral. All payments that the Agent makes under
this Section 6.14 and all reasonable out-of-pocket costs and expenses that the
Agent pays or incurs in connection with any action taken by it hereunder shall
be charged to the Borrower's Loan Account as a Revolving Loan. Any payment
made or other action taken by the Agent under this Section 6.14 shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed thereafter as herein provided.
6.15 Power of Attorney. Each Loan Party hereby appoints the Agent
and the Agent's designee as such Loan Party's attorney, with power: (a) so
long as an Event of Default has occurred and is continuing, to endorse such
Loan Party's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Agent's or any Lender's
possession; (b) to sign such Loan Party's name on any invoice, bill of lading,
warehouse receipt or other document of title relating to any Collateral, on
drafts against customers, on assignments of Accounts and on notices of
assignment; (c) to sign such Loan Party's name on, financing statements and
other public records and to file any such financing statements by electronic
means with or without a signature as authorized or required by applicable law
or filing procedure; (d) so long as any Event of Default has occurred and is
continuing, to notify the post office authorities to change the address for
delivery of such Loan Party's mail to an address designated by the Agent and to
receive, open and dispose of all mail addressed to such Loan Party; (e) to send
requests for verification of Accounts to customers or Account Debtors; (f) so
long as an Event of Default has occurred and is continuing, to clear Imported
Inventory through customs in such Loan Party's name, the Agent's name or the
name of the Agent's designee, and to sign and deliver to customs officials
powers of attorney in any such name for such purpose; and (g) to do all things
necessary to carry out this Agreement. Such Loan Party ratifies and approves
all acts of such attorney. None of the Lenders or the Agent nor their
attorneys will be liable for any acts or omissions or for any error of judgment
or mistake of fact or law. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
6.16 The Agent's and Lenders' Rights, Duties and Liabilities. Each
Loan Party assumes all responsibility and liability arising from or relating to
the use, sale or other disposition of the Collateral. The Obligations shall
not be affected by any failure of the Agent or any Lender to take any steps to
perfect the Agent's Liens or to collect or realize upon the Collateral, nor
shall loss of or damage to the Collateral release any Loan Party from any of
the Obligations. Following the occurrence and continuation of an Event of
Default, the Agent may (but shall not be required to), and at the direction of
the Majority Lenders shall, without notice to
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or consent from any Loan Party, sue upon or otherwise collect, extend the time
for payment of, modify or amend the terms of, compromise or settle for cash,
credit, or otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any other action
with respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of any Loan Party for the Obligations or
under this Agreement or any other agreement now or hereafter existing between
the Agent and/or any Lender and any Loan Party.
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records. Each Loan Party shall maintain, at all
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with GAAP
applied consistently with the audited Financial Statements required to be
delivered pursuant to Section 7.2(a). Each Loan Party shall, by means of
appropriate entries, reflect in such accounts and in all Financial Statements
proper liabilities and reserves for all taxes and proper provision for
depreciation and amortization of property and bad debts, all in accordance with
GAAP. Each Loan Party shall maintain at all times books and records pertaining
to Collateral in such detail, form and scope as the Agent or any Lender shall
reasonably require, including, but not limited to, records of (a) all payments
received and all credits and extensions granted with respect to the Accounts;
(b) the return, rejections, repossession, stoppage in transit, loss, damage, or
destruction of any Inventory; and (c) all other dealings affecting the
Collateral.
7.2 Financial Information. The Borrower on its own behalf and on
behalf of each other Loan Party shall promptly furnish to each Lender, all such
financial information as the Agent or any Lender shall reasonably request, and
notify its auditors and accountants that the Agent, on behalf of the Lenders,
is authorized to obtain such information directly from them; provided that the
Agent shall give reasonable notice to a Responsible Officer of the Borrower and
endeavor to discuss with such Responsible Officer the information being sought,
before obtaining information from such auditors and accountants. Without
limiting the foregoing, the Borrower will furnish to the Agent, in sufficient
copies for distribution by the Agent to each Lender, in such detail as the
Agent or the Lenders shall request, the following:
(a) As soon as available, but in any event not later than
ninety (90) days after the close of each Fiscal Year, consolidated and
consolidating audited balance sheets, and statements of income and expense,
cash flow and of stockholders' equity for the Parent and its Subsidiaries for
such Fiscal Year, and the accompanying notes thereto, setting forth in each
case in comparative form figures for the previous Fiscal Year, all in
reasonable detail, fairly presenting the consolidated and consolidating
financial position and the results of operations of the Parent and its
consolidated Subsidiaries as at the date thereof and for the Fiscal Year then
ended, and prepared in accordance with GAAP. Such statements shall be examined
in accordance with generally accepted auditing standards by and, in the case of
such statements performed on a consolidated basis, accompanied by a report
thereon unqualified as to scope (including not qualified due to possible
failure to take all appropriate steps to successfully
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address Year 2000 Problem) of KPMG Peat Marwick LLP or such other independent
certified public accountants selected by the Parent and reasonably satisfactory
to the Agent. The Parent, simultaneously with retaining such independent
public accountants to conduct such annual audit, shall send a letter to such
accountants, with a copy to the Agent and the Lenders, notifying such
accountants that one of the primary purposes for retaining such accountants'
services and having audited financial statements prepared by them is for use by
the Agent and the Lenders. The Parent hereby authorizes the Agent to
communicate directly with its certified public accountants and, by its
provision, authorizes those accountants to disclose to the Agent any and all
financial statements and other supporting financial documents and schedules
relating to the Parent or any of its Subsidiaries and to discuss directly with
the Agent the finances and affairs of the Parent and any of its Subsidiaries;
provided that the Agent shall give reasonable notice to a Responsible Officer
of the Borrower and endeavor to discuss with a Responsible Officer of the
Borrower the information being sought, before any such direct communication or
before obtaining information from such auditors and accountants.
(b) As soon as available, but in any event not later than
thirty (30) days after the end of each month (or forty (40) days in the case of
the first four months following the Closing Date), consolidated and
consolidating unaudited balance sheets of the Parent and its consolidated
Subsidiaries as at the end of such month, and consolidated and consolidating
unaudited statements of income and expense and cash flow for the Parent and its
consolidated Subsidiaries for such month and for the period from the beginning
of the Fiscal Year to the end of such month, all in reasonable detail, fairly
presenting the consolidated and consolidating financial position and results of
operations of the Parent and its consolidated Subsidiaries as at the date
thereof and for such periods, and prepared in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 7.2(a). The Borrower shall certify by a certificate signed
by its chief financial officer that all such statements have been prepared in
accordance with GAAP and present fairly, subject to normal year- end
adjustments, the Parent's financial position as at the dates thereof and its
results of operations for the periods then ended.
(c) As soon as available, but in any event not later than
forty-five (45) days after the close of each fiscal quarter other than the
fourth quarter of a Fiscal Year, consolidated and consolidating unaudited
balance sheets of the Parent and its consolidated Subsidiaries as at the end of
such quarter, and consolidated and consolidating unaudited statements of income
and expense and statement of cash flows for the Parent and its Subsidiaries for
such quarter and for the period from the beginning of the Fiscal Year to the
end of such quarter, all in reasonable detail, fairly presenting the
consolidated and consolidating financial position and results of operation of
the Parent and its Subsidiaries as at the date thereof and for such periods,
prepared in accordance with GAAP consistent with the audited Financial
Statements required to be delivered pursuant to Section 7.2(a). The Borrower
shall certify by a certificate signed by its chief financial officer that all
such statements have been prepared in accordance with GAAP and present fairly,
subject to normal year-end adjustments, the Parent's financial position as at
the dates thereof and its results of operations for the periods then ended.
(d) With each of the audited Financial Statements
delivered pursuant to Section 7.2(a), and so long as and to the extent not
contrary to the then current recommendations
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of the AICPA, a certificate of the independent certified public accountants
that examined such statement to the effect that they have reviewed and are
familiar with this Agreement and that, in examining such Financial Statements,
they did not become aware of any fact or condition which then constituted a
Default or an Event of Default, except for those, if any, described in
reasonable detail in such certificate.
(e) With each of the annual audited Financial Statements
delivered pursuant to Section 7.2(a), and within forty-five (45) days after the
end of each fiscal quarter, a certificate of the chief financial officer of the
Borrower (i) setting forth in reasonable detail the calculations required to
establish that the Loan Parties were in compliance with the covenants set forth
in Sections 9.22 through 9.25 during the period covered in such Financial
Statements and as at the end thereof, and (ii) stating that, except as
explained in reasonable detail in such certificate, (A) all of the
representations and warranties of the Loan Parties contained in this Agreement
and the other Loan Documents, are correct and complete in all material respects
as at the date of such certificate as if made at such time, except for those
that speak as of a particular day, (B) the Loan Parties are, at the date of
such certificate, in compliance in all material respects with all of their
respective covenants and agreements in this Agreement and the other Loan
Documents, (C) no Default or Event of Default then exists or existed during the
period covered by such Financial Statements, (D) describing and analyzing in
reasonable detail all material trends, changes, and developments in each and
all Financial Statements; and (E) explaining the variances of the figures in
the corresponding budgets and prior Fiscal Year financial statements. If such
certificate discloses that a representation or warranty is not correct or
complete, or that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set forth what
action the affected Loan Party has taken or proposes to take with respect
thereto.
(f) No sooner than sixty (60) days prior to the beginning
of each Fiscal Year but no later than the beginning of each Fiscal Year, annual
forecasts (to include forecasted consolidated and consolidating balance sheets,
statements of income and expenses and statements of cash flow) for the Loan
Parties and their Subsidiaries as at the end of and for each month of such
Fiscal Year.
(g) Promptly after filing with the PBGC and the IRS, a
copy of each annual report or other filing filed with respect to each Plan of
the Parent or any of its Subsidiaries.
(h) Promptly after the filing thereof, copies of all
reports, if any, or other documents filed by the Parent or any of its
Subsidiaries with the Securities and Exchange Commission under the Exchange
Act, and all reports, notices, or statements sent or received by the Parent or
any of its Subsidiaries to or from the holders of any equity interests of the
Parent (other than routine non-material correspondence sent by shareholders of
the Parent to the Parent) or any such Subsidiary or of any Debt for Borrowed
Money of the Parent or any of its Subsidiaries registered under the Securities
Act of 1933 or to or from the trustee under any indenture under which the same
is issued.
(i) As soon as available, but in any event not later than
15 days after the Parent's receipt thereof, a copy of all management reports
and management letters prepared for
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the Parent by KPMG Pete Marwick LLP or any other independent certified public
accountants of the Parent.
(j) Promptly after their distribution, copies of any and
all proxy statements, financial statements, and reports which the Parent makes
available to its shareholders.
(k) Promptly upon the filing thereof, copies of all
reports, if any, or other documents filed by the Parent with the Securities and
Exchange Commission under the Exchange Act, and all reports, notices, or
statements sent or received by the Parent to or from the holders of any equity
interest of the Parent (other than routine non-material correspondence sent by
shareholders of the Parent to the Parent) or of any Debt For Borrowed Money of
the Parent registered under the Securities Act of 1933 or to or from the
trustee under any indenture under which the same is issued.
(l) Promptly after filing with the IRS, a copy of each
tax return filed by the Parent or by any of its Subsidiaries.
(m) Such additional information as the Agent and/or any
Lender may from time to time reasonably request regarding the financial and
business affairs of the Parent or any Subsidiary.
7.3 Notices to the Lenders. Each Loan Party, itself or through
the Borrower, shall notify, or cause another Loan Party to notify, the Agent
and the Lenders, in writing of the following matters at the following times:
(a) Immediately after becoming aware of any Default or
Event of Default.
(b) Immediately after becoming aware of the assertion by
the holder of any capital stock of the Parent or Subsidiary thereof or of any
Debt that a default exists with respect thereto or that the Parent is not in
compliance with the terms thereof, or the threat or commencement by such holder
of any enforcement action because of such asserted default or non-compliance.
(c) Immediately after becoming aware of any material
adverse change in the Parent's or any Subsidiary's property, business,
operations, or condition (financial or otherwise).
(d) Immediately after becoming aware of any pending or
threatened action, suit, proceeding, or counterclaim by any Person, or any
pending or threatened investigation by a Governmental Authority, which may
materially and adversely affect the Collateral, the repayment of the
Obligations, the Agent's or any Lender's rights under the Loan Documents, or
the Parent's or any Subsidiary's property, business, operations, or condition
(financial or otherwise).
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, unfair labor practice claim, or other labor
dispute affecting the Parent or any of its Subsidiaries in a manner which could
reasonably be expected to have a Material Adverse Effect.
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(f) Immediately after becoming aware of any violation of
any law, statute, regulation, or ordinance of a Governmental Authority
affecting the Parent or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
(g) Immediately after receipt of any notice of any
violation by the Parent or any of its Subsidiaries of any Environmental Law
which could reasonably be expected to have a Material Adverse Effect or that
any Governmental Authority has asserted that the Parent or any Subsidiary
thereof is not in compliance with any Environmental Law or is investigating the
Parent's or such Subsidiary's compliance therewith.
(h) Immediately after receipt of any written notice that
the Parent or any of its Subsidiaries is or may be liable to any Person as a
result of the Release or threatened Release of any Contaminant or that the
Parent or any Subsidiary is subject to investigation by any Governmental
Authority evaluating whether any remedial action is needed to respond to the
Release or threatened Release of any Contaminant which, in either case, is
reasonably likely to give rise to liability in excess of $100,000.
(i) Immediately after receipt of any written notice of
the imposition of any Environmental Lien against any property of the Parent or
any of its Subsidiaries.
(j) Any change in such Loan Party's name, state of
incorporation, or form of organization, trade names under which such Loan Party
will sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto.
(k) Within ten (10) Business Days after the Parent or any
ERISA Affiliate knows or has reason to know, that an ERISA Event or a
prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the
Code) has occurred, and, when known, any action taken or threatened by the IRS,
the DOL or the PBGC with respect thereto.
(l) Upon request, or, in the event that such filing
reflects a significant change with respect to the matters covered thereby,
within three (3) Business Days after the filing thereof with the PBGC, the DOL
or the IRS, as applicable, copies of the following: (i) each annual report
(form 5500 series), including Schedule B thereto, filed with the PBGC, the DOL
or the IRS with respect to each Plan, (ii) a copy of each funding waiver
request filed with the PBGC, the DOL or the IRS with respect to any Plan and
all communications received by the Parent or any ERISA Affiliate from the PBGC,
the DOL or the IRS with respect to such request, and (iii) a copy of each other
filing or notice filed with the PBGC, the DOL or the IRS, with respect to each
Plan of either the Parent or any ERISA Affiliate.
(m) Upon request, copies of each actuarial report for any
Plan or Multi-employer Plan and annual report for any Multi-employer Plan; and
within three (3) Business Days after receipt thereof by the Parent or any ERISA
Affiliate, copies of the following: (i) any notices of the PBGC's intention to
terminate a Plan or to have a trustee appointed to administer such Plan; (ii)
any favorable or unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code; or (iii) any notice
from a Multi-employer Plan regarding the imposition of withdrawal liability.
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(n) Within three (3) Business Days after the occurrence
thereof: (i) any changes in the benefits of any existing Plan which increase
the affected Loan Party's annual costs with respect thereto by an amount in
excess of $500,000, or the establishment of any new Plan or the commencement of
contributions to any Plan to which such Loan Party or any ERISA Affiliate was
not previously contributing; or (ii) any failure by such Loan Party or any
ERISA Affiliate to make a required installment or any other required payment
under Section 412 of the Code on or before the due date for such installment or
payment.
(o) Within three (3) Business Days after the Parent or
any ERISA Affiliate knows or has reason to know that any of the following
events has or will occur: (i) a Multi-employer Plan has been or will be
terminated; (ii) the administrator or plan sponsor of a Multi-employer Plan
intends to terminate a Multi-employer Plan; or (iii) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multi-employer Plan.
Each notice given under this Section shall describe the
subject matter thereof in reasonable detail, and shall set forth the action
that the Parent, its Subsidiary, or any ERISA Affiliate, as applicable, has
taken or proposes to take with respect thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
Each Loan Party warrants and represents to the Agent and the Lenders
that except as hereafter disclosed to and accepted by the Agent and the
Majority Lenders in writing:
8.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents. Such Loan Party has the corporate power and authority
to execute, deliver and perform this Agreement and the other Loan Documents to
which it is a party, to incur obligations hereunder and thereunder that
constitute Obligations, and to grant to the Agent Liens upon and security
interests in the Collateral relating to such Loan Party. Each Loan Party has
taken all necessary corporate action (including without limitation, obtaining
approval of its stockholders if necessary) to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents to
which it is a party. This Agreement and the other Loan Documents have been
duly executed and delivered by such Loan Party, and constitute the legal, valid
and binding obligations of such Loan Party, enforceable against it in
accordance with their respective terms without defense, setoff or counterclaim,
except as such enforcement may be limited by any bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to or
affecting the rights of creditors generally. Such Loan Party's execution,
delivery, and performance of this Agreement and the other Loan Documents to
which it is a party do not and will not conflict with, or constitute a
violation or breach of, or constitute a default under, or result in the
creation or imposition of any Lien upon the property of such Loan Party or any
of its Subsidiaries by reason of the terms of (a) any contract, mortgage, Lien,
lease, agreement, indenture, or instrument to which such Loan Party is a party
or which is binding upon it, (b) any Requirement of Law applicable to such Loan
Party or any of its Subsidiaries, or (c) the certificate or articles of
incorporation or by-laws of such Loan Party or any of its Subsidiaries.
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8.2 Validity and Priority of Security Interest. The provisions of
this Agreement and the other Loan Documents to which it is a party create legal
and valid Liens on all the Collateral relating to such Loan Party in favor of
the Agent, for the ratable benefit of the Agent and the Lenders, and such Liens
constitute perfected and continuing Liens on all such Collateral, having
priority over all other Liens on such Collateral (except Liens described in
subsections (d), (g) and (j) of the definition of "Permitted Liens") securing
all the Obligations, and enforceable against the such Loan Party and all third
parties.
8.3 Organization and Qualification. Each Loan Party (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the state of its incorporation, (b) is qualified to do business as a foreign
corporation and is in good standing in the jurisdictions set forth on Schedule
8.3 which are the only jurisdictions in which the failure to so qualify or be
in good standing could reasonably be expected to have a material adverse effect
on such Loan Party's business, operations, prospects, property, or condition
(financial or otherwise), and (c) has all requisite power and authority to
conduct its business and to own its property.
8.4 Corporate Name; Prior Transactions. Except as set forth in
Schedule 8.4, each Loan Party has not, during the past four (4) years, been
known by or used any other corporate or fictitious name, or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property outside of the ordinary course of
business.
8.5 Subsidiaries and Affiliates. Schedule 8.5 is a correct and
complete list of the name and relationship to such Loan Party of each and all
of such Loan Party's Subsidiaries and other Affiliates. Each such Subsidiary
is (a) duly incorporated and organized and validly existing in good standing
under the laws of its state of incorporation set forth on Schedule 8.5, and (b)
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which the failure to so qualify or be in good standing could
reasonably be expected to have a material adverse effect on any such
Subsidiary's business, operations, prospects, property, or condition (financial
or otherwise) and (c) has all requisite power and authority to conduct its
business and own its property.
8.6 Financial Statements and Projections.
(a) The Parent has delivered to the Agent and the Lenders
the audited balance sheet and related statements of income, retained earnings,
cash flows, and changes in stockholders equity for the Parent and its
consolidated Subsidiaries as of December 31, 1996, and for the Fiscal Year then
ended, accompanied by the report thereon of the Parent's independent certified
public accountants, KPMG Peat Marwick LLP. The Parent has also delivered to
the Agent and the Lenders the unaudited balance sheet and related statements of
income and cash flows for the Parent and its consolidated Subsidiaries as of
December 31, 1997. Such financial statements are attached hereto as Exhibit A.
All such financial statements have been prepared in accordance with GAAP and
present fairly the consolidated and consolidating financial position of the
Parent and its consolidated Subsidiaries as at the dates thereof and their
results of operations for the periods then ended.
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(b) The Latest Projections when submitted to the Lenders
as required herein represent the Parent's best estimate of the future financial
performance of the Parent and its consolidated Subsidiaries for the periods set
forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Borrower believes are fair and
reasonable in light of current and reasonably foreseeable business conditions
at the time submitted to the Lender.
8.7 Capitalization. The Parent's authorized capital stock
consists of 20,000,000 shares of common stock, par value $.001 per share, of
which approximately 9,821,000 shares are validly issued and outstanding, fully
paid and non-assessable as of December 31, 1997. The Parent's authorized
preferred stock consists of 5,000,000 shares of preferred stock, par value
$.001 per share, of which 0 shares are validly issued and outstanding as of
December 31, 1997.
8.8 Solvency. Such Loan Party is Solvent prior to and after
giving effect to the making of the Revolving Loans to be made on the Closing
Date and the issuance of the Letters of Credit to be issued on the Closing
Date, and shall remain Solvent during the term of this Agreement.
8.9 Debt. After giving effect to the making of the Revolving
Loans to be made on the Closing Date, the Parent and its Subsidiaries have no
Debt, except (a) the Obligations, (b) Debt described on Schedule 8.9, and (c)
trade payables and other contractual obligations arising in the ordinary course
of business.
8.10 Distributions. Since December 31, 1996, no Distribution has
been declared, paid, or made upon or in respect of any capital stock or other
securities of such Loan Party or any of its Subsidiaries.
8.11 Title to Property. Such Loan Party has good and marketable
title in fee simple to its real property listed in Schedule 8.12, hereto, and
has good, indefeasible, and merchantable title to all of its other property
(including, without limitation, the assets reflected on the December 31, 1997
Financial Statements delivered to the Agent and the Lenders, except as disposed
of in the ordinary course of business since the date thereof), free of all
Liens except Permitted Liens.
8.12 Real Estate; Leases. Schedule 8.12 sets forth, as of the
Closing Date, a correct and complete list of all Real Estate owned by such Loan
Party or any of its Subsidiaries, all leases and subleases of real or personal
property by such Loan Party or its Subsidiaries as lessee or sublessee (other
than leases of personal property as to which such Loan party is lessee or
sublessee for which the value of such personal property is less than $200,000,
and all leases and subleases of real or personal property by such Loan Party or
its Subsidiaries as lessor, lessee, sublessor or sublessee. Each of such
leases and subleases is valid and enforceable in accordance with its terms and
is in full force and effect, and no default by any party to any such lease or
sublease exists.
8.13 Proprietary Rights. Schedule 8.13 sets forth a correct and
complete list of all of such Loan Party's Proprietary Rights. None of such
Proprietary Rights is subject to any licensing agreement or similar arrangement
except as set forth on Schedule 8.13. To the best of
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such Loan Party's knowledge, none of the Proprietary Rights infringes on or
conflicts with any other Person's property, and no other Person's property
infringes on or conflicts with the Proprietary Rights. The Proprietary Rights
described on Schedule 8.13 constitute all of the property of such type
necessary to the current and anticipated future conduct of such Loan Party's
business and upon the occurrence of an Event of Default the Agent or its
designee shall be entitled to use and exercise all such property and
Proprietary Rights, subject only to the first priority Lien in favor of the
Bank of America.
8.14 Trade Names and Terms of Sale. All trade names or styles
under which such Loan Party or any of its Subsidiaries will sell Inventory or
create Accounts, or to which instruments in payment of Accounts may be made
payable, are listed on Schedule 8.14.
8.15 Litigation. Except as set forth on Schedule 8.15, there is no
pending or (to the best of such Loan Party's knowledge) threatened, action,
suit, proceeding, or counterclaim by any Person, or investigation by any
Governmental Authority, or any basis for any of the foregoing, in each care
which would reasonably be expected to cause a Material Adverse Effect.
8.16 Restrictive Agreements. Neither such Loan Party nor any of
its Subsidiaries is a party to any material contract or agreement, or subject
to any charter or other corporate restriction, which affects its ability to
execute, deliver, and perform this Agreement or the other Loan Documents to
which it is a party and repay the Obligations incurred by it hereunder or
thereunder or which materially and adversely affects or, insofar as such Loan
Party can reasonably foresee, could reasonably be expected to materially and
adversely affect, the property, business, operations, or condition (financial
or otherwise) of such Loan Party or such Subsidiary, or would in any respect
cause a Material Adverse Effect.
8.17 Labor Disputes. Except as set forth on Schedule 8.17, (a)
there is no collective bargaining agreement or other labor contract covering
employees of such Loan Party or any of its Subsidiaries, (b) no such collective
bargaining agreement or other labor contract is scheduled to expire during the
term of this Agreement, (c) no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees of
such Loan Party or any of its Subsidiaries or for any similar purpose, and (d)
there is no pending or (to the best of such Loan Party's knowledge) threatened,
strike, work stoppage, material unfair labor practice claim, or other material
labor dispute against or affecting the Borrower or its Subsidiaries or their
employees.
8.18 Environmental Laws. Except as otherwise disclosed on Schedule
8.18 and to the best knowledge of the Borrower:
(a) Such Loan Party and its Subsidiaries have complied in
all material respects with all Environmental Laws applicable to its Premises
and business, and neither such Loan Party nor any Subsidiary nor any of its
present Premises or operations, nor its past property or operations, is subject
to any enforcement order from or liability agreement with any Governmental
Authority or private Person respecting (i) compliance with any Environmental
Law or (ii) any potential liabilities and costs or remedial action arising from
the Release or threatened Release of a Contaminant.
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<PAGE> 84
(b) Such Loan Party and its Subsidiaries have obtained
all permits necessary for their current operations under Environmental Laws,
and all such permits are in good standing and such Loan Party and its
Subsidiaries are in compliance with all terms and conditions of such permits.
(c) Neither such Loan Party nor any of its Subsidiaries,
nor, to the best of such Loan Party's knowledge, any of its predecessors in
interest, has, in violation of applicable law, stored, treated or disposed of
any hazardous waste on any Premises, as defined pursuant to 40 CFR Part 261 or
any equivalent Environmental Law.
(d) Neither such Loan Party nor any of its Subsidiaries
has received any summons, complaint, order or similar written notice that it is
not currently in compliance with, or that any Governmental Authority is
investigating its compliance with, any Environmental Laws or that it is or may
be liable to any other Person as a result of a Release or threatened Release of
a Contaminant.
(e) None of the present or past operations of such Loan
Party and its Subsidiaries is the subject of any investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to a Release or threatened Release of a Contaminant.
(f) There is not now, nor to the best of such Loan
Party's knowledge has there ever been on or in the Premises:
(1) any underground storage tanks or surface
impoundments,
(2) any asbestos-containing material, or
(3) any polychlorinated biphenyls (PCB's) used in
hydraulic oils, electrical transformers or other equipment.
(g) Neither such Loan Party nor any of its Subsidiaries
has filed any notice under any requirement of Environmental Law reporting a
spill or accidental and unpermitted release or discharge of a Contaminant into
the environment.
(h) Neither such Loan Party nor any of its Subsidiaries
has entered into any negotiations or settlement agreements with any Person
(including, without limitation, the prior owner of its property) imposing
material obligations or liabilities on such Loan Party or any of its
Subsidiaries with respect to any remedial action in response to the Release of
a Contaminant or environmentally related claim.
(i) None of the products manufactured, distributed or
sold by such Loan Party or any of its Subsidiaries contain asbestos containing
material.
(j) No Environmental Lien has attached to any Premises of
such Loan Party or any of its Subsidiaries.
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8.19 No Violation of Law. Neither such Loan Party nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it, which violation could reasonably
be expected to have a Material Adverse Effect.
8.20 No Default. Neither such Loan Party nor any of its
Subsidiaries is in default with respect to any note, indenture, loan agreement,
mortgage, lease, deed, or other agreement to which such Loan Party or such
Subsidiary is a party or by which it is bound, which default could reasonably
be expected to have a Material Adverse Effect.
8.21 ERISA Compliance. Except as specifically disclosed in
Schedule 8.21 and to the best knowledge of the Borrower:
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law. Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and to the best
knowledge of such Loan Party, nothing has occurred which would cause the loss
of such qualification. Such Loan Party and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
such Loan Party, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect. There has been
no prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither such Loan Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) neither such Loan Party nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multi-employer Plan; and (v) neither such Loan Party nor any ERISA Affiliate
has engaged in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA.
8.22 Taxes. Such Loan Party and its Subsidiaries have filed all
federal and other tax returns and reports required to be filed, and have paid
all federal and other taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable.
8.23 Regulated Entities. None of such Loan Party, any Person
controlling such Loan Party, or any Subsidiary, is an "Investment Company"
within the meaning of the Investment Company Act of 1940. Such Loan Party is
not subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, any state
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public utilities code or law, or any other federal or state statute or
regulation limiting its ability to incur indebtedness.
8.24 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for working capital and general corporate purposes.
Neither such Loan Party nor any Subsidiary is engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.
8.25 Copyrights, Patents, Trademarks and Licenses, etc. Such Loan
Party owns or is licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual franchises,
authorizations and other rights used by such Loan Party that are reasonably
necessary for the operation of its businesses, without conflict with the rights
of any other Person. To the best knowledge of such Loan Party, no slogan or
other advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by such Loan Party
or any Subsidiary infringes upon any rights held by any other Person. No claim
or litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of such Loan
Party, proposed, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
8.26 No Material Adverse Change. No Material Adverse Effect has
occurred since the date of the Financial Statements referred to in Section 8.6.
8.27 Full Disclosure. None of the representations or warranties
made by such Loan Party in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of such Loan Party in connection with the Loan Documents
(including the offering and disclosure materials delivered by or on behalf of
such Loan Party to the Lenders prior to the Closing Date), contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they are made, not misleading as of the time when
made or delivered.
8.28 Material Agreements. Schedule 8.28 hereto sets forth all
material agreements and contracts to which such Loan Party or any of its
Subsidiaries is a party or is bound as of the date hereof.
8.29 Bank Accounts. Schedule 8.29 contains a complete and accurate
list of all bank accounts maintained by such Loan Party with any bank or other
financial institution.
8.30 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, such
Loan Party or any of its Subsidiaries of this Agreement or any other Loan
Document.
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8.31 Year 2000 Compliance. Such Loan Party has conducted a review
and assessment of its computer applications and made inquiry of its key
suppliers, vendors and customers with respect to the Year 2000 Problem and,
based on that review and inquiry, such Loan Party does not believe the Year
2000 Problem will result in a material adverse change in its business condition
(financial or otherwise), operations properties or prospects, or ability to
repay the Obligations.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Loan Party covenants to the Agent and each Lender that, so long
as any of the Obligations remain outstanding or this Agreement is in effect:
9.1 Taxes and Other Obligations. Such Loan Party shall, and shall
cause each of its Subsidiaries to, (a) file when due all tax returns and other
reports which it is required to file; (b) pay, or provide for the payment, when
due, of all taxes, fees, assessments and other governmental charges against it
or upon its property, income and franchises, make all required withholding and
other tax deposits, and establish adequate reserves for the payment of all such
items, and provide to the Agent and the Lenders, upon request, satisfactory
evidence of its timely compliance with the foregoing; and (c) subject to the
MLBFS Intercreditor Agreement, pay when due all Debt owed by it and all claims
of materialmen, mechanics, carriers, warehousemen, landlords, processors and
other like Persons, and all other indebtedness owed by it and perform and
discharge in a timely manner all other obligations undertaken by it; provided,
however, neither such Loan Party nor any of its Subsidiaries need pay any tax,
fee, assessment, or governmental charge or any such Debt or claims, that (i)
it is contesting in good faith by appropriate proceedings diligently pursued,
(ii) such Loan Party or its Subsidiary, as the case may be, has established
proper reserves for as provided in GAAP, and (iii) no Lien (other than a
Permitted Lien) results from such non-payment.
9.2 Corporate Existence and Good Standing. Such Loan Party shall,
and shall cause each of its Subsidiaries to, maintain its corporate existence
and its qualification and good standing in all jurisdictions in which the
failure to maintain such existence and qualification or good standing could
reasonably be expected to have a material adverse effect on such Loan Party's
or such Subsidiary's property, business, operations, prospects, or condition
(financial or otherwise).
9.3 Compliance with Law and Agreements; Maintenance of Licenses.
Such Loan Party shall comply, and shall cause each Subsidiary to comply, in all
material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act). Such Loan Party shall, and shall cause each of its
Subsidiaries to, obtain and maintain all licenses, permits, franchises, and
governmental authorizations necessary in the Borrower's reasonable judgment to
own its property and to conduct its business as conducted on the Closing Date.
Such Loan Party shall not modify, amend or alter its certificate or article of
incorporation other than in a manner which does not adversely affect the rights
of the Lenders or the Agent.
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9.4 Maintenance of Property. Such Loan Party shall, and shall
cause each of its Subsidiaries to, maintain all of its property necessary and
useful in the conduct of its business, in good operating condition and repair,
ordinary wear and tear excepted.
9.5 Insurance.
(a) Such Loan Party shall maintain, and shall cause each
of its Subsidiaries to maintain, with financially sound and reputable insurers
having a rating of at least A-VII or better by Best Rating Guide, such
insurance coverage for such amounts (and such amounts shall be increased to
cover increases in the value of Collateral) as is currently maintained by such
Loan Party, as identified in Schedule 9.5, and such other insurance against
such other hazards or of such other types as is customary for Persons engaged
in the same or similar business. Without limiting the foregoing, such Loan
Party shall also maintain, and shall cause each of its Subsidiaries to
maintain, flood insurance, in the event of a designation of the area in which
any Real Estate covered by the Mortgages and any of the Equipment and Inventory
located on such Real Estate is located as "flood prone" or a "flood risk area,"
(hereinafter "SFHA") as defined by the Flood Disaster Protection Act of 1973,
in an amount to be reasonably determined by the Agent, and shall comply with
the additional requirements of the National Flood Insurance Program as set
forth in said Act. Such Loan Party shall also maintain flood insurance for its
Inventory and Equipment which is, at any time, located in a SFHA.
(b) Such Loan Party shall cause the Agent, for the
ratable benefit of the Agent and the Lenders, to be named in each such policy
as secured party or mortgagee and loss payee or additional insured in form and
substance reasonably acceptable to the Agent, which loss payee endorsement will
be senior to any rights of Bank of America with respect to payments arising out
of loss relating to any insured assets except patents, trademarks and other
intellectual property. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days' prior
written notice to the Agent in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of the
Agent shall not be impaired or invalidated by any act or neglect of such Loan
Party or any of its Subsidiaries or the owner of any premises for purposes more
hazardous than are permitted by such policy. All premiums for such insurance
shall be paid by such Loan Party when due, and certificates of insurance and,
if requested by the Agent or any Lender, photocopies of the policies, shall be
delivered to the Agent, in each case in sufficient quantity for distribution by
the Agent to each of the Lenders. If such Loan Party fails to procure such
insurance or to pay the premiums therefor when due, the Agent may, at its
reasonable discretion, and at the direction of the Majority Lenders shall, do
so from the proceeds of Revolving Loans.
(c) Such Loan Party shall promptly notify the Agent and
the Lenders of any material loss, damage, or destruction to the Collateral
arising from its use, whether or not covered by insurance. The Agent is hereby
authorized to collect all insurance proceeds directly, and to apply or remit
them as follows:
(i) With respect to insurance proceeds relating
to property other than Collateral, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall promptly remit to such Loan Party such
proceeds.
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(ii) With respect to insurance proceeds relating
to Collateral other than Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall apply such proceeds, ratably, to the
reduction of the Obligations in the order provided for in Section 4.5.
(iii) With respect to insurance proceeds relating
to Collateral consisting of Fixed Assets, after deducting from such proceeds
the reasonable expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall apply such proceeds to the reduction of the
Revolving Loans or at the option of the applicable Loan Party, so long as there
does not then exist any Event of Default, shall permit such Loan Party to use
such money, or any part thereof, to replace, repair, restore or rebuild the
relevant Fixed Assets in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the loss,
damage or destruction; provided, however, that such Loan Party first provides
the Agent with plans and specifications for any such repair or restoration.
9.6 Condemnation.
(a) Such Loan Party shall, immediately upon learning of
the institution of any proceeding for the condemnation or other taking of any
of its property, notify the Agent of the pendency of such proceeding, and
agrees that the Agent may participate in any such proceeding, and such Loan
Party from time to time will deliver to the Agent all instruments reasonably
requested by the Agent to permit such participation.
(b) The Agent is hereby authorized to collect the
proceeds of any condemnation claim or award directly, and to apply or remit
them as follows:
(i) With respect to condemnation proceeds
relating to property other than Collateral, after deducting from such proceeds
the reasonable expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall remit to such Loan Party such proceeds.
(ii) With respect to condemnation proceeds
relating to Collateral other than Fixed Assets, after deducting from such
proceeds the reasonable expenses, if any, incurred by the Agent in the
collection or handling thereof, the Agent shall apply such proceeds, ratably,
to the reduction of the Obligations in the order provided for in Section 4.5.
(iii) With respect to condemnation proceeds
relating to Collateral consisting of Fixed Assets, after deducting from such
proceeds the reasonable expenses, if any, incurred by the Agent in the
collection or handling thereof, the Agent shall apply such proceeds, ratably,
to the reduction of the Revolving Loans or at the option of the applicable Loan
Party, so long as there does not then exist any Event of Default, shall permit
such Loan Party to use such money, or any part thereof, to replace, repair,
restore or rebuild the relevant Fixed Assets in a diligent and expeditious
manner with materials and workmanship of substantially the same quality as
existed before the condemnation; provided, however, that plans and
specifications for any such repair or restoration shall be provided to the
Agent.
9.7 Environmental Laws.
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(a) Such Loan Party shall, and shall cause each of its
Subsidiaries to, conduct its business in material compliance with all
Environmental Laws applicable to it, including, without limitation, those
relating to the generation, handling, use, storage, and disposal of any
Contaminant. Such Loan Party shall, and shall cause each of its Subsidiaries
to, take prompt and appropriate action to respond to any material
non-compliance with Environmental Laws and shall regularly report to the Agent
on such response.
(b) The Agent or any Lender may request copies of
technical reports prepared by such Loan Party and its communications with any
Governmental Authority to determine whether such Loan Party or any of its
Subsidiaries is proceeding reasonably to correct, cure or contest in good faith
any alleged non-compliance or environmental liability. Such Loan Party shall,
at the Agent's reasonable request and at the Borrower's expense, (a) retain an
independent environmental engineer acceptable to the Agent to evaluate the
site, including tests if appropriate, where the non-compliance or alleged
non-compliance with Environmental Laws has occurred and prepare and deliver to
the Agent, in sufficient quantity for distribution by the Agent to the Lenders,
a report setting forth the results of such evaluation, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof, and (b) provide to the Agent and the Lenders a supplemental
report of such engineer whenever the scope of the environmental problems, or
the response thereto or the estimated costs thereof, shall change in any
material respect.
9.8 Compliance with ERISA. Such Loan Party shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; (c) make all required
contributions to any Plan subject to Section 412 of the Code; (d) not engage in
a prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan; and (e) not engage in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
9.9 Mergers, Consolidations or Sales. Neither such Loan Party nor
any of its Subsidiaries shall merge, reorganize or consolidate with or into any
other Person, or transfer, sell, assign, lease, or otherwise dispose of all or
any part of its property, or wind up, liquidate or dissolve, or agree to do any
of the foregoing, except (i) for sales of Inventory in the ordinary course of
its business, and (ii) for sales or other dispositions of Equipment in the
ordinary course of business that are obsolete or no longer useable by such Loan
Party in its business as permitted by Section 6.11.
9.10 Distributions; Capital Change; Restricted Investments.
Neither such Loan Party nor any of its Subsidiaries shall (i) directly or
indirectly declare or make, or incur any liability to make, any Distribution,
except Distributions to such Loan Party by its Subsidiaries, (ii) make any
change in its capital structure which could have a Material Adverse Effect or
(iii) make any Restricted Investment.
9.11 Transactions Affecting Collateral or Obligations. Neither
such Loan Party nor any of its Subsidiaries shall enter into any transaction
which would be reasonably expected to have a Material Adverse Effect.
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9.12 Guaranties. Neither such Loan Party nor any of its
Subsidiaries shall make, issue, or become liable on any Guaranty, except
Guaranties of the Obligations in favor of the Agent, the Guaranties set forth
on Schedule 9.12 , and other Guaranties which do not in the aggregate exceed
$250,000 (or $500,000 upon payment in full of the BofA Loan).
9.13 Debt. Neither such Loan Party nor any of its Subsidiaries
shall incur or maintain any Debt, other than: (a) the Obligations; (b) trade
payables and contractual obligations incurred in the ordinary course of
business; (c) the MLBFS Loan (provided that no payments are made on the
principal amount owing under the MLBFS Loan until the maturity of the MLBFS
Loan); (d) the BofA Loan; (e) Debt existing on the Closing Date and reflected
on Schedule 9.13; and (f) Debt constituting renewals, extensions or
replacements of any of the foregoing.
9.14 Prepayment. If an Event of Default has occurred and is
continuing, neither such Loan Party nor any of its Subsidiaries shall
voluntarily prepay any Debt, except the Obligations in accordance with the
terms of this Agreement. Notwithstanding the foregoing, neither such Loan
Party nor any of its Subsidiaries shall make payment of principal on the MLBFS
Loan or terminate the MLBFS Loan before the BofA Loan has been paid in full.
9.15 Transactions with Affiliates. Except as set forth below,
neither such Loan Party nor any of its Subsidiaries shall, sell, transfer,
distribute, or pay any money or property, including, but not limited to, any
fees or expenses of any nature (including, but not limited to, any fees or
expenses for management services), to any Affiliate, or lend or advance money
or property to any Affiliate, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any
property, of any Affiliate, or become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any Affiliate.
Notwithstanding the foregoing: (a) a Loan Party may engage in transactions with
other Loan Parties; (b) a Loan Party may sell Inventory to foreign Subsidiaries
of the Parent at prices and terms consistent with past practices (cost plus
8.0%): provided that the aggregate amount of any receivables owing on account
of such sales shall not at any time exceed (i) $14,000,000 or (ii) upon and
after repayment in full of the BofA Loan, $16,500,000; (c) the Parent may pay
annual management fees, not to exceed $100,000 in any one year, and may
reimburse for reasonable expenses related thereto, to an affiliate of Bain
Capital, Inc. (a stockholder of the Parent), (d) Riteway Distributors Central
may maintain the lease with Rock Road Group, Inc. for the property located at
13910 St. Charles Rock Road, St. Louis County, Missouri; (e) the Parent may
maintain the lease with 25 Dewberry Lane, Inc. for the property located at 25
Dewberry Lane, Cheektowaga, New York; (f) Riteway North Central may maintain
the lease with Parkway Associates, L.P. for the property located at 2932
Behrens Parkway, Sheboygan, Wisconsin; and (g) subject to clauses (b), (c) (d),
(e) and (f) above, such Loan Party and its Subsidiaries may engage in
transactions with Affiliates in the ordinary course of business consistent with
past practices and as disclosed in monthly financial reports, in amounts and
upon terms fully disclosed to the Agent and the Lenders, and no less favorable
to such Loan Party and its Subsidiaries than would be obtained in a comparable
arm's-length transaction with a third party who is not an Affiliate.
9.16 Investment Banking and Finder's Fees. Neither such Loan Party
nor any of its Subsidiaries shall pay or agree to pay, or reimburse any other
party with respect to, any investment banking or similar or related fee,
underwriter's fee, finder's fee, or broker's fee to any Person in connection
with this Agreement. Such Loan Party shall defend and indemnify the
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Agent and the Lenders against and hold them harmless from all claims of any
Person that such Loan Party is obligated to pay for any such fees, and all
costs and expenses (including without limitation, attorneys' fees) incurred by
the Agent and/or any Lender in connection therewith.
9.17 Business Conducted. Such Loan Party shall not and shall not
permit any of its Subsidiaries to, engage directly or indirectly, in any line
of business other than the businesses in which such Loan Party is engaged on
the Closing Date.
9.18 Liens. Neither such Loan Party nor any of its Subsidiaries
shall create, incur, assume, or permit to exist any Lien on any property now
owned or hereafter acquired by any of them, except Permitted Liens.
9.19 Sale and Leaseback Transactions. Neither such Loan Party nor
any of its Subsidiaries shall, directly or indirectly, enter into any
arrangement with any Person providing for such Loan Party or such Subsidiary to
lease or rent property that the Borrower or such Subsidiary has sold or will
sell or otherwise transfer to such Person.
9.20 New Subsidiaries. Such Loan Party shall not, directly or
indirectly, organize, create, acquire or permit to exist any Subsidiary other
than those listed on Schedule 8.5.
9.21 Fiscal Year. Such Loan Party shall not change its Fiscal
Year.
9.22 Capital Expenditures. None of the Consolidated Domestic
Companies or any of their respective Subsidiaries shall make or incur any
Capital Expenditure if, after giving effect thereto, the aggregate amount of
all Capital Expenditures by such Consolidated Domestic Companies and its
Subsidiaries on a consolidated basis would exceed $3,000,000 during any Fiscal
Year.
9.23 Adjusted Tangible Net Worth. The Parent will maintain
Adjusted Tangible Net Worth, determined as of the last day of the month, and
tested as of the end of each quarter, of not less than the amount set forth
below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
June 1998 $39,000,000
September 1998 $41,000,000
December 1998 $43,000,000
March 1999 $43,000,000
June 1999 $44,000,000
September 1999 $46,000,000
December 1999 $48,000,000
</TABLE>
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<TABLE>
<S> <C>
March 2000 $48,000,000
June 2000 $49,000,000
September 2000 $49,000,000
December 2000 and $50,000,000
thereafter
</TABLE>
9.24 Interest Coverage Ratio. The Consolidated Domestic Companies
will maintain an Interest Coverage Ratio for each period set forth below,
measured at the end of each fiscal quarter on a Fiscal Year to date basis for
1998 and on a rolling four quarter basis thereafter, of not less than the ratio
set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 1998 1.15 to 1.0
September 1998 1.45 to 1.0
December 1998 1.70 to 1.0
March 1999 1.65 to 1.0
June 1999 1.75 to 1.0
September 1999 1.75 to 1.0
December 1999 1.80 to 1.0
through September
2000
December 2000 and 1.90 to 1.0
thereafter
</TABLE>
9.25 Use of Proceeds. The Borrower shall not, and shall not
suffer or permit any Affiliate to, use any portion of the Loan proceeds,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Borrower or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to acquire any security in any transaction
that is subject to Section 13 or 14 of the Exchange Act.
9.26 Further Assurances. Such Loan Party shall execute and
deliver, or cause to be executed and delivered, to the Agent and/or the Lenders
such documents and agreements, and
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shall take or cause to be taken such actions, as the Agent or any Lender may,
from time to time, reasonably request to carry out the terms and conditions of
this Agreement and the other Loan Documents.
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Making of Loans on the Closing Date.
The obligation of the Lenders to make the initial Revolving Loans on the
Closing Date, the obligation of the Agent to cause to be issued or provide
Credit Support for any Letter of Credit on the Closing Date, the obligation of
the Lenders to participate in Letters of Credit issued on the Closing Date or
in Credit Support for any Letters of Credit, and the obligation of the Agent to
incur the Other Indemnified Transactions on the Closing Date, are subject to
the following conditions precedent having been satisfied in a manner
satisfactory to the Agent and each Lender:
(a) This Agreement and the other Loan Documents have been
executed by each party thereto and the Borrower and the other Loan Parties
shall have performed and complied with all covenants, agreements and conditions
contained herein and the other Loan Documents which are required to be
performed or complied with by the Borrower and such other Loan Parties before
or on such Closing Date.
(b) On the Closing Date, the remaining Availability,
after making the initial Revolving Loans (including such Revolving Loans made
to finance the Facility Fee or otherwise pursuant to Section 3.4 as
reimbursement for fees, costs and expenses then payable under this Agreement)
and with all obligations of the Borrower current, will be at least $4,000,000
(calculated at the time of closing as if no such Loans had been made).
(c) All representations and warranties made hereunder and
in the other Loan Documents shall be true and correct in all material respects
as of the Closing Date as if made on such date.
(d) No Default or Event of Default shall exist on the
Closing Date, or would exist after giving effect to the Loans to be made on
such date.
(e) The Agent and the Lenders shall have received such
opinions of counsel for the Loan Parties and their Subsidiaries as the Agent or
any Lender shall reasonably request, each such opinion to be in a form, scope,
and substance reasonably satisfactory to the Agent, the Lenders, and their
respective counsel.
(f) The Agent shall have received:
(i) Acknowledgment copies of proper financing
statements, duly filed on or before the Closing Date under the UCC of all
jurisdictions that the Agent may deem necessary or desirable in order to
perfect the Agent's Lien; and
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(ii) Duly executed UCC-3 Termination Statements
and such other instruments, in form and substance satisfactory to the Agent, as
shall be necessary to terminate and satisfy all Liens on the Property of the
Parent and its Subsidiaries except Permitted Liens.
(iii) The Blocked Account Agreements as required to
be delivered to the Agent pursuant to Section 6.9;
(iv) Certified copies of resolutions of the Board
of Directors of each Loan Party approving (A) the execution and delivery of the
Loan Documents to which such Loan Party is a party, (B) the performance of the
Obligations incurred by such Loan Party under Loan Documents to which it is a
party, and (C) the consummation of the transactions contemplated by the Loan
Documents;
(v) A certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true signatures of the
officers of such Loan Party, authorized to sign the Loan Documents;
(vi) A copy of the Certificate of Incorporation of
each Loan Party, certified by the Secretary of State of the State of
incorporation as of a recent date;
(vii) A copy of the Bylaws of each Loan Party,
certified by the Secretary or an Assistant Secretary of the Loan Party, as of
the date of this Agreement as being accurate and complete;
(viii) A Certificate of the Secretary of State of
the State of incorporation for each Loan Parties certifying that such Loan
Party is in good standing as of a recent date;
(ix) Consolidating financial projections for the
Parent on an annual basis for the 1998, 1999 and 2000 fiscal years (attached
hereto as Exhibit E), with the projections therein being substantially similar
to those that were previously provided on a consolidated basis; and
(x) With respect to the Parent's and its
Subsidiaries' Real Estate, the Agent's standard environmental questionnaire
with the results being satisfactory to the Agent.
(g) There shall have occurred no material adverse change
(as determined by the Lenders in their sole discretion) in business,
operations, profits or prospects of any Loan Party since the financial
statements dated December 31, 1997.
(h) The Agent shall have received evidence, in form,
scope, and substance, reasonably satisfactory to the Agent, of all insurance
coverage as required by this Agreement.
(i) The Agent shall have received certified copies of all
consents or approvals of any Government Authority or other Person which the
Agent reasonably determines is required in connection with the transactions
contemplated by this Agreement.
(j) Each Loan Party shall have used commercially
reasonable efforts prior to the Closing Date to obtain as promptly as possible
an executed Landlord's Waiver from each
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Person which leases real property to such Loan Party.
(k) The Agent and the Loan Parties shall have entered
into the Post-Closing Letter.
(l) The Borrower shall have paid all fees and expenses of
the Agent and the Attorney Costs incurred in connection with any of the Loan
Documents and the transactions contemplated thereby to the extent invoiced.
(m) The extension of the BofA Loan to Loan Parties
secured by the Loan Parties' intellectual property on terms and conditions
acceptable to the Agent.
(n) The approval by the Agent of any legal documentation
relating to any financing undertaken or contemplated by Caratti Sport Limited.
All proceedings taken in connection with the execution of this
Agreement, all other Loan Documents and all documents and papers relating
thereto shall be reasonably satisfactory in form, scope, and substance to the
Agent and the Lenders.
The acceptance by the Borrower of any Loans made on the Closing Date
shall be deemed to be a representation and warranty made by the Borrower and
each other Loan Party to the effect that all of the conditions precedent to the
making of such Loans have been satisfied (except as expressly set forth in the
Post-Closing Letter), with the same effect as delivery to the Agent and the
Lenders of a certificate signed by a Responsible Officer of the Borrower and of
each other Loan Party, dated the Closing Date, to such effect.
Execution and delivery to the Agent by a Lender of a counterpart of
this Agreement shall be deemed confirmation by such Lender that (i) all
conditions precedent in this Section 10.1 have been fulfilled to the
satisfaction of such Lender and (ii) the decision of such Lender to execute and
deliver to the Agent an executed counterpart of this Agreement was made by such
Lender independently and without reliance on the Agent or any other Lender as
to the satisfaction of any condition precedent set forth in this Section 10.1.
10.2 Conditions Precedent to Each Loan. The obligation of the
Lenders to make each Loan, including the initial Revolving Loans on the Closing
Date, and the obligation of the Agent to take reasonable steps to cause to be
issued or to provide Credit Support for any Letter of Credit and the obligation
of the Lenders to participate in Letters of Credit or Credit Support for
Letters of Credit, shall be subject to the further conditions precedent that on
and as of the date of any such extension of credit:
(a) the following statements shall be true, and the
acceptance by the Borrower of any extension of credit shall be deemed to be a
statement to the effect set forth in clauses (i) and (ii), with the same effect
as the delivery to the Agent and the Lenders of a certificate signed by a
Responsible Officer of the Borrower and of each other Loan Party, dated the
date of such extension of credit, stating that:
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(i) The representations and warranties contained
in this Agreement and the other Loan Documents are correct in all material
respects on and as of the date of such extension of credit as though made on
and as of such date, other than any such representation or warranty which
relates to a specified prior date and except to the extent the Agent and the
Lenders have been notified by the Borrower or by another Loan Party that any
representation or warranty is not correct and the Majority Lenders have
explicitly waived in writing compliance with such representation or warranty;
and
(ii) No event has occurred and is continuing, or
would result from such extension of credit, which constitutes a Default or an
Event of Default; and
(b) without limiting Section 10.1(b), the amount of the
Availability shall be sufficient to make such Revolving Loan without exceeding
the Availability, provided, however, that the foregoing conditions precedent
are not conditions to each Lender participating in or reimbursing BABC or the
Agent for such Lenders' Pro Rata Share of any BABC Loan or Agent Advance as
provided in Sections 2.2(h), (i) and (j).
ARTICLE 11
DEFAULT; REMEDIES
11.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) any failure to pay the principal of or interest or
premium on any of the Obligations when due, whether upon demand or otherwise;
(b) any representation or warranty made or deemed made by the
Borrower or any other Loan Party in this Agreement, or in any of the other Loan
Documents, any Financial Statement, or any certificate furnished by the
Borrower or any other Loan Party at any time to the Agent or any Lender shall
prove to be untrue in any material respect as of the date on which made, deemed
made, or furnished;
(c) any default shall occur in the observance or
performance of any of the covenants and agreements contained in this Agreement
and such default shall continue for thirty (30) days after the defaulting Loan
Party becomes aware or should have become aware of the occurrence of such
default (except that (i) a two-day period shall apply to a default with respect
to Sections 6.7 and 7.2 (other than (g), (h), (j), (k) and (l) thereof); (ii) a
fifteen-day period shall apply to a default with respect to Sections 6.2, 6.5,
6.6(a), 6.8(c), 6.8(e), 6.11(b), 6.11(c) or 7.3; and (iii) no thirty-day or
other period shall apply to a default with respect to Sections 6.3, 6.4,
6.8(a), 6.8(b), 6.8(d), 6.8(f), 6.9, 6.10, 6.12, 6.13, 9.2, 9.5 (other than
insurance unrelated to the Collateral), 9.9 through and including 9.17 or 9.19
through and including 9.26), any other Loan Documents or any other agreement
entered into at any time to which the Borrower or any other Loan party and the
Agent or any Lender are party (subject to any cure provisions contained in any
such Loan Document or other agreement), or if any such terms hereof or with the
written consent of the Agent and the Majority Lenders) or become void or
unenforceable, without the written consent of the Agent and the Majority
Lenders;
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(d) default shall occur with respect to any Debt For
Borrowed Money (other than the Obligations) in an outstanding principal amount
which exceeds $650,000 in the aggregate in the case of Consolidated Domestic
Companies and the Parent, and $1,000,000 in the aggregate in the case of
foreign Subsidiaries of the Loan Parties, or under any agreement or instrument
under or pursuant to which any such Debt For Borrowed Money may have been
issued, created, assumed, or guaranteed by the Parent or any of its
Subsidiaries, and such default shall continue for more than the period of
grace, if any, therein specified, if the effect thereof (with or without the
giving of notice or further lapse of time or both) is to accelerate, or to
permit the holders of any such Debt For Borrowed Money to accelerate, the
maturity of any such Debt For Borrowed Money; or any such Debt For Borrowed
Money shall be declared due and payable or be required to be prepaid (other
than by a regularly scheduled required prepayment) prior to the stated maturity
thereof;
(e) the Parent or any of its Subsidiaries shall (i) file
a voluntary petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization, arrangement
or readjustment of its debts or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or
law, state or federal, now or hereafter existing, or consent to, approve of, or
acquiesce in, any such petition, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, monitor, trustee or similar officer for it or for all or any part of
its property; (iii) make an assignment for the benefit of creditors; or (iv) be
unable generally to pay its debts as they become due;
(f) an involuntary petition or proposal shall be filed or
an action or proceeding otherwise commenced seeking reorganization,
arrangement, consolidation or readjustment of the debts of the Parent or any of
its Subsidiaries or for any other relief under the federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing and either (i) such petition, proposal,
action or proceeding shall not have been dismissed within a period of sixty
(60) days after its commencement or (ii) an order for relief against the Parent
or such Subsidiary shall have been entered in such proceeding;
(g) a receiver, assignee, liquidator, sequestrator,
custodian, monitor, trustee or similar officer for the Parent or any of its
Subsidiaries or for all or any part of its property shall be appointed or a
warrant of attachment, execution or similar process shall be issued against any
part of the property of the Parent or any of its Subsidiaries;
(h) the Parent or any of its Subsidiaries shall file a
certificate of dissolution under applicable state law or shall be liquidated,
dissolved or wound-up or shall commence or have commenced against it any action
or proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;
(i) all or any material part of the property of the
Parent or any of its Subsidiaries shall be nationalized, expropriated or
condemned, seized or otherwise appropriated, or custody or control of such
property or of the Parent or any such Subsidiary shall be assumed by any
Governmental Authority or any court of competent jurisdiction at the instance
of any
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Governmental Authority, except where contested in good faith by proper
proceedings diligently pursued where a stay of enforcement is in effect;
(j) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid;
(k) one or more judgments or orders for the payment of
money aggregating in excess of $1,000,000, or aggregating in excess of $500,000
for any one of the Parent or any of its Subsidiaries, which amount shall not be
fully covered by insurance, shall be rendered against the Parent or any of its
Subsidiaries;
(l) any loss, theft, damage or destruction of any item or
items of Collateral or other property of the Parent or any of its Subsidiaries
occurs which materially and adversely affects the property, business,
operation, prospects, or condition of the Parent or any of its Subsidiaries;
(m) there occurs a Material Adverse Effect;
(n) there is filed against the Parent or any of its
Subsidiaries any civil or criminal action, suit or proceeding under any federal
or state racketeering statute (including, without limitation, the Racketeer
Influenced and Corrupt Organization Act of 1970), which action, suit or
proceeding (1) is not dismissed within one hundred twenty (120) days, and (2)
could reasonably be expected to result in the confiscation or forfeiture of any
material portion of the Collateral;
(o) for any reason other than the failure of the Agent to
take any action available to it to maintain perfection of the Agent's Liens,
pursuant to the Loan Documents, any Loan Document ceases to be in full force
and effect or any Lien with respect to any material portion of the Collateral
intended to be secured thereby ceases to be, or is not, valid, perfected and
prior to all other Liens (other than Permitted Liens) or is terminated, revoked
or declared void;
(p) an ERISA Event shall occur with respect to a Pension
Plan or Multi-employer Plan which has resulted or could reasonably be expected
to result in liability of the Parent or any of its Subsidiaries under Title IV
of ERISA to the Pension Plan, Multi- employer Plan or the PBGC in an aggregate
amount in excess of $1,000,000; (ii) the aggregate amount of Unfunded Pension
Liability among all Pension Plans at any time exceeds $1,000,000; or (iii) the
Parent or any ERISA Affiliate shall fail to pay when due, after the expiration
of any applicable grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a Multi- employer Plan
in an aggregate amount in excess of $1,000,000;
(q) there occurs a Change of Control; or
(r) any default shall occur in respect to any of the
Other Indemnified Transactions, or there occurs a change, not consented to by
the Agent, in any instrument, agreement or other document relating thereto
(other than a non-material change which does not
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increase the scope, nature or extent of the Agent's obligations represented by
such Other Indemnified Obligations).
11.2 Remedies.
(a) If an Event of Default exists, the Agent may, in its
discretion, and shall, at the direction of the Majority Lenders, do one or more
of the following at any time or times and in any order, without notice to or
demand on any Loan Party: (i) reduce the Maximum Revolver Amount, or the
advance rates against Eligible Accounts and/or Eligible Inventory used in
computing the Availability, or reduce one or more of the other elements used
in computing the Availability; (ii) restrict the amount of or refuse to make
Revolving Loans; and (iii) restrict or refuse to arrange for or provide Letters
of Credit or Credit Support. If an Event of Default exists, the Agent shall,
at the direction of the Majority Lenders, do one or more of the following, in
addition to the actions described in the preceding sentence, at any time or
times and in any order, without notice to or demand on any Loan Party: (a)
terminate the Commitments and this Agreement; (b) declare any or all
Obligations to be immediately due and payable; provided, however, that upon the
occurrence of any Event of Default described in Sections 11.1(e), 11.1(g), or
11.1(h), the Commitments shall automatically and immediately expire and all
Obligations shall automatically become immediately due and payable without
notice or demand of any kind; and (c) pursue its other rights and remedies
under the Loan Documents and applicable law.
(b) If an Event of Default has occurred and is
continuing: (i) the Agent shall have for the ratable benefit of the Lenders,
in addition to all other rights of the Agent and the Lenders, the rights and
remedies of a secured party under the UCC; (ii) the Agent may, at any time,
take possession of the Collateral and keep it on any Loan Party's premises, at
no cost to the Agent or any Lender, or remove any part of it to such other
place or places as the Agent may desire, or each Loan Party shall, upon the
Agent's demand, at such Loan Party's cost, assemble the Collateral relating to
such Loan Party and make it available to the Agent at a place reasonably
convenient to the Agent; and (iii) the Agent may sell and deliver any
Collateral at public or private sales, for cash, upon credit or otherwise, at
such prices and upon such terms as the Agent deems advisable, in its sole
discretion, and may, if the Agent deems it reasonable, postpone or adjourn any
sale of the Collateral by an announcement at the time and place of sale or of
such postponed or adjourned sale without giving a new notice of sale. Without
in any way requiring notice to be given in the following manner, each Loan
Party agrees that any notice by the Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the
UCC or otherwise, shall constitute reasonable notice to such Loan Party if such
notice is mailed by registered or certified mail, return receipt requested,
postage prepaid, or is delivered personally against receipt, at least five (5)
Business Days prior to such action to such Loan Party's address specified in or
pursuant to Section 15.8. If any Collateral is sold on terms other than
payment in full at the time of sale, no credit shall be given against the
Obligations until the Agent or the Lenders receive payment, and if the buyer
defaults in payment, the Agent may resell the Collateral without further notice
to such Loan Party. In the event the Agent seeks to take possession of all or
any portion of the Collateral by judicial process, each Loan Party irrevocably
waives: (a) the posting of any bond, surety or security with respect thereto
which might otherwise be required; (b) any demand for possession prior to the
commencement of any suit or action to recover the Collateral; and (c) any
requirement that the Agent retain
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possession and not dispose of any Collateral until after trial or final
judgment. Each Loan Party agrees that the Agent has no obligation to preserve
rights to the Collateral or marshal any Collateral for the benefit of any
Person. Upon the occurrence of an Event of Default, the Agent is hereby
granted a license or other right to use, upon the occurrence of an Event of
Default, and without charge, any Loan Party's labels, patents, copyrights,
name, trade secrets, trade names, trademarks, and advertising matter, or any
similar property, in completing production of, advertising or selling any
Collateral, and such Loan Party's rights under all licenses and all franchise
agreements shall inure to the Agent's benefit for such purpose. The proceeds
of sale shall be applied first to all expenses of sale, including attorneys'
fees, and then to the Obligations in whatever order the Agent elects. The
Agent will return any excess to any Loan Party entitled thereto and each Loan
Party shall remain liable for any deficiency.
(c) If an Event of Default occurs, each Loan Party hereby
waives all rights to notice and hearing prior to the exercise by the Agent of
the Agent's rights to repossess any Collateral without judicial process or to
replevy, attach or levy upon any Collateral without notice or hearing.
ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination. The term of this Agreement shall end on
the Stated Termination Date. The Agent upon direction from the Majority
Lenders may terminate this Agreement without notice upon the occurrence of an
Event of Default. Upon the effective date of termination of this Agreement for
any reason whatsoever, all Obligations (including, without limitation, all
unpaid principal, accrued interest and any early termination or prepayment fees
or penalties) shall become immediately due and payable and each Loan Party
shall immediately arrange for the cancellation or replacement, to the
reasonable satisfaction of the Agent, of Letters of Credit then outstanding as
provided in Section 2.3(j). Notwithstanding the termination of this Agreement,
until all Obligations are indefeasibly paid and performed in full in cash, the
Borrower shall remain bound by the terms of this Agreement and shall not be
relieved of any of its Obligations hereunder, and the Agent and the Lenders
shall retain all their rights and remedies hereunder (including, without
limitation, the Agent's Liens in and all rights and remedies with respect to
all then existing and after-arising Collateral).
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 No Waivers; Cumulative Remedies. No failure by the Agent or
any Lender to exercise any right, remedy, or option under this Agreement or any
present or future supplement thereto, or in any other agreement by or among any
Loan Party and the Agent and/or any Lender, or delay by the Agent or any Lender
in exercising the same, will not operate as a waiver thereof. No waiver by the
Agent or any Lender will be effective unless it is in writing, and then only to
the extent specifically stated. No waiver by the Agent or the Lenders on any
occasion shall affect or diminish the Agent's and each Lender's rights
thereafter to require strict performance by each Loan Party of any provision of
this Agreement or any other Loan Document to which it
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is a party (other than provisions or rights waived). The Agent's and each
Lender's rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy which the Agent or
any Lender may have.
13.2 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by any Loan Party therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Lenders (or by the
Agent at the written request of the Majority Lenders) and such Loan Party, and
then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing and signed by
all the Lenders and the Borrower and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts payable hereunder or
under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the
Lenders or any of them to take any action hereunder;
(e) increase any of the percentages set forth in the
definition of Availability;
(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section
14.11;
(h) change the definitions of "Majority Lenders" or
"Required Lenders";
(i) increase the Maximum Revolver Amount, the Maximum
Inventory Loan, and Unused Letter of Credit Subfacility.
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent, affect the rights or duties of the Agent under
this Agreement or any other Loan Document.
13.3 Assignments; Participations.
(a) Any Lender may, with the written consent of the
Agent, assign and delegate to one or more assignees that are commercial banks
with minimum capital of $150,000,000 or commercial finance companies or
affiliates of such banks or finance companies (provided that no written consent
of the Agent shall be required in connection with any
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assignment and delegation by a Lender to an Affiliate of such Lender) (each an
"Assignee") all, or any ratable part of all, of the Loans, the Commitments and
the other rights and obligations of such Lender hereunder, in a minimum amount
of $10,000,000 or if less the entire amount of such Lender's Commitment;
provided, however, that the Borrower and the Agent may continue to deal solely
and directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Borrower and the Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance in the form of Exhibit D
("Assignment and Acceptance") and (iii) the assignor Lender or Assignee has
paid to the Agent a processing fee in the amount of $3,000; and provided,
further, that unless (i) BABC sells all of its Commitment and Revolving Loans
as part of a sale, transfer or other disposition by BABC of substantially all
of its loan portfolio, or (ii) an Event of Default shall have occurred and is
continuing, any assignments by BABC shall not cause its Commitment remaining
after such assignments to be less than one-third of the amount of the Maximum
Revolver Amount.
(b) From and after the date that the Agent notifies the
assignor Lender that it has received an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations,
including, but not limited to, the obligation to participate in Letters of
Credit and Credit Support have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Lender under the
Loan Documents, and (ii) the assignor Lender shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease
to be a party hereto).
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (1)
other than as provided in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
furnished pursuant hereto; (2) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Loan Party or the performance or observance by any Loan Party of any of
its obligations under this Agreement or any other Loan Document furnished
pursuant hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof,
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together with such powers as are reasonably incidental thereto; and (6) such
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed
by it as a Lender.
(d) Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Lender to such extent.
(e) Any Lender may at any time sell to one or more
commercial banks, financial institutions, or other Persons not Affiliates of
the Borrower (a "Participant") participating interests in any Loans, the
Commitment of such Lender and the other interests of such Lender (the
"originating Lender") hereunder and under the other Loan Documents; provided,
however, that (i) the originating Lender's obligations under this Agreement
shall remain unchanged, (ii) the originating Lender shall remain solely
responsible for the performance of such obligations, (iii) the Loan Parties and
the Agent shall continue to deal solely and directly with the originating
Lender in connection with the originating Lender's rights and obligations under
this Agreement and the other Loan Documents, and (iv) no Lender shall transfer
or grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, and all amounts payable by the Borrower
or other Loan Party hereunder shall be determined as if such Lender had not
sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent and subject
to the same limitation as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement.
(f) Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
ARTICLE 14
THE AGENT
14.1 Appointment and Authorization. Each Lender hereby designates
and appoints BankAmerica Business Credit, Inc. as its Agent under this
Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes the Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this Article 14. The provisions of this Article 14 are
solely for the benefit of the Agent and the Lenders and the
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Borrower shall have no rights as a third party beneficiary of any of the
provisions contained herein. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties. Except as
expressly otherwise provided in this Agreement, the Agent shall have and may
use its sole discretion with respect to exercising or refraining from
exercising any discretionary rights or taking or refraining from taking any
actions which the Agent is expressly entitled to take or assert under this
Agreement and the other Loan Documents, including, without limitation, (a) the
determination of the applicability of ineligibility criteria with respect to
the calculation of the Availability, (b) the making of Agent Advances pursuant
to Section 2.2(i), and (c) the exercise of remedies pursuant to Section 11.2,
and any action so taken or not taken shall be deemed consented to by the
Lenders.
14.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
14.3 Liability of Agent. None of the Agent-Related Persons shall
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Lenders
for any recital, statement, representation or warranty made by any Loan Party
or any Subsidiary or Affiliate of such Loan Party, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party or any of such Loan Party's Subsidiaries or
Affiliates.
14.4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
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genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to any Loan Party), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance with
a request or consent of the Majority Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.
(b) For purposes of determining compliance with the
conditions specified in Section 10.1, each Lender that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent by the Agent to such
Lender for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lender.
14.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Lenders, unless the
Agent shall have received written notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." The Agent will notify the
Lenders of its receipt of any such notice. The Agent shall take such action
with respect to such Default or Event of Default as may be requested by the
Majority Lenders in accordance with Section 11; provided, however, that unless
and until the Agent has received any such request, the Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.
14.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of the affairs of
the Borrower and its Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and its Affiliates, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrower.
Each Lender also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of the Borrower and its
Affiliates. Except for notices, reports and
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other documents expressly herein required to be furnished to the Lenders by the
Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Borrower and its Affiliates which may come into the possession of any of the
Agent-Related Persons.
14.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), pro
rata, from and against any and all Indemnified Liabilities as such term is
defined in Section 15.11; provided, however, that no Lender shall be liable for
the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
the Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including Attorney Costs) incurred by the Agent in connection with
the preparation, execution, delivery, administration, modification, amendment
or enforcement (whether through negotiations, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated by or referred
to herein, to the extent that the Agent is not reimbursed for such expenses by
or on behalf of the Borrower. The undertaking in this Section shall survive
the payment of all Obligations hereunder and the resignation or replacement of
the Agent.
14.8 Agent in Individual Capacity. BABC and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with any Loan Party
and its Subsidiaries and Affiliates as though BABC were not the Agent hereunder
and without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BABC or its Affiliates may receive information
regarding any such Loan Party or its Affiliates (including information that may
be subject to confidentiality obligations in favor of such Loan Party or such
Affiliate) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BABC shall have
the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" include BABC in its individual capacity.
14.9 Successor Agent. If, subject to BABC's compliance with the
provisions of Section 13.3(a), the Commitment of BABC becomes less than
one-third of the amount of the Maximum Revolver Amount, or if an Event of
Default then exists, the Agent may resign as Agent upon 30 days' notice to the
Lenders and the Borrower. In the event BABC sells all of its Commitments and
Revolving Loans as part of a sale, transfer or other disposition by BABC of
substantially all of its loan portfolio, BABC shall resign as Agent and such
purchaser or transferee shall become the successor Agent hereunder. If the
Agent resigns under this Agreement, subject to the proviso in the preceding
sentence, the Majority Lenders shall appoint from among the Lenders a successor
agent for the Lenders. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Lenders and the Borrower, a successor agent from among the
Lenders. Upon the
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acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring Agent
and the term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 14 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Agent hereunder until such time, if any, as the Majority Lenders appoint a
successor agent as provided for above.
14.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership
or trust" within the meaning of the Code and such Lender claims exemption from,
or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Lender agrees with and in favor of the Agent, to deliver to the
Agent:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the
first calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Lender claims that interest paid
under this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender,
two properly completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid under
this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Borrower to such Lender, such Lender
agrees to notify the Agent of the percentage amount in which it is no longer
the beneficial owner of Obligations of the Borrower to such Lender. To the
extent of such percentage amount, the Agent will treat such Lender's IRS Form
1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise
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transfers all or part of the Obligations of the Borrower or other Loan Party to
such Lender, such Lender agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Lender not providing such forms
or other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Lender shall indemnify the Agent
fully for all amounts paid, directly or indirectly, by the Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to the Agent under this Section,
together with all costs and expenses (including Attorney Costs). The
obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of the Agent.
14.11 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent,
at its option and in its sole discretion, to release any Agent's Lien upon any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrower of all Loans and reimbursement obligations in
respect of Letters of Credit, Credit Support and Indemnity Obligations, and the
termination of all outstanding Letters of Credit (whether or not any of such
obligations are due) and all other Obligations; (ii) constituting property
being sold or disposed of if the Loan Party owning such property certifies to
the Agent that the sale or disposition is made in compliance with Section 9.9
(and the Agent may rely conclusively on any such certificate, without further
inquiry); (iii) constituting property in which neither the Borrower nor other
Loan Party owned any interest at the time the Lien was granted or at any time
thereafter; or (iv) constituting property leased to the Borrower or other Loan
Party under a lease which has expired or been terminated in a transaction
permitted under this Agreement. Except as provided above, the Agent will not
release any of the Agent's Liens without the prior written authorization of the
Lenders; provided that the Agent may, in its discretion, release the Agent's
Liens on Collateral valued in the aggregate not in excess of $1,000,000 in any
one year period without the prior written authorization of the Lenders. Upon
request by the Agent or the Borrower at any time, the Lenders will confirm in
writing the Agent's authority to release any Agent's Liens upon particular
types or items of Collateral pursuant to this Section 14.11.
(b) Upon receipt by the Agent of any authorization
required pursuant to Section 14.11(a) from the Lenders of the Agent's authority
to release any Agent's Liens upon particular types or items of Collateral, and
upon at least five (5) Business Days' prior written
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request by the Borrower, the Agent shall (and is hereby irrevocably authorized
by the Lenders to) execute such documents as may be necessary to evidence the
release of the Agent's Liens upon such Collateral; provided, however, that (i)
the Agent shall not be required to execute any such document on terms which, in
the Agent's opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of the Borrower or other Loan
Party in respect of) all interests retained by the Borrower or such other Loan
Party, including (without limitation) the proceeds of any sale, all of which
shall continue to constitute part of the Collateral.
(c) The Agent shall have no obligation whatsoever to any
of the Lenders to assure that the Collateral exists or is owned by the Borrower
or other Loan Party or is cared for, protected or insured or has been
encumbered, or that the Agent's Liens have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Agent pursuant to
any of the Loan Documents, it being understood and agreed that in respect of
the Collateral, or any act, omission or event related thereto, the Agent may
act in any manner it may deem appropriate, in its sole discretion given the
Agent's own interest in the Collateral in its capacity as one of the Lenders
and that the Agent shall have no other duty or liability whatsoever to any
Lender as to any of the foregoing.
14.12 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without
the express consent of all Lenders, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of all Lenders, set off against
the Obligations, any amounts owing by such Lender to the Borrower or other Loan
Party (as applicable) or any accounts of the Borrower or such other Loan Party
now or hereafter maintained with such Lender. Each of the Lenders further
agrees that it shall not, unless specifically requested to do so by the Agent,
take or cause to be taken any action to enforce its rights under this Agreement
or other Loan Document or against the Borrower or other Loan Party, including,
without limitation, the commencement of any legal or equitable proceedings, to
foreclose any Lien on, or otherwise enforce any security interest in, any of
the Collateral.
(b) If at any time or times any Lender shall receive (i)
by payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations of the Borrower or other Loan Party to
such Lender arising under, or relating to, this Agreement or the other Loan
Documents, except for any such proceeds or payments received by such Lender
from the Agent pursuant to the terms of this Agreement, or (ii) payments from
the Agent in excess of such Lender's ratable portion of all such distributions
by the Agent, such Lender shall promptly (1) turn the same over to the Agent,
in kind, and with such endorsements as may be required to negotiate the same to
the Agent, or in same day funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (2) purchase, without recourse or
warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such
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excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part
of such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest
except to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
14.13 Agency for Perfection. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender (other than the Agent) obtain possession of any
such Collateral, such Lender shall notify the Agent thereof, and, promptly upon
the Agent's request therefor shall deliver such Collateral to the Agent or in
accordance with the Agent's instructions.
14.14 Payments by Agent to Lenders. All payments to be made by the
Agent to the Lenders shall be made by bank wire transfer or internal transfer
of immediately available funds to their respective wire transfer accounts
listed on the signature pages below; or pursuant to such other wire transfer
instructions as each party may designate for itself by written notice to the
Agent. Concurrently with each such payment, the Agent shall identify whether
such payment (or any portion thereof) represents principal, premium or interest
on the Revolving Loans or otherwise.
14.15 Concerning the Collateral and the Related Loan Documents.
Each Lender authorizes and directs the Agent to enter into this Agreement and
the other Loan Documents relating to the Collateral, for the ratable benefit of
the Agent and the Lenders. Each Lender agrees that any action taken by the
Agent, Majority Lenders or Required Lenders, as applicable, in accordance with
the terms of this Agreement or the other Loan Documents relating to the
Collateral, and the exercise by the Agent, the Majority Lenders, or the
Required Lenders, as applicable, of their respective powers set forth therein
or herein, together with such other powers that are reasonably incidental
thereto, shall be binding upon all of the Lenders.
14.16 Field Audit and Examination Reports; Disclaimer by Lenders.
By signing this Agreement, each Lender:
(a) is deemed to have requested that the Agent furnish
such Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by
the Agent;
(b) expressly agrees and acknowledges that neither BABC
nor the Agent (i) makes any representation or warranty as to the accuracy of
any Report, or (ii) shall be liable for any information contained in any
Report;
(c) expressly agrees and acknowledges that the Reports
are not comprehensive audits or examinations, that the Agent or other party
performing any audit or examination will inspect only specific information
regarding the Borrower and other Loan Parties and will rely significantly upon
the Borrower's and other Loan Parties' books and records, as well as on
representations of the Borrower's and other Loan Parties' personnel;
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(d) agrees to keep all Reports confidential and strictly
for its internal use, and not to distribute except to its participants, or use
any Report in any other manner; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold the
Agent and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit
accommodations that the indemnifying Lender has made or may make to the
Borrower or other Loan Parties, or the indemnifying Lender's participation in,
or the indemnifying Lender's purchase of, a loan or loans of the Borrower; and
(ii) to pay and protect, and indemnify, defend and hold the Agent and any such
other Lender preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses and other amounts (including, without
limitation attorney costs) incurred by the Agent and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.
14.17 Relation Among Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.
ARTICLE 15
MISCELLANEOUS
15.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Agent's and each Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of
one right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative. The Agent and the Lenders may, without limitation,
proceed directly against the Borrower or other Loan Parties to collect the
Obligations without any prior recourse to the Collateral. No failure to
exercise and no delay in exercising, on the part of the Agent or any Lender,
any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
15.2 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
15.3 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH
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THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT
PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO
APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC)
OF THE STATE OF CALIFORNIA; PROVIDED THAT THE PARTIES SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN OR CENTRAL DISTRICT OF
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
BORROWER AND OTHER LOAN PARTIES, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH OF THE BORROWER AND OTHER LOAN PARTIES, THE AGENT AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING
THE FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST ANY LOAN PARTY OR ITS PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE
IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND
(2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS
DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) EACH OF THE BORROWER AND OTHER LOAN PARTIES HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO THE BORROWER OR OTHER LOAN PARTIES (AS APPLICABLE) AT
ITS ADDRESS SET FORTH IN SECTION 15.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS
TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
(d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT
TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT INCLUDING ANY
CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OR ANY
PARTY HERETO BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be
conducted in accordance with the United States Arbitration Act (Title 9, U.S.
Code), notwithstanding any choice of law provision in this Agreement, and under
the Commercial Rules of the American
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Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuant to a provisional or ancillary remedy shall not constitute a waiver
of the right of either party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.
(e) Notwithstanding the provisions of (d) above, no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or related to an Obligation to the Lenders which is secured
by real estate property collateral (exclusive of real estate space lease
assignments). If all the parties do not consent to submission of such a
controversy or claim to arbitration, the controversy or claim shall be
determined as provided in Section 15.3(f).
(f) At the request of either party a controversy or claim
which is not submitted to arbitration as provided and limited in Section
15.3(d) and (f) shall be determined by judicial reference. If such an election
is made, the parties shall designate to the court a referee or referees
selected under the auspices of the AAA in the same manner as arbitrators are
selected in AAA-sponsored proceedings. The presiding referee of the panel, or
the referee if there is a single referee, shall be an active attorney or
retired judge. Judgment upon the award rendered by such referee or referees
shall be entered in the court in which such proceeding was commenced.
(g) No provision of Sections (d) through (g) shall limit
the right of the Agent or the Lenders to exercise self-help remedies such as
setoff, foreclosure against or sale of any real or personal property collateral
or security, or obtaining provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of
either party to resort to arbitration or reference. At the Agent's option,
foreclosure under a deed of trust or mortgage may be accomplished either by
exercise of power of sale under the deed of trust or mortgage or by judicial
foreclosure.
15.4 WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION
15.3(d), THE BORROWER AND OTHER LOAN PARTIES, THE LENDERS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE BORROWER AND OTHER LOAN PARTIES, THE LENDERS AND THE AGENT EACH AGREE THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS
TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART,
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TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
15.5 Survival of Representations and Warranties. All of the
Borrower's and other Loan Party's representations and warranties contained in
this Agreement shall survive the execution, delivery, and acceptance thereof by
the parties, notwithstanding any investigation by the Agent or the Lenders or
their respective agents.
15.6 Other Security and Guaranties. The Agent, may, without notice
or demand and without affecting the Borrower's or other Loan Party's
obligations hereunder, from time to time: (a) take from any Person and hold
collateral (other than the Collateral) for the payment of all or any part of
the Obligations and exchange, enforce or release such collateral or any part
thereof; and (b) accept and hold any endorsement or guaranty of payment of all
or any part of the Obligations and release or substitute any such endorser or
guarantor, or any Person who has given any Lien in any other collateral as
security for the payment of all or any part of the Obligations, or any other
Person in any way obligated to pay all or any part of the Obligations.
15.7 Fees and Expenses. The Borrower agrees to pay to the Agent,
for its benefit, on demand, all costs and expenses that the Agent pays or
incurs in connection with the negotiation, preparation, syndication,
consummation, administration, enforcement, and termination of this Agreement or
any of the other Loan Documents, including, without limitation: (a) Attorney
Costs; (b) reasonable costs and expenses (including attorneys' and paralegals'
fees and disbursements which shall include the allocated costs of Agent's
in-house counsel fees and disbursements) for any amendment, supplement, waiver,
consent, or subsequent closing in connection with the Loan Documents and the
transactions contemplated thereby; (c) reasonable costs and expenses of lien
and title searches and title insurance; (d) taxes, fees and other charges for
filing financing statements and continuations, and other actions to perfect,
protect, and continue the Agent's Liens (including costs and expenses paid or
incurred by the Agent in connection with the consummation of Agreement); (e)
sums reasonably paid or incurred to pay any amount or take any action required
of the Borrower or any other Loan Party under the Loan Documents that the
Borrower or such other Loan Party fails to pay or take; (f) costs of
appraisals, inspections, and verifications of the Collateral, including,
without limitation, travel, lodging, and meals for inspections of the
Collateral and the Borrower's and any other Loan Party's operations by the
Agent, plus the Agent's then customary charge for field examinations and audits
and the preparation of reports thereof (such charge is currently $600 per day
(or portion thereof) for each agent or employee of the Agent with respect to
each field examination or audit); (g) costs and expenses of forwarding loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining Payment Accounts and lock boxes; (h) reasonable costs and expenses
of preserving and protecting the Collateral; and (i) reasonable costs and
expenses (including attorneys' and paralegals' fees and disbursements which
shall include the allocated cost of Agent's in-house counsel fees and
disbursements) paid or incurred to obtain payment of the Obligations, enforce
the Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise
enforce the provisions of the Loan Documents, or to defend any claims made or
threatened against the
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Agent or any Lender arising out of the transactions contemplated hereby
(including without limitation, preparations for and consultations concerning
any such matters) other than claims based solely on the gross negligence or
willful misconduct of the Agent or any Lender. The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and
expenses shall be charged to the Borrower's Loan Account as Revolving Loans as
described in Section 4.4.
15.8 Notices. Except as otherwise provided herein, all notices,
demands and requests that any party is required or elects to give to any other
shall be in writing, or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, but not limited to, delivery by overnight mail and
courier service, (b) four (4) days after it shall have been mailed by United
States mail, first class, certified or registered, with postage prepaid, or (c)
in the case of notice by such a telecommunications device, when properly
transmitted, in each case addressed to the party to be notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
55 South Lake Avenue, Suite 900
Pasadena, California 91101
Attention: Division Manager
Telecopy No. 626-578-6069
with copies to:
Bank of America NT & SA
10124 Old Grove Road
San Diego, California 92131
Attention: Legal Department
Telecopy No. (619) 549-7518
If to any Loan Party:
GT Bicycles, Inc.
2001 East Dyes Road
Santa Ana, California 92705
Attention: Charles Cimitile
Telecopy No. (714) 481-7115
with copies to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive
Newport Beach, California 92660
Attention: K. C. Schaaf, Esq.
Telecopy No. (714) 725-4000
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or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
15.9 Waiver of Notices. Unless otherwise expressly provided
herein, each Loan Party waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, notice of intent to accelerate the
Obligations and notice of acceleration of the Obligations, as well as any and
all other notices to which it might otherwise be entitled. No notice to or
demand on any Loan Party which the Agent or any Lender may elect to give shall
entitle such Loan Party to any or further notice or demand in the same, similar
or other circumstances.
15.10 Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective representatives,
successors, and assigns of the parties hereto; provided, however, that no
interest herein may be assigned by the Borrower or any other Loan Party without
prior written consent of the Agent and each Lender. The rights and benefits of
the Agent and the Lenders hereunder shall, if such Persons so agree, inure to
any party acquiring any interest in the Obligations or any part thereof.
15.11 Indemnity of the Agent and the Lenders by the Borrower.
(a) Each Loan Party agrees to defend, indemnify and hold
the Agent-Related Persons, and each Lender and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement, any other
Loan Document, or the Loans or the use of the proceeds thereof, whether or not
any Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that such Loan Party shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the willful misconduct of such Indemnified
Person. The agreements in this Section shall survive payment of all other
Obligations.
(b) Each Loan Party agrees to indemnify, defend and hold
harmless the Agent and the Lenders from any loss or liability directly or
indirectly arising out of the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal or presence of a
hazardous substance relating to such Loan Party's operations, business or
property. This indemnity will apply whether the hazardous substance is on,
under or about such Loan Party's property or operations or property leased to
such Loan Party. The indemnity includes but is not limited to attorneys' fees
(including the reasonable estimate of the allocated cost of in-house
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counsel and staff). The indemnity extends to the Agent and the Lenders, their
parents, affiliates, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns. "Hazardous substances"
means any substance, material or waste that is or becomes designated or
regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar
designation or regulation under any federal, state or local law (whether under
common law, statute, regulation or otherwise) or judicial or administrative
interpretation of such, including without limitation petroleum or natural gas.
This indemnity will survive repayment of all other Obligations.
15.12 Limitation of Liability. No claim may be made by any Loan
Party, any Lender or other Person against the Agent, any Lender, or the
affiliates, directors, officers, officers, employees, or agents of any of them
for any special, indirect, consequential or punitive damages in respect of any
claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement or any other Loan
Document, or any act, omission or event occurring in connection therewith, and
each Loan Party and each Lender hereby waive, release and agree not to sue upon
any claim for such damages, whether or not accrued and whether or not know or
suspected to exist in its favor.
15.13 Final Agreement. This Agreement and the other Loan Documents
are intended by the Loan Parties, the Agent and the Lenders to be the final,
complete, and exclusive expression of the agreement between them. This
Agreement supersedes any and all prior oral or written agreements relating to
the subject matter hereof. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement or any other Loan Document shall
be made, except by a written agreement signed by the Loan Parties and a duly
authorized officer of each of the Agent and the requisite Lenders.
15.14 Counterparts. This Agreement may be executed in any number of
counterparts, and by the Agent, each Lender and each Loan Party in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement; signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so
that all signature pages are physically attached to the same document.
15.15 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not
be construed to modify, enlarge, or restrict any provision.
15.16 Right of Setoff. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default has occurred and is continuing
or the Loans have been accelerated, each Lender is authorized at any time and
from time to time, without prior notice to the Borrower or any other Loan Party,
any such notice being waived by the Borrower and each other Loan Party 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 by,
and other indebtedness at any time owing by, such Lender to or for the credit or
the account of the Borrower or other Loan Party (as applicable) against any and
all Obligations owing to such Lender, now or hereafter existing, irrespective of
whether or not the Agent or such Lender shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. Each Lender agrees promptly to notify the Borrower or other Loan
Party (as
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applicable) and the Agent after any such set-off and application made by such
Lender; provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application. NOTWITHSTANDING THE FOREGOING, NO
LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST
ANY DEPOSIT ACCOUNT OR PROPERTY OF THE BORROWER OR OTHER LOAN PARTY (AS
APPLICABLE) HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN
UNANIMOUS CONSENT OF THE LENDERS.
[The remainder of this page is intentionally left blank]
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<PAGE> 120
IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
"BORROWER"
GT Bicycles California, Inc.
By /s/ CHARLES CIMITILE
---------------------------------------------
Name Charles Cimitile
-------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
"AGENT"
BankAmerica Business Credit, Inc., as the Agent
By /s/ JAY WHITE
---------------------------------------------
Name Jay White
-------------------------------------------
Title: Executive Vice President
-----------------------------------------
"LENDERS"
Commitment: $75,000,000 BankAmerica Business Credit, Inc., as a Lender
By /s/ JAY WHITE
---------------------------------------------
Name Jay White
-------------------------------------------
Title: Executive Vice President
-----------------------------------------
"PARENT"
GT Bicycles, Inc.
By /s/ CHARLES CIMITILE
---------------------------------------------
Name Charles Cimitile
-------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
S-1
<PAGE> 121
"RITEWAY EAST"
Riteway Products East, Inc.
By /s/ CHARLES CIMITILE
---------------------------------------------
Name Charles Cimitile
-------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
"RITEWAY NORTH CENTRAL"
Riteway Products North Central, Inc.
By /s/ CHARLES CIMITILE
---------------------------------------------
Name Charles Cimitile
---------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
"RIGHTWAY DISTRIBUTORS CENTRAL"
Rite-Way Distributors Central, Inc.
By /s/ CHARLES CIMITILE
---------------------------------------------
Name Charles Cimitile
-------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
"RITEWAY DISTRIBUTORS"
Rite-Way Distributors, Inc.
By /s/ CHARLES CIMITILE
---------------------------------------------
Name Charles Cimitile
------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
S-2
<PAGE> 122
EXHIBIT A
FINANCIAL STATEMENTS
<PAGE> 123
EXHIBIT B
NOTICE OF BORROWING
Date: _____________, 199__
To: BankAmerica Business Credit, Inc. as Agent for the Lenders who are
parties to the Loan and Security Agreement dated as of April 29, 1998
(as extended, renewed, amended or restated from time to time, the
"Loan and Security Agreement") among GT Bicycles California, Inc., GT
Bicycles, Inc., Riteway Products East, Inc., Riteway Products North
Central, Inc., Rite-Way Distributors Central, Inc., Rite- Way
Distributors, Inc. (together, the "Loan Parties"), certain Lenders
which are signatories thereto and BankAmerica Business Credit, Inc.,
as Agent
Ladies and Gentlemen:
The undersigned, GT Bicycles California, Inc. (the "Borrower"), refers
to the Loan and Security Agreement, the terms defined therein being used herein
as therein defined, and hereby gives you notice irrevocably of the Borrowing
specified below:
1. The Business Day of the proposed Borrowing is_________, 19___.
2. The aggregate amount of the proposed Borrowing is $__________.
3. The Borrowing is to be comprised of $___________ of Base Rate
and $_____________ of LIBOR Revolving Loans.
4. The duration of the Interest Period for the LIBOR Revolving
Loans, if any, included in the Borrowing shall be _____
months.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed
Borrowing, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) The representations and warranties of the Borrower contained
in the Loan and Security Agreement are true and correct as though made on and
as of such date;
(b) No Default or Event of Default has occurred and is continuing,
or would result from such proposed Borrowing; and
<PAGE> 124
(c) The proposed Borrowing will not cause the aggregate principal
amount of all outstanding Revolving Loans plus the aggregate amount available
for drawing under all outstanding Letters of Credit, to exceed the Availability
or the combined Commitments of the Lenders.
GT BICYCLES CALIFORNIA, INC.
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
<PAGE> 125
EXHIBIT C
NOTICE OF CONVERSION/CONTINUATION
Date: ________________, 199__
To: BankAmerica Business Credit, Inc. as Agent for the Lenders to the Loan
and Security Agreement dated as of April 29, 19998 (as extended,
renewed, amended or restated from time to time, the "Loan and Security
Agreement") among GT Bicycles California, Inc., GT Bicycles, Inc.,
Riteway Products East, Inc., Riteway Products North Central, Inc.,
Rite-Way Distributors Central, Inc., Rite-Way Distributors, Inc.
(together, the "Loan Parties"), certain Lenders which are signatories
thereto and BankAmerica Business Credit, Inc., as Agent
Ladies and Gentlemen:
The undersigned, GT Bicycles California, Inc. (the "Borrower"), refers
to the Loan and Security Agreement, the terms defined therein being used herein
as therein defined, and hereby gives you notice irrevocably of the [conversion]
[continuation] of the Loans specified herein, that:
1. The Conversion/Continuation Date is ____________, 19__.
2. The aggregate amount of the Loans to be [converted]
[continued] is $______________.
3. The Loans are to be [converted into] [continued as] [LIBOR
Rate] [Base Rate] Loans.
4. The duration of the Interest Period for the LIBOR Revolving
Loans included in the [conversion] [continuation] shall be ___ months.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the proposed
Conversion/Continuation Date, before and after giving effect thereto and to the
application of the proceeds therefrom:
(a) The representations and warranties of the Borrower contained
in the Loan and Security Agreement are true and correct as though made on and
as of such date;
(b) No Default or Event of Default has occurred and is continuing,
or would result from such proposed [conversion] [continuation]; and
<PAGE> 126
(c) The proposed conversion-continuation will not cause the
aggregate principal amount of all outstanding Revolving Loans plus the
aggregate amount available for drawing under all outstanding Letters of Credit
to exceed the Availability or the combined Commitments of the Lenders.
GT BICYCLES CALIFORNIA, INC.
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
<PAGE> 127
EXHIBIT D
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of ____________, 199__ is made between
________________________ (the "Assignor") and __________________________ (the
"Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Loan and
Security Agreement dated as of April 29, 1998 (as amended, amended and
restated, modified, supplemented or renewed, the "Credit Agreement") among GT
Bicycles California, Inc., GT Bicycles, Inc., Riteway Products East, Inc.,
Riteway Products North Central, Inc., Rite-Way Distributors Central, Inc.,
Rite-Way Distributors, Inc. (together, the "Loan Parties"), the several
financial institutions from time to time party thereto (including the Assignor,
the "Lenders"), and BankAmerica Business Credit, Inc., as agent for the Lenders
(the "Agent"). Any terms defined in the Credit Agreement and not defined in
this Assignment and Acceptance are used herein as defined in the Credit
Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor
has committed to making Loans (the "Committed Loans") to the Loan Parties in an
aggregate amount not to exceed $__________ (the "Commitment");
WHEREAS, the Assignor has made Committed Loans in the
aggregate principal amount of $__________ to the Loan Parties
WHEREAS, [the Assignor has acquired a participation in its
prorata share of the Lenders' liabilities under Letters of Credit in an
aggregate principal amount of $____________ (the "L/C Obligations")] [no
Letters of Credit are outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part
of the] [all] rights and obligations of the Assignor under the Credit Agreement
in respect of its Commitment, together with a corresponding portion of each of
its outstanding Committed Loans and L/C Obligations, in an amount equal to
$__________ (the "Assigned Amount") on the terms and subject to the conditions
set forth herein and the Assignee wishes to accept assignment of such rights
and to assume such obligations from the Assignor on such terms and subject to
such conditions;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this
Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns
to the Assignee, and (ii) the Assignee hereby
<PAGE> 128
purchases, assumes and undertakes from the Assignor, without recourse and
without representation or warranty (except as provided in this Assignment and
Acceptance) __% (the "Assignee's Percentage Share") of (A) the Commitment, the
Committed Loans and the L/C Obligations of the Assignor and (B) all related
rights, benefits, obligations, liabilities and indemnities of the Assignor
under and in connection with the Credit Agreement and the Loan Documents.
(b) With effect on and after the Effective Date (as
defined in Section 5 hereof), the Assignee shall be a party to the Credit
Agreement and succeed to all of the rights and be obligated to perform all of
the obligations of a Lender under the Credit Agreement, including the
requirements concerning confidentiality and the payment of indemnification,
with a Commitment in an amount equal to the Assigned Amount. The Assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender. It is the intent of the parties hereto that the
Commitment of the Assignor shall, as of the Effective Date, be reduced by an
amount equal to the Assigned Amount and the Assignor shall relinquish its
rights and be released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee; provided, however,
the Assignor shall not relinquish its rights under Sections __ and __ of the
Credit Agreement to the extent such rights relate to the time prior to the
Effective Date.
(c) After giving effect to the assignment and assumption
set forth herein, on the Effective Date the Assignee's Commitment will be
$__________.
(d) After giving effect to the assignment and assumption
set forth herein, on the Effective Date the Assignor's Commitment will be
$__________.
2. Payments.
(a) As consideration for the sale, assignment and
transfer contemplated in Section 1 hereof, the Assignee shall pay to the
Assignor on the Effective Date in immediately available funds an amount equal
to $__________, representing the Assignee's Pro Rata Share of the principal
amount of all Committed Loans.
(b) The Assignee further agrees to pay to the Agent a
processing fee in the amount specified in Section (__) of the Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment, and Committed Loans and L/C Obligations shall
be for the account of the Assignor. Any interest, fees and other payments
accrued on and after the Effective Date with respect to the Assigned Amount
shall be for the account of the Assignee. Each of the Assignor and the
Assignee agrees that it will hold in trust for the other party any interest,
fees and other amounts which it may receive to which the other party is
entitled pursuant to the preceding sentence and pay to the other party any such
amounts which it may receive promptly upon receipt.
<PAGE> 129
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the
Credit Agreement and the Schedules and Exhibits thereto, together with copies
of the most recent financial statements of the Loan Parties, and such other
documents and information as it has deemed appropriate to make its own credit
and legal analysis and decision to enter into this Assignment and Acceptance;
and (b) agrees that it will, independently and without reliance upon the
Assignor, the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit and legal decisions in taking or not taking action under the Credit
Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the
effective date for this Assignment and Acceptance shall be __________, 199__
(the "Effective Date"); provided that the following conditions precedent have
been satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be
executed and delivered by the Assignor and the Assignee;
[(ii) the consent of the Agent required for an
effective assignment of the Assigned Amount by the Assignor to the Assignee
shall have been duly obtained and shall be in full force and effect as of the
Effective Date;]
(iii) the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Assignment and Acceptance;
[(iv) the Assignee shall have complied with
Section (___) of the Credit Agreement (if applicable);]
(v) the processing fee referred to in Section
2(b) hereof and in Section ____ of the Credit Agreement shall have been paid to
the Agent; and
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Loan Parties and the Agent for
acknowledgment by the Agent, a Notice of Assignment in the form attached hereto
as Schedule 1.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the
Assignor to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Agent by the Lenders
pursuant to the terms of the Credit Agreement.
(b) The Assignee shall assume no duties or obligations
held by the Assignor in its capacity as Agent under the Credit Agreement.]
<PAGE> 130
7. Withholding Tax.
The Assignee (a) represents and warrants to the Lender, the Agent and
the Loan Parties that under applicable law and treaties no tax will be required
to be withheld by the Lender with respect to any payments to be made to the
Assignee hereunder, (b) agrees to furnish (if it is organized under the laws of
any jurisdiction other than the United States or any State thereof) to the
Agent and the Loan Parties prior to the time that the Agent or Loan Parties is
required to make any payment of principal, interest or fees hereunder,
duplicate executed originals of either U.S. Internal Revenue Service Form 4224
or U.S. Internal Revenue Service Form 1001 (wherein the Assignee claims
entitlement to the benefits of a tax treaty that provides for a complete
exemption from U.S. federal income withholding tax on all payments hereunder)
and agrees to provide new Forms 4224 or 1001 upon the expiration of any
previously delivered form or comparable statements in accordance with
applicable U.S. law and regulations and amendments thereto, duly executed and
completed by the Assignee, and (c) agrees to comply with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any Lien or other adverse claim;
(ii) it is duly organized and existing and it has the full power and authority
to take, and has taken, all action necessary to execute and deliver this
Assignment and Acceptance and any other documents required or permitted to be
executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against the Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto. The Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of the Loan Parties, or the performance or
observance by the Loan Parties, of any of its respective obligations under the
Credit Agreement or any other instrument or document furnished in connection
therewith.
(c) The Assignee represents and warrants that (i) it is
duly organized and existing and it has full power and authority to take, and
has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be
<PAGE> 131
executed or delivered by it in connection with this Assignment and Acceptance,
and to fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; [and (iv) it is an
Eligible Assignee.]
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Loan Parties or the Agent, which may be
required in connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without
any set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF ________
_______________ [NOTE: CONFIRM CHOICE OF LAW]. The Assignor and the Assignee
each irrevocably submits to the non-exclusive jurisdiction of any State or
Federal court sitting in [______________] over any suit, action or proceeding
arising out of or relating to this Assignment and Acceptance and irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such [____________] State or Federal court. Each party to this
Assignment
<PAGE> 132
and Acceptance hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
OR STATEMENTS (WHETHER ORAL OR WRITTEN).
<PAGE> 133
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
Address:
[ASSIGNEE]
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
Address:
<PAGE> 134
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, 19__
BankAmerica Business Credit, Inc.
- ---------------------------------
- ---------------------------------
Attn:
----------------------------
Re: [Name and Address of Loan Parties]
Ladies and Gentlemen:
We refer to the Loan and Security Agreement dated as of April 29, 1998
(as amended, amended and restated, modified, supplemented or renewed from time
to time the "Credit Agreement") among GT Bicycles California, Inc., GT
Bicycles, Inc., Riteway Products East, Inc., Riteway Products North Central,
Inc., Rite-Way Distributors Central, Inc., Rite-Way Distributors, Inc.
(together, the "Loan Parties"), the Lenders referred to therein and BankAmerica
Business Credit, Inc., as agent for the Lenders (the "Agent"). Terms defined
in the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and
to the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor, all
outstanding Loans made by the Assignor and the Assignor's participation in the
Letters of Credit pursuant to the Assignment and Acceptance Agreement attached
hereto (the "Assignment and Acceptance"). We understand and agree that the
Assignor's Commitment, as of _____________, 19__, is $ ___________, the
aggregate amount of its outstanding Loans is $_____________, and its
participation in L/C Obligations is $_____________.
2. The Assignee agrees that, upon receiving the consent of the
Agent and, if applicable, the Loan Parties to such assignment, the Assignee
will be bound by the terms of the Credit Agreement as fully and to the same
extent as if the Assignee were the Lender originally holding such interest in
the Credit Agreement.
<PAGE> 135
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name:
--------------------------------------
Address:
---------------------------------------------
---------------------------------------------
Attention:
------------------------------------------
Telephone: (___)
-----------------------------------
Telecopier: (___)
----------------------------------
Telex (Answerback):
---------------------------------
(B) Payment Instructions:
Account No.:
----------------------------------------
At:
----------------------------------------
----------------------------------------
----------------------------------------
Reference:
----------------------------------------
Attention:
----------------------------------------
4. You are entitled to rely upon the representations, warranties
and covenants of each of the Assignor and Assignee contained in the Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
---------------------------------------------
Title:
------------------------------------------
[NAME OF ASSIGNEE]
By:
---------------------------------------------
Title:
------------------------------------------
<PAGE> 136
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
BankAmerica Business Credit, Inc,
as Agent
By:
---------------------------------------------
Title:
------------------------------------------
<PAGE> 1
EXHIBIT 10.61
================================================================================
[B OF A LOGO] AMENDMENT TO DOCUMENTS
================================================================================
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
(RECEIVABLES AND INVENTORY)
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT (RECEIVABLES AND
INVENTORY) (this "Agreement") is entered into as of April 29, 1998 among Bank of
America National Trust and Savings Association ("Bank") and GT Bicycles
California, Inc. ("GTBC"), Riteway Products East, Inc. ("East"), Riteway
Products North Central, Inc. ("North Central"), Rite-Way Distributors Central,
Inc. ("Central"), Rite-Way Distributors, Inc. ("Distributors"), and GT Bicycles,
Inc. ("GT"). GTBC, East, North Central, Central, and Distributors are sometimes
hereinafter referred to collectively as "Borrowers" and individually as a
"Borrower."
RECITALS
A. Bank, Borrowers, and GT are parties to that certain Second Amended
and Restated Credit Agreement (Receivables and Inventory) dated as of August 12,
1996, as amended (the "Existing Agreement").
B. BankAmerica Business Credit, Inc. is extending credit to Borrowers
for the purpose, among other things, of refinancing the "Revolving Facility" and
"Term Loan", as such terms are defined in the Existing Agreement.
C. Borrowers have requested that Bank make a new term loan available to
Borrowers not exceeding $20,000,000.
D. The parties hereto now desire to amend and restate the Existing
Agreement in full on the terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions and Financial Requirements.
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes
hereof:
"Availability Period" means the period commencing on the date
of this Agreement and ending on July 31, 1999.
"BABC" means BankAmerica Business Credit, Inc., a Delaware
corporation.
- --------------------------------------------------------------------------------
-1-
<PAGE> 2
"BABC Excess Availability" means, as of the date of initial
funding, the difference between the maximum amount of credit available
under the BABC Loan Agreement and the amount of credit outstanding
thereunder, including without limitation Contingent Obligations (if
any) in respect of letters of credit, shipside bonds, and the like
under the revolving line of credit under the BABC Loan Agreement.
"BABC Loan Agreement" means that certain Loan and Security
Agreement dated as of April 29, 1998 among BABC and Borrowers, as such
agreement may be amended, extended and renewed from time to time.
"Banking Day" means, unless otherwise defined in this
Agreement, a day other than a Saturday or a Sunday on which Bank is
open for business in California.
"Caratti" means Caratti Sport, Ltd., a corporation organized
under the laws of the United Kingdom.
"Caratti Facility" means those certain credit accommodations
extended to Caratti by Bank through its London Branch.
"Collateral" means the real or personal property described in
the Collateral Agreements.
"Collateral Agreements" means the security agreement(s)
required under Article 6 of this Agreement.
"Contingent Obligation" means any obligation guaranteeing or
intended to guarantee any indebtedness, leases, dividends or other
obligations (`primary obligations') of any person, firm, or corporation
(the `primary obligor') in any manner, whether directly or indirectly,
including, without limitation, any obligation, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless
the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming that
performance thereunder is required) as determined in good faith.
"EBITDA" means, for GT and its Subsidiaries on a consolidated
basis for any period of determination, the sum of (i) net income (or
loss) for such period plus (ii) to the extent deducted in the
calculation of net income for such period, Interest Expense for such
period plus (iii) to the extent deducted in the calculation of net
income for such period, federal and state income taxes for such period,
plus (iv) to the extent deducted in the calculation of net income for
such period, depreciation and amortization expense for such period.
- --------------------------------------------------------------------------------
-2-
<PAGE> 3
"ERISA" means the Employee Retirement Income Act of 1974, as
amended from time to time.
"ERISA Plan" means any employee pension benefit plan
maintained or contributed to by any Borrower and insured by the Pension
Benefit Guaranty Corporation under Title IV of ERISA.
"Event of Default" means any event listed in Article 9 of this
Agreement.
"Funded Debt" means all liabilities of whatever nature or
duration consisting of indebtedness for borrowed money or indebtedness
(including obligations under capital leases) incurred to finance the
purchase of any asset, excluding any such indebtedness that consists of
obligations due to trade creditors within one year, accrued
liabilities, liabilities of entities with respect to which any Borrower
has a minority equity investment and which do not constitute a
Subsidiary of any such Borrower, and deferred tax liabilities.
"Guarantors" means GT, each of its U.S. Subsidiaries and any
U.S. Subsidiary which guaranties the obligations under the Agreement
pursuant to Paragraph 8.10 below (excluding Innovations in Composites,
Charger, and ATI); individually a "Guarantor."
"Intercreditor Agreement" means that certain Intercreditor
Agreement dated April 29, 1998, between Bank and BABC, as amended from
time to time.
"Interest Coverage Ratio" means, for GT and its Subsidiaries
on a consolidated basis for any period of determination, the ratio of
EBITDA to Interest Expense.
"Interest Expense" means, for GT and its Subsidiaries on a
consolidated basis for any period of determination, the total interest
expense (including, without limitation, interest expense attributable
to capitalized leases for such period.
"Interest Period" means:
(a) for each Offshore Rate Portion the period
commencing on the date such portion shall begin to bear
interest at a rate related to the Offshore Rate and ending no
less than 14 days (for Offshore Rate Portions of $1,000,000 or
more) or 30 days and no more than six months (for all Offshore
Rate Portions) thereafter, as requested by any Borrower at the
time such Borrower requests the portion; provided, however,
that the last day of each Offshore Rate Interest Period shall
be determined in accordance with the practices of the offshore
Dollar inter-bank markets as from time to time in effect; and
(b) for each LIBOR Rate Portion the period commencing
on the date such portion shall begin to bear interest at a
rate related to the LIBOR Rate and ending no less than 14 days
(for LIBOR Rate Portions of $1,000,000 or more) or 30 days and
no more than six months (for all LIBOR Rate Portions)
thereafter, as requested by any Borrower at the time such
Borrower requests the portion; provided, however, that the
last day of each LIBOR Rate Interest Period shall be
determined in accordance with the practices of the London
inter-bank market as from time to time in effect.
- --------------------------------------------------------------------------------
-3-
<PAGE> 4
"Inventory" means all goods owned by any Borrower and held for
sale or lease in such Borrower's business, or to be furnished under a
contract of service, including, without limitation, raw materials, work
in process, and materials and supplies to be used or consumed in such
Borrower's business.
"LIBOR Rate" means for each Interest Period for each LIBOR
Rate Portion the rate of interest (rounded upward, if necessary, to the
nearest 1/100th of one percent) determined pursuant to the following
formula:
LIBOR Rate = London Rate
---------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Rate" means for such Interest Period the
rate of interest (rounded upward, if necessary, to the nearest
1/16th of one percent) at which Dollar deposits for such
Interest Period would be offered by Bank's London Branch,
London, Great Britain, to other major banks in the London
inter-bank market as approximately 11:00 a.m. London time two
Banking Days before the commencement of such Interest Period.
(ii) "Reserve Percentage" means for such Interest
Period the total (expressed as a decimal) of the maximum
reserve percentages (including, but not limited to, marginal,
emergency, supplemental, special, and other reserve
percentages) in effect on the first day of such Interest
Period as prescribed by the Board of Governors of the Federal
Reserve System for determining the reserves to be maintained
by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward, if necessary, to the nearest 1/100th of one
percent.
"LIBOR Rate Portion" means all or such part of the principal
balance of credit provided under this Agreement for which interest is
payable at the rate related to the LIBOR Rate.
"Material Adverse Impact" means a material adverse impact on
GT's or on GT and any of its Subsidiaries' (taken as a whole) financial
condition, operations, or ability to perform obligations under this
Agreement or any instrument or agreement required under this Agreement.
"Offshore Rate" means for each Interest Period for each
Offshore Rate Portion the rate of interest (rounded upward, if
necessary, to the nearest 1/100th of one percent) determined pursuant
to the following formula:
Offshore Rate = Grand Cayman Rate
---------------------------
(1.00 - Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means for such Interest
Period the rate of interest (rounded upward, if necessary, to
the nearest 1/16th of one percent) at which Dollar deposits
for such Interest Period would be offered by Bank's Grand
- --------------------------------------------------------------------------------
-4-
<PAGE> 5
Cayman Branch, Grand Cayman, British West Indies, to other
major banks in the offshore Dollar inter-bank markets upon the
request of such banks.
(ii) "Reserve Percentage" means for such Interest
Period the total (expressed as a decimal) of the maximum
reserve percentages (including, but not limited to, marginal,
emergency, supplemental, special, and other reserve
percentages) in effect on the first day of such Interest
Period as prescribed by the Board of Governors of the Federal
Reserve System for determining the reserves to be maintained
by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward, if necessary, to the nearest 1/100th of one
percent.
"Offshore Rate Portion" means all or such part of the
principal balance of credit provided under this Agreement for which
interest is payable at the rate related to the Offshore Rate.
"Receivables" means all rights to the payment of money owned
by any Borrower, whether due or to become due and whether or not earned
by performance including, but not limited to, Accounts, contract
rights, chattel paper, instruments and documents.
"Reference Rate" means the rate of interest publicly announced
from time to time by Bank in San Francisco, California, as its
reference rate. Any change in the Reference Rate shall take effect on
the day specified in the public announcement of such change. The
Reference Rate is set by Bank based on various factors, including
Bank's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans. Bank
may price loans at, above or below the Reference Rate.
"Riteway France" means Riteway Products France S.A.R.L., a
corporation organized under the laws of France.
"Riteway France Facility" means those certain credit
accommodations extended to Riteway France by Bank through its Paris
Branch.
"Riteway Japan" means Riteway Products Japan K.K., a
corporation organized under the laws of Japan.
"Riteway Japan Facility" means those certain credit
accommodations extended to Riteway Japan by Bank through its Tokyo
Branch.
"Significant Subsidiaries" means Riteway France, Riteway
Japan, and Caratti; individually, a "Significant Subsidiary."
"Subsidiary" means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in
which) GT directly or indirectly owns more than 50% of (a) the issued
and outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such
limited liability company, partnership or joint venture or (c) the
beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by GT or any of its Subsidiaries;
collectively, "Subsidiaries."
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<PAGE> 6
"Term Loan" means the term loan described in Paragraph 2.1.
1.2 Financial Requirements. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
financial computations required under this Agreement shall be made, and all
financial information required under this Agreement shall be prepared in
accordance with generally accepted accounting principles consistently applied.
2. The Term Loan
2.1 Amount and Disbursement. During the Availability Period, Bank will
fund the Term Loan to Borrowers in a single disbursement. The amount of the Term
Loan may not exceed the lesser of (i) $20,000,000 or (ii) $20,000,000 less the
amount by which BABC Excess Availability exceeds 10% of the maximum amount of
credit available under the BABC Loan Agreement on the date hereof.
2.2 Use of Term Loan Proceeds. Borrowers shall use the proceeds of the
Term Loan to refinance credit outstanding under the Existing Agreement.
2.3 Principal Repayment. Borrowers shall repay the principal of the
Term Loan in quarterly installments of $1,250,000 each, commencing June 30,
1998, and continuing on the last Banking Day of each September, December, March
and June thereafter until July 31, 1999 (the "Term Loan Maturity Date"), on
which date all remaining principal and interest then owing with respect to the
Term Loan shall be due and payable, together with all accrued and unpaid
interest thereon.
2.4 Co-Terminous. Notwithstanding the repayment schedule set forth in
Paragraph 2.3 above, if the revolving line of credit under the BABC Loan
Agreement terminates for any reason, the entire principal balance of the Term
Loan, together with all accrued and unpaid interest thereon, shall be due and
payable on the effective date of such termination. Such termination could be the
result of:
(a) Borrowers' request to cancel the revolving line of credit
under the BABC Loan Agreement;
(b) cancellation of the revolving line of credit under the
BABC Loan Agreement by BABC because of Borrowers' default;
(c) BABC's decision not to renew the revolving line of credit
under the BABC Loan Agreement beyond any availability period applicable
thereto; or
(d) Borrowers' decision not to accept BABC's offer to renew
the revolving line of credit under the BABC Loan Agreement upon such
terms and conditions as may be offered by BABC.
2.5 Voluntary Prepayments. Borrowers may at any time prepay the Term
Loan in full or in part provided such prepayment is accompanied by the fee set
forth in Paragraph 2.10(d). Partial prepayments shall be applied to the most
remote installments of the Term Loan.
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<PAGE> 7
2.6 Mandatory Prepayments, Borrower shall apply in prepayment of the
Term Loan, as and when received, all net proceeds of (i) any equity securities
issued by any Borrower or GT after the date of this Agreement and (ii) any
public or private placement of debt or equity. Partial prepayments shall be
applied to the most remote installments of the Term Loan.
2.7 Interest. The Term Loan shall, at Borrower's election, bear
interest at a rate per annum equal to the Reference Rate plus three and one half
(3.5) percentage points or, subject to the requirements set forth in Paragraph
2.10, the Offshore Rate plus four (4.0) percentage points, the LIBOR Rate plus
four (4.0) percentage points, or a combination thereof; provided, however, that
no more than four (4) designations of optional interest rates under the Term
Loan may be in effect at any one time.
2.8 Interest Payments. Borrower shall pay interest monthly on the first
day of each month and, with respect to each Offshore Rate Portion and LIBOR Rate
Portion, on the first day of each month and on the last day of the each Interest
Period applicable thereto, in each case until the last day of the Term Loan
Maturity Date, on which date all accrued and unpaid interest shall be due and
payable.
2.9 Minimum Optional Rate Portions. Each Offshore Rate Portion and
LIBOR Rate Portion shall be in a principal amount of not less than $1,000,000.
2.10 Special Provisions Relating to Offshore Rate Portions and LIBOR
Rate Portions. Offshore Rate Portions and LIBOR Rate Portions are subject to the
following:
(a) No Interest Period for an Offshore Rate Portion or a LIBOR
Rate Portion under the relating to the Term Loan shall end later than
the Term Loan Maturity Date.
(b) Borrower may not elect an Offshore Rate or a LIBOR Rate
with respect to any portion of the principal balance of the Term Loan
which is scheduled to be repaid before the last day of the applicable
Interest Period.
(c) Neither an Offshore Rate Portion nor a LIBOR Rate Portion
may be converted to a different interest rate during its Interest
Period. Upon the expiration of an Interest Period, an Offshore Rate
Portion and a LIBOR Rate Portion shall thereafter bear interest at the
rate related to the Reference Rate unless Borrowers elect a new
interest rate as provided hereunder.
(d) Any payment of an Offshore Rate Portion or a LIBOR Rate
Portion prior to the last day of the Interest Period for such portion,
whether voluntary, by reason of acceleration or otherwise, including
mandatory payments required under this Agreement and applied by Bank to
an Offshore Rate Portion or a LIBOR Portion shall be accompanied by the
amount of accrued interest on the amount repaid and by the amount (if
any) by which (i) the additional interest which would have been payable
on the amount repaid had it not been paid until the last day of its
Interest Period exceeds (ii) the interest which would have been
recoverable by Bank by placing the amount repaid on deposit in the
offshore Dollar inter-bank markets, the London inter-bank markets or
the certificate of deposit markets, as applicable, for a period
starting on the date it was repaid and ending on the last day of the
Interest Period for such portion.
(e) Bank shall have no obligation to accept an election for an
Offshore Rate Portion or a LIBOR Portion if any of the following
described events has occurred and is continuing:
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(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of an Offshore Rate
Portion or a LIBOR Portion are not available in the offshore
Dollar inter-bank markets or the London inter-bank markets as
applicable; or
(ii) the Offshore Rate or LIBOR Rate does not
accurately reflect the cost of an Offshore Rate Portion or a
LIBOR Portion, as applicable.
(f) Upon the occurrence of an Event of Default, Bank may
terminate the availability of the Offshore Rate and the LIBOR Rate for
Interest Periods commencing after the occurrence of the Event of
Default.
3. Fees and Expenses.
3.1 Facility Fee. On or before the date of this Agreement, Borrowers
shall pay Bank a fee in the amount heretofore agreed upon by letter agreement
dated February 9, 1998, between Borrower and Bank.
3.2 Expenses.
(a) Borrowers agree to pay to Bank, on demand, all reasonable
out-of-pocket costs and expenses incurred by Bank in connection with
this Agreement, including, but not limited to, filing and search fees.
(b) Borrowers agree to pay to Bank, on demand, all reasonable
costs and expenses incurred by Bank in connection with the preparation
of this Agreement and any agreement or instrument required by this
Agreement Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of Bank's in-house
counsel.
(c) Borrowers agree to reimburse Bank for the cost of periodic
audits and appraisals of the Collateral at such intervals as Bank may
reasonably require; provided, however, that Bank shall not require any
such audit or appraisal more frequently than semi-annually unless an
Event of Default shall have occurred; If an Event of Default has
occurred Bank may conduct such audits or appraisals as frequently as it
deems necessary in its sole discretion. The audits and appraisals may
be performed by employees of Bank or by independent auditors or
appraisers.
4. Collateral.
4.1 Personal Property (Borrowers). All obligations of Borrowers under
this Agreement and under any interest rate protection agreements from time to
time entered into with Bank shall be secured by one or more security agreements
executed by Borrowers as debtor in favor of Bank as secured party, granting Bank
a security interest in the following personal property of Borrowers:
(a) Receivables.
(b) Inventory.
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(c) Machinery, equipment, and fixtures.
(d) Patents, trademarks and other general intangibles.
The personal property shall be more particularly described in the security
agreement(s) executed by Borrowers. All personal property securing this
Agreement and any interest rate protection agreements shall also secure all
other present and future obligations of Borrowers to Bank and all personal
property securing any other present or future obligations of Borrowers to Bank
shall also secure Borrowers' obligations under this Agreement.
In addition, all obligations of GTBC under this Agreement shall be secured by
one or more security agreements executed by GTBC as debtor in favor of Bank as
secured party, granting Bank a security interest in 65% of any stock and other
securities of Caratti owned by GTBC (provided that Bank shall hold, but not have
a security interest in, all stock and other securities of Caratti and Bank will
have "come-along" rights with respect to such other stock). Regulation U of the
Board of Governors of the Federal Reserve System places certain restrictions on
loans secured by margin stock (as defined in the Regulation). If any of such
stock collateral is margin stock, GTBC shall provide Bank with a Form U-1
Purpose Statement, confirming that none of the proceeds of credit provided under
this Agreement will be used to buy or carry any margin stock. If GTBC has
obtained any other credit from Bank for the purpose of buying or carrying margin
stock (purpose loan), then such stock collateral shall not secure such purpose
loan, and any collateral securing the purpose loan shall not secure GTBC's
obligations under its Guaranty.
4.2 Personal Property (Guarantors). All obligations of Guarantors shall
be secured by one or more security agreements executed by such guarantor in
favor of Bank, granting Bank a security interest in the following personal
property of such guarantor:
(a) Receivables.
(b) Inventory.
(c) Machinery, equipment, and fixtures.
(d) Patents, trademarks and other general intangibles.
The personal property shall be more particularly described in the security
agreement(s) executed by such guarantors.
5. Extensions of Credit, Payments and Interest Calculations
5.1 Requests for Credit. Each request for an extension of credit shall
be made in writing on a form acceptable to Bank or in any other manner
acceptable to Bank. The form of a written request for credit shall be acceptable
to Bank if it: i) identifies the amount of the request in United States Dollars;
ii) identifies the applicable interest rate; iii) identifies the date the
request is to be funded and provides at least three business days notice of such
date; iv.) identifies the deposit account into which the requested funds are to
be deposited; v) identifies the maturity date for such request; and vi) is
signed by an officer of Borrower who has been authorized to execute such
requests by appropriate corporate resolution of Borrower, a certified copy of
which together with specimen signatures shall have been furnished to Bank.
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5.2 Oral Requests. At Bank's sole discretion in each instance, Bank may
honor telephone instructions for repayments or for the designation of optional
interest rates. Repayments will be withdrawn from GTBC's commercial account
number 14586-26007 at Bank's South Orange County Regional Commercial Banking
Office, or such other account(s) as may be specified in writing by Borrowers.
Telephone requests may be made by any one of the individuals authorized to sign
loan agreements on behalf of any Borrower, or any other individual designated by
any one of such authorized signers. Bank shall be entitled to rely upon
telephone instructions from persons it reasonably believes to be authorized by
any Borrower to make such requests without making independent inquiry. Borrowers
and each of them hereby indemnify Bank for, and holds Bank harmless from, any
and all losses, damages, claims and expenses (including reasonable attorneys'
fees and allocated costs of Bank's in-house counsel), however arising, which
Bank suffers or incurs based on or arising out of payments made on any telephone
request except that Bank shall not be indemnified against its own gross
negligence or willful misconduct. The provisions of this Paragraph shall survive
termination of this Agreement.
5.3 Disbursements and Payments. Each disbursement by Bank and each
payment by Borrowers under this Agreement shall be made in immediately available
funds and at Bank's South Orange County Regional Commercial Banking Office or
such other branch of Bank as Bank and Borrowers may from time to time select by
mutual agreement.
5.4 Branch Accounts. Each extension of credit under this Agreement
shall be made for the account of such branch of Bank as Bank may from time to
time select.
5.5 Evidence of Indebtedness. Principal, interest and all other sums
due Bank under this Agreement shall be evidenced by entries in records
maintained by Bank, and, if required by Bank, by a promissory note or notes.
Each payment on and any other credits with respect to principal, interest and
all other sums due under this Agreement shall be evidenced by entries to records
maintained by Bank.
5.6 Direct Debit (Pre-Billing)
(a) Borrowers hereby authorizes Bank to debit GTBC's account
number 14586-26007 at Bank's South Orange County Regional Commercial
Banking Office (the "Designated Account") in the amount of principal,
interest, fees or any other amount due under this Agreement or under
any instrument or agreement required under this Agreement. Bank shall
debit the account on the date such amounts become due, or, if such due
date is not a Banking Day, on the next Banking Day after such due date.
If there are insufficient funds in the account to cover the amount
debited to the account in accordance with this Paragraph, such debit
will be reversed and such amount will remain unpaid.
(b) Approximately 10 days prior to each due date, Bank will
mail to Borrowers a statement of the amounts that will be due on that
due date (the "Billed Amount"). The calculation will be made on the
assumption that no new extensions of credit or payments will be made
between the date of the billing statement and the due date, and that
there will be no changes in the applicable interest rate.
(c) Bank will debit the Designated Account for the Billed
Amount, regardless of the actual amount due on that date (the "Accrued
Amount"). If the Billed Amount debited to the Designated Account
differs from the Accrued Amount, the discrepancy will be treated as
follows:
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(1) If the Billed Amount is less than the Accrued
Amount, the Billed Amount for the following due date will be
increased by the amount of the discrepancy. Borrowers will not
be in default by reason of any such discrepancy.
(2) If the Billed Amount is more than the Accrued
Amount, any overpayment resulting from such discrepancy shall
be applied as soon after receipt as by Bank as is practicable
to payment of principal outstanding under this Agreement, and
the Billed Amount for the following due date will be adjusted
accordingly.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. Bank will not pay Borrowers interest on any overpayment.
5.7 Banking Day. Any sum payable by Borrowers hereunder which becomes
due on a day which is not a Banking Day shall be due on the next Banking Day
after such due date. Any payments received by Bank on a day which is not a
Banking Day shall be deemed to be received on the next Banking Day after such
date of receipt.
5.8 Taxes and Other Charges. Borrowers agree to make all payments or
reimbursements under this Agreement free and clear of and without deduction for
any present or future taxes, levies, imposts, fees or other charges of any kind
which may be imposed by any governmental authority with respect to such payments
or reimbursements. If any such taxes are imposed by any governmental authority,
Borrowers will pay such taxes and will also pay to Bank, at the time interest is
paid, any additional amount which Bank specifies as necessary to preserve the
after-tax yield Bank would have received if such taxes had not been imposed.
Upon request by Bank, Borrowers will confirm payment of all such taxes by
delivery of official tax receipts or notarized copies thereof to Bank within 30
days after the due date for each tax payment. This Paragraph shall not apply
with respect to any taxes which are imposed on or measured by Bank's net income
by any jurisdiction.
5.9 Increased Costs. Borrowers shall reimburse or compensate Bank, upon
demand by Bank, for all costs incurred, losses suffered or payments made by Bank
which are applied or allocated by Bank to this Agreement (all as determined by
Bank using any reasonable method of calculation) by reason of any statute,
regulation, or any request or requirement of any regulatory agency, whether or
not having the force of law, which is applicable to all or a class of all
national banks, including:
(a) any and all present or future reserve, deposit or similar
requirements applied against (or against any class of or change in or
in the amount of) assets or liabilities of, or commitments or
extensions of credit by, Bank; and
(b) any and all present or future capital or similar
requirements against (or against any class of or change in or in the
amount of) assets or liabilities of, or commitments or extensions of
credit by, Bank.
5.10 Interest Calculation. Except as otherwise stated in this
Agreement, all interest and fees, if any, payable under this Agreement shall be
computed on the basis of a 360 day year and actual days elapsed, which results
in more interest or a larger fee than if a 365 day year were used.
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<PAGE> 12
5.11 Late Payments; Compounding. Any sum payable by Borrowers hereunder
(including unpaid interest) if not paid when due shall bear interest (payable on
demand) from its due date until payment in full at a rate per annum equal to the
Reference Rate plus five and one half (5.5) percentage points.
5.12 Default Rate. Upon the occurrence and during the continuation of
any Event of Default, and without constituting a waiver of any such Event of
Default, advances under the Revolving Facility shall at the option of Bank bear
interest at a rate per annum which is two (2.0) percentage points higher than
the rate of interest otherwise provided under this Agreement.
6. Conditions to Availability of Credit.
Bank's obligation to extend credit under this Agreement is subject to
Bank's receipt of the following, each of which must be in form and substance
satisfactory to Bank:
6.1 The Collateral Agreements;
6.2 The Intercreditor Agreement;
6.3 All Collateral, if any, in which Bank wishes to have a possessory
security interest, except the Caratti stock, which shall be delivered to BABC;
6.4 Financing statements, fixture filings with respect to the real
properties commonly known as 2001 East Dyer, Santa Ana, California, and 2330
South Yale Street, Santa Ana, California (collectively, the "Santa Ana
Property"), assignments, notices and such other documentation as Bank may
reasonably request to perfect Bank's security interest in the Collateral;
6.5 Evidence that the security interests and liens in favor of Bank are
valid, enforceable and prior to the rights and interests of others except those
consented to in writing by Bank (including the rights of BABC and the
Intercreditor Agreement);
6.6 Continuing Cross-Guaranty of GT and all U.S. Subsidiaries of GT in
favor of Bank, guarantying all amounts owing hereunder and any extensions of
credit by Bank to any Borrower and Caratti;
6.7 Evidence that the execution, delivery, and performance by each
Borrower of this Agreement and the execution, delivery, and performance by each
Borrower and any guarantor of any instrument or agreement required under this
Agreement, as appropriate, have been duly authorized;
6.8 Evidence that Borrowers have obtained the insurance coverage
required under Article 8 of this Agreement;
6.9 Evidence that Caratti has accepted a credit commitment from BABC or
another financial institution in an amount sufficient and for the purpose of
fully refinancing the Caratti Facility.
6.10 A Warrant representing the rights to purchase 5% of the common
stock of GT;
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<PAGE> 13
6.11 An opinion of GT's counsel regarding the due authorization,
execution, and delivery of the Warrant described in Paragraph 6.10 above and the
reservation of unissued shares of the common stock of GT in an amount sufficient
to honor the exercise of such warrant.
6.12 All representations and warranties, including without limitation,
all financial and business information previously delivered or conveyed to Bank
shall have been true and correct in all material respects.
6.13 The transactions provided for by the BABC Loan Agreement have
closed, and the Term Loan provided for hereby has been reduced to the amount
provided for in paragraph 2.1, of this Agreement.
6.14 BABC has indemnified Bank with regards to the Caratti Facility, in
form and substance reasonably satisfactory to Bank.
6.15 The WCMA Loan Agreement between Borrower and Merrill Lynch
Financial Services, Inc. shall have closed and Borrower shall have drawn down
$3,000,000 pursuant thereto.
6.16 The BABC Excess Availability shall be at least $4,000,000.
7. Representations and Warranties
Each Borrower and each Guarantor jointly and severally represents and
warrants (and each request for an extension of credit under this Agreement shall
be deemed a representation and warranty made on the date of such request) that:
7.1 Organization. GT and each of its Subsidiaries are corporations duly
organized and existing under the laws of the state of their respective
organization, and the execution, delivery, and performance of this Agreement by
each Borrower and each Guarantor and of any instrument or agreement required by
this Agreement are within each Borrower's and each Guarantor's corporate powers,
have been duly authorized, and are not in conflict with the terms of any
charter, bylaw, or other organizational papers of each Borrower and each
Guarantor;
7.2 No Conflicts. Except as disclosed in Schedule 7.2 hereto, the
execution, delivery, and performance of this Agreement and of any instrument or
agreement required by this Agreement are not in conflict with any law or any
indenture, agreement, or undertaking to which GT or any of its Subsidiaries is a
party or by which GT or any of its Subsidiaries is bound or affected, except
where such conflict would not result in a Material Adverse Impact;
7.3 Enforceability. This Agreement is a legal, valid and binding
agreement of each Borrower and each Guarantor, enforceable against each Borrower
and each Guarantor in accordance with its terms, and any instrument or agreement
required under this Agreement, when executed and delivered, will be similarly
legal, valid, binding and enforceable, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other, similar laws affecting the enforcement of creditor's rights generally or
by general principles of equity;
7.4 Good Standing. GT and each of its Subsidiaries are properly
licensed and in good standing in each state in which GT and its Subsidiaries are
doing business, and GT and its Subsidiaries have qualified under, and complied
with, where required, the fictitious name statute
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<PAGE> 14
of each state in which GT and its Subsidiaries are doing business, except where
the failure to be so licensed, in good standing, or qualified would not have a
Material Adverse Impact;
7.5 Compliance with Laws. GT and each of its Subsidiaries have complied
with all federal, state, and local laws, rules, and regulations affecting the
business of GT and each of its Subsidiaries including, but not limited to, laws
regulating GT's or its Subsidiaries' sales or the furnishing of services to
Receivable Debtors and disclosures in connection therewith, except where the
failure to so comply would not have a Material Adverse Impact;
7.6 Ownership of Collateral. Except as has been disclosed in writing to
Bank in Schedule 7.6, hereof, all Collateral described in Article 4 of this
Agreement is owned by Borrowers or Guarantors free and clear of all security
interests, liens, encumbrances and rights of others except the rights of Bank
under any security agreements required under this Agreement and those consented
to in writing by Bank (including without limitation the security interests of
BABC).
7.7 Permits, Franchises. GT and its Subsidiaries posses all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary to
enable GT and its Subsidiaries to conduct the business in which they are now
engaged, except where the failure to possess such items would not have a
Material Adverse Impact;
7.8 Perfected Security Interest in Collateral. No further action is
necessary in order to establish and perfect Bank's lien on or security interest
in the Collateral, except for (i) the filing of a financing statement with
respect to the Collateral, (ii) the delivery to Bank of any Collateral as to
which possession is the only method of perfecting a security interest therein,
(iii) the filing of a security agreement covering patents, trademarks, and
similar collateral with the U.S. Patent and Trademark Office, and (iv) the
recording of a fixture filing with any county recorder's office;
7.9 Litigation. Except as disclosed on Schedule 7.9 hereto, there is no
litigation, tax claim, proceeding or dispute pending, or, to the knowledge of GT
or any of its Subsidiaries, threatened, against or affecting such Borrower or
its Subsidiaries or its property, the adverse determination of which is
reasonably expected to have a Material Adverse Impact;
7.10 No Event of Default. No event has occurred and is continuing or
would result from the extension of credit under this Agreement which constitutes
or is reasonably expected to constitute an Event of Default or which, upon a
lapse of time or notice or both, would become an Event of Default;
7.11 Other Obligations. Neither GT nor any of its Subsidiaries is in
default under any other agreement involving the borrowing of money, the
extension of credit, or the lease of real or personal property to which GT or
any of its Subsidiaries is a party as borrower, guarantor, installment purchaser
or lessee, except where being in default of such obligations would not have a
Material Adverse Impact;
7.12 Income Tax Returns. Except as disclosed on Schedule 7.12 hereto,
neither GT nor any of its Subsidiaries has any knowledge of any pending
assessments or adjustments with respect to its income tax liabilities for any
year;
7.13 Information Submitted. All financial and other information that
has been or will be submitted by GT or any of its Subsidiaries to Bank,
including GT's consolidated financial statement dated as of December 31, 1997,
is and will be:
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<PAGE> 15
(a) prepared in accordance with generally accepted accounting
principles consistently applied;
(b) true and correct in all material respects and is complete
insofar as may be necessary to give Bank a true and accurate knowledge
of the subject matter thereof;
(c) in form and content reasonably required by Bank; and
(d) in material compliance with all government regulations
applicable thereto;
7.14 No Material Adverse Change. There has been no material adverse
change in the financial condition of GT or any of its Subsidiaries since the
date of its most recent financial statements submitted to Bank;
7.15 ERISA Plan Compliance.
(a) GT and its Subsidiaries have fulfilled their obligations,
if any, under the minimum funding standards of ERISA and the Internal
Revenue Code of 1986, as amended from time to time, (the "Code") with
respect to each ERISA Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the
Code, and has not incurred any liability in excess of $500,000 with
respect to any ERISA Plan under Title IV of ERISA;
(b) No reportable event has occurred under Section 4043(b) of
ERISA for which the Pension Benefit Guaranty Corporation requires 30
day notice;
(c) No action by GT or any of its Subsidiaries to terminate or
withdraw from any ERISA Plan has been taken and no notice of intent to
terminate an ERISA Plan has been filed under Section 4041 of ERISA; and
(d) No proceeding has been commenced with respect to an ERISA
Plan under Section 4042 of ERISA, and no event has occurred or
condition exists which might constitute grounds for the commencement of
such a proceeding;
7.16 Location of GT and Subsidiaries. GT's and each of its
Subsidiaries' place of business (or, if GT or any of its Subsidiaries has more
than one place of business, its chief executive office) is located at the
address listed on Schedule 7.16 hereto.
7.17 Year 2000 Compliance. Borrower has made inquiry of each business
entity in which Borrower holds a material interest with respect to the "year
2000 problem" (that is, the risk that computer applications may not be able to
properly perform date-sensitive functions after December 31, 1999). Based on
that inquiry, Borrower does not believe the year 2000 problem will cause any
such business entity to suffer a material adverse change in its business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay its obligations. For purposes of this paragraph, a business
entity in which Borrower holds a "material interest" means any business entity
that is of material importance to the financial well-being of Borrower.
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8. Covenants
So long as credit is available under this Agreement and until full and
final payment of all of Borrowers' obligations under this Agreement and any
instrument or agreement required under this Agreement, GT shall, and shall cause
each of its Subsidiaries to, unless Bank waives compliance in writing:
8.1 Notices of Certain Events. Promptly give written notice to Bank of:
(a) all litigation affecting GT or any of its Subsidiaries
where the amount claimed is $500,000 or more;
(b) any substantial dispute which may exist between GT or any
of its Subsidiaries and any governmental regulatory body or law
enforcement authority;
(c) any Event of Default or any event which, upon a lapse of
time or notice or both, would become an Event of Default;
(d) the occurrence of any reportable event under Section
4043(b) of ERISA for which the Pension Benefit Guaranty Corporation
requires 30 day notice; any action by GT or any of its Subsidiaries to
terminate or withdraw from an ERISA Plan or the filing of any notice of
intent to terminate under Section 4041 of ERISA; any notice of
noncompliance made with respect to an ERISA Plan under Section 4041(b)
of ERISA; or the commencement of any proceeding with respect to an
ERISA Plan under Section 4042 of ERISA;
(e) any other matter which has resulted or is reasonably
likely to have a Material Adverse Impact;
8.2 Financial and Other Information. Deliver to Bank in form and detail
reasonably satisfactory to Bank, and in such number of copies as Bank may
reasonably request:
(a) Within 90 days after the end of each fiscal year, GT's
consolidated financial statements for such year, audited by a certified
public accountant with an unqualified opinion, and GT's consolidating
financial statements for such year, prepared by GT with a comparison to
projections for such fiscal year and the results of the prior fiscal
year;
(b) Within 45 days after the end of each fiscal quarter, GT's
consolidated and consolidating financial statements for such period and
the fiscal year to date, prepared by GT with a comparison to
projections for such period and year-to-date and the same period and
year-to-date period for the prior fiscal year;
(c) Within 45 days after the end of each fiscal quarter, a
compliance certificate, substantially in the form of Exhibit A attached
hereto, with appropriate insertions, signed by a responsible officer of
GT;
(d) Within 30 days after the date of filing with the
Securities and Exchange Commission, copies of GT's Form 10-K Annual
Report, Form 10-Q Quarterly Report and any Form 8-K Current Report;
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(e) Promptly upon request of Bank, such other statements,
lists of property and accounts, budgets, forecasts or reports as to GT
or any of its Subsidiaries as Bank may reasonably request;
8.3 Books, Records, Audits and Inspections. Maintain adequate books,
accounts and records and prepare all financial statements required hereunder in
accordance with generally accepted accounting principles consistently applied,
and in compliance with the regulations of any governmental regulatory body
having jurisdiction over GT or any of its Subsidiaries or GT's or any of its
Subsidiaries' business. Further, GT and each of its Subsidiaries will permit
employees or agents of Bank at any reasonable time during regular business
hours, to inspect the Collateral and GT's and any of its Subsidiaries'
properties, to conduct appraisals of the Collateral, and to examine or audit
GT's and any of its Subsidiaries' books, accounts, and records and make copies
and memoranda thereof. In the event any Collateral, properties, books, accounts
or records are in the possession of or under the control of a third party, GT
and each of its Subsidiaries shall direct and hereby authorize such third party
to permit access to Bank's employees or agents for the purpose of performing the
inspections, appraisals, examinations or audits permitted under this Paragraph,
and to respond to any requests from Bank for information concerning the amount,
status or condition of any Collateral in such third party's possession or
control;
8.4 Interest Coverage Ratio. Cause GT to maintain on a consolidated
basis an Interest Coverage Ratio of at least 2.00 to 1.00. This ratio shall be
calculated quarterly using the results of the most recently concluded quarterly
accounting period and each of the three (3) immediately preceding quarterly
accounting periods;
8.5 Maximum Total Funded Debt. Not permit the total principal amount of
Funded Debt incurred by Borrowers and GT, on a consolidated basis, including
without limitation the outstanding principal balance of the Term Loan, to exceed
$128,000,000 at any one time.
8.6 Liens. Not create, assume or suffer to exist any security interest,
lien (including the lien of an attachment, judgment or execution) or
encumbrance, securing a charge or obligation, on or of any of its property, real
or personal, whether now owned or hereafter acquired, except:
(a) security interest(s) and deed(s) of trust in favor of
Bank;
(b) liens, security interests and encumbrances in existence as
of the date of this Agreement which have been disclosed to Bank in
writing or which are set forth on Schedule 8.6, hereto;
(c) liens for current taxes, assessments or other governmental
charges which are not delinquent or remain payable without any penalty;
(d) purchase money security interests in personal property
hereafter acquired by purchase or by sale leaseback securing
obligations not exceeding to $3,000,000 in any fiscal year of GT, when
the security interest does not extend beyond the property purchased;
(e) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and other liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent
or being diligently contested in good faith;
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(f) liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance and other types of Social Security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(g) any attachment or judgment lien (including judgment or
appeal bonds) the enforcement of which would not constitute a default
pursuant to Paragraph 9.8 of this Agreement; (h) leases or subleases of
real property granted to others not interfering with the ordinary
conduct of the business of GT and its Subsidiaries;
(i) easements, rights of way, restrictions and other similar
charges or encumbrances which do not, individually or in the aggregate,
materially interfere with the ordinary conduct of the business of GT or
any of its Subsidiaries at any location;
(j) any interest, title or lien of a lessor under any
operating lease;
(k) liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(l) liens (including capitalized leases) and respective
property acquired, constructed, or improved by GT or any of its
Subsidiaries after the date of this Agreement, which liens exist or are
created at the time of acquisition or completion of construction or
improvement of such property, or within 60 days thereafter, to secure
indebtedness incurred pursuant to Section 8.6(d), but any such lien
shall cover only the property so acquired or constructed and any
improvements thereto (and any real property on which such property is
located, if such property is a building, improvement or fixtures);
(m) liens on the assets of Caratti securing indebtedness of
Caratti owing to BABC or another financial institution and used to
fully refinance the Caratti Facility;
(n) liens on the assets of Riteway France securing
indebtedness of Riteway France owing to BABC or another financial
institution and used to fully refinance to the Riteway France Facility;
(o) liens on the assets of Riteway Japan securing indebtedness
of Riteway Japan owing to BABC or another financial institution and
used to fully refinance the Riteway Japan Facility;
(p) liens securing obligations under the BABC Loan Agreement
or under any guaranties thereof; and
(q) liens constituting renewals, extensions, or replacements
of the liens described in Sub-paragraphs 8.6 (a) through (l),
inclusive, above.
8.7 Acquisitions. Without Bank's prior written consent, not acquire or
purchase all or substantially all of the assets or business of any other person,
firm, corporation, or any division thereof, or acquire or purchase securities;
provided, however, that this Paragraph shall not prohibit:
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(a) the acquisition or purchase of obligations issued or
guarantied by the United States; and
(b) the acquisition or purchase of short term marketable
securities that do not constitute more than five percent of the capital
stock, partnership interests, membership interests, or equity of any
person, firm, or corporation.
Notwithstanding the foregoing, any subsidiary of GT may be merged or
consolidated with or into GT, any Borrower, or any of GT's Subsidiaries, or be
liquidated, wound up or dissolved, or all or substantially all of the business,
property or assets may be conveyed, sold, leased, transferred or otherwise
disposed of in one transaction or a series of transactions, to GT or any of GT's
U.S. Subsidiaries; provided, however, that in the case of such a merger or
consolidation (i) GT or one of GT's U.S. Subsidiaries shall be the continuing or
surviving corporation, (ii) immediately before and immediately after any such
consolidation, merger or other disposition, no Event of Default or event which
with notice, lapse of time, or both would become an Event of Default shall have
occurred and be continuing, and (iii) no disposition under this Subsection 8.7
shall release GT, any surviving Borrower or any of GT's Subsidiaries from
liability in respect of the indebtedness hereunder; and
8.8 Dividends. Not declare or pay any dividends on any of its shares
except dividends payable in capital stock of GT or any of its Subsidiaries, and
not purchase, redeem or otherwise acquire for value any of its shares, or create
any sinking fund in relation thereto;
8.9 Capital Ownership. Not cause, permit, or suffer any change, direct
or indirect, in any Subsidiaries' capital ownership;
8.10 Covenant to Guarantee Obligations. At such time as any new direct
or indirect domestic Subsidiary is formed or acquired by GT (excluding
Subsidiaries of GT that are also Borrowers), cause such new Subsidiary that is a
wholly owned Subsidiary to (i) within 10 days thereafter or such later time as
Borrowers, GT, and Bank shall agree (but in any event no later than 30
additional days thereafter), duly execute and deliver to Bank continuing
guarantees substantially in the form set forth in Exhibit B, hereto,
guaranteeing Borrowers' obligations under this Agreement;
8.11 Existence and Properties. Except as otherwise permitted in
Paragraph 8.7, hereof, maintain and preserve GT's and each of its Subsidiaries'
existence and all rights, privileges and franchises now enjoyed, conduct GT and
each of its Subsidiaries' business in an orderly, efficient and customary
manner, keep all properties of GT and each of its Subsidiaries in good working
order and condition consistent with past practices, ordinary wear and tear
excepted, and from time to time make all needed repairs, renewals or
replacements thereto and thereof consistent with past practices so that the
efficiency of such property shall be fully maintained and preserved;
8.12 Liquidations and Mergers. Not liquidate or dissolve or consummate
any consolidation, merger, partnership, joint venture or other combination,
except as permitted in Paragraph 8.7 of this Agreement, unless all obligations
of Borrowers to Bank arising out of this Agreement have been paid in full and
the obligations of the Bank to extend credit under this Agreement shall have
terminated;
8.13 Sale of Assets. Not sell, lease, or otherwise dispose of its
business or assets as a whole or such as in the opinion of Bank constitute a
substantial portion of its business or assets
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except in the ordinary course of its business as heretofore conducted without
the prior written consent of Bank;
8.14 Insurance.
(a) Maintain, and cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers having a rating of at least A-VII
or better by Best Rating Guide, such insurance coverage for such amounts (as
such amounts should be increased to cover increased Collateral) as is currently
maintained by Borrowers , as identified in Schedule 8.14, and such other
insurance against such other hazards or such other types as is customary for
persons engaged in the same or similar business to Borrowers or Subsidiaries.
Without limiting the foregoing, Borrowers and Subsidiaries shall maintain flood
insurance for the Collateral in the event of the designation of the area in
which any of the Collateral is located as "flood prone" or a "flood risk area"
as defined by the Flood Disaster Protection Act of 1973, in an amount to be
reasonably determined by Bank, and shall comply with such additional
requirements of the National Flood Insurance Program set forth in said Act.
b) Each such policy shall contain a loss payable endorsement
in favor of Bank in form and substance reasonably acceptable to Bank, which loss
payable endorsement will be senior to any rights of BABC with respect to
payments arising out of loss relating to patents, trademarks, or other
intellectual property, but which may be junior and subordinate to any rights of
BABC with respect to other insured assets;
8.15 Compliance with Laws. At all times comply with, or cause to be
complied with in all material respects, all laws, statutes (including but not
limited to any fictitious name statute), rules, regulations, orders and
directions of any governmental authority having jurisdiction over GT or any of
its Subsidiaries or GT's or any of its Subsidiaries' businesses, including but
not limited to laws regulating GT's or any of its Subsidiaries' sales to or
performance of services for Receivable Debtors and disclosures in connection
therewith; provided, however, that if GT is not in compliance with some law or
statute such non-compliance shall not be deemed material if such law or statute
provides for a cure period and GT comes into compliance therewith within the
shorter of i.) thirty days of being out of compliance with any such law or
statute, or (ii) the cure period provided for by such statute;
8.16 Accuracy of Financial Information. Cause all financial
information, including information relating to the Collateral, upon submission
by GT or any of its Subsidiaries to Bank to be true and correct in all material
respects and complete to the extent necessary to give Bank a true and accurate
knowledge of the subject matter thereof;
8.17 Additional Acts. Perform, on request of Bank, such acts as may be
necessary or advisable to perfect any lien or security interest provided for
herein or otherwise to carry out the intent of this Agreement;
8.18 Business Activities. Not engage in any business activities or
operations substantially different from or unrelated to present business
activities and operations;
8.19 Change in Name, Structure or Location. Notify Bank in writing
prior to any change in (a) GT's or any of its Subsidiaries' name, (b) GT's or
any its Subsidiaries' business or legal structure, or (c) GT's or any of its
Subsidiaries' place of business or chief executive office if GT or any of its
Subsidiaries has more than one place of business;
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<PAGE> 21
8.20 Capital Expenditures. Not spend more than $3,000,000 in any fiscal
year of GT to acquire fixed or capital assets;
8.21 Loans, Investments, and Guarantees. Not make any loans or other
extensions of credit to, or make any investments in, or guarantee the debt of,
or make any capital contributions or other transfers of assets to, any
individual or entity, except for:
(a) Equipment to be used in the business of the Borrowers so
long as the acquisition costs thereof constitute Capital Expenditures
subject to the limitations of paragraph 8.20 hereof;
(b) Inventory in the ordinary course of business;
(c) current assets arising from the sale or lease of goods or
the rendition of services in the ordinary course of business of the
Borrowers;
(d) direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of
America, provided that such obligations mature within one year of the
date of acquisition;
(e) certificates of deposit maturing within one year of the
date of acquisition, bankers acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a
trust company organized under the laws of the Unites States of America
or any state thereof, having surplus and capital aggregating at least
$100,000,000;
(f) commercial paper given a rating of "A2" or better by
Standard & Poor's Corporation or "P2" or better by Moody's Investor
Service, Inc. and maturing not more than 90 days from the date of
creation thereof;
(g) any investments in Innovations in Composites already made
or existing as of the date hereof so long as the acquisition costs
thereof constitute Capital Expenditures subject to the limitations of
paragraph 8.20 hereof;
(h) other investments not to exceed in the aggregate in any
Fiscal Year $250,000 so long as the acquisition costs thereof
constitute Capital Expenditures subject to the limitations of paragraph
8.20 hereof.
9. Events of Default
The occurrence of any of the following Events of Default shall
terminate any obligation on the part of Bank to extend credit under this
Agreement and, at the option of Bank under all Paragraphs except Paragraphs 9.5
and 9.6, and automatically in the case of Paragraphs 9.5 and 9.6, shall make all
obligations of Borrowers to Bank under or in respect of this Agreement and any
instrument or agreement required under this Agreement immediately due and
payable, without notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or demands of any kind or
character, except as specifically provided below:
9.1 Failure to Pay. Any Borrower fails to pay, within two (2) Banking
Days of when due, any installment of interest or principal or any other sum due
under this Agreement in accordance with the terms hereof;
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9.2 Breach of Representation or Warranty. Any representation or
warranty herein or in any agreement, instrument or certificate executed pursuant
hereto or in connection with any transaction contemplated hereby proves to have
been false or misleading in any material respect when made;
9.3 Falsity of Information. Any financial or other information
delivered by GT or any of its Subsidiaries to Bank proves to be false or
misleading in any material respect;
9.4 Security Interest. Bank fails to have a valid and enforceable
perfected security interest in or lien on the Collateral or such security
interest or lien fails to be prior to the rights and interest of others except
those consented to in writing by Bank, including without limitation the security
interests of BABC required under the BABC Loan Agreements;
9.5 Failure to Pay Debts; Voluntary Bankruptcy. GT or any of its
Subsidiaries fails to pay its debts generally as they come due, or files any
petition, proceeding, case, or action for relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or any other law or laws for the
relief of, or relating to, debtors;
9.6 Involuntary Bankruptcy. An involuntary petition is filed under any
bankruptcy or similar statute against GT or any of its Subsidiaries, or a
receiver, trustee, liquidator, assignee, custodian, sequestrator, or other
similar official is appointed to take possession of the properties of GT or any
of its Subsidiaries, and such petition or appointment is not dismissed or
withdrawn or does not cease to be in effect within 60 days of filing or
appointment;
9.7 Suits. One or more suits are filed against GT or any of its
Subsidiaries, by a trade creditor or trade creditors of such person in the
aggregate amount of $500,000 or more and are not being contested in good faith
by appropriate proceedings by such person;
9.8 Judgments. One or more judgments or arbitration awards are entered
against GT or any of its Subsidiaries on a claim or claims not covered by
insurance and remain undischarged, unvacated, unbonded, or unstayed for a period
of 30 days or in any event later than five days prior to any proposed sale under
any such judgment or award, or GT or any of its Subsidiaries enters into any
settlement agreements with respect to any litigation or arbitration, in the
aggregate amount of $500,000 or more on a claim or claims not covered by
insurance;
9.9 Suspension of Business. GT or any of its Subsidiaries voluntarily
suspends its business for more than five business days in any 30 day period;
9.10 Governmental Action. Any governmental regulatory authority takes
or institutes action which, in the opinion of Bank, will materially adversely
affect GT's or any of its Subsidiaries' condition, operations or ability to pay
any of their respective obligations owing to Bank;
9.11 Default of Other Financial Obligations. Any default which is not
waived (prospectively or retroactively) occurs under any other agreement
(including without limitation the BABC Loan Agreement) involving the borrowing
of money or the extension of credit in the amount of $500,000 or more to which
GT or any of its Subsidiaries may be a party as borrower, guarantor or
installment purchaser if such default consists of the failure to pay any
obligation when due or if such default gives to the holder of the obligation
concerned the right to accelerate the obligation;
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<PAGE> 23
9.12 Default under Guaranty or Subordination Agreement. Any guaranty,
subordination agreement or other agreement or instrument required hereunder is
breached or becomes ineffective or any default which is not waived occurs under
any such agreement or instrument;
9.13 Misuse of Collateral. Bank, in good faith, considers any
Collateral to be unsafe or in danger of misuse by GT or any of its Subsidiaries
to the extent that Bank's prospect of or right to payment or performance under
this Agreement or any instrument or agreement required hereunder is materially
impaired;
9.14 Default of Other Bank Obligations.
(a) any default which is not waived occurs under any other
obligation of GT or any of its Subsidiaries to Bank, or to any subsidiary or
affiliate of Bank, other than a default of the BABC Loan Agreement, and such
default is not cured within 30 days if in Bank's reasonable discretion such
default is capable of being cured;
(b) any default which is not waived occurs under any
obligation of GT or any of its Subsidiaries to Bank, or to any subsidiary or
affiliate of Bank, of the BABC Loan Agreement;
9.15 Material Adverse Change. Any material adverse change occurs in the
financial condition or results of operations of GT or any of its Subsidiaries or
in GT's or any of its Subsidiaries' ability to perform its obligations under
this Agreement or under any instrument or agreement required by this Agreement;
9.16 ERISA Plan Termination. Any ERISA Plan termination or any full or
partial withdrawal from an ERISA Plan occurs which could result in liability of
GT or any of its Subsidiaries to the Pension Benefit Guaranty Corporation or to
the ERISA Plan in an aggregate amount which, in the reasonable opinion of Bank,
will have a material adverse effect on the financial condition of GT or any of
its Subsidiaries;
9.17 Breach of Certain Covenants. Any Borrower or any Guarantor fails
to comply with or perform any term or provision contained in Paragraphs 8.2(a)
through 8.2(e), inclusive, and Paragraph 8.3 of this Agreement, and such failure
is not remedied or waived in writing of Bank within 30 days of the occurrence
thereof;
9.18 Breach of Other Covenants. Any Borrower or any Guarantor fails to
comply with or perform any term or condition contained in this Agreement other
than those specifically referred to in Paragraph 9.17 above or elsewhere in this
Article 9;
9.19 Payment of Merrill Lynch. Any Borrower makes any payment of any
obligation arising under that certain WCMA Note and Loan Agreement between GT
Bicycles, Inc. and Merrill Lynch Business Financial Services, Inc., or any
renewal, extension, or replacement thereof, other than the payment of interest
provided for by such agreement.
Upon the occurrence of any event which, with notice or lapse of time or
both would become an Event of Default, Bank may decline to extend further credit
to Borrowers under this Agreement until the event has been cured or no longer
exists.
10. Miscellaneous
10.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that neither any
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Borrower nor any Guarantor shall assign this Agreement or any of the rights,
duties or obligations of such Borrower or any Guarantor hereunder without the
prior written consent of Bank.
10.2 Consents and Waivers. No consent or waiver under this Agreement
shall be effective unless in writing. No waiver of any breach or default shall
be deemed a waiver of any breach or default thereafter occurring.
10.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California.
10.4 Administration Costs. Borrowers and GT agree to pay to Bank, on
demand, all reasonable costs and expenses incurred by Bank in connection with
the administration of this Agreement and any instrument or agreement required
under this Agreement.
10.5 Joint and Several Liability.
(a) Each Borrower agrees that it is jointly and severally
liable to Bank for the payment of all obligations arising under this
Agreement, and that such liability is independent of the obligations of
the other Borrowers or any Guarantor. Bank may bring an action against
any Borrower, whether an action is brought against any other Borrower
or any Guarantor.
(b) Each Borrower agrees that any release which may be given
by Bank to any other Borrower or any Guarantor will not release such
Borrower from its obligations under this Agreement.
(c) Each Borrower waives any right to assert against Bank any
defense, setoff, counterclaim, or claims which such Borrower may have
against any other Borrower or any Guarantor or any other party liable
to Bank for the obligations of Borrowers under this Agreement.
(d) Each Borrower agrees that it is solely responsible for
keeping itself informed as to the financial condition of any other
Borrower or any Guarantor and of all circumstances which bear upon the
risk of nonpayment. Each Borrower waives any right it may have to
require the Bank to disclose to such Borrower any information which the
Bank may now or hereafter acquire concerning the financial condition of
any other Borrower or any Guarantor.
(e) Each Borrower waives all rights to notices of default or
nonperformance by any other Borrower or any Guarantor under this
Agreement. Each Borrower further waives all rights to notices of the
existence or the creation of new indebtedness by any other Borrower or
any Guarantor.
(f) Borrowers and each of them represent and warrant to the
Bank that each will derive benefit, directly and indirectly, from the
collective administration and availability of credit under this
Agreement. Borrowers agree that Bank will not be required to inquire as
to the disposition by any Borrower of funds disbursed in accordance
with the terms of this Agreement.
(g) Each Borrower waives any right of subrogation,
reimbursement, indemnification and contribution (contractual, statutory
or otherwise), including without
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limitation, any claim or right of subrogation under the Bankruptcy Code
(Title 11 of the U.S. Code) or any successor statute, which such
Borrower may now or hereafter have against any other Borrower or any
Guarantor with respect to the indebtedness incurred under this
Agreement. Each Borrower waives any right to enforce any remedy which
Bank now has or may hereafter have against any other Borrower or any
Guarantor, and waives any benefit of, and any right to participate in,
any security now or hereafter held by Bank.
10.6 Attorneys' Fees. Borrowers and GT shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. In the event that any case is commenced by or against the
Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar
or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or
enforcement of any rights of the Bank in such a case. As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's in-house counsel.
10.7 Integration. This Agreement and any instrument, agreement or
document attached hereto or referred to herein (a) integrate all the terms and
conditions mentioned herein or incidental hereto, (b) supersede all oral
negotiations and prior writings in respect to the subject matter hereof, and (c)
are intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in this Agreement and any such
instrument, agreement or document and as the complete and exclusive statement of
the terms agreed to by the parties. In the event of any conflict between the
terms, conditions and provisions of this Agreement and any such instrument,
agreement, or document, the terms, conditions and provisions of this Agreement
shall prevail.
10.8 Disposition of Schedules, Reports, Etc. Delivered by GT or
Subsidiaries. Bank shall be under no obligation to return any schedules,
invoices, statements, budgets, forecasts, reports or other papers delivered by
GT or any of its Subsidiaries and shall destroy or otherwise dispose of same at
such time as Bank, in its discretion, deems appropriate.
10.9 Confidentiality. Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
non-public information provided to it by GT or any of its Subsidiaries in
connection with this Agreement and agrees and undertakes that neither it nor any
of its affiliates shall use any such information for any purpose or in any
manner other than pursuant to the terms contemplated by this Agreement. Bank may
disclose such information (i) at the request of any regulatory authority or in
connection with an examination of Bank by any such authority; (ii) pursuant to
subpoena or other court process; (iii) when required to do so in accordance with
the provisions of any applicable law; (iv) at the express direction or any other
agency of any State of the United States of America or of any other jurisdiction
in which Bank conducts its business; and (v) to Bank's independent auditors and
other professional advisors.
10.10 Returned Merchandise. Until Bank exercises its rights to collect
the Receivables as provided under any security agreement required under this
Agreement, each Borrower or each Guarantor may continue its present policies for
returned merchandise and adjustments. Credit adjustments with respect to
returned merchandise shall be made immediately upon
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receipt of the merchandise by such Borrower or such Guarantor or upon such other
disposition of the merchandise by the Receivable Debtor in accordance with such
Borrower's or such Guarantor's instructions.
10.11 Verification of Receivables. As a part of any periodic audit for
which Borrowers are obligated to pay pursuant to Paragraph 3.2(c) of this
Agreement, or at any time after the occurrence of an Event of Default, Bank may,
either orally or in writing, request confirmation from any Receivable Debtor of
the current amount and status of the Receivable upon which such Receivable
Debtor is obligated.
10.12 Participations. Bank may at any time sell to any other person,
firm, or corporation (a "Participant") participations in a portion of the
obligations of Borrowers and Guarantors under this Agreement. On condition that
any Participant or prospective Participant agrees to keep information concerning
GT or any of its Subsidiaries confidential on substantially the terms of
Paragraph 10.9 above, Borrowers and Guarantors authorize Bank to disclose to any
prospective Participant and any Participant any and all information in Bank's
possession concerning GT and any of its Subsidiaries, this Agreement and the
Collateral. Notwithstanding the foregoing, prior to August 30, 1998, Bank shall
not sell any such participation without the prior written consent of Borrowers,
which consent shall not unreasonably be withheld; thereafter, Borrowers' consent
shall not be required for any such sale. Bank and Borrowers may have agreed to
other restrictions on the sale of participations which may be set forth in a
letter between Bank and Borrowers.
10.13 Indemnification. Each Borrower and each Guarantor agree to
indemnify Bank against, and hold Bank harmless from, all claims, actions,
losses, costs and expenses (including reasonable attorneys' fees and allocated
costs for in-house legal services) incurred by Bank and arising from any
contention, whether well-founded or otherwise, that there has been a failure to
comply with any law regulating any Borrower's or any Guarantor's sales to or
performance of services for Receivable Debtors and disclosures in connection
therewith. The provisions of this Paragraph shall survive termination of this
Agreement.
10.14 Arbitration; Reference Proceeding.
(a) Any controversy or claim between or among the parties,
including but not limited to those arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered
in connection herewith and any claim based on or arising from an
alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the
United States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Agreement, and under the Commercial
Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall give effect to statutes of limitation in
determining any claim. Any controversy concerning whether an issue is
arbitrable shall be determined by the arbitrator(s). Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit
of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such
action for judicial relief.
(b) Notwithstanding the provisions of subparagraph (a), no
controversy or claim shall be submitted to arbitration without the
consent of all parties if, at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation to Bank
which is secured by real property collateral located in California. If
all parties do
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<PAGE> 27
not consent to submission of such a controversy or claim to
arbitration, the controversy or claim shall be determined as provided
in subparagraph (c).
(c) A controversy or claim which is not submitted to
arbitration as provided and limited in subparagraphs (a) and (b) shall,
at the request of any party, be determined by a reference in accordance
with California Code of Civil Procedure Sections 638 et seq. If such an
election is made, the parties shall designate to the court a referee or
referees selected under the auspices of the AAA in the same manner as
arbitrators are selected in AAA-sponsored proceedings. The presiding
referee of the panel, or the referee if there is a single referee,
shall be an active attorney or retired judge. Judgment upon the award
rendered by such referee or referees shall be entered in the court in
which such proceeding was commenced in accordance with California Code
of Civil Procedure Sections 644 and 645.
(d) No provision of this paragraph shall limit the right of
any party to this Agreement to exercise self-help remedies such as
setoff, to foreclose against or sell any real or personal property
collateral or security, or to obtain provisional or ancillary remedies
from a court of competent jurisdiction before, after, or during the
pendency of any arbitration or other proceeding. The exercise of a
remedy does not waive the right of either party to resort to
arbitration or reference. At Bank's option, foreclosure under a deed of
trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.
10.15 Notices. All notices required hereunder shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses set
forth on the signature page of this Agreement, or to such other addresses as the
parties hereto may specify from time to time in writing.
10.16 Headings. Article and paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
10.17 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
10.18 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same agreement.
10.19 Amendment and Restatement of Existing Agreement. This Agreement
amends and restates the Existing Agreement. Those extensions of credit
outstanding under the Existing Agreement which are refinanced under the Term
Loan shall be deemed outstanding hereunder with the same tenor and, as
applicable, interest periods as under the Existing Agreement, but with any
changes in interest rate margins set forth herein to be effective on any
continuing LIBOR Rate Portions and Offshore Rate Portions outstanding as of the
date hereof.
10.20 Intercreditor Agreement. This Agreement is subject to the terms
of that certain Intercreditor Agreement, of even date herewith, between Bank and
BABC (the "Intercreditor Agreement") to which Borrowers have consented. In the
event there is any conflict between the
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<PAGE> 28
terms of this Agreement and the terms of the Intercreditor Agreement the terms
of the Intercreditor Agreement shall prevail and control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BANK OF AMERICA NATIONAL TRUST GT BICYCLES CALIFORNIA, INC.
AND SAVINGS ASSOCIATION RITEWAY PRODUCTS EAST, INC.
RITEWAY PRODUCTS NORTH
By: /s/ HENRY P. ROGERS CENTRAL, INC.
------------------------------- RITE-WAY DISTRIBUTORS CENTRAL, INC.
Henry P. Rogers RITE-WAY DISTRIBUTORS, INC.
Vice President GT BICYCLES, INC.
Address where notices to Bank
are to be sent: By: /s/ CHARLES CIMITILE
-------------------------------
Bank of America Dept. #1415 Name: Charles Cimitile
50 California Street, Suite #740 -----------------------------
San Francisco, California 94111 Title: VP Finance/CFO
----------------------------
Address where notices to all
Borrowers and GT are to be sent:
2001 E. Dyer
Santa Ana, California 92705
Attn: Chief Financial Officer
- --------------------------------------------------------------------------------
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<PAGE> 29
SCHEDULE 7.2
(Conflicting Documents)
None.
- --------------------------------------------------------------------------------
-29-
<PAGE> 30
SCHEDULE 7.6
(Security Interests, Liens, Encumbrances)
1. GT Bicycles California, Inc., as Borrower, is party to that certain
Loan and Security Agreement among BankAmerica Business Credit, Inc. as
Agent to certain Lenders, GT Bicycles California, Inc., GT Bicycle,
Inc., Riteway Products East, Inc., Riteway Products North Central,
Inc., Rite-Way Distributors Central, Inc., and Rite-Way Distributors,
Inc., dated as of even date herewith.
2. GT Bicycles, Inc. is party to that certain WCMA Note and Loan Agreement
among GT Bicycles, Inc. and Merrill Lynch Business Financial Services
Inc., dated as of even date herewith.
3. GT Bicycles, Inc. is party to that certain Loan Agreement among GT
Bicycles, Inc., GE Capital Public Finance, Inc., and the California
Economic Development Financing Authority, dated as of September 1,
1997.
4. GT Bicycles, Inc. is party to that certain IBM Lease of Computers and
Software between GT Bicycles, Inc. and IBM Credit Corporation, which
lease terminates December 31, 1999.
5. GT Bicycles, Inc. is obligated under a certain Promissory Note to Doug
Olson for the principal amount of $65,000 due June 30, 2000.
- --------------------------------------------------------------------------------
-30-
<PAGE> 31
SCHEDULE 7.9
(Litigation)
No Borrower has any material pending or threatened legal proceedings, other than
routine litigation incidental to its business as discussed in the Form 10-K
filed with the SEC for Fiscal Year 1997 for GT Bicycles, Inc.
- --------------------------------------------------------------------------------
-31-
<PAGE> 32
SCHEDULE 7.12
(Pending Income Tax Assessments or Adjustments)
Except for the 1995 and 1996 Federal Income Tax Return of GT Bicycles, Inc.
which is currently under examination, all Borrower tax returns have been
examined by the applicable federal or California authority, or the statute of
limitations concerning such examination has passed.
- --------------------------------------------------------------------------------
-32-
<PAGE> 33
SCHEDULE 7.16
(Location of GT Bicycles, Inc. and Subsidiaries)
1. GT Bicycles, Inc. maintains its corporate headquarters at 2001 East
Dyer Road, Santa Ana, California, and maintains a research and
development facility at 711 1st Avenue, Longmont, Colorado.
2. GT Bicycles California, Inc. is located at 2001 East Dyer Road, Santa
Ana, California.
3. GT BMX, Inc. is located at 2001 East Dyer Road, Santa Ana, California.
4. Rite-Way Distributors, Inc. is located at 2001 East Dyer Road, Santa
Ana, California.
5. Rite-Way Distributors Central, Inc. is located at 13910 St. Charles
Rock Road, St. Louis County, Missouri, and also maintains a warehouse
facility at 8291 Forshee Drive, Westside Industrial Park, Jacksonville,
Florida.
6. Riteway Products East, Inc. is located at 25 Dewberry Lane,
Cheektowaga, New York.
7. Riteway Products North Central, Inc. is located at 2932 Behrens
Parkway, Sheboygan, Wisconsin.
8. Riteway Products France S.A.R.L. is located in Nancy, France.
9. Riteway Products Japan K.K. is located in Saitama, Japan.
10. Riteway Products Canada is located in Winnipeg, Manitoba, Canada.
11. Caratti Sport Limited is located in Bristol in the United Kingdom.
12. Innovation in Composites, Inc. is located at 4059 Oceanside Boulevard,
Suite E, Oceanside, California.
- --------------------------------------------------------------------------------
-33-
<PAGE> 34
SCHEDULE 8.6
(Permitted Liens)
Reference is made to the Liens disclosed on Schedule 7.6 hereto.
- --------------------------------------------------------------------------------
-34-
<PAGE> 35
SCHEDULE 8.14
(Insurance)
See attached Record of Insurance as of October 1, 1997.
- --------------------------------------------------------------------------------
-35-
<PAGE> 1
EXHIBIT 10.62
[MERRILL LYNCH LOGO] No. 230-07C17
================================================================================
WCMA(R) NOTE AND LOAN AGREEMENT
WCMA NOTE AND LOAN AGREEMENT NO. 230-07C17 ("Loan Agreement") dated as of April
20, 1998, between GT BICYCLES, INC., a corporation organized and existing under
the laws of the State of Delaware having its principal office at 2001 East Dyer,
Santa Ana, CA 92705 ("Customer"), and MERRILL LYNCH BUSINESS FINANCIAL SERVICES
INC., a corporation organized and existing under the laws of the State of
Delaware having its principal office at 33 West Monroe Street, Chicago, IL 60603
("MLBFS").
In accordance with that certain WORKING CAPITAL MANAGEMENT(R) ACCOUNT AGREEMENT
No. 230-07C17 ("WCMA Agreement") between Customer and MLBFS' affiliate, MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MLPF&S"), Customer has subscribed
to the WCMA Program described in the WCMA Agreement. The WCMA Agreement is by
this reference incorporated as a part hereof. In conjunction therewith and as
part of the WCMA Program, Customer has requested that MLBFS provide, and subject
to the terms and conditions herein set forth MLBFS has agreed to provide, a
commercial line of credit for Customer (the "WCMA Line of Credit").
Accordingly, and in consideration of the premises and of the mutual covenants of
the parties hereto, Customer and MLBFS hereby agree as follows:
1. DEFINITIONS
(a) SPECIFIC TERMS. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:
(i)"Activation Date" shall mean the date upon which MLBFS shall cause the WCMA
Line of Credit to be fully activated under MLPF&S' computer system as part of
the WCMA Program.
(ii) "Additional Agreements" shall mean all agreements, instruments, documents
and opinions other than this Loan Agreement, whether with or from Customer or
any other party, which are contemplated hereby or otherwise reasonably required
by MLBFS in connection herewith, or which evidence the creation, guaranty or
collateralization of any of the Obligations or the granting or perfection of
liens or security interests upon any collateral for the Obligations.
(iii) "Bankruptcy Event" shall mean any of the following: (A) a proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt or
receivership law or statute shall be filed or consented to by Customer or any
Guarantor; or (B) any such proceeding shall be filed against Customer or any
Guarantor and shall not be dismissed or withdrawn within sixty (60) days after
filing; or (C) Customer or any Guarantor shall make a general assignment for the
benefit of creditors; or (D) Customer or any Guarantor shall generally fail to
pay or admit in writing its inability to pay its debts as they become due; or
(E) Customer or any Guarantor shall be adjudicated a bankrupt or insolvent.
(iv) "Business Day" shall mean any day other than a Saturday, Sunday, federal
holiday or other day on which the New York Stock Exchange is regularly closed.
(v) "Commitment Expiration Date" shall mean May 11, 1998.
(vi) "Default" shall mean an "Event of Default" as defined in Section 7 hereof,
or an event which with the giving of notice, passage of time, or both, would
constitute such an Event of Default.
(vii) "General Funding Conditions" shall mean each of the following conditions
to any WCMA Loan by MLBFS hereunder: (A) no Default shall have occurred and be
continuing or would result from the making of
<PAGE> 2
any WCMA Loan hereunder by MLBFS; (B) there shall not have occurred and be
continuing any material adverse change in the business or financial condition of
Customer or any Guarantor; (C) all representations and warranties of Customer or
any Guarantor herein or in any Additional Agreements shall then be true and
correct in all material respects; (D) MLBFS shall have received this Loan
Agreement and all of the Additional Agreements, duly executed and filed or
recorded where applicable, all of which shall be in form and substance
reasonably satisfactory to MLBFS; (E) MLBFS shall have received evidence
reasonably satisfactory to it as the ownership of and the perfection and
priority of MLBFS' liens and security interests on any collateral for the
Obligations furnished pursuant to any of the Additional Agreements; and (F) any
additional conditions specified in the "WCMA Line of Credit Approval" letter
executed by MLBFS with respect to the transactions contemplated hereby shall
have been met to the reasonable satisfaction of MLBFS.
(viii) "Guarantor" shall mean a person or entity who has either guaranteed or
provided collateral for any or all of the Obligations; and "Business Guarantor"
shall mean any such Guarantor that is a corporation, partnership,
proprietorship, limited liability company or other entity regularly engaged in a
business activity.
(ix) "Initial Maturity Date" shall mean the first date upon which the WCMA Line
of Credit will expire (subject to renewal in accordance with the terms hereof);
to wit: October 31, 1999.
(x) "Interest Rate" shall mean a variable per annum rate of interest equal to
the sum of 2.50% and the 30-Day Commercial Paper Rate. The "30-Day Commercial
Paper Rate" shall mean, as of the date of any determination, the interest rate
from time to time published in the "Money Rates" section of The Wall Street
Journal for 30-day high-grade unsecured notes sold through dealers by major
corporations. The Interest Rate will change as of the date of publication in The
Wall Street Journal of a 30-Day Commercial Paper Rate that is different from
that published on the preceding Business Day. In the event that The Wall Street
Journal shall, for any reason, fail or cease to publish the 30-Day Commercial
Paper Rate, MLBFS will choose a reasonably comparable index or source to use as
the basis for the Interest Rate.
(xi) "Line Fee" shall mean the fee of $15,000.00 payable periodically by
Customer to MLBFS in connection with the WCMA Line of Credit, as provided
herein.
(xii) "Maturity Date" shall mean the date of expiration of the WCMA Line of
Credit.
(xiii) "Maximum WCMA Line of Credit" shall mean $3,000,000.00.
(xiv) "Obligations" shall mean all liabilities, indebtedness and other
obligations of Customer to MLBFS, howsoever created, arising or evidenced,
whether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary or joint or several,
and, without limiting the foregoing, shall include interest accruing after the
filing of any petition in bankruptcy, and all present and future liabilities,
indebtedness and obligations of Customer under this Loan Agreement.
(xv) "Renewal Year" shall mean and refer to the 12-month period immediately
following the Initial Maturity Date and each 12-month period thereafter.
(xvi) "WCMA Account" shall mean and refer to the Working Capital Management
Account of Customer with MLPF&S identified as Account No. 230-07C17 and any
successor WCMA account.
(xvii) "WCMA Loan" shall mean each advance made by MLBFS pursuant to this Loan
Agreement.
(xviii) "WCMA Loan Balance" shall mean an amount equal the aggregate unpaid
principal amount of all WCMA Loans.
(b) OTHER TERMS. Except as otherwise defined herein: (i) all terms used in this
Loan Agreement which are defined in the Uniform Commercial Code of Illinois
("UCC") shall have the meanings set forth in the UCC, and (ii) capitalized terms
used herein which are defined in the WCMA Agreement shall have the meanings set
forth in the WCMA Agreement.
<PAGE> 3
2. WCMA PROMISSORY NOTE
FOR VALUE RECEIVED, Customer hereby promises to pay to the order of MLBFS, at
the times and in the manner set forth in this Loan Agreement, or in such other
manner and at such place as MLBFS may hereafter designate in writing, the
following: (a) on the Maturity Date, or if earlier, on the date of termination
of the WCMA Line of Credit, the WCMA Loan Balance; (b) interest at the Interest
Rate on the outstanding WCMA Loan Balance, from and including the date on which
the initial WCMA Loan is made until the date of payment of all WCMA Loans in
full; and (c) on demand, all other sums payable pursuant to this Loan Agreement,
including, but not limited to, the periodic Line Fee and any late charges.
Except as otherwise expressly set forth herein, Customer hereby waives
presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate and all other
notices and formalities in connection with this WCMA Promissory Note and this
Loan Agreement.
3. WCMA LOANS
(a) ACTIVATION DATE. Provided that: (i) the Commitment Expiration Date shall not
then have occurred, and (ii) Customer shall have subscribed to the WCMA Program
and its subscription to the WCMA Program shall then be in effect, the Activation
Date shall occur on or promptly after the date, following the acceptance of this
Loan Agreement by MLBFS at its office in Chicago, Illinois, upon which each of
the General Funding Conditions shall have been met or satisfied to the
reasonable satisfaction of MLBFS. No activation by MLBFS of the WCMA Line of
Credit for a nominal amount shall be deemed evidence of the satisfaction of any
of the conditions herein set forth, or a waiver of any of the terms or
conditions hereof.
(b) WCMA LOANS. Subject to the terms and conditions hereof, during the period
from and after the Activation Date to the first to occur of the Maturity Date or
the date of termination of the WMCA Line of Credit pursuant to the terms hereof:
(i) MLBFS will make WCMA Loans to Customer in such amounts as Customer may from
time to time request in accordance with the terms hereof, up to an aggregate
outstanding amount not to exceed the Maximum WCMA Line of Credit, and (ii)
Customer may repay any WCMA Loans in whole or in part at any time, and request a
re-borrowing of amounts repaid on a revolving basis. Customer may request such
WCMA Loans by use of WCMA Checks, FTS, Visa(R) charges, wire transfers, or such
other means of access to the WCMA Line of Credit as may be permitted by MLBFS
from time to time; it being understood that so long as the WCMA Line of Credit
shall be in effect, any charge or debit to the WCMA Account which but for the
WCMA Line of Credit would under the terms of the WCMA Agreement result in an
overdraft, shall be deemed a request by Customer for a WCMA Loan.
(c) CONDITIONS OF WCMA LOANS. Notwithstanding the foregoing, MLBFS shall not be
obligated to make any WCMA Loan, and may without notice refuse to honor any such
request by Customer, if at the time of receipt by MLBFS of Customer's request:
(i) the making of such WCMA Loan would cause the Maximum WCMA Line of Credit to
be exceeded; or (ii) the Maturity Date shall have occurred, or the WCMA Line of
Credit shall have otherwise been terminated in accordance with the terms hereof;
or (iii) Customer's subscription to the WCMA Program shall have been terminated;
or (iv) an event shall have occurred and be continuing which shall have caused
any of the General Funding Conditions to not then be met or satisfied to the
reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a time
when any one or more of said conditions shall not have been met shall not in any
event be construed as a waiver of said condition or conditions or of any
Default, and shall not prevent MLBFS at any time thereafter while any condition
shall not have been met from refusing to honor any request by Customer for a
WCMA Loan.
(d) FORCE MAJEURE. MLBFS shall not be responsible, and shall have no liability
to Customer or any other party, for any delay or failure of MLBFS to honor any
request of Customer for a WCMA Loan or any other act or omission of MLBFS,
MLPF&S or any of their affiliates due to or resulting from any system failure,
error or delay in posting or other clerical error, loss of power, fire, Act of
God or other cause beyond the reasonable control of MLBFS, MLPF&S or any of
their affiliates unless directly arising out of the willful wrongful act or
gross negligence of MLBFS. In no event shall MLBFS be liable to Customer or any
other party for any incidental or consequential damages arising from any act or
omission by MLBFS, MLPF&S or any of their affiliates in connection with the WCMA
Line of Credit or this Loan Agreement.
<PAGE> 4
(E) INTEREST. The WCMA Loan Balance shall bear interest at the Interest Rate.
Interest shall be computed for the actual number of days elapsed on the basis of
a year consisting of 360 days. Notwithstanding any provision to the contrary in
this Agreement or any of the Additional Agreements, no provision of this
Agreement or any of the Additional Agreements shall require the payment or
permit the collection of any amount in excess of the maximum amount of interest
permitted to be charged by law ("Excess Interest"). If any Excess Interest is
provided for, or is adjudicated as being provided for, in this Agreement or any
of the Additional Agreements, then: (a) Customer shall not be obligated to pay
any Excess Interest; and (b) any Excess Interest that MLBFS may have received
hereunder or under any of the Additional Agreements shall, at the option of
MLBFS, be: (i) applied as a credit against the then unpaid WCMA Loan Balance,
(ii) refunded to the payer thereof, or (iii) any combination of the foregoing.
Except as otherwise provided herein, accrued and unpaid interest on the WCMA
Loan Balance shall be payable monthly on the last Business Day of each calendar
month, commencing with the last Business Day of the calendar month in which the
Activation Date shall occur. Customer hereby irrevocably authorizes and directs
MLPF&S to pay MLBFS such accrued interest from any available free credit
balances in the WCMA Account, and if such available free credit balances are
insufficient to satisfy any interest payment due, to liquidate any investments
in the Money Accounts (other than any investments constituting any Minimum Money
Accounts Balance under the WCMA Directed Reserve program) in an amount up to the
balance of such accrued interest, and pay to MLBFS the available proceeds on
account thereof. If available free credit balances in the WCMA Account and
available proceeds of the Money Accounts are insufficient to pay the entire
balance of accrued interest, and Customer otherwise fails to make such payment
when due, MLBFS may, in its sole discretion, make a WCMA Loan in an amount equal
to the balance of such accrued interest and pay the proceeds of such WCMA Loan
to itself on account of such interest. The amount of any such WCMA Loan will be
added to the WCMA Loan Balance. If MLBFS declines to extend a WCMA Loan to
Customer under these circumstances, Customer hereby authorizes and directs
MLPF&S to make all such interest payments to MLBFS from any Minimum Money
Accounts Balance. If there is no Minimum Money Accounts Balance, or it is
insufficient to pay all such interest, MLBFS will invoice Customer for payment
of the balance of the accrued interest, and Customer shall pay such interest as
directed by MLBFS within 5 Business Days of receipt of such invoice.
(f) PAYMENTS. All payments required or permitted to be made pursuant to this
Loan Agreement shall be made in lawful money of the United States. Unless
otherwise directed by MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customer's WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer hereby irrevocably authorizes and directs
MLPF&S to apply available free credit balances in the WCMA Account to the
repayment of the WCMA Loan Balance prior to application for any other purpose.
Payments to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. All funds received by MLBFS from MLPF&S pursuant to the aforesaid
authorization shall be applied by MLBFS to repayment of the WCMA Loan Balance.
The acceptance by or on behalf of MLBFS of a check or other payment for a lesser
amount than shall be due from Customer, regardless of any endorsement or
statement thereon or transmitted therewith, shall not be deemed an accord and
satisfaction or anything other than a payment on account, and MLBFS or anyone
acting on behalf of MLBFS may accept such check or other payment without
prejudice to the rights of MLBFS to recover the balance actually due or to
pursue any other remedy under this Loan Agreement or applicable law for such
balance. All checks accepted by or on behalf of MLBFS in connection with the
WCMA Line of Credit are subject to final collection.
(g) STATEMENTS. MLPF&S will include in each monthly statement it issues under
the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.
(h) USE OF LOAN PROCEEDS; SECURITIES TRANSACTIONS. The proceeds of each WCMA
Loan shall be used by Customer solely for working capital in the ordinary course
of its or any Guarantor's business, or, with the prior written consent of MLBFS,
for other lawful business purposes of Customer or any Guarantor not prohibited
hereby. Customer agrees that under no circumstances will funds borrowed from
MLBFS through the WCMA Line of Credit be used: (i) for personal, family or
household purposes of any
<PAGE> 5
person whatsoever, or (ii) to purchase, carry or trade in securities, or repay
debt incurred to purchase, carry or trade in securities, whether in or in
connection with the WCMA Account, another account of Customer with MLPF&S or an
account of Customer at any other broker or dealer in securities.
(i) RENEWAL AT OPTION OF MLBFS; RIGHT OF CUSTOMER TO TERMINATE. MLBFS may at any
time, in its sole discretion and at its sole option, renew the WCMA Line of
Credit for one or more Renewal Years; it being understood, however, that no such
renewal shall be effective unless set forth in a writing executed by a duly
authorized representative of MLBFS and delivered to Customer. Unless any such
renewal is accompanied by a proposed change in the terms of the WCMA Line of
Credit (other than the extension of the Maturity Date), no such renewal shall
require Customer's approval. Customer shall, however, have the right to
terminate the WCMA Line of Credit at any time upon written notice to MLBFS.
(j) LINE FEES. (i) In consideration of the extension of the WCMA Line of Credit
by MLBFS to Customer during the period from the Activation Date to the Initial
Maturity Date, Customer has paid or shall pay the Line Fee to MLBFS. If the Line
Fee has not heretofore been paid by Customer, Customer hereby authorizes MLBFS,
at its option, to either cause the Line Fee to be paid on the Activation Date
with a WCMA Loan, or invoice Customer for such Line Fee (in which event Customer
shall pay said fee within 5 Business Days after receipt of such invoice). No
delay in the Activation Date, howsoever caused, shall entitle Customer to any
rebate or reduction in the Line Fee or to any extension of the Initial Maturity
Date.
(ii) Customer shall pay an additional Line Fee for each Renewal Year. In
connection therewith, Customer hereby authorizes MLBFS, at its option, to either
cause each such additional Line Fee to be paid with a WCMA Loan on or at any
time after the first Business Day of such Renewal Year or invoiced to Customer
at such time (in which event Customer shall pay such Line Fee within 5 Business
Days after receipt of such invoice). Each Line Fee shall be deemed fully earned
by MLBFS on the date payable by Customer, and no termination of the WCMA Line of
Credit, howsoever caused, shall entitle Customer to any rebate or refund of any
portion of such Line Fee.
4. REPRESENTATIONS AND WARRANTIES
Customer represents and warrants to MLBFS that:
(a) ORGANIZATION AND EXISTENCE. Customer is a corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware and is
qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary, other than in any state where the failure to so qualify does not have
a material adverse effect on the business, operations or financial condition of
Customer; and, where applicable, each Business Guarantor is duly organized,
validly existing and in good standing under the laws of the state of its
formation and is qualified to do business and in good standing in each other
state where the nature of its business or the property owned by it make such
qualification necessary, other than in any state where the failure to so qualify
does not have a material adverse effect on the business, operations or financial
condition of such Business Guarantor.
(b) EXECUTION, DELIVERY AND PERFORMANCE. The execution, delivery and performance
by Customer of this Loan Agreement and by Customer and each Guarantor of such of
the Additional Agreements to which it is a party: (i) have been duly authorized
by all requisite action, (ii) do not and will not violate or conflict with any
material law or other material governmental requirement, or any of the
agreements, instruments or documents which formed or govern Customer or any such
Guarantor, and (iii) do not and will not breach or violate in any material way
any of the provisions of, and will not result in a default by Customer or any
such Guarantor under, any other agreement, instrument or document to which it is
a party or by which it or its properties are bound.
(c) NOTICES AND APPROVALS. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by Customer or any
Guarantor of such of this Loan Agreement and the Additional Agreements to which
it is a party.
(d) ENFORCEABILITY. This Loan Agreement and such of the Additional Agreements to
which Customer or any Guarantor is a party are the respective legal, valid and
binding obligations of Customer and such Guarantor, enforceable against it or
them, as the case may be, in accordance with their respective terms, except as
<PAGE> 6
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally or by general principles of equity.
(e) FINANCIAL STATEMENTS. Except as expressly set forth in Customer's or any
Business Guarantor's financial statements, all financial statements of Customer
and each Business Guarantor furnished to MLBFS have been prepared in conformity
with generally accepted accounting principles, consistently applied, are true
and correct, and fairly present in all material respects the financial condition
of it as at such dates and the results of its operations for the periods then
ended; and since the most recent date covered by such financial statements,
there has been no material adverse change in any such financial condition or
operation. All financial statements furnished to MLBFS of any Guarantor other
than a Business Guarantor are true and correct and fairly represent in all
material respects such Guarantor's financial condition as of the date of such
financial statements, and since the most recent date of such financial
statements, there has been no material adverse change in such financial
condition.
(f) LITIGATION. No litigation, arbitration, administrative or governmental
proceedings are pending or, to the knowledge of Customer, threatened against
Customer or any Guarantor, which would, if adversely determined, materially and
adversely affect the liens and security interests of MLBFS hereunder or under
any of the Additional Agreements, the financial condition of Customer or any
such Guarantor or the continued operations of Customer or any Business
Guarantor.
(g) TAX RETURNS. All federal, state and local tax returns, reports and
statements required to be filed by Customer and each Guarantor have been filed
with the appropriate governmental agencies and all taxes due and payable by
Customer and each Guarantor have been timely paid (except to the extent that any
such failure to file or pay will not materially and adversely affect either the
liens and security interests of MLBFS hereunder or under any of the Additional
Agreements, the financial condition of Customer or any Guarantor, or the
continued operations of Customer or any Business Guarantor).
Each of the foregoing representations and warranties: (i) has been and will be
relied upon as an inducement to MLBFS to provide the WCMA Line of Credit, and
(ii) is continuing and shall be deemed remade by Customer concurrently with each
request for a WCMA Loan.
5. FINANCIAL AND OTHER INFORMATION
Customer shall furnish or cause to be furnished to MLBFS during the term of this
Loan Agreement all of the following:
(a) ANNUAL FINANCIAL STATEMENTS. Within 120 days after the close of each fiscal
year of Customer, Customer shall furnish or cause to be furnished to MLBFS a
copy of the annual audited financial statements of Customer, consisting of at
least a balance sheet as at the close of such fiscal year and related statements
of income, retained earnings and cash flows, certified by its current
independent certified public accountants or other independent certified public
accountants reasonably acceptable to MLBFS.
(b) INTERIM FINANCIAL STATEMENTS. Within 45 days after the close of each fiscal
quarter of Customer, Customer shall furnish or cause to be furnished to MLBFS:
(i) its statement of profit and loss for the fiscal quarter then ended, and (ii)
a balance sheet as at the close of such fiscal quarter; all in reasonable detail
and certified by its chief financial officer.
(c) SEC REPORTS. Customer shall furnish to MLBFS a copy of each 10-K and 10-Q
report filed with the SEC not later than 10 days after filing with the SEC.
(d) OTHER INFORMATION. Customer shall furnish or cause to be furnished to MLBFS
such other information as MLBFS may from time to time reasonably request
relating to Customer or any Guarantor.
<PAGE> 7
6. OTHER COVENANTS
Customer further covenants and agrees during the term of this Loan Agreement
that:
(a) FINANCIAL RECORDS; INSPECTION. Customer and each Business Guarantor will:
(i) maintain at its principal place of business complete and accurate books and
records, and maintain all of its financial records in a manner consistent with
the financial statements heretofore furnished to MLBFS, or prepared on such
other basis as may be approved in writing by MLBFS; and (ii) permit MLBFS or its
duly authorized representatives, upon reasonable notice and at reasonable times,
to inspect its properties (both real and personal), operations, books and
records.
(b) TAXES. Customer and each Guarantor will pay when due all taxes, assessments
and other governmental charges, howsoever designated, and all other liabilities
and obligations, except to the extent that any such failure to pay will not
materially and adversely affect either any liens and security interests of MLBFS
under any Additional Agreements, the financial condition of Customer or any
Guarantor or the continued operations of Customer or any Business Guarantor.
(c) COMPLIANCE WITH LAWS AND AGREEMENTS. Neither Customer nor any Guarantor will
violate any law, regulation or other governmental requirement, any judgment or
order of any court or governmental agency or authority, or any agreement,
instrument or document to which it is a party or by which it is bound, if any
such violation will materially and adversely affect either any liens and
security interests of MLBFS under any Additional Agreements, the financial
condition of Customer or any Guarantor, or the continued operations of Customer
or any Business Guarantor.
(d) NOTIFICATION BY CUSTOMER. Customer shall provide MLBFS with prompt written
notification of: (i) any Default; (ii) any materially adverse change in the
business, financial condition or operations of Customer or any Business
Guarantor; and (iii) any information which indicates that any financial
statements of Customer or any Guarantor fail in any material respect to present
fairly the financial condition and results of operations purported to be
presented in such statements. Each notification by Customer pursuant hereto
shall specify the event or information causing such notification, and, to the
extent applicable, shall specify the steps being taken to rectify or remedy such
event or information.
(e) NOTICE OF CHANGE. Customer shall give MLBFS not less than 30 days prior
written notice of any change in the name (including any fictitious name) or
principal place of business or residence of Customer or any Guarantor.
(f) CONTINUITY. Except upon the prior written consent of MLBFS, which consent
will not be unreasonably withheld: (i) neither Customer nor any Business
Guarantor shall be a party to any merger or consolidation with, or purchase or
otherwise acquire all or substantially all of the assets of, or any material
stock, partnership, joint venture or other equity interest in, any person or
entity, or sell, transfer or lease all or any substantial part of its assets, if
any such action would result in either: (A) a material change in the principal
business, ownership or control of Customer or such Business Guarantor, or (B) a
material adverse change in the financial condition or operations of Customer or
such Business Guarantor; (ii) Customer and each Business Guarantor shall
preserve their respective existence and good standing in the jurisdictions of
establishment and operation, and shall not operate in any material business
substantially different from their respective business in effect as of the date
of application by Customer for credit from MLBFS; and (iii) neither Customer nor
any Business Guarantor shall cause or permit any material change in its
controlling ownership.
(g) MINIMUM TANGIBLE NET WORTH. Customer's "tangible net worth" shall at all
times exceed $37,000,000.00. For the purposes hereof, the term "tangible net
worth" shall mean Customer's net worth as shown on Customer's regular financial
statements prepared in a manner consistent with the terms hereof, but excluding
an amount equal to: (i) any assets which are ordinarily classified as
"intangible" in accordance with generally accepted accounting principles, and
(ii) any amounts now or hereafter directly or indirectly owing to Customer by
officers, shareholders or affiliates of Customer.
<PAGE> 8
(h) DEBT TO WORTH. The ratio of Customer's total debt to Customer's tangible net
worth, determined as aforesaid, shall not at any time exceed 3.75 to 1.00.
(i) NEGATIVE PLEDGE. Except upon the prior written consent of MLBFS, Customer
shall not directly or indirectly sell, assign, transfer, mortgage, encumber,
pledge or grant a lien or security interest to anyone other than MLBFS in the
real property and improvements thereon commonly known as 1801A Ironhorse Drive,
Longmont, CO 80501.
ACQUISITIONS. Without limiting any other provision hereof, Customer agrees that
prior to Customer's direct or indirect acquisition of the assets or stock of any
other entity, it will (i) obtain the written consent of MLBFS to such
transaction not less than 30 days prior thereto if the aggregate cost thereof is
in excess of $10,000,000.00, and (ii) notify MLBFS in writing not less than 30
days prior thereto if the aggregate cost thereof is equal to or less than
$10,000,000.00.
(j) MINIMUM CASH FLOW. The "Net Cash Flow" of Customer as of the end of each of
its fiscal years shall not be less than $1,000,000.00. As used herein, "Net Cash
Flow" shall mean the excess of (i) the sum of Customer's annual net after-tax
income, depreciation and amortization, over (ii) the sum of the current portion
of long term debt (excluding, however, for fiscal year 1998, an amount equal to
principal due and outstanding, not to exceed $15,000,000.00, as of June 1, 1999
under that certain Third Amended and Restated Credit Agreement (Receivables and
Inventory) dated April __, 1998 among Customer, and Bank of America N.T.S.A.,
and all dividends and other distributions to shareholders; all as shown on
Customer's regular financial statements prepared in a manner consistent with the
terms hereof.
7. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement:
(a) EXCEEDING THE MAXIMUM WCMA LINE OF CREDIT. If the WCMA Loan Balance shall at
any time exceed the Maximum WCMA Line of Credit and Customer shall fail to
deposit sufficient funds into the WCMA Account to reduce the WCMA Loan Balance
below the Maximum WCMA Line of Credit within five (5) Business Days after
written notice thereof shall have been given by MLBFS to Customer.
(b) OTHER FAILURE TO PAY. Customer shall fail to pay to MLBFS or deposit into
the WCMA Account when due any other amount owing or required to be paid or
deposited by Customer under this Loan Agreement, or shall fail to pay when due
any other Obligations, and any such failure shall continue for more than five
(5) Business Days after written notice thereof shall have been given by MLBFS to
Customer.
(c) FAILURE TO PERFORM. Customer or any Guarantor shall default in the
performance or observance of any covenant or agreement on its part to be
performed or observed under this Loan Agreement or any of the Additional
Agreements (not constituting an Event of Default under any other clause of this
Section), and such default shall continue unremedied for ten (10) Business Days
after written notice thereof shall have been given by MLBFS to Customer.
(d) BREACH OF WARRANTY. Any representation or warranty made by Customer or any
Guarantor contained in this Loan Agreement or any of the Additional Agreements
shall at any time prove to have been incorrect in any material respect when
made.
(e) DEFAULT UNDER OTHER AGREEMENT. A default or Event of Default by Customer or
any Guarantor shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed.
(f) BANKRUPTCY EVENT. Any Bankruptcy Event shall occur.
(g) MATERIAL IMPAIRMENT. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of full payment or performance
by Customer or any Guarantor of any of their respective
<PAGE> 9
liabilities or obligations under this Loan Agreement or any of the Additional
Agreements to which Customer or such Guarantor is a party has been materially
impaired.
(h) ACCELERATION OF DEBT TO OTHER CREDITORS. Any event shall occur which results
in the acceleration of the maturity of any indebtedness of $1,000,000.00 or more
of Customer or any Guarantor to another creditor under any indenture, agreement,
undertaking, or otherwise.
8. REMEDIES
(a) REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of any
Event of Default, MLBFS may at its sole option do any one or more or all of the
following, at such time and in such order as MLBFS may in its sole discretion
choose:
(i) TERMINATION. MLBFS may without notice terminate the WCMA Line of Credit and
all obligations to provide the WCMA Line of Credit or otherwise extend any
credit to or for the benefit of Customer (it being understood, however, that
upon the occurrence of any Bankruptcy Event the WCMA Line of Credit and all such
obligations shall automatically terminate without any action on the part of
MLBFS); and upon any such termination MLBFS shall be relieved of all such
obligations.
(ii) ACCELERATION. MLBFS may declare the principal of and interest on the WCMA
Loan Balance, and all other Obligations to be forthwith due and payable,
whereupon all such amounts shall be immediately due and payable, without
presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate or other notice
or formality of any kind, all of which are hereby expressly waived; provided,
however, that upon the occurrence of any Bankruptcy Event all such principal,
interest and other Obligations shall automatically become due and payable
without any action on the part of MLBFS.
(b) SET-OFF. MLBFS shall have the further right upon the occurrence and during
the continuance of an Event of Default to set-off, appropriate and apply toward
payment of any of the Obligations, in such order of application as MLBFS may
from time to time and at any time elect, any cash, credit, deposits, accounts,
securities and any other property of Customer which is in transit to or in the
possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or
affiliate of MLBFS or MLPF&S, including, without limitation, the WCMA Account
and any Money Accounts, and all cash, securities and other financial assets
therein or controlled thereby, and all proceeds thereof. Customer hereby
collaterally assigns and grants to MLBFS a continuing security interest in all
such property as additional security for the Obligations. Upon the occurrence
and during the continuance of an Event of Default, MLBFS shall have all rights
in such property available to collateral assignees and secured parties under all
applicable laws, including, without limitation, the UCC.
(c) REMEDIES ARE SEVERABLE AND CUMULATIVE. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Additional Agreements, at law or in equity, and any
one or more of such rights and remedies may be exercised simultaneously or
successively.
9. MISCELLANEOUS
(a) NON-WAIVER. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement or any of the Additional
Agreements shall operate as a waiver thereof, and no single or partial exercise
of any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. Neither any waiver
of any provision of this Loan Agreement or any of the Additional Agreements, nor
any consent to any departure by Customer therefrom, shall be effective unless
the same shall be in writing and signed by MLBFS. Any waiver of any provision of
this Loan Agreement or any of the Additional Agreements and any consent to any
departure by Customer from the terms of this Loan Agreement or any of the
Additional Agreements shall be effective only in the specific instance and for
the specific purpose for which given. Except as otherwise expressly provided
herein, no notice to or demand on Customer shall in any case entitle Customer to
any other or further notice or demand in similar or other circumstances.
<PAGE> 10
(b) DISCLOSURE. Customer hereby irrevocably authorizes MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other
any and all financial and other information about Customer. In connection with
said authorization, the parties recognize that in order to provide a WCMA Line
of Credit certain information about Customer is required to be made available on
a computer network accessible by certain affiliates of MLBFS, including MLPF&S.
(c) COMMUNICATIONS. All notices and other communications required or permitted
hereunder shall be in writing, and shall be either delivered personally, mailed
by postage prepaid certified mail or sent by express overnight courier or by
facsimile. Such notices and communications shall be deemed to be given on the
date of personal delivery, facsimile transmission or actual delivery of
certified mail, or one Business Day after delivery to an express overnight
courier. Unless otherwise specified in a notice sent or delivered in accordance
with the terms hereof, notices and other communications in writing shall be
given to the parties hereto at their respective addresses set forth at the
beginning of this Loan Agreement, or, in the case of facsimile transmission, to
the parties at their respective regular facsimile telephone number.
(d) COSTS, EXPENSES AND TAXES. Customer shall upon demand pay or reimburse MLBFS
for: (i) all Uniform Commercial Code filing and search fees and expenses
incurred by MLBFS in connection with the verification, perfection or
preservation of MLBFS' rights hereunder or in any collateral for the
Obligations; (ii) any and all stamp, transfer and other taxes and fees payable
or determined to be payable in connection with the execution, delivery and/or
recording of this Loan Agreement or any of the Additional Agreements; and (iii)
all reasonable fees and out-of-pocket expenses (including, but not limited to,
reasonable fees and expenses of outside counsel) incurred by MLBFS in connection
with the collection of any sum payable hereunder or under any of the Additional
Agreements not paid when due, the enforcement of this Loan Agreement or any of
the Additional Agreements and the protection of MLBFS' rights hereunder or
thereunder, excluding, however, salaries and normal overhead attributable to
MLBFS' employees. The obligations of Customer under this paragraph shall survive
the expiration or termination of this Loan Agreement and the discharge of the
other Obligations.
(e) RIGHT TO PERFORM OBLIGATIONS. If Customer shall fail to do any act or thing
which it has covenanted to do under this Loan Agreement or any representation or
warranty on the part of Customer contained in this Loan Agreement shall be
breached, MLBFS may, in its sole discretion, after 5 days written notice is sent
to Customer (or such lesser notice, including no notice, as is reasonable under
the circumstances), do the same or cause it to be done or remedy any such
breach, and may expend its funds for such purpose. Any and all reasonable
amounts so expended by MLBFS shall be repayable to MLBFS by Customer upon
demand, with interest at the Interest Rate during the period from and including
the date funds are so expended by MLBFS to the date of repayment, and all such
amounts shall be additional Obligations. The payment or performance by MLBFS of
any of Customer's obligations hereunder shall not relieve Customer of said
obligations or of the consequences of having failed to pay or perform the same,
and shall not waive or be deemed a cure of any Default.
(f) LATE CHARGE. Any payment required to be made by Customer pursuant to this
Loan Agreement not paid within ten (10) days of the applicable due date shall be
subject to a late charge in an amount equal to the lesser of: (i) 5% of the
overdue amount, or (ii) the maximum amount permitted by applicable law. Such
late charge shall be payable on demand, or, without demand, may in the sole
discretion of MLBFS be paid by a WCMA Loan and added to the WCMA Loan Balance in
the same manner as provided herein for accrued interest.
(g) FURTHER ASSURANCES. Customer agrees to do such further acts and things and
to execute and deliver to MLBFS such additional agreements, instruments and
documents as MLBFS may reasonably require or deem advisable to effectuate the
purposes of this Loan Agreement or any of the Additional Agreements.
(h) BINDING EFFECT. This Loan Agreement and the Additional Agreements shall be
binding upon, and shall inure to the benefit of MLBFS, Customer and their
respective successors and assigns. Customer shall not assign any of its rights
or delegate any of its obligations under this Loan Agreement or any of the
Additional Agreements without the prior written consent of MLBFS. Unless
otherwise expressly agreed to in a writing
<PAGE> 11
signed by MLBFS, no such consent shall in any event relieve Customer of any of
its obligations under this Loan Agreement or the Additional Agreements.
(i) HEADINGS. Captions and section and paragraph headings in this Loan Agreement
are inserted only as a matter of convenience, and shall not affect the
interpretation hereof.
(j) GOVERNING LAW. This Loan Agreement, and, unless otherwise expressly provided
therein, each of the Additional Agreements, shall be governed in all respects by
the laws of the State of Illinois.
(k) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this Loan
Agreement and the Additional Agreements shall be interpreted in such manner as
to be effective and valid under applicable law. Any provision of this Loan
Agreement or any of the Additional Agreements which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
the remaining provisions of this Loan Agreement and the Additional Agreements or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(l) TERM. This Loan Agreement shall become effective on the date accepted by
MLBFS at its office in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as the WCMA Line of Credit shall be
in effect or there shall be any Obligations outstanding.
(m) COUNTERPARTS. This Loan Agreement may be executed in one or more
counterparts which, when taken together, constitute one and the same agreement.
(n) JURISDICTION; WAIVER. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS
BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION, IN
ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT AND THE ADDITIONAL
AGREEMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER JURISDICTION WHERE
CUSTOMER OR ANY COLLATERAL FOR THE OBLIGATIONS MAY BE LOCATED. CUSTOMER CONSENTS
TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN ANY STATE OR FEDERAL COURT
IN THE COUNTY OF COOK FOR SUCH PURPOSES, AND CUSTOMER WAIVES ANY AND ALL RIGHTS
TO CONTEST SAID JURISDICTION AND VENUE. CUSTOMER FURTHER WAIVES ANY RIGHTS TO
COMMENCE ANY ACTION AGAINST MLBFS IN ANY JURISDICTION EXCEPT IN THE COUNTY OF
COOK AND STATE OF ILLINOIS. MLBFS AND CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY
AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY
MATTER RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE WCMA LINE OF
CREDIT, THIS LOAN AGREEMENT, ANY ADDITIONAL AGREEMENTS AND/OR ANY OF THE
TRANSACTIONS WHICH ARE THE SUBJECT MATTER OF THIS LOAN AGREEMENT.
(o) INTEGRATION. THIS LOAN AGREEMENT, TOGETHER WITH THE ADDITIONAL AGREEMENTS,
CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS THE FULL AND FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN AGREEMENTS OR PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS OF THE PARTIES. WITHOUT LIMITING THE FOREGOING, CUSTOMER ACKNOWLEDGES
THAT EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN: (I) NO PROMISE OR COMMITMENT
HAS BEEN MADE TO IT BY MLBFS, MLPF&S OR ANY OF THEIR RESPECTIVE EMPLOYEES,
AGENTS OR REPRESENTATIVES TO EXTEND THE AVAILABILITY OF THE WCMA LINE OF CREDIT
OR THE MATURITY DATE, OR TO INCREASE THE MAXIMUM WCMA LINE OF CREDIT, OR
OTHERWISE EXTEND ANY OTHER CREDIT TO CUSTOMER OR ANY OTHER PARTY; (II) NO
PURPORTED EXTENSION OF THE MATURITY DATE, INCREASE IN THE MAXIMUM WCMA LINE OF
CREDIT OR OTHER EXTENSION OR AGREEMENT TO EXTEND CREDIT SHALL BE VALID OR
BINDING UNLESS EXPRESSLY SET FORTH IN A WRITTEN INSTRUMENT SIGNED BY MLBFS; AND
(III) THIS LOAN AGREEMENT SUPERSEDES AND REPLACES ANY AND ALL PROPOSALS, LETTERS
OF INTENT AND APPROVAL AND COMMITMENT LETTERS FROM MLBFS TO CUSTOMER, NONE OF
WHICH SHALL BE CONSIDERED AN ADDITIONAL
<PAGE> 12
AGREEMENT. NO AMENDMENT OR MODIFICATION OF THIS AGREEMENT OR ANY OF THE
ADDITIONAL AGREEMENTS TO WHICH CUSTOMER IS A PARTY SHALL BE EFFECTIVE UNLESS IN
A WRITING SIGNED BY BOTH MLBFS AND CUSTOMER
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year
first above written.
GT BICYCLES, INC.
By: /s/ CHARLES CIMITILE /s/ MICHAEL HAYNES
-----------------------------------------------------------------
Signature (1) Signature (2)
Charles Cimitile Michael Haynes
-----------------------------------------------------------------
Printed Name Printed Name
Chief Financial Officer President
-----------------------------------------------------------------
Title Title
Accepted at Chicago, Illinois:
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
By: /s/ KATHY THOMAS
----------------------------------
<PAGE> 1
EXHIBIT 10.63
[MERRILL LYNCH LETTERHEAD]
Private Client Group
Merrill Lynch Business
Financial Services Inc.
33 West Monroe Street
22nd Floor
Chicago, Illinois 60603
312/845-1020
FAX 312/845-9093
April 30, 1998
GT Bicycles, Inc.
2001 E. Dyer
Santa Ana, CA 92705
Re: Amendment to Loan Documents
Ladies & Gentlemen:
This Letter Agreement will serve to confirm certain agreements of Merrill Lynch
Business Financial Services Inc. ("MLBFS") and GT Bicycles, Inc. ("Customer")
with respect to: (i) that certain WCMA NOTE AND LOAN AGREEMENT No. 230-07C17
between MLBFS and Customer (including any previous amendments and extensions
thereof), and (ii) all other agreements between MLBFS and Customer or any party
who has guaranteed or provided collateral for Customer's obligations to MLBFS (a
"Guarantor") in connection therewith ( collectively, the "Loan Documents").
Capitalized terms used herein and not defined herein shall have the meaning set
forth in the Loan Documents.
Subject to the terms hereof, effective as of the "Effective Date" (as defined
below), the Loan Documents are hereby amended as follows:
1. The annual "Line Fee" during the period ending October 31, 1999 is
$22,500.00. MLBFS acknowledges the receipt of Customer's check no. 91114 in the
amount of $15,000.00 as partial satisfaction of said fee. Customer hereby
authorizes and directs MLBFS to charge the remaining balance of $7,500.00 to
WCMA Account No. 230-07C17 on or at any time after the Effective Date.
Except as expressly amended hereby, the Loan Documents shall continue in full
force and effect upon all of their terms and conditions.
By their execution of this Letter Agreement, the below-named Guarantors hereby
consent to the foregoing modifications to the Loan Documents, and hereby agree
that the "Obligations" under their Unconditional Guaranty shall extend to and
include the Obligations of Customer under the Loan Documents, as amended hereby.
Customer and said Guarantors acknowledge, warrant and agree, as a primary
inducement to MLBFS to enter into this Agreement, that: (a) no Default or Event
of Default has occurred and is continuing under the Loan Documents; (b) each of
the warranties of Customer in the Loan Documents are true and correct as of the
date hereof and shall be deemed remade as of the date hereof; (c) neither
Customer nor any of said Guarantors have any claim against MLBFS or any of its
affiliates arising out of or in connection w ith the Loan Documents or any other
matter whatsoever; and (d) neither Customer nor any of said Guarantors have any
defense to payment of any amounts owing, or any right of counterclaim for any
reason under, the Loan Documents.
<PAGE> 2
GT Bicycles, Inc.
April 30, 1998
Page No. 2
MLBFS requests that as soon as feasible Customer furnish to MLBFS the following
item (however, the Effective Date of this Letter Agreement is not conditioned
upon the receipt of the such item):
An executed negative pledge UCC-1 Financing Statement with a legal description.
Provided that no Event of Default, or event which with the giving of notice,
passage of time, or both, would constitute an Event of Default, shall then have
occurred and be continuing under the terms of the Loan Documents, the amendments
and agreements in this Letter Agreement will become effective on the date (the
"Effective Date") upon which: (a) Customer and the Guarantors shall have
executed and returned the duplicate copy of this Letter Agreement enclosed
herewith; and (b) an officer of MLBFS shall ha ve reviewed and approved this
Letter Agreement as being consistent in all respects with the original internal
authorization hereof.
Notwithstanding the foregoing, if Customer and the Guarantors do not execute and
return the duplicate copy of this Letter Agreement within 14 days from the date
hereof, or if for any other reason (other than the sole fault of MLBFS) the
Effective Date shall not occur within said 14-day period, then all of said
amendments and agreements will, at the sole option of MLBFS, be void.
Very truly yours,
Merrill Lynch Business Financial Services Inc.
By: /s/ Ellen Lee
-----------------------------------------
Ellen Lee
Division Documentation Manager
Accepted:
GT Bicycles, Inc.
By: /s/ Charles Cimitle
-----------------------------------------
Printed Name: Charles Cimitile
-------------------------------
Title: VP of Finance/CFO
--------------------------------------
Approved:
GT Bicycles California, Inc.
By: /s/ Charles Cimitle
-----------------------------------------
Printed Name: Charles Cimitile
-------------------------------
Title: VP of Finance/CFO
--------------------------------------
<PAGE> 3
GT Bicycles, Inc.
April 30, 1998
Page No. 3
GT BMX, Inc.
By: /s/ Charles Cimitle
-----------------------------------------
Printed Name: Charles Cimitile
-------------------------------
Title: VP of Finance/CFO
--------------------------------------
Riteway Distributors, Inc.
By: /s/ Charles Cimitle
-----------------------------------------
Printed Name: Charles Cimitile
-------------------------------
Title: VP of Finance/CFO
--------------------------------------
Riteway Products East, Inc.
By: /s/ Charles Cimitle
-----------------------------------------
Printed Name: Charles Cimitile
-------------------------------
Title: VP of Finance/CFO
--------------------------------------
Riteway Products North Central, Inc.
By: /s/ Charles Cimitle
-----------------------------------------
Printed Name: Charles Cimitile
-------------------------------
Title: VP of Finance/CFO
--------------------------------------
Rite-way Distributors Central, Inc.
By: /s/ Charles Cimitle
-----------------------------------------
Printed Name: Charles Cimitile
-------------------------------
Title: VP of Finance/CFO
--------------------------------------
<PAGE> 1
EXHIBIT 10.64
================================================================================
FIRST SUPPLEMENTAL AGREEMENT
AMENDING AND RESTATING THE
MULTICURRENCY CREDIT FACILITIES AGREEMENT DATED
18 SEPTEMBER 1996
================================================================================
30 JUNE 1998
CARATTI SPORT LIMITED
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
<PAGE> 2
FIRST SUPPLEMENTAL AGREEMENT made on 30 June 1998
BETWEEN
(1) CARATTI SPORT LIMITED of 6-9 Middle Street, London EC1A 7JA (the BORROWER);
(2) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the BANK) acting
through its London Branch at 1 Alie Street, London E1 8DE.
WHEREAS:
(A) The parties to this Supplemental Agreement are parties to a multicurrency
credit facilities agreement dated 18 September, 1996 (the FACILITY AGREEMENT).
(B) The parties to this Supplemental Agreement wish to amend and restate the
Facility Agreement on the terms set out in Schedule 1 (the RESTATED FACILITY
AGREEMENT) and subject to the terms of this Supplemental Agreement.
IT IS AGREED:
DEFINITIONS
1.1 Unless otherwise defined herein or the context requires otherwise, terms
defined in the Restated Facility Agreement have the same meanings when used in
this Supplemental Agreement.
1.2 In this Supplemental Agreement, unless the contrary intention appears or the
contract requires otherwise:
EFFECTIVE DATE means the date on which the conditions precedent in Clause 3 are
satisfied;
1.3 Clauses 1.2, 1.3, 1.4, 22.1, 22.2, 22.3, 27, 28 ,29.1, 29.2, 29.3, 31.1,
31.2, 31.3, 31.4, and 31.5 of the Restated Facility Agreement shall apply to
this Supplemental Agreement, mutatis mutandis.
AMENDMENTS TO FACILITY AGREEMENT
2. Subject to clause 4.2 below, on the Effective Date the Facility Agreement
shall for all purposes be amended and restated so as to incorporate all the
amendments reflected in Schedule 1 hereto and so that the Facility Agreement
shall be read and construed as so amended and restated.
CONDITIONS PRECEDENT
3.1 The obligations of the Bank and the amendments to the Facility Agreement
reflected in Schedule 1 hereto shall each be subject to and conditional upon:
(a) receipt by the Bank of a duly executed original of this Supplemental
Agreement;
<PAGE> 3
(b) receipt by the Bank of the following (each in form and substance
satisfactory to it) in respect of the Borrower:
(i) copies of the Memorandum and Articles of Association,
certificate of incorporation and certificates of name change (if
any);
(ii) evidence of all relevant corporate authority to enter into and
perform this Supplemental Agreement; and
(iii) secretarial or director's certificate certifying copies of the
foregoing;
(c) receipt by the Bank of the documents listed in the First Schedule to the
Restated Facility Agreement set out in Schedule 1 hereto.
3.2 The Bank will notify the Borrower when the conditions precedent described in
clause 3.1 have been satisfied and the date of the Effective Date.
REPRESENTATIONS AND WARRANTIES
4.1 On the date of this Supplemental Agreement the Borrower represents and
warrants to the Bank, with reference to the facts and circumstances now
subsisting, that each of the representations and warranties contained in clause
14 of the Restated Facility Agreement remains true, accurate and correct as if
the Restated Facility Agreement were in full force and effect.
4.2 The Borrower shall be deemed to represent and warrant to the Bank on the
Effective Date with reference to the facts and circumstances then subsisting,
that each of the representations and warranties referred to in clause 4.1 above
remains true, accurate and correct.
FINANCE DOCUMENT
5. This Supplemental Agreement is a Finance Document for the purposes of the
Restated Facility Agreement.
COUNTERPARTS
6. This Agreement may be executed in any number of counterparts, all of which
taken together and delivered to the Bank shall constitute one and the same
instrument. Any party may enter into this Agreement by signing any such
counterpart.
GOVERNING LAW AND SUBMISSION TO JURISDICTION
7. This Agreement is governed by and shall be construed in accordance with
English law.
THIS SUPPLEMENTAL AGREEMENT has been executed on the date stated above.
<PAGE> 4
SIGNED by )
for and on behalf of )
CARATTI SPORT LIMITED ) ARTHUR JOHN COOK
in the presence of: )
S JOHNSTON
SIGNED by )
for and on behalf of )
BANK OF AMERICA NATIONAL ) TIM JACOB
TRUST AND SAVINGS )
ASSOCIATION in the presence of: )
NEIL MARTIN
<PAGE> 5
SCHEDULE 1
CARATTI SPORT LTD
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
====================
MULTICURRENCY CREDIT FACILITIES AGREEMENT
====================
<PAGE> 6
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
1. INTERPRETATION..............................................................8
2. THE FACILITIES.............................................................17
3. PURPOSE....................................................................18
4. CONDITIONS PRECEDENT.......................................................18
5. UTILISATION OF THE FACILITIES..............................................18
6. INTEREST...................................................................21
7. REPAYMENT, NETTING OFF AND TERMINATION.....................................21
8. PREPAYMENT AND CANCELLATION................................................22
9. TAXES......................................................................22
10. TAX RECEIPTS/CREDITS.......................................................23
11. INCREASED COSTS............................................................24
12. ILLEGALITY.................................................................25
13. MITIGATION.................................................................25
14. REPRESENTATIONS............................................................25
15. COVENANTS..................................................................29
16. EVENTS OF DEFAULT..........................................................40
17. DEFAULT INTEREST AND INDEMNITY.............................................43
18. CURRENCY OF ACCOUNT AND PAYMENT............................................44
19. PAYMENTS...................................................................44
20. SET-OFF....................................................................45
21. FEES.......................................................................45
22. COSTS AND EXPENSES.........................................................46
23. BENEFIT OF AGREEMENT.......................................................46
24. ASSIGNMENTS AND TRANSFERS..................................................46
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
25. DISCLOSURE OF INFORMATION..................................................47
26. CALCULATIONS AND EVIDENCE OF DEBT..........................................47
27. RIGHTS CUMULATIVE, WAIVERS.................................................47
28. PARTIAL INVALIDITY.........................................................48
29. NOTICES....................................................................48
30. LAW........................................................................50
31. JURISDICTION...............................................................50
THE FIRST SCHEDULE ..............................................................51
Condition Precedent Documents...............................................51
THE SECOND SCHEDULE..............................................................53
Notice of Drawdown..........................................................53
THE THIRD SCHEDULE...............................................................54
Part 1......................................................................54
Ineligible Accounts.........................................................54
Part 2......................................................................55
Ineligible Inventory........................................................55
THE FOURTH SCHEDULE..............................................................56
Hire Purchase Agreements....................................................56
THE FIFTH SCHEDULE...............................................................57
Foreign Exchange Contracts..................................................57
THE SIXTH SCHEDULE...............................................................58
Borrowing Base Certificate..................................................58
</TABLE>
<PAGE> 8
THIS AGREEMENT is made on 18 September 1996
BETWEEN
(1) CARATTI SPORT LTD a company incorporated in England and Wales (No.
01702392) whose registered office is at 6-9 Middle Street, London EC1A
7JA (the BORROWER); and
(2) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the BANK),
acting through its London Branch at 1 Alie Street, London E1 8DE.
NOW IT IS HEREBY AGREED as follows:
INTERPRETATION
1.1 In this Agreement:
ACCOUNT means the Borrower's right to payment for a sale or lease and delivery
of goods or rendering of services;
ACCOUNT DEBTOR means each person having any obligation on or in connection with
an Account;
ADVANCE means a Revolving Advance or a Spike Advance (as the context requires);
AFFILIATE means:
(a) a person which, directly or indirectly, controls or is controlled by or
is under constant control with, the Borrower;
(b) a person which beneficially owns or holds, directly or indirectly 5% or
more of any class of voting shares of the Borrower; or
(c) a person in which 5% of any class of voting shares is beneficially owned
or held, directly or indirectly, by the Borrower;
APPLICABLE GAAP means generally accepted accounting principles and policies in
the United Kingdom;
AVAILABLE COMMITMENT means at any time the Commitment of the Bank at such time
less the Outstandings;
BANK'S ACCOUNT means the account with Midland Bank plc sort code 16-50-50 in the
name of the Bank into which cleared funds from the Barclays Collection Account
are deposited on a daily basis;
BARCLAYS COLLECTION ACCOUNT means the Borrower's account numbered 20413887 with
Barclays Bank PLC (sort code 20-13-34) into which Eligible Accounts Receivable
are deposited;
<PAGE> 9
BARCLAYS OPERATING ACCOUNTS means the Borrower's operating accounts at Barclays
Bank PLC as set out in the Caratti Bank Agreement and into which Advances are
credited and BARCLAYS OPERATING ACCOUNT means any one of them;
BARCLAYS RETAINED FACILITIES means the unsecured BACS, Business Master II and
Barclaycard facilities which are or are to be made available to the Borrower by
Barclays Bank PLC;
BMBF FACILITIES means all the unsecured finance lease or lease purchase
facilities and the equipment lease facilities made between the Borrower and
Barclays Mercantile Business Finance Limited the outstandings in respect of
which shall not at any time exceed in aggregate (pound)300,000 or such higher
figure as may be agreed between the Bank and the Borrower;
BONDING FACILITY means the (pound)600,000 bonding facility provided by the Bank
to the Borrower for the issue of duty/VAT deferment guarantees in favour of H.
M. Customs & Excise on the terms and subject to the conditions set out in the
Bonding Facility Letter;
BONDING FACILITY LETTER means the letter dated 10 September 1996 under which the
Bank has agreed to provide the Bonding Facility;
BORROWER GROUP means Caratti Sport Ltd and its subsidiaries from time to time;
BORROWINGS has the meaning given to it in clause 15.1(e);
CAPITAL EXPENDITURE means all payments due (whether or not paid) in respect of
the cost of any fixed asset or improvement, or replacement, substitution or
addition thereto, which has a useful life of more than one year, including,
without limitation, those arising in connection with the direct or indirect
acquisition of such assets by way of increased product or service charges or
offset items or in connection with finance leases;
CARATTI BANK AGREEMENT means the bank operating agreement dated 30 June 1998
entered into between the Borrower, the Bank and Barclays Bank PLC;
CARATTI BORROWING BASE means, at any time, an amount equal to the sum of:
(a) Eligible Accounts Receivable multiplied by 85% or such lesser amount as
the Bank (in its reasonable discretion) may determine subject to the
proviso below; and
(b) Eligible Inventory multiplied by 60% (except that during the months of
June, July, August, September and October 1998, Eligible Inventory shall
be multiplied by 70% and for the month of November 1998 Eligible
Inventory shall be multiplied by 65% to account for the Spike Facility)
or such lesser amount as the Bank (in its reasonable discretion) may
determine subject to the proviso below; less
(c) an amount equal to 10% (or such other percentage as the Bank may require
in its absolute discretion subject to the proviso below) of the
contingent liabilities of the Borrower at any time under the FX
Contracts ignoring for the purposes of this calculation any contingent
or actual liabilities of the Borrower's counterparty under such FX
Contracts; less
(d) all Outstandings; less
<PAGE> 10
(e) all other reserves which the Bank deems necessary in the exercise of its
reasonable credit judgement to maintain with respect to the Borrower's
account including, without limitation, any amounts which the Bank may be
obliged to pay in the future for the account of the Borrower,
where all calculations and determinations to be made in respect of Eligible
Accounts Receivables and Eligible Inventory shall be made by the Bank in its
reasonable credit judgement and such determinations by the Bank shall, save in
the case of manifest error, be binding provided that in relation to Eligible
Accounts Receivable and Eligible Inventory which is already constituting the
Caratti Borrowing Base and is supporting current Outstandings the Bank shall use
its reasonable discretion in determining such lesser amounts and shall use
reasonable efforts to notify the Borrower as soon as reasonably practicable
after making such determination;
CLOSING DATE means the date on which the conditions precedent in clause 4 are
satisfied;
COMMITMENT means the Revolving Credit Facility Available Commitment or the Spike
Commitment (as the context requires) and COMMITMENTS means both of them;
CONTAMINANT means any radioactive emissions and any natural or artificial
substance (whether in solid or liquid form or in the form of a gas or vapour and
whether alone or in combination with any other substance) capable (in each case)
of causing harm to man or any other living organism or damaging the environment
or public health or welfare, including (without limitation) any controlled,
special, hazardous, toxic, radioactive or dangerous waste;
DISTRIBUTION means all rights, money (including without limitation, dividends)
and property whatsoever which may from time to time be derived from, accrue on
or be offered in respect of shares or other securities of any Borrower Group
company whether by way of redemption, exchange, conversion rights, bonus,
capital reorganisation or otherwise howsoever;
DOLLARS and $ means the lawful currency of the United States of America;
ELIGIBLE ACCOUNTS RECEIVABLE means, without intending to limit the Bank's
discretion to establish other criteria of eligibility those Accounts which are
not Ineligible Accounts as the basis for Advances and Undertakings;
ELIGIBLE INVENTORY means, without intending to limit the Bank's discretion to
establish other criteria of eligibility, Inventory which is not Ineligible
Inventory as the basis for Advances and Undertakings which may at no time, when
aggregated with the face value of any Undertakings, exceed (pound)7,000,000 of
the Commitments;
ENVIRONMENTAL LAW means all applicable laws, regulations, codes of practice,
circulars, guidance notices and the like (whether in the United Kingdom or in
any other jurisdiction in which the Borrower or any member of the Borrower Group
carries on its business or in which its assets may be situated) concerning the
protection of human health, living organisms or the environment or the
conditions of the work place or the generation, transportation, storage,
treatment or disposal of Contaminants, the compliance with which is customary or
required by law;
ENVIRONMENTAL LICENCE means any permit, licence, consent, authorisation or other
approval required by or pursuant to any Environmental Law;
<PAGE> 11
EVENT OF DEFAULT means any of those events specified in clause 16.1;
EURO means the currency adopted by two or more European Union states as the
single currency of the European Union;
FACILITIES means the Revolving Credit Facility, the L/C Facility, the Bonding
Facility and the Spike Facility;
FINAL MATURITY DATE means the date falling 3 years from the Closing Date or if
such day is not a business day the next preceding business day;
FINANCE DOCUMENTS means this Agreement, the Bonding Facility Letter, the
Guarantees, the Security Documents, the general indemnity dated on or around the
date hereof as such may be amended from time to time and the FX Contracts;
FINANCIAL PERFORMANCE PROJECTIONS means the financial performance projections
delivered to the Bank by the Borrower in January 1998 and subsequently pursuant
to clause 15(b)(iv);
FINANCIAL STATEMENTS means, according to the context in which it is used, the
Original Financial Statements or any other financial statements required to be
given to the Bank in accordance with clause 15.1(b);
FINANCIAL YEAR means the period from the Closing Date to 31 December 1998 and
thereafter any period of twelve months ending on 31 December;
FIXED AND FLOATING CHARGE means the fixed and floating charge dated the date
hereof as such may be amended or modified entered into by the Borrower in favour
of the Bank;
FX CONTRACTS means the interest rate and currency rate hedging agreements to be
entered into between the Borrower and the Bank referred to in clause 15.2(f);
GROUP means GT Bicycles, Inc. and its subsidiaries for the time being;
GTBC CREDIT AGREEMENT means the credit agreement dated 29 April 1998 between
Bank America Business Credit, Inc., GT Bicycles California, Inc. and others as
amended from time to time;
GUARANTEES means the guarantees given in favour of the Bank by the Guarantors;
GUARANTORS means GT Bicycles, Inc., GT Bicycles California, Inc., Riteway
Products East Inc., Riteway Products North Central Inc., Rite-Way Distributors
Central, Inc., Rite-Way Distributors, Inc. and any wholly owned future domestic
subsidiaries of GT Bicycles, Inc. which are incorporated or acquired after the
date of this Agreement;
INDEMNITY means the general indemnity in clause 5.14 in favour of the Bank in
respect of the Bonding Facility and the L/C Facility;
INELIGIBLE ACCOUNTS means those Accounts set out in Part 1 of the Third Schedule
as such may be defined and amended from time to time by the Bank in its absolute
discretion;
INELIGIBLE INVENTORY means the Inventory set out in Part 2 of the Third Schedule
as such may be defined and amended from time to time by the Bank in its absolute
discretion;
<PAGE> 12
INTERCOMPANY ACCOUNTS means all assets and liabilities, however arising, which
are due to the Borrower from, due from the Borrower to, or which otherwise arise
from any transaction by the Borrower with, any Affiliate;
INVENTORY means all of the Borrower's now owned and hereafter acquired
inventory, goods and merchandise, wherever located, to be furnished under any
contract of service or held for sale or lease, all raw materials,
work-in-progress, finished goods, returned goods and materials and supplies of
any kind, nature or description which are or might be used or consumed in the
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and such
other personal property, and all documents of title or other documents
representing them;
L/C FACILITY means a multicurrency facility for the issue of irrevocable
commercial letters of credit of up to 180 days' validity;
LOAN means the aggregate principal amount for the time being outstanding under
this Agreement under the Revolving Credit Facility and the Spike Facility;
LOAN ACCOUNT means the loan account denominated in sterling maintained with the
Bank to which the Bank is authorised to debit all Revolving Advances and Spike
Advances together with all interest thereon and all commissions, costs, expenses
and other charges under or pursuant to the Finance Documents and all payments
made and out of pocket expenses incurred by the Bank pursuant to the Finance
Documents;
MANAGEMENT ACCOUNTING PERIOD means each period of one calendar month ending on
the last day of that month;
MANAGEMENT ACCOUNTS means, as at the date of this Agreement, the unaudited but
consolidated management accounts of the Borrower in respect of the Management
Accounting Period ended 30 April 1998 to be prepared in accordance with
Applicable GAAP and in a format agreed by the Bank on or prior to the date of
this Agreement and thereafter those accounts or the then latest such accounts
for successive Management Accounting Periods required to be delivered to the
Bank;
MARGIN means the Revolving Credit Facility Margin or the Spike Margin (as the
context so requires);
MATERIAL ADVERSE EFFECT means any effect which is or is reasonably likely to be
materially adverse to (i) the Eligible Accounts Receivable and/or the Eligible
Inventory, (ii) the ability of the Borrower to perform its obligations under any
of the Finance Documents to which it is a party or (iii) the business, assets or
financial condition of:
(a) the Borrower; or
(b) the Group taken as a whole.
NOTICE OF DRAWDOWN means a notice delivered under this Agreement substantially
in the form set out in the Second Schedule;
OPTIONAL CURRENCY means subject to the written agreement of the Bank (which may
be withheld in its absolute discretion) any currency (other than sterling) which
is freely
<PAGE> 13
transferable and freely convertible into sterling (or Euros after the Sterling
Conversion Date) in the London market or, in relation to the L/C Facility, means
dollars;
ORIGINAL FINANCIAL STATEMENTS means the audited (and consolidated, where the
Borrower has one or more Subsidiaries) accounts for the Borrower in respect of
the fourteen month period ended 31 December 1997;
ORIGINAL STERLING AMOUNT means, in relation to an Advance denominated in
sterling, the amount of such Advance as requested in the relevant Notice of
Drawdown relating thereto (as the same may be reduced pursuant to clause 5.4)
or, if such Advance is not denominated in sterling, the equivalent of such
amount (as the same may be so reduced) in sterling, calculated as at such
business day as the Bank and the Borrower may agree;
OUTSTANDINGS means
(a) in relation to the Revolving Credit Facility at any time the aggregate
of the Sterling Amounts of:
(i) all outstanding Revolving Advances and accrued interest thereon;
and
(ii) all outstanding Undertakings; and
(iii) all amounts outstanding under the Bonding Facility, or
(b) in relation to the Spike Facility at any time the aggregate of the
Sterling Amounts of all outstanding Spike Advances and accrued interest
thereon;
QUALIFYING BANK means a bank as defined for the purposes of section 840A of the
Income and Corporation Taxes Act 1988 which is within the change to United
Kingdom corporation tax as respect interest payable to it at the time when such
interest is paid;
PERMITTED SECURITY INTEREST means any security interest referred to in clause
15.3(a);
POTENTIAL EVENT OF DEFAULT means any event which would become (with the passage
of time, the giving of notice, the making of any determination of materiality
under this Agreement), an Event of Default;
RELEASE means a release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration of a Contaminant into the
indoor or outdoor environment or into or out of any real estate or other
property, including the movement of Contaminants through or in the air, soil,
surface water, groundwater or real estate or other property;
REFERENCE RATE means the rate of interest determined from time to time by the
Bank as its reference rate for sterling and for each Optional Currency (as
appropriate) being the rate set by the Bank applicable to any borrower based on
various factors including the Bank's costs and desired return, general economic
conditions and other factors and which is used as a reference point for pricing
some loans provided that (i) the Bank may price loans at, above or below such
determined rate and (ii) any changes in the Reference Rate shall take effect on
the day determined by the Bank;
RELEVANT ACCOUNTING INFORMATION has the meaning given to it in clause 15.1(d);
<PAGE> 14
RESTRICTED INVESTMENT means any acquisition of any assets by the Borrower or any
member of the Borrower Group in exchange for cash or other assets, whether in
the form of an acquisition of shares, debt securities or other indebtedness or
obligation, or the purchase of acquisition of any other assets, or a loan,
advance, capital contribution or subscription, except acquisitions of the
following:
(a) those permitted under clause 15.3;
(b) gilt-edged securities issued by the United Kingdom government;
(c) any other freely negotiable and marketable debt securities issued by the
government of either the United Kingdom or the United States of America,
or any agency thereof, and which constitute direct, primary and
unsubordinated obligations of the same, provided that such obligations
mature within one year from the date of acquisition thereof;
(d) certificates of deposit maturing within one year from the date of
acquisition, bankers acceptances, Eurodollar bank deposits, or overnight
bank deposits, in each case issued by, created by, or with a prime bank
organised under the laws of the United Kingdom or the United States of
America or any state thereof having capital and surplus aggregating at
least (pound)60,000,000;
(e) commercial paper given the highest rating by a national credit rating
agency and maturing not more than 270 days from its date of creation;
and
(f) other assets acquired with the consent of the Bank.
REVOLVING ADVANCE means the principal amount of each amount made available to
the Borrower under this Agreement by way of loan under the Revolving Credit
Facility or (as the context requires) its principal amount for the time being
outstanding;
REVOLVING CREDIT FACILITY means the multicurrency revolving credit facility
referred to in clause 2;
REVOLVING CREDIT FACILITY AVAILABLE COMMITMENT means the lesser of (a)
(pound)10,000,000 (ten million pounds) and (b) the Caratti Borrowing Base;
REVOLVING CREDIT FACILITY MARGIN means 1.8 per cent. per annum or if financial
ratios in clause 15.1(d) are met at 30 June 1999, 1.7 per cent. per annum, or if
such financial ratios are met at 30 June 2000, 1.6 per cent. per annum, or if
such financial ratios are met at 31 December 2000, 1.5 per cent. per annum, in
each case so that the rate is applied from that specified date;
SECURITY DOCUMENTS means the Fixed and Floating Charge together with such other
security documents as may from time to time be required to be entered into by
the Borrower pursuant to any of the Finance Documents;
SPIKE ADVANCE means the principal amount of each amount made available to the
Borrower under this Agreement by way of loan under the Spike Facility (or as the
context may require) its principal amount for the time being outstanding;
SPIKE COMMITMENT means (pound)2,500,000;
<PAGE> 15
SPIKE FACILITY means the spike facility referred to in clause 2;
SPIKE MARGIN means 2.5 per cent. per annum;
STERLING AMOUNT means:
(i) in relation to any Advance, its Original Sterling Amount as reduced by
the proportion (if any) of such Advance which has been repaid;
(ii) in relation to any Undertaking issued under the L/C Facility, the
equivalent in sterling of the contingent maximum liability of the Bank
under any such Undertaking calculated at the spot rate of exchange of
the Bank; and
(iii) in relation to the Loan, the aggregate of the amounts referred to in
paragraph (i) of this definition;
STERLING CONVERSION DATE means the date on which sterling becomes a currency of
the Euro;
STERLING, POUNDS STERLING or (POUND) means the lawful currency of the United
Kingdom;
UNDERTAKING means an irrevocable commercial letter of credit of up to 180 days'
validity issued by the Bank under the L/C Facility; and
1999 MODEL BICYCLES means new bicycles to be imported to meet new specifications
for the 1999 model year
1.2 Any reference in this Agreement to:
an AFFILIATE of the Bank shall be construed as a reference to a subsidiary or
holding company of the Bank or to a subsidiary of such holding company;
BANK shall be construed so as to include its and any subsequent successors,
transferees and assigns in accordance with their respective interests;
a BUSINESS DAY shall be construed as a reference to a day (other than a Saturday
or Sunday) on which banks are generally open for business in London and if such
reference relates to a date for the payment or purchase of any sum denominated
in an Optional Currency, a day (other than a Saturday or a Sunday) on which
banks are generally open for business in the principal financial centre of the
country of such Optional Currency;
CASH COLLATERAL, CASH COLLATERALISE or CASH COLLATERALISATION and any other
similar expression shall be construed as a reference to the deposit of cash in
sterling or the relevant Optional Currency by the Borrower in an account with
the Bank in support of any liability whether actual or contingent it may owe to
the Bank under the L/C Facility on terms satisfactory to the Bank;
a CLAUSE shall, subject to any contrary indication, be construed as a reference
to a clause of this Agreement;
an ENCUMBRANCE shall be construed as a reference to a mortgage, charge, pledge,
lien or other encumbrance securing any obligation of any person or any other
type of agreement or
<PAGE> 16
arrangement (including, without limitation, title transfer and retention
arrangements) having the effect of conferring security;
the EQUIVALENT on any given date in one currency (the FIRST CURRENCY) of an
amount denominated in another currency (the SECOND CURRENCY) is a reference to
the amount of the first currency which could be purchased with the amount of the
second currency at the spot rate of exchange quoted by the Bank at or about
11.00 a.m. on such date for the purchase of the first currency with the second
currency;
a HOLDING COMPANY of a company or corporation shall be construed as a reference
to any company or corporation of which the first-mentioned company or
corporation is a subsidiary;
INDEBTEDNESS shall be construed so as to include any obligation (whether
incurred as principal or as surety) for the payment or repayment of money,
whether present or future, actual or contingent;
a MONTH is a reference to a period starting on one day in a calendar month and
ending on the numerically corresponding day in the next succeeding calendar
month save that, where any such period would otherwise end on a day which is not
a business day, it shall end on the next succeeding business day, unless that
day falls in the calendar month succeeding that in which it would otherwise have
ended, in which case it shall end on the immediately preceding business day
Provided that, if a period starts on the last business day in a calendar month
or if there is no numerically corresponding day in the month in which that
period ends, that period shall end on the last business day in that later month
(and references to MONTHS shall be construed accordingly);
a PERSON shall be construed as a reference to any person, firm, company,
corporation, government, state or agency of a state or any association or
partnership (whether or not having separate legal personality) of two or more of
the foregoing;
a SCHEDULE shall, subject to any contrary indication, be construed as a
reference to a schedule hereto;
a SUBSIDIARY of a company means:
(i) a subsidiary within the meaning of section 736 of the Companies Act 1985
as amended by section 144 of the Companies Act 1989; and
(ii) unless the context otherwise requires, a subsidiary undertaking within
the meaning of section 258 of the Companies Act 1985 (as inserted by
section 21 of the Companies Act 1989).
or as the context requires a subsidiary of a company or corporation incorporated
in the United States shall be construed as a reference to any company or
corporation:
(i) which is controlled, directly or indirectly, by the first-mentioned
company or corporation;
(ii) more than half the issued share capital of which is beneficially owned,
directly or indirectly, by the first-mentioned company or corporation;
or
<PAGE> 17
(iii) which is a subsidiary of another subsidiary of the first-mentioned
company or corporation
and, for these purposes, a company or corporation shall be treated as being
controlled by another if that other company or corporation is able to direct its
affairs and/or to control the composition of its board of directors or
equivalent body;
TAX shall be construed so as to include any tax, levy, impost, duty or other
charge of a similar nature (including, without limitation, any penalty or
interest payable in connection with any failure to pay or any delay in paying
any of the same);
VAT shall be construed as a reference to value added tax including any similar
tax which may be imposed in place thereof from time to time; and
the WINDING-UP, DISSOLUTION or ADMINISTRATION of a company or corporation shall
be construed so as to include any equivalent or analogous proceedings under the
law of the jurisdiction in which such company or corporation is incorporated or
any jurisdiction in which such company or corporation carries on business
including the seeking of liquidation, winding-up, reorganisation, dissolution,
administration, arrangement, adjustment, protection or relief of debtors.
1.3 Words importing the singular shall include the plural and vice versa.
1.4 Save where the contrary is indicated, any reference in this Agreement
to:
(i) this Agreement or any other agreement or document shall be construed as
a reference to this Agreement or, as the case may be, such other
agreement or document as the same may have been, or may from time to
time be, amended, varied, novated or supplemented;
(ii) a statute shall be construed as a reference to such statute as the same
may have been, or may from time to time be, amended or re-enacted; and
(iii) a time of day shall be construed as a reference to London time.
1.5 Clause and Schedule headings are for ease of reference only.
THE FACILITIES
2.1 The Bank grants to the Borrower, on the terms and subject to the
conditions of this Agreement:
(i) a multicurrency revolving credit facility;
(ii) a multicurrency L/C Facility,
in an aggregate amount equal to the lesser of (a) (pound)10,000,000 (ten million
pounds sterling) or its equivalent from time to time in Optional Currencies and
(b) the Caratti Borrowing Base.
2.2 The maximum potential liability of the Bank under the L/C Facility shall be
limited to (pound)7,000,000 (seven million pounds sterling) or its equivalent
from time to time in Optional Currencies.
<PAGE> 18
2.3 The Bank also grants to the Borrower, on the terms and subject to the
conditions of this Agreement a spike facility in an aggregate amount of
(pound)2,500,000 (two million five hundred thousand pounds sterling) or its
equivalent from time to time in Optional Currencies.
2.4 On the date of this Agreement and subsequently as soon as reasonably
practicable after receiving the information to be delivered on a weekly basis by
the Borrower in accordance with clause 15.1(c), the Bank shall calculate and
determine, in its discretion acting reasonably, the Caratti Borrowing Base for
the forthcoming week and shall advise the Borrower of its determination.
PURPOSE
3.1 The Revolving Credit Facility shall be used to repay the Spike Facility, to
pay all fees referred to in clause 21 and for the working capital purposes of
the Borrower. The L/C Facility shall be used for the issue of Undertakings. The
Spike Facility shall be used solely for the importation of 1999 Model Bicycles.
3.2 Without prejudice to the obligations of the Borrower under clause 3.1, the
Bank shall not be obliged to concern itself with the application of amounts
raised by the Borrower under this Agreement.
CONDITIONS PRECEDENT
4. Save as the Bank may otherwise agree, the Borrower may not deliver any Notice
of Drawdown under this Agreement unless the Bank has received all the documents
listed in the First Schedule, in each case in form and content satisfactory to
the Bank.
UTILISATION OF THE FACILITIES
REVOLVING CREDIT FACILITY AND SPIKE FACILITY
5.1 Subject to there remaining Available Commitment of at least 10% of the
Available Commitment calculated prior to the making of the first Advance, the
first duly completed Notice of Drawdown to be delivered by the Borrower to the
Bank shall request the making of an Advance in sterling of an amount sufficient
to discharge the Borrower's overdraft with the Bank in full (having regard to
any other payments made by or on behalf of the Borrower). Such Notice of
Drawdown, which shall be irrevocable, shall specify (i) the proposed date for
making the Advance, which shall be a business day and (ii) the amount of the
Advance.
5.2 Save as otherwise provided in this Agreement, the Borrower may from time to
time request the making of an Advance by the Bank by the delivery to the Bank in
the case of an Advance to be denominated in sterling by 11.00 a.m. on, and in
the case of Optional Currencies not less than two business days before, the
proposed date for the making of such Advance of a duly completed Notice of
Drawdown therefor.
5.3 Each Notice of Drawdown delivered to the Bank pursuant to clause 5.2 shall
be irrevocable and shall specify:
(i) whether the Advance is to be made under the Revolving Credit Facility or
the Spike Facility;
<PAGE> 19
(ii) the proposed date for the making of the Advance requested, which shall
be a business day falling before the Final Maturity Date in the case of
a Revolving Advance or a business day falling on or before 30 July 1998
in the case of a Spike Advance;
(iii) the currency of denomination of the Advance requested, which shall be
sterling or an Optional Currency;
(iv) the amount of the Advance requested, which shall be a minimum amount of
(pound)100,000 (or, if the Advance is to be denominated in an Optional
Currency, such comparable and convenient amount thereof as the Bank may
from time to time specify) which is less than or equal to the amount of
the Available Commitment, and the Original Sterling Amount of which
shall not exceed the Available Commitment, adjusted to take account of:
(i) any reduction in the Commitment; and
(ii) the Sterling Amounts of any Advances which are scheduled to be
made or repaid on or before the date of drawdown of the proposed
Advance; and
(v) the account to which the proceeds of the proposed Advance are to be paid
which shall in all cases be a Barclays Operating Account.
5.4 If the Borrower requests that an Advance be denominated in an Optional
Currency and no later than 12.00 noon on the business day falling one business
day before the date for such Advance, the Bank notifies the Borrower that it is
of the opinion that it is not feasible for such Advance to be made in such
Optional Currency then, unless the Borrower and the Bank otherwise agree, such
Advance shall not be made.
5.5 If the Borrower requests an Advance in accordance with the preceding
provisions of this clause 5 and on the proposed date for the making of such
Advance:
(i) the Original Sterling Amount of such Advance when made will not exceed
the Available Commitment; and
(ii) either:
(a) no Event of Default has occurred;
(b) no Potential Event of Default which (in the Bank's absolute
discretion) might have a Material Adverse Effect has occurred;
and
(c) the representations set out in clause 14 are true on and as of
the proposed date for the making of such Advance
or the Bank agrees (notwithstanding any matter mentioned at (a) or (b)
or (c) above) to make such Advance,
then, save as otherwise provided in this Agreement, such Advance will be made by
crediting the proceeds of the Advance to a Barclays Operating Account in
accordance with the provisions of this Agreement.
<PAGE> 20
5.6 The Bank, in its discretion, may elect to allow the limits of the Caratti
Borrowing Base to be exceeded on one or more occasions but, if it does so, the
Bank shall not be deemed thereby to have changed the limits of the Caratti
Borrowing Base on any other occasion. If the Original Sterling Amount of the
unpaid balance of the Revolving Advances exceeds the Caratti Borrowing Base
(with the Caratti Borrowing Base determined for this purpose as if the amount of
the Revolving Advances were zero), then the Bank may refuse to make or otherwise
restrict Revolving Advances on such terms as the Bank determines until such
excess has been eliminated.
5.7 Notwithstanding the provisions of clause 5.2, in lieu of delivering a Notice
of Drawdown, the Borrower may request Advances by telephone. Each oral request
for an Advance, if accepted by the Bank, shall be conclusively presumed to be
made by a person authorised by the Borrower to do so and the crediting of an
Advance to a Barclays Operating Account shall conclusively establish the
obligation of the Borrower to repay such Advance as provided in this Agreement.
L/C FACILITY AND BONDING FACILITY
5.8 The Borrower may from time to time request the issue by the Bank of
Undertakings.
5.9 Subject to the terms of this Agreement, the Bank shall, upon the Borrower's
request from time to time issue Undertakings for the Borrower's account. The
Bank will not issue any Undertaking if:
(a) the maximum face amount of the requested Undertaking plus the aggregate
undrawn amount of all outstanding Undertakings, would exceed
(pound)7,000,000;
(b) the maximum face amount of the requested Undertaking plus all
commissions, fees and charges due from the Borrower to the Bank in
connection with its issue, would cause the Caratti Borrowing Base to be
exceeded at such time; or
(c) the expiry date of the Undertaking would be later than the Final
Maturity Date or a date falling more than 180 days from the date of
issue.
5.10 All Undertakings issued under this Agreement shall be in a form and on
terms satisfactory to the Bank. Applications for the issue of Undertakings shall
be made on the Bank's standard form. Each Undertaking shall require, for
payment, the presentation of bills of lading drawn to order and blank endorsed,
or drawn to the Bank's order, or drawn to order of the Borrower endorsed in the
Bank's favour. The Borrower hereby irrevocably and unconditionally undertakes to
endorse any bill of lading according to the Bank's instructions. Payments
pursuant to Undertakings shall be at sight.
5.11 All goods financed in relation to any Undertaking issued under this
Agreement shall be kept insured on such terms, against such risks and with such
insurers as are reasonably satisfactory to the Bank. The Borrower hereby
undertakes to have all such insurance policies (including, without limitation,
marine insurance policies) contain loss payable clauses in the Bank's favour.
5.12 If any Undertakings issued under this Agreement are cash collateralised at
the request of the Bank or otherwise in accordance with the provisions of this
Agreement, the Bank shall be entitled to hold all and any such sums with
interest accruing for the account of the Borrower at the Bank's normal deposit
rate as determined by the Bank in its absolute
<PAGE> 21
discretion and to apply such sums against the Bank's potential liability under
any such Undertakings. The Borrower shall not be entitled to the repayment of
any such sums unless all the Bank's obligations in respect of such Undertakings
have been discharged and only to the extent that there are sums left over after
such discharge.
5.13 Subject to the terms of the Bonding Facility Letter the Bank shall make
available to the Borrower the Bonding Facility.
5.14 The Borrower agrees to indemnify and hold harmless the Bank from and
against all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable legal fees) which the Bank may incur or sustain
as a consequence, direct or indirect, of the issue of any Undertaking or the
performance of its obligations thereunder or the performance of its obligations
under the Bonding Facility. This is a continuing indemnity, extends to the
ultimate balance of the Borrower's obligations and liabilities and shall
continue in force notwithstanding any intermediate payment in whole or in part
of those obligations or liabilities.
INTEREST
6.1 Interest shall accrue on each Advance on a daily basis and shall be debited
to the Loan Account monthly in arrears.
6.2 The rate of interest applicable to each Advance from time to time shall be a
fluctuating rate per annum which is the sum of the Reference Rate and the
Margin. Each change in Reference Rate shall be reflected in such interest rate
as of the effective date of such change.
REPAYMENT, NETTING OFF AND TERMINATION
7.1 All amounts received into the Bank's Account shall be used on a daily basis
to reduce Outstandings under the Revolving Credit Facility.
7.2 Subject to clause 7.1, the Borrower shall repay all the Outstandings under
the Revolving Credit Facility by the Final Maturity Date and all Outstandings
under the Spike Facility by 30 October 1998.
7.3 The Borrower shall not repay all or any part of any Advance except at the
times and in the manner expressly provided in this Agreement but, subject to the
terms and conditions of this Agreement, shall be entitled to re-borrow any
amount repaid.
7.4 If on any date:
(a) the Bank is required to make an Advance; and
(b) a payment is due to the Bank pursuant to this clause 7
then the Bank may (without prejudice to the Borrower's obligation to make the
payment in question pursuant to this clause 7 prior to any application pursuant
to this clause 7 and without prejudice to the Borrower's remaining obligation in
relation to such payment after any such application) apply any amount payable by
the Bank to the Borrower on that date in or towards satisfaction of the amount
payable by the Borrower to the Bank on such date pursuant to this clause 7
provided that such amounts are in the same currency.
<PAGE> 22
7.5 On or before the Final Maturity Date, the Borrower shall pay to the Bank an
amount equal to the Bank's maximum potential liability under all Undertakings
issued under the L/C Facility. The Bank shall be entitled to hold such amount
and to apply such amount against the Bank's maximum potential liability under
all Undertakings which have been issued. The Borrower shall not be entitled to
repayment of all or any part of such amount unless all the Bank's obligations
under all Undertakings have been released or discharged and only to the extent
that there is any amount left over after such release or discharge.
7.6 The Borrower shall repay the Outstandings under the Spike Facility to the
Bank in four instalments on a monthly basis, commencing with a minimum payment
of (pound)625,000 (or such lesser amount as may been utilised) on 31 July 1998
and thereafter on the last day of each month such that the overall advance rate
against Eligible Inventory shall not exceed 65% on or after 30 November 1998 and
60% on or after 31 December 1998.
7.7 Notwithstanding the other terms and conditions of this Agreement, if any of
the facilities made or to be made available under the GTBC Credit Agreement is
terminated by the Bank, for whatever reason, the Bank's Commitment will be
reduced to zero and the Bank may demand immediate repayment of the Loan and cash
collateralisation of any outstanding Undertakings.
PREPAYMENT AND CANCELLATION
8.1 The Borrower may, subject to clause 21.6, by giving the Bank not less than
five business days' prior written notice to that effect, cancel the whole of the
Commitment.
8.2 Any notice given by the Borrower under clause 8.1 shall be irrevocable and
shall specify the date upon which such cancellation is to be made. No amount
cancelled under clause 8.1 may subsequently be reinstated.
8.3 If the Bank claims indemnification from the Borrower under clause 9.2 or
clause 11.1, the Borrower may, within sixty days thereafter and by not less than
five days' prior notice to the Bank (which notice shall be irrevocable), without
paying any fee in accordance 21.6 cancel the Commitment of the Bank whereupon
the Bank shall cease to be obliged to make any further Advances or issue any
Undertakings to the Borrower and the Bank's Commitment shall be reduced to zero.
TAXES
9.1 All payments to be made by the Borrower under this Agreement shall be made
free and clear of and without deduction for or on account of tax unless the
Borrower is required to make such a payment subject to the deduction or
withholding of tax, in which case the sum payable by the Borrower, in respect of
which such deduction or withholding is required to be made, shall be increased
to the extent necessary to ensure that, after the making of the required
deduction or withholding, the Bank receives and retains (free from any liability
in respect of any such deduction or withholding) a net sum equal to the sum
which it would have received and so retained had no such deduction or
withholding been made or required to be made.
9.2 Without prejudice to the provisions of clause 9.1, if the Bank is required
to make any payment on account of tax (not being a tax imposed on its overall
net income) or otherwise on or in relation to any sum received or receivable
under this Agreement by the Bank (including, without limitation, any sum
received or receivable under this clause 9) or any
<PAGE> 23
liability in respect of any such payment is asserted, imposed, levied or
assessed against the Bank the Borrower shall, upon demand, promptly indemnify
the Bank against such payment or liability, together with any interest,
penalties and expenses payable or incurred in connection therewith.
9.3 If the Bank intends to make a claim pursuant to clause 9.2 it shall notify
the Borrower of the event by reason of which it is entitled to do so, Provided
that nothing in this Agreement shall require the Bank to disclose any
confidential information relating to the organisation of its affairs.
9.4(a) The Bank warrants to the Borrower, that at the date of this Agreement
the Bank is a Qualifying Bank;
(b) If the Bank ceases to be a Qualifying Bank, the Borrower shall not be
obliged to pay to the Bank under clause 9.1 any amount in excess of the
amount it would have been obliged to pay if the Bank had not ceased to
be a Qualifying Bank provided that this clause 9.4 shall not apply and
the Borrower shall continue to be obliged to comply with its obligations
under clause 9.1 if after the date of this Agreement there shall have
been any change in, or in the interpretation or application of, any
relevant law or the practice of the United Kingdom Inland Revenue and as
a result of such change (i) the Bank ceases to be a Qualifying Bank or
(ii) the Bank would be required to make a deduction or withholding on
account of tax irrespective of whether the Bank was or was not a
Qualifying Bank.
TAX RECEIPTS/CREDITS
10.1 If, at any time, the Borrower is required by law to make any deduction or
withholding from any sum payable by it under this Agreement (or if thereafter
there is any change in the rates at which or the manner in which such deductions
or withholdings are calculated), the Borrower shall promptly notify the Bank.
10.2 If the Borrower makes any payment under this Agreement in respect of which
it is required to make any deduction or withholding, it shall pay the full
amount required to be deducted or withheld to the relevant taxation or other
authority within the time allowed for such payment under applicable law and
shall deliver to the Bank, within thirty days after it has made such payment to
the applicable authority, an original receipt (or a certified copy thereof)
issued by such authority evidencing the payment to such authority of all amounts
so required to be deducted or withheld in respect of such payment.
10.3 If the Borrower pays any additional amount under clause 9.1 and the Bank
effectively obtains a refund of tax or credit against tax on its overall net
income by reason of such payment and the Bank is able to identify any credit as
being attributable to such payment, then the Bank shall reimburse to the
Borrower such amount as it shall determine to be the proportion of such credit
as will leave the Bank, after that reimbursement, in no better or worse position
than it would have been in if that payment had not been required. The Bank shall
have absolute discretion as to whether to claim any such credit and, if it does
so claim, the extent, order and manner in which it does so, provided that
nothing in this Agreement shall require the Bank to disclose any confidential
information relating to the organisation of its affairs.
<PAGE> 24
INCREASED COSTS
11.1 If, by reason of:
(i) any change in law or in its interpretation or administration;
and/or
(ii) compliance with any request from or requirement of any central
bank or other fiscal, monetary or other authority, whether or
not having the force of law but with which it is customary to
comply, (including, without limitation, a request or requirement
which affects the manner in which the Bank or the holding
company of the Bank is required to or does maintain capital
resources having regard to the Bank's obligations under this
Agreement and to amounts owing to it under this Agreement):
(a) the Bank or the holding company of the Bank incurs a cost as a result of
the Bank having entered into and/or performing its obligations under
this Agreement and/or assuming or maintaining its Commitment and/or
making one or more Advances and/or making a payment under or in respect
of any Undertaking;
(b) the Bank or the holding company of the Bank is unable to obtain the rate
of return on its overall capital which it would have been able to obtain
but for the Bank having entered into and/or performing its obligations
and/or assuming or maintaining its Commitment under this Agreement;
(c) there is any increase in the cost to the Bank or the holding company of
the Bank of funding or maintaining all or any of the advances comprised
in a class of advances formed by or including the Advances made or to be
made by the Bank under this Agreement;
(d) the Bank or the holding company of the Bank becomes liable to make any
payment on account of tax (not being a tax imposed on its overall net
income) or otherwise on or calculated by reference to the amount of the
Advances made or to be made or the Undertakings issued or to be issued
by the Bank under this Agreement and/or to any sum received or
receivable by it under this Agreement
then the Borrower shall, from time to time on demand promptly pay the Bank
amounts sufficient to indemnify the Bank or its holding company against, as the
case may be, (1) such cost, (2) such reduction in such rate of return (or such
proportion of such reduction as is, in the opinion of the Bank, attributable to
its obligations under this Agreement), (3) such increased cost (or such
proportion of such increased cost as is, in the opinion of the Bank,
attributable to its funding or maintaining advances under this Agreement or
amounts paid under or in respect of any Undertaking) or (4) such liability.
11.2(a) If the Bank intends to make a claim pursuant to clause 11.1 (whether in
respect of itself or its holding company) it shall notify the Borrower
as soon as reasonably practicable after it becomes aware of such change
or has received any such request;
(b) the Bank shall not make the same claim in respect of both itself and its
holding company; and
(c) nothing in this Agreement shall require the Bank to disclose any
confidential information relating to the organisation of its affairs.
<PAGE> 25
ILLEGALITY
12. If at any time, it is unlawful for the Bank to make, fund or allow to remain
outstanding all or any of the Advances made or to be made by it under this
Agreement, or to issue or allow to remain outstanding any Undertaking, then the
Bank shall, promptly after becoming aware of the same, deliver to the Borrower a
certificate to that effect and:
(i) the Bank shall not thereafter be obliged to make Advances, or issue any
Undertakings under this Agreement and the amount of its Commitment shall
be immediately reduced to zero;
(ii) if the Bank so requires the Borrower shall on the date specified by the
Bank (which shall, unless otherwise required by any relevant law
affecting the Borrower or the Bank, be not less than ninety days from
the date that the certificate in question is delivered to the Borrower)
repay any outstanding Advances together with accrued interest thereon,
pay all other amounts owing to the Bank under this Agreement and cash
collateralise any outstanding Undertakings.
MITIGATION
13.1 If circumstances arise which would or would upon the delivery of a
certificate in accordance with clause 12 result in the reduction of the Bank's
Commitment to zero, repayment of the Loan and cash collateralisation of all
outstanding Undertakings, then, without in any way limiting, reducing or
otherwise qualifying the Bank's rights or the Borrower's obligations under
clause 12, the Bank shall as soon as reasonably practicable upon becoming aware
of the same notify the Borrower and (so long as request for repayment shall have
been made as referred to in clause 12(ii) in relation thereto) the Bank shall,
at its own discretion take such steps, during a period not exceeding 30 days
from the date it shall have given notice to the Borrower as aforesaid, as may
reasonably be open to it to mitigate the effects of such circumstances.
13.2 If circumstances arise which would cause the Bank to demand payment under
clauses 9.2 or 11.1 the Bank shall at its own discretion take such steps as may
be reasonably open to it to mitigate the effects of such circumstances.
REPRESENTATIONS
14.1 The Borrower represents and warrants to the Bank that:
(a) STATUS: it is a limited liability company, duly incorporated and validly
existing under the laws of England and Wales and has the power to own
its property and assets and carry on its business as it is now being and
will be conducted. No administrator, receiver, liquidator or similar
officer has been appointed with respect to it or any of its assets nor
is any petition or proceeding for such appointment pending;
(b) POWERS AND AUTHORITY: it has the power to enter into and perform the
Finance Documents to which it is a party and the transactions to be
implemented pursuant thereto and has taken all necessary action to
authorise the entry into and performance of those documents and
transactions;
<PAGE> 26
(c) LEGAL VALIDITY: this Agreement constitutes, and each other Finance
Document to which it is or may become a party (when executed by it or on
its behalf) will constitute, its legal, valid and binding obligations
and (without limiting the generality of the foregoing) each Security
Document to which it is a party creates the security interests which
that Security Document purports to create or, as the case may be,
accurately evidences a security interest which has been validly created;
(d) NON-CONFLICT: the entry into and performance by it of this Agreement and
each other Finance Document to which it is a party and the transactions
to be implemented pursuant to those documents do not and will not
conflict with:
(i) any law or regulation or any official or judicial order
applicable to it, or
(ii) its memorandum or articles of association, statutes, by-laws or
other constitutional or governing documents or any of its
resolutions (having current effect), or
(iii) any agreement or instrument to which it is a party or which is
binding upon it or on its assets nor will it result in the
creation or imposition of any encumbrance on any of its assets
(save for any encumbrance created pursuant to the Security
Documents);
(e) NO DEFAULT: (i) no Event of Default has occurred and is continuing which
has not been waived, and (ii) no event has occurred and is continuing
which has not been waived and which constitutes or which, with the
giving of notice, expiry of any cure period, determination of
materiality or satisfaction of any other condition in each case as
provided for in the relevant agreement or document to which it is a
party (other than the mere occurrence of such event), is reasonably
likely to constitute a default under or in respect of any such agreement
or document and, in the case of (ii) only, which would have a Material
Adverse Effect;
(f) CONSENTS: all material authorisations, approvals, consents, licences,
exemptions, filings, registrations and other matters required by law for
or in consequence of (i) the entry into and performance by it of and/or
the validity of any of the Finance Documents or the transactions to be
implemented pursuant thereto and/or (ii) the carrying on of its business
in the ordinary course have been obtained or effected or will be
obtained or effected prior to the date required by law, save (in the
case of(i)) for the filing in the United Kingdom of the prescribed
particulars of the Security Documents pursuant to Section 395 of the
Companies Act 1985 (as amended), and other filings and registrations
necessary in connection with the Security Documents, all of which
filings and registrations will be effected promptly after execution by
the Borrower of the Finance Documents;
(g) FINANCIAL STATEMENTS: (i) the audited financial statements (including
the income statement, balance sheet and cash flow statement) of the
Borrower for the 14 months ended 31 December 1997 and (ii) the
management accounts for the period ended 30 April 1998 have been
prepared on a basis consistently applied in accordance with generally
accepted accounting principles and practices in England and Wales and
give in respect of (i) a true and fair view of, and in respect of (ii)
fairly represent, the results of its operations for that period and the
state of its affairs at that date, and in particular accurately disclose
or reserve against all the liabilities (actual or contingent) of the
Borrower;
<PAGE> 27
(h) LITIGATION AND LABOUR DISPUTES: no litigation, arbitration or
administrative or regulatory proceedings or investigations for which
process or initiation claims have been served on it or labour disputes
involving it are current and, to its knowledge, no litigation,
arbitration, administrative or regulatory proceedings or investigations
or labour disputes involving it are pending or threatened, which (i) in
the case of any such litigation, arbitration, administrative or
regulatory proceedings or investigations are reasonably likely to be
determined adversely to it and which, if so adversely determined would
have a Material Adverse Effect or (ii) in the case of any such labour
disputes, would have a Material Adverse Effect;
(i) TAX LIABILITIES: no claims are being or are reasonably likely to be
asserted against it with respect to taxes which are reasonably likely to
be determined adversely to it and which, if so adversely determined,
would have a Material Adverse Effect; it is not materially overdue in
the filing of any tax returns required to be filed by it and it has paid
all taxes shown to be due on any tax returns required to be filed by it
or on any assessments made against it for non-payment, or a claim for
payment, and which would in each such case have a Material Adverse
Effect;
(j) ENCUMBRANCES: no encumbrance exists over its assets which would cause a
breach of clause 15.3(a);
(k) OWNERSHIP OF ASSETS: it has good title to all Inventory and Accounts and
has good title to or valid leases or licences of or is otherwise
entitled to use all material assets necessary to conduct its business as
conducted by it;
(l) DISTRIBUTIONS: since 31 December 1997 no Distribution has been declared,
paid, or made upon or in respect of any shares or other securities of
the Borrower;
(m) ENVIRONMENTAL LAWS: no member of the Borrower Group has breached any
Environmental Law which might give rise to a material liability and no
condition exists or act or event has occurred which could give rise to
any material breach of, or any material liability of any kind under, any
Environmental Law;
(n) ENVIRONMENTAL LICENCES: each member of the Borrower Group is in
possession of all material Environmental Licences required for the
conduct of its business or operations (or any part thereof) and no
member of the Borrower Group has breached any of the terms or conditions
of any such Environmental Licence which might give rise to a material
liability;
(o) NOTICES OF ENVIRONMENTAL BREACHES: (i) no member of the Borrower Group
has received any summons, complaint, order or similar written notice
that it is not in compliance with, or any public authority is
investigating its compliance with, any Environmental Laws or that it is
or may be liable to any other person as a result of a Release or
threatened Release of a Contaminant and (ii) none of the present or past
operations of any member of the Borrower Group is the subject of any
investigation by any public authority evaluating whether any remedial
action is needed to respond to a Release or threatened Release of a
Contaminant;
(p) NO DEPOSIT OF CONTAMINANTS: no Contaminant has at any time been used,
disposed of, generated, stored, transported, dumped, released,
deposited, buried or emitted at, on, from or under any premises owned,
leased, occupied or controlled by any
<PAGE> 28
member of the Borrower Group in breach of any Environmental Law which
might give rise to a material liability;
(q) LIABILITY FOR ENVIRONMENTAL CLAIMS: no member of the Group has entered
into any negotiations or settlement agreements with any person
(including, without limitation, any prior owner of its property)
imposing material obligations or liabilities on any member of the Group
with respect to any remedial action in response to the Release of a
Contaminant or environmentally related claim;
(r) MATERIAL ADVERSE CHANGE: there has been no material adverse change in
the Borrower's financial condition since the date to which the most
recent Financial Statements delivered to the Bank were made up, nor in
the consolidated financial condition, business or operations of the
Borrower Group since that date. On the basis of a comprehensive review
and assessment undertaken by the Borrower of its computer applications
and inquiry made of its material suppliers, vendors or customers, the
Borrower believes that the "Year 2000 Problem" (that is, the risk that
computer applications used in connection with or otherwise affecting its
business may be unable to recognise and perform properly dated sensitive
functions involving certain dates prior to, and any date after, 31
December 1999) will not have a material adverse effect on the Borrower
or any other member of the Borrower Group;
(s) ACCOUNTS:
(i) each existing Account represents, and each future Account will
represent, a bona fide sale or lease and delivery of goods by the
Borrower, or the rendering of services by the Borrower, in the
ordinary course of the Borrower's business;
(ii) each existing Account is, and each future Account will be, for a
liquidated amount payable by the Account Debtor thereon on the
terms set forth in the invoice therefor or in the schedule
thereof delivered to the Bank, without set-off, deduction,
defence, or counterclaim;
(iii) no payment will be received with respect to any Account, and no
credit, discount, or extension, or agreement therefor will be
granted on any Account, except as reported to the Bank in
accordance with this Agreement;
(iv) each copy of an invoice delivered to the Bank by the Borrower
will be a genuine copy of the original invoice sent to the
Account Debtor named therein; and
(v) all goods described in any invoice representing a sale of goods
will have been delivered to the Account Debtor and all services
of the Borrower described in any invoice will have been
performed; and
(t) INVENTORY: all of the Inventory is and will be held for sale or lease,
or to be furnished in connection with the rendering of services in the
ordinary course of the Borrower's business and is and will be fit for
such purpose and will be kept by the Borrower, at its own expense, in
good and marketable condition.
(u) BORROWINGS: the Borrower has no Borrowings other than those under the
Facilities, the Bonding Facility, the Barclays Retained Facilities, the
BMBF Facilities, the FX
<PAGE> 29
Contracts, the hire purchase agreements listed in the Fourth Schedule,
the foreign exchange contracts listed in the Fifth Schedule and any
other foreign exchange contracts entered into by the Borrower from time
to time, trade credit on standard terms incurred in the ordinary course
of the Borrower's business or such other extended period as may be
agreed with the Bank and Borrowings in favour of a Guarantor.
(v) REPORTS: the Financial Performance Projections are prepared in good
faith and are based on reasonable assumptions.
14.2 The representation and warranties set out in clause 14.1 shall survive the
execution of this Agreement and the making of each Advance under this Agreement
and shall be made on the date hereof and be deemed to be repeated on the date of
delivery of each Notice of Drawdown hereunder and on each day an Advance is made
and on each date interest is payable, with reference to the facts and
circumstances then subsisting, as if made at each such time.
COVENANTS
15.1 ACCOUNTS INFORMATION: The Borrower undertakes with the Bank that, from the
date of this Agreement until all its liabilities under the Finance Documents
have been discharged:
(a) PREPARATION OF ACCOUNTS: it will prepare the financial statements
referred to in paragraph (b) on a basis consistently applied in
accordance with generally accepted accounting principles in England and
Wales and those financial statements shall (i) in the case of the
audited financial statements give a true and fair view of, and (ii) in
the case of all other financial statements fairly represent the results
of its operations for the period in question and the state of its
affairs as at the date to which the financial statements are made up and
shall accurately disclose or reserve against all liabilities (actual or
contingent) of the Borrower;
(b) INFORMATION:
(i) it will deliver to the Bank as soon as they become available (and
in any event within 90 days of the end of each of its financial
years) copies of its unaudited financial statements for that
period which shall contain an income statement and a balance
sheet;
(ii) it will deliver to the Bank as soon as they become available (and
in any event within 120 days of the end of its Financial Years)
copies of is audited Financial Statements for that period
together with the auditors report relating thereto;
(iii) it will deliver to the Bank as soon as they become available (and
in any event within 21 days of the end of each Management
Accounting Period, its Management Accounts as at the end of and
for that Management Accounting Period;
(iv) it will deliver to the Bank no later than 30 days before the end
of its Financial Year, annual Financial Performance Projections;
<PAGE> 30
(c) REPORTS: it will deliver to the Bank, in accordance with clause 29 or by
such form of electronic medium as agreed with the Bank prior to the date
of this Agreement, the following documents at the following times in
form satisfactory to the Bank:
(i) within 45 days after the end of each financial quarter, a report
of the Capital Expenditure of the Borrower Group for such
quarter.
(ii) on a weekly basis, a schedule of credit memos and reports, a
schedule of collections of accounts receivable, a schedule of
Accounts created since the last such schedule, a report of the
inventory balance (by location) based on the perpetual inventory
reports and a schedule of the 1999 Model Bicycles purchased in
the form of the borrowing base certificate set out in the Sixth
Schedule;
(iii) upon request, copies of invoices, credit memos, shipping and
delivery documents;
(iv) weekly ageings of accounts receivable to be delivered no later
than two business days after the end of the week for such week;
(v) weekly inventory reports by category to be delivered no later
than two business days after the end of the week for such week;
(vi) upon request, monthly perpetual inventory reports;
(vii) weekly ageings of accounts payable no later than two business
days after the end of the week for such week;
(viii) upon request, copies of purchase orders, invoices and delivery
documents for Inventory and equipment acquired by the Borrower;
(ix) such other reports or additional financial or other information
as the Bank shall reasonably request from time to time; and
(x) at the end of each of the periods specified in clause 15.1(d), a
certificate of an authorised signatory of the Borrower (without
personal liability) setting out in reasonable detail computations
establishing compliance with clause 15.1(d) and certifying that
all the representation and warranties are true as at that date
and that no Potential Event of Default which would have a
Material Adverse Effect or Event of Default has occurred during
such period;
(xi) certificates of an authorised signatory of the Borrower (without
personal liability) certifying that the foregoing reports fairly
represent the results of the Borrower's operations for that
period and the state of its affairs at that date.
If any of the Borrower's records or reports are prepared by an
accounting service or other environmental agent, the Borrower hereby
authorises such service or agent to deliver such records, reports and
related documents to the Bank.
<PAGE> 31
(d) FINANCIAL RATIOS:
The Borrower shall ensure that, at all times, the consolidated financial
condition of the Borrower Group shall be such that:
MINIMUM INTEREST COVERAGE
(A) the ratio of (i) EBIT for the period specified below to (ii)
Borrowing Costs for such period shall be not less than:
RATIO
From Closing to 30 September 1998 3.2:1
Closing to 31 December 1998 3.2:1
Closing to 31 March 1999 3.5:1
Closing to 30 June 1999 3.5:1
12 months to 30 September 1999 3.5:1
12 months to 31 December 1999 4.3:1
12 months to 31 December 2000 5.5:1
From 1 January 2001 to 30 June 2001 5.5:1
ADJUSTED TANGIBLE NET WORTH
(B) Adjusted Tangible Net Worth shall be not less than the
following amounts during the following periods:
PERIOD AMOUNT
(POUND)
From Closing to 30 September 1998 3,250,000
1 October 1998 to 31 December 1998 3,456,000
1 January 1999 to 31 March 1999 3,500,000
1 April 1999 to 30 June 1999 3,700,000
1 July 1999 to 30 September 1999 3,800,000
1 October 1999 to 31 December 1999 4,250,000
1 January 2000 to 31 March 2000 6,000,000
1 April 2000 to 30 June 2000 6,000,000
1 July 2000 to 30 September 2000 6,000,000
1 October 2000 to 31 December 2000 6,000,000
From 1 January 2001 to 30 June 2001 6,000,000
all as calculated by reference to the account information
(the RELEVANT ACCOUNTING INFORMATION) most recently delivered
under this Agreement.
<PAGE> 32
(e) FINANCIAL RATIOS: definition of terms:
The expressions used in clause 15.1(d) shall have the following
meanings:
ADJUSTED TANGIBLE ASSETS means all of the Borrower's assets
except:
(A) deferred assets, other than prepaid insurance and
prepaid taxes;
(B) patents, copyrights, trademarks, trade names,
franchises, goodwill and other similar intangibles;
(C) Restricted Investments;
(D) unamortised debt discount and expense;
(E) assets of the Borrower constituting Intercompany
Accounts; and
(F) fixed assets to the extent of any write-up in the book
value thereof resulting from a revaluation effective
after the Closing Date;
ADJUSTED TANGIBLE NET WORTH means, at any date:
(A) the book value (after deducting related depreciation,
amortisation, valuation and other proper reserves as
determined in accordance with Applicable GAAP) at which
the Adjusted Tangible Assets would be shown on a balance
sheet of the Borrower at such date prepared in
accordance with Applicable GAAP; LESS
(B) the amount at which the Borrower's liabilities would be
shown on such balance sheet, including as liabilities
all reserves for contingencies and other potential
liabilities which would be required to be shown on such
balance sheet.
BORROWINGS means a sum equal to the aggregate amount for the
time being of the principal, capital or nominal amount
(determined on a consolidated basis) of all financial
indebtedness of any member of the Borrower Group (other than
monies borrowed or raised from another member of the Borrower
Group) and, without prejudice to the generality of the
foregoing, shall be deemed to include the following:
(A) the principal amount of any debenture, bond, note, loan
stock, preference share capital, commercial paper or
similar instrument of any member of the Borrower Group;
(B) any amounts raised by any member of the Borrower Group
under any bill of exchange (but excluding any bill drawn
or accepted in the ordinary course of trade of the
relevant member of the Borrower Group and which is
payable at sight or not more than 90
<PAGE> 33
days after sight or has a final maturity or not more
than 90 days from the date thereof and is not
refinancing another bill whether or not relating to the
same underlying transaction) and the indebtedness of any
member of the Borrower Group under any acceptance
credit, bill discounting, note purchase or documentary
credit facility;
(C) the aggregate amount remaining to be paid by any member
of the Borrower Group under any credit agreement save
for amounts remaining to be paid which cannot properly
be attributed to capital in accordance with Applicable
GAAP;
(D) the capitalised value (determined in accordance with
Applicable GAAP) of the outstanding commitments of any
member of the Borrower Group under any finance lease;
(E) indebtedness under any receivables purchase, factoring
or discounting arrangement (to the extent there is any
recourse against any member of the Borrower Group);
(F) the aggregate amount remaining to be paid in respect of
any credit (other than normal trade credit which has
been outstanding for a period of less than 90 days or
such longer period as may be agreed with the Bank)
granted to, or of any deferred payments due from, any
member of the Borrower Group in respect of the
acquisition or constitution price of assets acquired or
constructed or the purchase price of services supplied;
(G) indebtedness of any member of the Borrower Group in
respect of any other transaction having the commercial
effect of a borrowing or other raising of money entered
into by it in order to finance its business or
operations or capital requirements; and
(H) (without double counting) indebtedness of any member of
the Borrower Group under any guarantee or other
assurance against financial loss in respect of the
financial indebtedness of any person.
For the purpose of determining the amount of BORROWINGS at any
time, any amount which is on a particular day outstanding or
repayable in a currency other than sterling shall on that day be
taken into account (i) if that day is the last day of a
Financial Year or financial quarter, at its equivalent in
sterling at the rate of exchange used for the purpose of
preparing the balance sheet forming part of the Relevant
Accounting Information prepared as at such date and (ii) in any
other case, at its equivalent in sterling as determined by the
Bank by reference to the Bank's spot rate of exchange for the
purchase of sterling with the relevant currency at or about
11.00 a.m. on the date on which the relevant determination falls
to be made.
BORROWING COSTS means in relation to any financial period a sum
equal to the aggregate amount of all continuing, regular or
periodic costs,
<PAGE> 34
charges and expenses incurred by the Borrower Group in respect
of such period (and whether paid or not) in effecting, servicing
or maintaining Borrowings including:
(A) interest (whether the same shall be payable immediately
or be capitalised or otherwise deferred);
(B) any fixed or minimum premium or dividend paid or payable
on the maturity of any Borrowings;
(C) consideration given whether by way of discount or
otherwise in connection with finance by way of
acceptance credit, bill discounting, note purchase,
receivables purchase, debt factoring or other like
arrangement; and
(D) the gross amount payable under any finance lease or
credit agreement less so much as can properly be
attributed to capital,
the amount of any such cost, charges and expenses to be
allocated to each such period over the term of any Borrowings in
accordance with Applicable GAAP;
EBIT means, in relation to any financial period a sum equal to
the Borrower Group's profit on ordinary activities before
taxation (save to the extent that such profit is attributable to
any interest received) after adding back Borrowing Costs in
respect of such period but excluding:
(A) profits or losses on the sale or termination of an
operation;
(B) profits or losses on the disposal of fixed assets; and
(C) extraordinary items.
(f) CHANGES IN BASIS OF PREPARATION OF RELEVANT ACCOUNTING INFORMATION:
Where any Relevant Accounting Information to be delivered under clause
15 has been prepared in a manner which is inconsistent with the
accounting principles or policies in accordance with which the Original
Financial Statements were prepared, the Borrower shall provide to the
Bank a written explanation of any such inconsistency, together with
details of its effects. If the Bank is satisfied that such inconsistency
has not altered any of the numerical information which would otherwise
have been provided and which would have been required for the purposes
of establishing compliance with the provisions of clause 15.1(d) then,
notwithstanding such inconsistency, the Relevant Accounting Information
shall be deemed to have been prepared in accordance with Applicable
GAAP.
(g) CHANGES IN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES: If, as a result of
any Financial Reporting Standard or other statement issued by the
Accounting Standards Board or any successor authority responsible for
the establishment and promulgation of generally accepted accounting
principles, there shall be any change in such principles such as would
be likely to affect the ability of the Bank to satisfy itself from the
information delivered as Relevant Accounting Information as to
compliance with the provisions of clause 15.1(d), the Bank shall have
the right to adjust the
<PAGE> 35
financial ratios set out in clause 15.1(d) or the relevant definitions
set out in clause 15.1(e) so as to reflect so far as is practicable the
effect of any such change.
15.2 GENERAL UNDERTAKINGS: The Borrower undertakes with the Bank that, from the
date of this Agreement until all its liabilities under the Finance Documents
have been discharged:
(a) CONDUCT OF BUSINESS: it has, and will ensure that each other member of
the Borrower Group has, the right to conduct its business and operations
as they are conducted in all applicable jurisdictions and will do, and
will procure that each other member of the Borrower Group does, all
things necessary (including compliance with all terms and conditions of
any licences and consents) to obtain, preserve and keep in full force
and effect all rights, licences (including, without limitation, all
Environmental Licences) and consents as are necessary for the conduct of
such business and operations;
(b) PAYMENT OF TAXES AND CLAIMS: it will, and will procure that each other
member of the Borrower Group will, duly and punctually pay and discharge
(i) all taxes imposed upon it or its properties (save where the same are
being contested in good faith and by appropriate proceedings and where
adequate reserves are being maintained with respect thereto) and (ii)
all lawful claims which, if unpaid, would by law become encumbrances
upon any of its properties;
(c) CONSENTS: it will obtain and promptly renew from time to time, and will
promptly deliver to the Bank certified copies of, any authorisation,
approval, consent, licence, exemption, registration, recording, filing
or notarisation as may be necessary or desirable to ensure the validity,
enforceability or priority of the liabilities and obligations of its or
the rights of the Bank under the Finance Documents to which it is a
party and it shall comply with the terms of the same;
(d) NOTICES TO BANK: the Borrower shall notify the Bank in writing of the
following matters at the following times (each such notice to describe
the subject matter thereof in reasonable detail and to set out the
action that the Borrower has taken or proposes to take with respect
thereto):
(i) promptly after becoming aware of the existence of any Event of
Default or Potential Event of Default;
(ii) after becoming aware that any shareholder in the Borrower or any
creditor of an amount in excess of (pound)10,000 in the Borrower
has given notice or taken any action with respect to a claimed
default;
(iii) promptly after becoming aware of any material adverse change in
the Borrower's assets, business, operations or condition
(financial or otherwise);
(iv) promptly after becoming aware of any pending or threatened
action, suit, proceeding or counterclaim by any person which if
adversely determined would have a Material Adverse Effect, or
any pending or threatened investigation by a public authority;
(v) after becoming aware of any pending or threatened strike, work
stoppage, material unfair labour practice claim, or other
material labour dispute affecting any member of the Borrower
Group;
<PAGE> 36
(vi) after becoming aware of any violation of any law, statute,
regulation, or ordinance of a public authority applicable to any
member of the Borrower Group or its assets which may have a
Material Adverse Effect;
(vii) promptly after becoming aware of any violation by the Borrower
of Environmental Laws which is likely to result is a material
liability in the Borrower Group or immediately upon receipt of
any notice that a public authority has asserted that the
Borrower is not in compliance with Environmental Laws or that
its compliance is being investigated;
(viii) not less than ten days prior to the Borrower changing its name
or the address of its registered office.
(e) INSURANCE: it will procure that it takes out and maintains insurance
cover over its assets and undertaking of a type and in an amount which
is consistent with good business practice in the industry concerned. It
further undertakes to keep and maintain all such insurance either in the
joint names of the Borrower and the Bank or (as the Bank may, in any
case, require) with the interest of the Bank as loss payee endorsed on
each relevant policy;
(f) HEDGING: it will within 90 days of the Closing Date and at all times
thereafter enter into such currency hedging agreements as are required
by the Bank in order to implement and maintain a hedging policy agreed
with the Bank;
(g) ENVIRONMENTAL LAWS: it shall take prompt and appropriate action to
respond to and remedy any non-compliance with Environmental Laws and
shall regularly report to the Bank on such response and remedying.
Without limiting the generality of the foregoing, whenever the Borrower
gives notice to the Bank the Borrower shall, at the Bank's request and
the Borrower's expense:
(i) cause an independent environmental engineer acceptable to the
Bank to conduct such tests of the site where the Borrower's
non-compliance or alleged non-compliance with Environmental Laws
has occurred and prepare and deliver tot he Bank a report
setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and
an estimate of the costs thereof; and
(ii) provide to the Bank a supplemental report of such engineer
whenever the scope of the environmental problems, or the
Borrower's response thereto or the estimated costs thereof,
shall change;
(h) YEAR 2000 PROBLEM: it will, on a timely basis, take all necessary or
appropriate steps to address the "Year 2000 Problem" referred to in
clause 14.1(r) so as to ensure that the Year 2000 Problem does not
have a Material Adverse Effect.
<PAGE> 37
15.3 NEGATIVE UNDERTAKINGS: The Borrower undertakes with the Bank that, from the
date of this Agreement until all its liabilities under the Finance Documents
have been discharged:
(a) SECURITY: it will not without the prior written consent of the Bank:
(i) create or permit to subsist any encumbrance on the whole or any
part of its present or future property, assets or revenues; or
(ii) sell or otherwise dispose of any of its property or assets on
terms whereby such property or assets are or may be leased to or
re-acquired or acquired by it; or
(iii) sell or otherwise dispose of any of its receivables;
except that it may:
(aa)create or permit to subsist a lien arising in the normal
course of trading or by operation of law or any right of
set-off arising by operation of law securing obligations not
more than thirty days overdue;
(bb)create or permit to subsist any conditional sale or title
retention on the suppliers standard terms of business arising
under or pursuant to any contract for the purchase of goods
in the normal course of business;
(cc)create or permit to subsist any encumbrance over any capital
asset to secure the payment of all or any part of the
purchase price of any capital asset (which shall not include
real property) on the acquisition of such capital asset
(whether such capital asset is purchased or leased), provided
that the aggregate of all such payments to be secured shall
not exceed (pound)526,000 in the Financial Year to 31
December 1998 and (pound)200,000 (or such other higher amount
as may be agreed by the Bank) in each Financial Year
thereafter and provided further that any such acquisition
shall have been previously notified to the Bank; and
(dd)permit to subsist any encumbrance created under any of the
Finance Documents;
(b) DISPOSALS: it will not, either in a single transaction or in a series of
transactions whether related or not and whether voluntarily or
involuntarily, sell, transfer, lease, loan or otherwise dispose of any
of its property or assets (including but not limited to Inventory and
Accounts) except that it may dispose of property or assets provided
always that any such disposal is:
(i) made in the ordinary course of the Borrower's business and for
full value and on arm's length terms; or
(ii) made in exchange for other property or assets comparable as to
type and value; or
(iii) of an asset or assets whose value is not more than (pound)200,000
in aggregate in any Financial Year;
and in each case provided the proceeds are credited to the Barclays
Collection Account.
(c) INDEBTEDNESS: it will not incur or have outstanding any Borrowings or
indebtedness other than indebtedness under (i) the Facilities; (ii) the
Bonding Facility; (iii) the FX
<PAGE> 38
Contracts (iv) the Barclays Retained Facilities and the BMBF Facilities;
(v) trade credit on standard terms incurred in the ordinary course of
the Borrower's business or any extended period as agreed with the Bank;
(vi) subject to the prior consent of the Bank, in favour of a Guarantor
or (vii) under other foreign exchange contracts as notified to the Bank;
(d) ACQUISITIONS: it will not, without the Bank's prior written consent (not
to be unreasonably withheld or delayed), make any acquisition of any
asset or business except that it may acquire:
(i) assets in the ordinary course of its business and for the
purpose of its trading activities;
(ii) any capital asset (which shall include real property) (whether
such capital asset is purchased or leased) provided that the
aggregate of all such acquisitions and Capital Expenditure does
not exceed (pound)526,000 in the Financial Year to 31 December
1998 and (pound)200,000 (or such other higher amount as may be
agreed by the Bank) in each Financial Year thereafter and
provided further that each such acquisition shall have been
notified to the Bank prior to making such acquisition; and
(iii) subject to notifying the Bank prior to any such acquisition, any
asset not otherwise included in sub-paragrapgh (i) and (ii) above
provided such expenditure does not exceed (pound)200,000 in any
Financial Year and will not result in any change of control of
any member of the Borrower Group, cause a Potential Event of
Default or an Event of Default or have any Material Adverse
Effect;
(e) DISTRIBUTIONS AND CHANGES IN CAPITAL STRUCTURE: no member of the
Borrower Group shall (i) directly or indirectly declare or make, or
incur any liability to make, any Distribution, except Distributions to
the Borrower by a Subsidiary wholly-owned by the Borrower or (ii) make
any change in its capital structure which could have a material adverse
effect on the Borrower or that member of the Borrower Group;
(f) GUARANTEES: it will not, and will procure that no other member of the
Borrower Group will, give any guarantee to or for the benefit of any
person or otherwise voluntarily assume any liability, whether actual or
contingent, in respect of any obligation of any other person;
(g) TRANSACTIONS WITH AFFILIATES: subject to the Bank's written consent, no
member of the Borrower Group shall:
(i) other than on arms' length terms and in the ordinary course of
business, sell, transfer, distribute or pay any money or assets
to any Affiliate except that, prior to a Potential Event of
Default or Event of Default which is continuing the Borrower may
repay principal and interest in whole or part of the intercompany
loan dated 31 August 1997 to GT Bicycles Inc., provided always
that after making such payment there shall be remaining Available
Commitment of at least (pound)750,000 of the Available Commitment
calculated prior to making such payment;
(ii) lend or advance money or assets to any Affiliate;
<PAGE> 39
(iii) invest in (by capital contribution or otherwise) or purchase or
repurchase any shares or indebtedness or any assets of any
Affiliate; or
(iv) become liable on any guarantee of the Indebtedness, dividends or
other obligations of any Affiliate.
(h) RESTRICTED INVESTMENTS: no member of the Borrower Group shall make any
Restricted Investment;
(i) ACCOUNTS: it shall not re-date any invoice or sale or make sales on
extended credit beyond that customary in its business or extend or
modify any Account; if the Borrower becomes aware of any matter
affecting any Account, including information regarding the Account
Debtor's creditworthiness, the Borrower will promptly so advise the Bank
in the case of Account Debtors owing more than (pound)35,000 promptly,
and in the case of other Account Debtors on a monthly basis;
(j) ACCEPTANCE OF NOTES OR OTHER INSTRUMENTS: it shall not accept any note
or other instrument (except a cheque or other instrument for the
immediate payment of money) with respect to any Account without the
Bank's written consent; if the Bank consents to the acceptance of any
such note or other instrument, it shall be considered as evidence of the
Account and not payment thereof, and the Borrower will promptly deliver
such note or instrument to the Bank appropriately endorsed. Regardless
of the form of presentment, demand, notice of dishonour, protest and
notice of protest with respect thereto, the Borrower will remain liable
thereon until such note or instrument is paid in full;
(k) DISPUTES WITH ACCOUNT DEBTORS: it shall notify the Bank promptly of all
disputes and claims with Account Debtors in excess of(pound)50,000 and
settle or adjust them at no expense to the Bank, but no discount, credit
or allowance shall be granted to any Account Debtor without the Bank's
consent, except for discounts, credits and allowances made or given in
the ordinary course of the Borrower's business when no Event of Default
exists hereunder. The Borrower shall send the Bank a copy of each credit
notes in excess of(pound)50,000 as soon as issued and copies of all
credit notes on a weekly basis. The Bank may at all times after a demand
for payment has been made under clause 16.2 settle or adjust disputes
and claims directly with customers or Account Debtors for amounts and
upon terms which the Bank considers advisable and, in all cases, the
Bank will credit the Borrower's loan account with only the net amounts
received by the Bank in payment of any Accounts;
(l) RETURNS OF INVENTORY: if an Account Debtor returns any Inventory to the
Borrower when no Event of Default exists, then the Borrower shall
promptly determine the reason for such return and shall issue a credit
note to the Account Debtor in the appropriate amount. The Borrower shall
immediately report to the Bank any return involving an amount in excess
of(pound)50,000 and shall report all returns to the Bank on a weekly
basis. Each such report shall indicate the reasons for the returns and
the locations and condition of the returned Inventory. If any Account
Debtor returns Inventory to the Borrower after a demand for payment has
been made under clause 16.2, the Borrower shall:
(i) hold the returned Inventory in trust for the Bank;
(ii) segregate all returned Inventory from all of its other assets;
<PAGE> 40
(iii) dispose of the returned Inventory solely according to the Bank's
written instructions; and
(iv) not issue any credits or allowances with respect thereto without
the Bank's prior written consent.
Whenever any Inventory is returned, the related Account shall be deemed
ineligible, and the Caratti Borrowing Base shall be adjusted
accordingly;
(m) INVENTORY: it will not, without prior written notice to the Bank,
acquire or accept any Inventory on consignment or approval;
(n) INVENTORY - REPORTING SYSTEM: it will maintain a perpetual inventory
reporting system at all times, through which a physical count of the
Inventory is conducted at least twice per Financial Year, and at such
other times as the Bank reasonably requests, and shall promptly, upon
completion, supply the Bank with a copy of such count accompanied by a
report of the value of such Inventory (valued at the lower of (i) costs,
on a first in, first out or weighted average basis or (ii) market
value); the Borrower will not without the Bank's prior written consent,
sell any Inventory on a sale or return, sale on approval, consignment or
other repurchase or return basis; and
(o) HEDGING/SPECULATIVE TRANSACTIONS: it will not enter into any interest
rate or currency swap, cap, ceiling, collar, floor or financial futures
or commodity contract or option or any similar treasury transactions
unless the same forms part of the hedging policy required by the Bank
pursuant to clause 15.2(f) or as part of an interest rate hedging
policy;
(p) CAPITAL EXPENDITURE: no member of the Borrower Group shall make or incur
any Capital Expenditure if, after giving effect thereto, the aggregate
amount of all Capital Expenditure (which for the avoidance of doubt
shall include any acquisitions made under clause 15.3(d)) by the
Borrower and its Subsidiaries in any Financial Year would exceed
(pound)526,000 in the Financial Year to 31 December 1998 and
(pound)200,000 (or such other higher amount as may be agreed by the
Bank) in each Financial Year thereafter;
(q) OPERATING LEASE OBLIGATIONS: no member of the Borrower Group shall enter
into any lease of real or personal property as lessee or sublessee
(other than a finance lease) if, after giving effect thereto, the
aggregate amount of Rentals (as hereinafter defined) payable by the
Borrower and its Subsidiaries in any Financial Year in respect of such
lease and all other such leases would exceed (pound)320,000. The term
RENTALS means all payments due from the lessee or sublessee under a
lease, including, without limitation, rent, service charge, utility or
maintenance costs and insurance premiums together with any VAT thereon.
EVENTS OF DEFAULT
16.1 If any of the events set out below occurs, the Bank may take any action as
is provided for in any of the Finance Documents:
(a) NON-PAYMENT: the Borrower or any Guarantor fails to pay any amount due
under any Finance Document within 2 business days of the due date or on
demand, if so payable;
<PAGE> 41
(b) BREACH OF OBLIGATIONS: the Borrower or any Guarantor fails to observe or
perform any of its obligations under the Finance Documents or under any
undertaking or arrangement entered into in connection therewith, other
than an obligation of the type referred to in clause 16.1(a), and, in
the case of any failure in respect of clause 15.1(b)(i) and (ii), such
failure if capable of remedy is not remedied to the satisfaction of the
Bank or not waived in writing by the Bank within 10 days of its
occurrence and, in the case of any failure in respect of clauses
15.1(c)(i), (ii), (iii) and (iv) such failure if capable of remedy is
not remedied to the satisfaction of the Bank or is not waived in writing
by the Bank within 5 days of its occurrence;
(c) MISREPRESENTATION: any representation, warranty or statement which is
made (or deemed or acknowledged to have been made) by the Borrower or
any Guarantor in the Finance Documents or which is contained in any
certificate, statement, legal opinion or notice provided under in
connection with the Finance Documents proves to be incorrect in any
material respect, or if repeated at any time with reference to the facts
and circumstances subsisting at such time, would not be accurate in all
material respects;
(d) INVALIDITY: any provision of any of the Finance Documents or the GTBC
Credit Agreement is or becomes, for any reason, invalid or
unenforceable;
(e) CESSATION OF BUSINESS: the Borrower changes or threatens to change the
nature or scope of its business, suspends or threatens to suspend a
substantial part of the present business operations which it now
conducts directly or indirectly, or any governmental authority
expropriates or threatens to expropriate all or part of its assets and
the result of any of the foregoing is, in the determination of the Bank,
materially and adversely to affect the financial condition of the Group
or the Borrower's or any Guarantor's ability to observe or perform its
obligations under the Finance Documents;
(f) CROSS-DEFAULT: either (i) any indebtedness in respect of Borrowings of
an aggregate amount of (pound)150,000 or more of the Borrower or any
member of the Borrower Group becomes due or capable of being declared
due before its stated maturity or is not paid on maturity or on demand
(if so payable), any guarantees of an aggregate amount of(pound)150,000
or more are not discharged at maturity or when called or the Borrower or
any member of the Borrower Group goes into default under, or commits a
breach of, any instrument or agreement relating to any such indebtedness
in respect of Borrowings or guarantee; or (ii) any default, howsoever
described, which entitles the Lenders (as defined in the GTBC Credit
Agreement) to demand early repayment, occurs under the GTBC Credit
Agreement, the Bonding Facility Letter or the FX Contracts;
(g) APPOINTMENT OF RECEIVER, LEGAL PROCESS: an encumbrancer takes possession
of, or a trustee or administrative or other receiver or similar officer
is appointed in respect of, all or any part of the business or assets of
the Borrower or distress or any form of execution is levied or enforced
upon or sued out against any such assets and is not discharged within
fifteen days of being levied, enforced or sued out, or any encumbrance
which may for the time being affect any of its assets becomes
enforceable;
(h) INSOLVENCY: the Borrower is unable to pay its debts within the meaning
of Section 123(1) of the Insolvency Act 1986 or becomes unable to pay
its debts as they
<PAGE> 42
fall due or suspends or threatens to suspend making payments (whether of
principal or interest) with respect to all or any class of its debts;
(i) COMPOSITION: the Borrower convenes a meeting of its creditors or
proposes or makes any arrangement or composition with, or any assignment
for the benefit of, its creditors;
(j) ADMINISTRATIVE, WINDING UP: a petition is presented or a meeting is
convened for the purpose of considering a resolution or other steps are
taken for making an administration order against or for the winding up
of the Borrower or an administration order or a winding up order is made
against the Borrower (other than for the purposes of and followed by a
reconstruction previously approved in writing by the Bank, unless during
or following such reconstruction the Borrower becomes or is declared to
be insolvent);
(k) ANALOGOUS PROCEEDINGS: anything analogous to any of the events specified
in paragraphs (g), (h), (i) or (j) occurs under the laws of any
applicable jurisdiction;
(l) MATERIAL ADVERSE CHANGE: any event or series of events whether related
or not occurs which would be likely materially and adversely to affect
the financial condition of the Group or the ability of the Borrower or
any Guarantor to perform its obligations under the Finance Documents;
(m) OWNERSHIP: the Borrower ceases to be a member of the Group;
(n) SECURITY DOCUMENTS: any of the security interests purported to be
granted pursuant to the Security Documents is not effective or is
alleged by any member of the Group to be ineffective in whole or part
for any reason; and
(o) CARATTI BORROWING BASE: as calculated by the Bank at any time the
Caratti Borrowing Base is exceeded by the Outstandings under the Spike
Facility and the Revolving Facility except if such occurrence is as a
result of the Bank varying the amount of the Caratti Borrowing Base in
relation to the current Outstandings in which event if the Caratti
Borrowing Base is exceeded by Outstandings under the Spike Facility and
the Revolving Facility and is not remedied by the Borrower within 10
days of receiving notice from the Bank.
16.2 ACTION ON EVENT OF DEFAULT: In the case of any of the events described in
clause 16.1 then, at once or at any time thereafter while the same is
continuing, the Bank may by notice to the Borrower:
(a) cancel its Commitment under the Revolving Facility and/or the L/C
Facility and/or the Spike Facility; and/or
(b) declare all or part of the Loan to be immediately due and payable
whereupon it shall become so due and payable together with accrued
interest thereon and any other amounts then payable under this
Agreement, such payment to be effected on a date to be notified by the
Bank to the Borrower; and/or
(c) demand immediate repayment of any amounts to which paragraph (b) above
applies or in the case of any Undertakings, demand cash
collateralisation of any such Undertakings; and/or
<PAGE> 43
(d) place all or part of the Loan on demand, whereupon it shall immediately
become repayable on demand and at any time thereafter:
(i) make any further amendment to the repayment or cash
collateralisation obligations relating to such Advances, and the
L/C Facility; and/or
(ii) demand repayment of all or part of the Advances together with
accrued interest and any other amounts then payable under this
Agreement.
DEFAULT INTEREST AND INDEMNITY
17.1 If any sum due and payable by the Borrower under this Agreement is not paid
on the due date therefor in accordance with the provisions of clause 19 or if
any sum due and payable by the Borrower under any judgment of any court in
connection with this Agreement is not paid on the date of such judgment, the
period beginning on such due date or, as the case may be, the date of such
judgment and ending on the date upon which the obligation of the Borrower to pay
such sum (the balance thereof for the time being unpaid being in this Agreement
referred to as an UNPAID SUM) is discharged shall be divided into successive
periods, each of which (other than the first) shall start on the last day of the
preceding such period and the duration of each of which shall (except as
otherwise provided in this clause 17) be selected by the Bank.
17.2 During each such period relating thereto as is mentioned in clause 17.1 an
unpaid sum shall bear interest at the rate per annum which is the sum from time
to time of two per cent. per annum above the cost of funds to the Bank from
whatever sources it reasonably selects.
17.3 Any interest which shall have accrued under clause 17.2 in respect of an
unpaid sum shall be due and payable and shall be paid by the Borrower at the end
of the period by reference to which it is calculated or on such other date or
dates as the Bank may specify by written notice to the Borrower.
17.4 The Borrower undertakes to indemnify the Bank on an after tax basis
against:
(i) any cost, claim, loss, expense (including reasonable legal fees) or
liability together with any VAT thereon, which it may reasonably sustain
or incur as a consequence of making any Advance, maintaining or funding
any Advance, issuing or maintaining any Undertaking, the occurrence of
any Event of Default or any default by the Borrower in the performance
of any of the obligations expressed to be assumed by it in this
Agreement; and
(ii) any loss it may suffer as a result of its funding an Advance, or issuing
Undertakings requested by the Borrower under this Agreement but not made
(other than by reason of negligence or wilful default by the Bank) by
reason of the operation of any one or more of the provisions of this
Agreement.
17.5 Any unpaid sum shall (for the purposes of this clause 17 and clause 11.1)
be treated as an Advance and accordingly in this clause 17 the term ADVANCE
includes any unpaid sum.
<PAGE> 44
CURRENCY OF ACCOUNT AND PAYMENT
18.1 Sterling is the currency of account and payment for each and every sum at
any time due from the Borrower under this Agreement Provided that:
(i) each repayment of an Advance or a part thereof shall be made in the
currency in which such Advance is denominated at the time of that
repayment;
(ii) any cash collateralisation in respect of any outstanding Undertakings
shall be made in the currency in which such amount to be repaid or cash
collateralised is denominated at the time of that repayment or cash
collateralisation;
(iii) each payment of interest shall be made in the currency in which the sum
in respect of which such interest is payable is denominated;
(iv) each payment in respect of costs and expenses shall be made in the
currency in which the same were incurred;
(v) each payment pursuant to clause 9.2 or clause 11.1 shall be made in the
currency specified by the Bank; and
(vi) any amount expressed to be payable in a currency other than dollars
shall be paid in that other currency.
18.2 If any sum due from the Borrower under this Agreement or any order or
judgment given or made in relation hereto has to be converted from the currency
(the FIRST CURRENCY) in which the same is payable under this Agreement or under
such order or judgment into another currency (the SECOND CURRENCY) for the
purpose of (i) making or filing a claim or proof against the Borrower, (ii)
obtaining an order or judgment in any court or other tribunal, or (iii)
enforcing any order or judgment given or made in relation hereto, the Borrower
shall indemnify and hold harmless the Bank from and against any loss suffered as
a result of any discrepancy between (a) the rate of exchange used for such
purpose to convert the sum in question from the first currency into the second
currency and (b) the rate or rates of exchange at which the Bank may in the
ordinary course of business purchase the first currency with the second currency
upon receipt of a sum paid to it in satisfaction, in whole or in part, of any
such order, judgment, claim or proof.
PAYMENTS
19.1 The following provisions shall apply to the making of payments:
(a) all payments by the Borrower to the Bank under this Agreement shall be
made to the Bank to its account at such office or bank as it may notify
to the Borrower;
(b) payments under this Agreement to the Bank shall be made for value on the
due date at such times and in such funds as the Bank may specify to the
Borrower as being customary at the time for the settlement of
transactions in the relevant currency in the place for payment.
19.2 All payments required to be made by the Borrower under this Agreement shall
be calculated without reference to any set-off or counterclaim and shall be made
free and clear of and without any deduction for or on account of any set-off or
counterclaim.
<PAGE> 45
SET-OFF
20. The Borrower authorises the Bank to apply any credit balance to which the
Borrower is entitled on any account of the Borrower with the Bank at any of its
branches in satisfaction of any sum due and payable from the Borrower to the
Bank under this Agreement but unpaid; for this purpose, the Bank is authorised
to purchase with the moneys standing to the credit of any such account such
other currencies as may be necessary to effect such application. The Bank shall
not be obliged to exercise any right given to it by this clause 20.
FEES
21.1 Facility Fee: The Borrower shall pay to the Bank a facility fee for the
Revolving Credit Facility of (pound)25,000 payable on the Closing Date.
21.2 AUDIT FEE: The Borrower shall pay to the Bank an audit fee at the rate of
(pound)500 per person per day, to be debited to the Loan Account as of the date
incurred by the Bank. The Bank's reasonably and properly incurred out-of-pocket
expenses together with any VAT payable thereon will be for the account of the
Borrower.
21.3 REVOLVING CREDIT FACILITY COMMITMENT FEE: The Borrower shall pay to the
Bank a commitment fee for the Revolving Credit Facility on the amount which is
equal to (pound)10,000,000 less any amounts cancelled in accordance with clause
8.2 (the COMMITTED AMOUNT) and less Outstandings from day to day during the
period beginning on the date of this Agreement and ending on the Final Maturity
Date (the USED AMOUNT). The commitment fee payable under this clause 21.3 shall
accrue daily and be calculated at the rates set out in Column 2 below and a 365
day year and shall be debited to the Loan Account on the last day of each month
and on the Final Maturity Date.
COLUMN 1 COLUMN 2
PERCENTAGE UTILISATION (%)* PERCENTAGE FEE RATE (%)
75-99 0.25% per annum
70-75 0.30% per annum
65-70 0.35% per annum
60-65 0.4% per annum
50-60 0.45% per annum
0-50 0.5% per annum
21.4 L/C FEE: The Borrower shall pay to the Bank a fee for the L/C Facility on
the amount of Outstandings under the L/C Facility calculated at the rate of 1.25
per cent. per annum and a 365 day year and shall be debited to the Loan Account
on the last day of each month and on the Final Maturity Date. The Bank's
out-of-pocket expenses reasonably and properly incurred together with any VAT
payable thereon will be for the account of the Borrower.
21.5 SPIKE FACILITY FEE: The Borrower shall pay to the Bank a Facility Fee for
the Spike Facility of (pound)5000 payable on the first drawdown under the Spike
Facility.
21.6 EARLY TERMINATION FEE: Except upon a change of control in the ownership of
GT Bicycles Inc. or if cancelled in accordance with clause 8.3 or clause 12, the
Borrower shall
- --------
* The Used Amount expressed as a percentage of the Committed Amount.
<PAGE> 46
pay to the Bank an early termination fee of one per cent. of the amount
cancelled under clause 8.1 or clause 16.2(a) (an EARLY TERMINATION) within 12
months of the Closing Date; or 0.5 per cent. of any amount cancelled if
termination occurs after 12 months but within 24 months of the date of the
Closing Date provided that if the Early Termination is as a result of a change
of control in the Borrower, the Borrower shall pay to the Bank an early
termination fee of 0.5 per cent. of the amount cancelled within 12 months of the
Closing Date; or 0.25 per cent. of any amount cancelled if termination occurs
after 12 months but within 24 months of the date of the Closing Date.
COSTS AND EXPENSES
22.1 The Borrower shall, from time to time on demand, reimburse the Bank for all
reasonable costs and expenses (including reasonable legal fees and
disbursements) (including, without limitation, the allocated cost of in-house
counsel to the Bank) together with any VAT thereon properly incurred by the Bank
in connection with the negotiation, preparation and execution of this Agreement.
The Bank's legal fees, excluding disbursements and VAT for the negotiation,
preparation and execution of this Agreement, the Fixed and Floating Charge, the
Caratti Bank Agreement and all documents ancillary thereto prior to the Closing
Date shall be capped at (pound)20,000 (which figure for the avoidance of doubt
shall be in addition to any fees previously paid by the Borrower).
22.2 The Borrower shall, from time to time on demand, reimburse the Bank for all
reasonable costs and expenses (including legal fees) together with any VAT
thereon incurred in or in connection with the preservation and/or enforcement of
any of its rights under this Agreement or in connection with any future
amendments or waivers to this Agreement.
22.3 The Borrower shall pay all stamp, registration and other taxes to which the
Finance Documents or any judgment given in connection with the Finance Documents
is or at any time may be subject and shall, from time to time on demand,
indemnify the Bank against any liabilities, costs, claims and expenses resulting
from any failure to pay or any delay in paying any such taxes.
BENEFIT OF AGREEMENT
23. This Agreement shall be binding upon and enure to the benefit of each party
hereto and its or any subsequent successors, transferees and assigns.
ASSIGNMENTS AND TRANSFERS
24.1 The Borrower shall not be entitled to assign or transfer all or any of its
rights, benefits and obligations under this Agreement.
24.2 At any time prior to an Event of Default the Bank shall only, if possible
assign or transfer the whole of its rights or obligations under this Agreement
to any assignee of BankAmerica Business Credit Inc. under the GTBC Credit
Agreement. After the occurrence of an Event of Default which is continuing, or
if it is not possible to assign or transfer the whole of its rights or
obligations under this Agreement to an assignee of BankAmerica Business Credit
Inc. under the GTBC Credit Agreement, the Bank may assign or transfer to any
other bank or financial institution the whole or part of its rights and/or
obligations under this Agreement.
<PAGE> 47
DISCLOSURE OF INFORMATION
25. The Bank may disclose to:
(i) any person with whom it is proposing to enter, or has entered, into any
kind of transfer, participation or other agreement in relation to this
Agreement; or
(ii) its professional advisers or any banking or other regulatory or
examining authorities (whether governmental or otherwise) with whose
instructions banks are accustomed to comply; or
(iii) any affiliate or holding company of the Bank,
such information about the Borrower and the Group or details of the Finance
Documents as the Bank shall consider appropriate.
CALCULATIONS AND EVIDENCE OF DEBT
26.1 Interest, commitment fee and commission shall accrue from day to day and
shall be calculated on the basis of a year of 365 days (or, in any case where
market practice differs, in accordance with market practice) and the actual
number of days elapsed.
26.2 Any repayment of an Advance denominated in an Optional Currency shall
reduce the amount of such Advance by the amount of such Optional Currency repaid
and shall reduce the Sterling Amount of such Advance proportionately.
26.3 The Bank shall maintain the Loan Account in accordance with its usual
practice evidencing the amounts from time to time lent by and owing to it under
this Agreement.
26.4 In any legal action or proceeding arising out of or in connection with this
Agreement, the entries made in the accounts maintained pursuant to clause 26.3
shall be conclusive evidence of the existence and amounts of the obligations of
the Borrower therein recorded.
26.5 A certificate of the Bank as to (i) the amount by which a sum payable to it
under this Agreement is to be increased under clause 9.1 or (ii) the amount for
the time being required to indemnify it against any such cost, payment or
liability as is mentioned in clause 9.2 or 11.1 shall, in the absence of
manifest error, be conclusive for the purposes of this Agreement.
RIGHTS CUMULATIVE, WAIVERS
27. The rights of the Bank under this Agreement are cumulative, may be exercised
as often as the Bank considers appropriate and are in addition to its rights
under the general law. The rights of the Bank in relation to the Facilities
(whether arising under this Agreement or under the general law) shall not be
capable of being waived or varied otherwise than by an express waiver or
variation in writing; and in particular any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or variation of that
or any other such right; any defective or partial exercise of any of such rights
shall not preclude any other or further exercise of that or any other such
right; and no act or course of conduct or negotiation on its part or on its
behalf shall in any way preclude the Bank from exercising any such right or
constitute a suspension or any variation of any such right.
<PAGE> 48
PARTIAL INVALIDITY
28. If, at any time, any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction,
neither the legality, validity or enforceability of the remaining provisions of
this Agreement nor the legality, validity or enforceability of such provision
under the law of any other jurisdiction shall in any way be affected or impaired
thereby.
NOTICES
29.1 Each communication to be made under this Agreement shall be made in writing
but, unless otherwise stated, may be made by telefax or letter.
29.2 Any communication or notice to be made or delivered by one person to
another pursuant to this Agreement shall (unless that other person has, by
fifteen days' written notice to each of the other parties, specified another
address) be made or delivered to that other person at the address identified
with its signature below and shall be deemed to have been made or delivered when
the same has been received in a legible form on a business day in the case of
any communication made by telefax and provided that a hard copy of such telefax
in contemporaneously despatched by letter by first class post to the addressee
thereof or in the case of any communication made by letter when left at that
address or as the case may be ten days after being deposited in the post postage
prepaid in an envelope addressed to it at that address.
THE BORROWER
CARATTI SPORT LTD
Address: 1180 Aztec West
Bristol
BS12 4SL
Attention: Mark Edwards/Arthur Cook
Telephone: 01454 201700
Telefax: 01179 612 413
Copy to:
Name: Mike Haynes
Telefax: 001 714 513 7115
and in the case of any notice delivered in accordance with clause 16.2 copy to:
GT BICYCLES, INC.
Address: 2001 East Dyer
Santa Anna
California
CA 92705-5709
USA
<PAGE> 49
Attention: Charles Cimitile
Telephone: 001 714 481 3737
Telefax: 001 714 481 7115
and
OSBORNE CLARKE
Address: 50 Queen Charlotte Street
Bristol
BS1 4HE
Attention: Margaret Childs
Telephone: 0117 984 5422
Telefax: 0117 929 2470
THE BANK
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, LONDON BRANCH
Address: 1 Alie Street
London E1 8DE
In respect of any Notice of Drawdown:
Attention: Loans Services Group
Telephone: 0182 313 2000
Telefax: 0181 313 2140
In respect of all other matters:
Attention: Tim Jacob and Miriam Gerver
Telephone: 0171 634 4688/4631
Telefax: 0171 634 4754
29.3 Each communication and document made or delivered by one party to another
pursuant to this Agreement shall be in the English language or accompanied by a
translation thereof into English certified (by an officer of the person making
or delivering the same) as being a true and accurate translation thereof.
<PAGE> 50
LAW
30. This Agreement is governed by, and shall be construed in accordance with,
English law.
JURISDICTION
31.1 The Borrower hereto irrevocably agrees for the benefit of the Bank that the
courts of England shall have jurisdiction to hear and determine any suit, action
or proceeding, and to settle any disputes, which may arise out of or in
connection with this Agreement and, for such purposes, irrevocably submits to
the jurisdiction of such courts.
31.2 The Borrower irrevocably waives any objection which it might now or
hereafter have to the courts referred to in clause 31.1 being nominated as the
forum to hear and determine any suit action or proceeding, and to settle any
disputes, which may arise out of or in connection with this Agreement and agrees
not to claim that any such court is not a convenient or appropriate forum.
31.3 The submission to the jurisdiction of the courts referred to in clause 31.1
shall not (and shall not be construed so as to) limit the right of the Bank to
take proceedings against the Borrower in any other court of competent
jurisdiction nor shall the taking of proceedings in any one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction
(whether concurrently or not) if and to the extent permitted by applicable law.
31.4 The Borrower hereby consents generally in respect of any legal action or
proceeding arising out of or in connection with this Agreement to the giving of
any relief or the issue of any process in connection with such action or
proceeding including, without limitation, the making, enforcement or execution
against any property whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such action or proceeding.
31.5 To the extent that the Borrower may in any jurisdiction claim for itself or
its assets immunity from suit, execution, attachment (whether in aid of
execution, before judgment or otherwise) or other legal process and to the
extent that in any such jurisdiction there may be attributed to itself or its
assets such immunity (whether or not claimed), the Borrower hereby irrevocably
agrees not to claim and hereby irrevocably waives such immunity to the full
extent permitted by the laws of such jurisdiction.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
<PAGE> 51
THE FIRST SCHEDULE
CONDITION PRECEDENT DOCUMENTS
1. A certified and dated copy of the certificate of incorporation and the
memorandum and articles of association of the Borrower, as currently in
force.
2. Audited accounts for the 14 months ended 31 December 1997.
3. Management accounts for the period to 30 April 1998 in form and
substance satisfactory to the Bank.
4. A borrowing base certificate in the form of the Sixth Schedule together
with supporting ageings, reports and warranty from an authorised
signatory (without personal liability).
5. An original Fixed and Floating Charge duly executed by the Borrower.
6. An original Caratti Bank Agreement duly executed by the Borrower and
Barclays Bank PLC.
7. The Indemnity executed by the Borrower.
8. The original Guarantees.
9. A certified and dated copy of a resolution of the directors of the
Borrower approving the execution, delivery and performance of the
Finance Documents to which it is a party and the terms and conditions of
the Finance Documents to which it is a party, authorising a named person
or persons to sign the Finance Documents to which it is a party and any
documents to be delivered by it pursuant thereto or in connection
therewith (including but not limited to the certificate referred to in
paragraph 14 below relating to the Financial Performance Projections)
and authorising a named person or persons to operate the Facilities and
the Bonding Facility, to sign Notices of Drawdown and generally to give
instructions on which the Bank may act in connection with any of the
Finance Documents to which it is a party.
10. A certificate of a duly authorised officer of the Borrower setting out
the names and signatures of the persons authorised to sign, on its
behalf, the Finance Documents to which it is a party and any documents
to be delivered by it pursuant thereto or in connection therewith and to
operate the Facilities and the Bonding Facility, to sign Notices of
Drawdown and generally to give instructions on which the Bank may act in
connection with any of the Finance Documents to which it is a party.
11. Evidence that the indebtedness of GT Bicycles Inc. has been refinanced
to the satisfaction of the Bank.
12. Letter of undertaking from GT Bicycles Inc to the Bank confirming that
the Borrower will be permitted to use the GT name for the duration of
this Agreement.
13. Confirmation from the Bank that all fees payable prior to or on Closing
have been paid.
<PAGE> 52
14. A certificate of an authorised officer of the Borrower certifying that
the Financial Performance Projections previously delivered to the Bank
have been met together with supporting accounts to the satisfaction to
the Bank.
15. Evidence that after taking into account Advances or Undertakings issued
or to be issued on the Closing Date there shall be remaining Available
Commitment of at least 10% of the Available Commitment calculated prior
to the making of such Advances and the issue of Undertakings.
16. Evidence of satisfactory insurance either in joint names of the Borrower
and the Bank or with the interest of the Bank as loss payee endorsed on
each relevant policy.
17. Completion of an audit by the Bank satisfactory to the Bank.
<PAGE> 53
THE SECOND SCHEDULE
NOTICE OF DRAWDOWN
From: Caratti Sport Ltd
To: Bank of America NT & SA, London Branch
Dated:
Dear Sirs
1. We refer to the agreement (as from time to time amended, varied, novated or
supplemented, the FACILITY AGREEMENT) dated 18 September, 1996 and made between
us. Terms defined in the Facility Agreement shall have the same meaning in this
notice.
2. We hereby give you notice that, pursuant to the Facility Agreement and upon
the terms and subject to the conditions contained therein, we wish an Advance to
be made to us as follows:
(i) Revolving Credit Facility/Spike Facility:
(ii) Currency and Amount:
(iii) Drawdown Date:
3. We confirm that, at the date of this Agreement, the representations set out
in clause 15 of the Facility Agreement are true and that no Event of Default or
Potential Event of Default has occurred.
4. The proceeds of the drawdown should be credited to the Barclays Operating
Account, Account number [_____ _____ _____ ] in the name of Caratti Sport Ltd.
Yours faithfully
.............................
for and on behalf of
Caratti Sport Ltd
<PAGE> 54
THE THIRD SCHEDULE
PART 1
INELIGIBLE ACCOUNTS
Ineligible Accounts includes:
DEBTORS:
1. Subject to paragraph 9 below, any amount outstanding more than 90 days
past date of invoice or 60 days past due.
2. Any debtor balance where more than 50% of outstanding is more than 90
days old or 60 days past due.
3. Debtor balances in excess of 25% of Outstandings.
4. Cash Sales.
5. Sales to other Group companies.
6. Pro forma invoices.
7. Sale or Return.
8. Contra or potential contra accounts where the debtor is also a supplier.
9. Any account with extended terms that are more than 30 days past due.
10. House and promotional accounts.
<PAGE> 55
PART 2
INELIGIBLE INVENTORY
Ineligible Inventory includes:
STOCK
1. Bicycle and frames, initially model year 1996 and before, and thereafter
more than two calendar years old.
2. Promotional material.
3. Kryptonite and other suppliers point of purchase displays.
4. Shogun models purchased before 31 December 1997.
5. Rock Shox initially model year 1996 and before and thereafter more than
two calendar years old.
6. Stock returned under warranty claims or suppliers.
7. Used bikes that have been utilised as demonstration models and used on
promotions.
8. In-Transit stock, in which payment has not been made, title has not
passed and is not subject to any Undertaking.
<PAGE> 56
THE FOURTH SCHEDULE
HIRE PURCHASE AGREEMENTS
1. BMBF Facility
2. Lloyds
<PAGE> 57
THE FIFTH SCHEDULE
FOREIGN EXCHANGE CONTRACTS
None
<PAGE> 58
THE SIXTH SCHEDULE
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE DATE RATE OF TOTAL BANK OF
ADVANCE AMERICA
USE ONLY
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Beginning Balance (previous ending
Balance) ________ ________
Plus: Sales as of ________ ________ ________
Less: Credits as of ________ ________ ________
Less: Gross Collections as of ________ ________ ________
+/- Adjustments ________ ________
Ending Balance ________ ________
Less: Ineligible Accounts (details to be ________ ________
attached)
Eligible Accounts Receivable Availability 85% ________ ________
not to exceed
- ----------------------------------------------------------------------------------------
________
- ----------------------------------------------------------------------------------------
INVENTORY ________
Raw Material as of ________ ________ 0% ________
WIP as of ________ ________ 0% ________
Finished Goods as of ________ ________ ________
________ 60% ________ ________
1999 Model Bicycles as of ________ ________ 60% ________ ________
Less: Ineligible Inventory (details to be ________ ________ ________
attached)
Eligible Inventory Availability not to
exceed (pound)7,000,000
- ----------------------------------------------------------------------------------------
LESS PREFERENTIAL CREDITORS
- ----------------------------------------------------------------------------------------
TOTAL AVAILABILITY
- ----------------------------------------------------------------------------------------
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS (WITHOUT PERSONAL LIABILITY OF THE
SIGNATORY) THAT THE INFORMATION SET FORTH ABOVE IS TRUE AND COMPLETE. THE
UNDERSIGNED REPRESENTS AND WARRANTS THAT SAID COLLATERAL COMPLIES WITH THE
REPRESENTATIONS, WARRANTIES, CREDIT AND COVENANTS CONTAINED IN THE CREDIT
AGREEMENT BETWEEN BANK OF AMERICA NT & SA AND THE UNDERSIGNED
BORROWER ___________________________________________
AUTHORISED SIGNATURE ___________________________________________
TITLE ___________________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 224
<SECURITIES> 0
<RECEIVABLES> 55,857
<ALLOWANCES> 2,597
<INVENTORY> 72,447
<CURRENT-ASSETS> 131,806
<PP&E> 18,371
<DEPRECIATION> 5,231
<TOTAL-ASSETS> 168,166
<CURRENT-LIABILITIES> 20,958
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 62,453
<TOTAL-LIABILITY-AND-EQUITY> 168,166
<SALES> 108,820
<TOTAL-REVENUES> 108,820
<CGS> 78,496
<TOTAL-COSTS> 78,496
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 392
<INTEREST-EXPENSE> 4,134
<INCOME-PRETAX> 791
<INCOME-TAX> 308
<INCOME-CONTINUING> 483
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 483
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
