EXHIBIT 10.17
AMENDED AND RESTATED CREDIT AGREEMENT
among
XXXXXXXXXXXXXX.XXX LLC
as Borrower,
PARIBAS, CHICAGO BRANCH
as Agent,
and
the Banks Named Herein
31 December 1999
TABLE OF CONTENTS
ARTICLE 1 Definitions....................................................................... 1
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Section 1.1 Definitions.......................................................... 1
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Section 1.2 Other Definitional Provisions........................................ 22
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Section 1.3 Accounting Terms and Determinations.................................. 22
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Section 1.4 Time of Day.......................................................... 22
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Section 1.5 Exhibits and Schedules to the Prior Agreement........................ 22
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ARTICLE 2 Revolving Credit Facility......................................................... 23
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Section 2.1 Revolving Commitments................................................ 23
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Section 2.2 Revolving Notes...................................................... 23
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Section 2.3 Repayment of Revolving Loans......................................... 23
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Section 2.4 Use of Proceeds...................................................... 23
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Section 2.5 Revolving Commitment Fee............................................. 24
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Section 2.6 Reduction or Termination of Revolving Commitments.................... 24
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Section 2.7 Letters of Credit.................................................... 24
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Section 2.8 Borrowing Base....................................................... 27
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ARTICLE 3 Term Loans........................................................................ 27
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Section 3.1 Term Loan Notes...................................................... 27
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Section 3.2 Repayment of Term Loans.............................................. 27
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ARTICLE 4 Interest and Fees................................................................. 28
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Section 4.1 Interest Rate........................................................ 28
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Section 4.2 Determinations of Margins and Fees................................... 28
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Section 4.3 Payment Dates........................................................ 28
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Section 4.4 Default Interest..................................................... 29
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Section 4.5 Conversions and Continuations of Accounts............................ 29
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Section 4.6 Computations......................................................... 29
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ARTICLE 5 Administrative Matters............................................................ 29
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Section 5.1 Borrowing Procedure.................................................. 29
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Section 5.2 Minimum Amounts...................................................... 30
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Section 5.3 Certain Notices...................................................... 30
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Section 5.4 Prepayments.......................................................... 31
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Section 5.5 Method of Payment.................................................... 33
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Section 5.6 Pro Rata Treatment................................................... 34
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Section 5.7 Sharing of Payments.................................................. 34
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Section 5.8 Non-Receipt of Funds by the Agent.................................... 35
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Section 5.9 Withholding Taxes.................................................... 35
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Section 5.10 Withholding Tax Exemption............................................ 36
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Section 5.11 Participation Obligations Absolute; Failure to Fund Participation..... 36
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Section 5.12 Tax Indemnity......................................................... 36
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Section 5.13 Reinstatement of Obligations.......................................... 37
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ARTICLE 6 Yield Protection and Illegality..................................................... 37
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Section 6.1 Additional Costs...................................................... 37
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Section 6.2 Limitation on Libor Accounts.......................................... 39
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Section 6.3 Illegality............................................................ 39
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Section 6.4 Treatment of Affected Loans........................................... 39
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Section 6.5 Compensation.......................................................... 40
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Section 6.6 Capital Adequacy...................................................... 41
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Section 6.7 Replacement of a Bank................................................. 41
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ARTICLE 7 Conditions Precedent................................................................ 42
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Section 7.1 Effectiveness of Agreement; Initial Loans and Letter of Credit........ 42
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Section 7.2 All Loans and Letters of Credit....................................... 43
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ARTICLE 8 Representations and Warranties...................................................... 44
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Section 8.1 Corporate Existence................................................... 44
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Section 8.2 Financial Statements.................................................. 44
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Section 8.3 Corporate Action; No Breach........................................... 45
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Section 8.4 Operation of Business................................................. 45
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Section 8.5 Litigation and Judgments.............................................. 46
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Section 8.6 Rights in Properties; Liens........................................... 46
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Section 8.7 Enforceability........................................................ 46
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Section 8.8 Approvals............................................................. 46
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Section 8.9 Debt.................................................................. 46
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Section 8.10 Taxes................................................................. 46
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Section 8.11 Margin Securities..................................................... 47
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Section 8.12 ERISA................................................................. 47
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Section 8.13 Disclosure............................................................ 47
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Section 8.14 Subsidiaries; Capitalization.......................................... 47
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Section 8.15 Agreements............................................................ 48
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Section 8.16 Compliance with Laws.................................................. 48
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Section 8.17 Investment Company Act................................................ 48
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Section 8.18 Public Utility Holding Company Act.................................... 48
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Section 8.19 Environmental Matters................................................. 48
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Section 8.20 Solvency.............................................................. 49
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Section 8.21 Labor Relations....................................................... 49
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ARTICLE 9 Positive Covenants.................................................................... 50
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Section 9.1 Reporting Requirements.................................................. 50
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iii
Section 9.2 Maintenance of Existence; Conduct of Business........................... 52
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Section 9.3 Maintenance of Properties............................................... 52
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Section 9.4 Taxes and Claims........................................................ 52
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Section 9.5 Insurance............................................................... 53
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Section 9.6 Inspection Rights....................................................... 53
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Section 9.7 Keeping Books and Records............................................... 53
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Section 9.8 Compliance with Laws.................................................... 53
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Section 9.9 Compliance with Agreements.............................................. 53
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Section 9.10 Further Assurances; Post Closing Matters................................ 53
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Section 9.11 New Subsidiaries........................................................ 54
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Section 9.12 Mortgaged Properties.................................................... 54
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Section 9.13 ERISA................................................................... 55
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Section 9.14 Interest Rate Protection................................................ 55
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ARTICLE 10 Negative Covenants................................................................... 55
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Section 10.1 Debt.................................................................... 55
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Section 10.2 Limitation on Liens and Restrictions on Subsidiaries.................... 56
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Section 10.3 Mergers, Etc............................................................ 57
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Section 10.4 Restricted Payments..................................................... 59
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Section 10.5 Investments............................................................. 60
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Section 10.6 Limitation on Issuance of Equity Interests.............................. 61
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Section 10.7 Transactions With Affiliates............................................ 61
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Section 10.8 Disposition of Assets................................................... 61
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Section 10.9 Sale and Leaseback...................................................... 62
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Section 10.10 Lines of Business....................................................... 62
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Section 10.11 Management Fees and Compensation........................................ 62
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Section 10.12 Modification to Operating Agreement; Management Agreement............... 62
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Section 10.13 Acquisition Agreements.................................................. 63
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ARTICLE 11 Financial Covenants.................................................................. 63
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Section 11.1 Consolidated Net Worth.................................................. 63
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Section 11.2 Minimum Adjusted EBITDA................................................. 63
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Section 11.3 Interest Coverage....................................................... 64
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Section 11.4 Fixed Charge Coverage................................................... 64
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Section 11.5 Total Debt to Adjusted EBITDA Ratio..................................... 65
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Section 11.6 Capital Expenditure Limits.............................................. 65
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Section 11.7 Internet Expenditures................................................... 66
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ARTICLE 12 Default.............................................................................. 66
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Section 12.1 Events of Default....................................................... 66
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Section 12.2 Remedies................................................................ 69
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Section 12.3 Rescission of Acceleration.............................................. 70
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Section 12.4 Performance by the Agent................................................ 70
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Section 12.5 Cash Collateral......................................................... 70
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Section 12.6 Setoff.................................................................. 70
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Section 12.7 Continuance of Default.................................................. 71
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ARTICLE 13 The Agent............................................................................ 71
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Section 13.1 Appointment, Powers and Immunities...................................... 71
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Section 13.2 Rights of Agent as a Bank............................................... 72
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Section 13.3 Defaults................................................................ 72
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Section 13.4 Indemnification......................................................... 72
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Section 13.5 Independent Credit Decisions............................................ 73
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Section 13.6 Several Commitments..................................................... 73
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Section 13.7 Successor Agent......................................................... 73
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Section 13.8 Reliance by Agent....................................................... 74
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Section 13.9 Failure to Act.......................................................... 74
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Section 13.10 Agent Fee............................................................... 74
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ARTICLE 14 Miscellaneous........................................................................ 75
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Section 14.1 Expenses................................................................ 75
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Section 14.2 Indemnification......................................................... 75
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Section 14.3 Limitation of Liability................................................. 76
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Section 14.4 No Duty................................................................. 76
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Section 14.5 No Fiduciary Relationship............................................... 76
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Section 14.6 Equitable Relief........................................................ 76
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Section 14.7 No Waiver; Cumulative Remedies.......................................... 77
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Section 14.8 Successors and Assigns.................................................. 77
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Section 14.9 Survival................................................................ 79
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Section 14.10 ENTIRE AGREEMENT; Amendment and Restatement............................. 79
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Section 14.11 Amendments.............................................................. 80
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Section 14.12 Maximum Interest Rate................................................... 81
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Section 14.13 Notices................................................................. 81
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Section 14.14 GOVERNING LAW; SUBMISSION TO JURISDICTION............................... 82
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Section 14.15 Counterparts............................................................ 82
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Section 14.16 Severability............................................................ 82
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Section 14.17 Headings................................................................ 82
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Section 14.18 Construction............................................................ 82
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Section 14.19 Independence of Covenants............................................... 82
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Section 14.20 WAIVER OF JURY TRIAL.................................................... 82
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Section 14.21 Confidentiality......................................................... 83
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Section 14.22 Approvals and Consent................................................... 83
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Section 14.23 Agent for Services of Process........................................... 83
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INDEX TO EXHIBITS
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Exhibit Description of Exhibit
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"A" Monthly Compliance Report
"B" Assignment and Acceptance
"C" Compliance Certificate
INDEX TO SCHEDULES
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Schedule Description of Schedule
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0.1 Existing Assignments
8.2 Projections
8.5 Existing Litigation
8.12 ESOP Matters
8.14 Subsidiaries and Capitalization
10.1 Existing Debt
10.2 Existing Liens
vi
AMENDED AND RESTATED CREDIT AGREEMENT
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THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated as of
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December 31, 1999, is among XXXXXXXXXXXXXX.XXX LLC, a limited liability company,
duly organized and validly existing under the laws of the State of California
(the "Borrower"), each of the banks or other lending institutions which is or
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which may from time to time become a signatory hereto or any successor or
assignee thereof (individually, a "Bank" and, collectively, the "Banks") and
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PARIBAS, CHICAGO BRANCH, a bank organized under the laws of France acting
through its Chicago Branch, individually as a Bank and as agent for itself and
the other Banks (in its capacity as agent, together with its successors in such
capacity, the "Agent").
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R E C I T A L S:
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The Borrower and Paribas, Chicago Branch, as agent and as the only lender,
previously entered into that certain Credit Agreement dated as of May 5, 1999
(as the same has been amended, herein referred to as the "Prior Agreement").
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Through various assignments, which are listed on Schedule 0.1 hereto, the
interest of Paribas, Chicago Branch, as a "Bank" in the Prior Agreement has been
assigned to the Banks. The Borrower, the Banks and the Agent now desire to
enter into this Agreement to amend and restate the Prior Agreement in its
entirety.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
Definitions
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Section 1.1 Definitions. As used in this Agreement, the following terms
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have the following meanings:
"Account" means either a Base Rate Account or a Libor Account.
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"Account Debtor" means a Person who is obligated on a Receivable.
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"Additional Costs" has the meaning specified in Section 6.1.
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"Adjusted EBITDA" means, for any period with respect to the Borrower, the
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total of the following calculated without duplication on a consolidated basis
for such period: (a) the Borrower's EBITDA; plus (b), to the extent deducted as
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an expense in calculating Net Income for such period and to the extent that a
corresponding Equity Issuance has been made by the Borrower equal to at least
the amount of Internet Expenditures, all Internet Expenditures.
PAGE 1
"Adjusted Libor Rate" means, for any Libor Account for any Interest Period
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therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%) determined by the Agent to be equal to the Libor Rate for such Libor
Account for such Interest Period divided by 1 minus the Reserve Requirement for
such Libor Account for such Interest Period.
"Affiliate" means with respect to any Person, any other Person directly or
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indirectly controlling (including but not limited to all directors, officers and
trustees of such Person), controlled by, or under direct or indirect common
control with, such Person: provided, however, that for purposes of Section
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10.7, an Affiliate of the Borrower shall include (i) any Person that directly or
indirectly owns more than 5% of any class of the Equity Interests of the
Borrower, (ii) any officer, director, trustee or beneficiary of the Borrower or
any such shareholder, (iii) any spouse, parent, sibling or descendant of any
such Person in clause (i) or (ii)above, and (iv) any trust for the benefit of
any such Person or for any spouse, issue or lineal descendant of such Person
described in clauses (i) through (ii) above. For all purposes of this
Agreement, neither the Agent, any Bank nor any of their respective Affiliates,
shall be considered an Affiliate of the Borrower or any Subsidiary. A Person
shall be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" has the meaning set forth in the introductory paragraph of this
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Agreement.
"Agreement" has the meaning set forth in the introductory paragraph of this
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Agreement.
"Applicable Lending Office" means for each Bank and each Type of Account,
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the lending office of such Bank (or of an Affiliate of such Bank) designated for
such Account below its name on the signature pages hereof or such other office
of such Bank (or of an Affiliate of such Bank) as such Bank may from time to
time specify to the Borrower and the Agent as the office by which its Loans
subject to Accounts of such Type are to be made and maintained.
"Applicable Rate" has the meaning set forth in Section 4.1.
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"Asset Disposition" means the disposition by Borrower or a Subsidiary of
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any Property (other than dispositions of assets permitted by clauses (a), (b)
and (c) of Section 10.8), whether by sale, lease, transfer, assignment,
condemnation, loss, damage, destruction or otherwise, excluding any disposition
in which an Insurance Recovery is received.
"Assignee" has the meaning specified in Section 14.8.
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"Assignment and Acceptance" means an assignment and acceptance entered into
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by a Bank and its assignee and accepted by the Agent pursuant to Section 14.8,
in substantially the form of Exhibit "B" hereto.
"Bank" has the meaning set forth in the introductory paragraph of this
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Agreement.
PAGE 2
"Bankruptcy Code" has the meaning specified in Section 12.1(f).
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"Base Rate" means, at any time, the rate of interest per annum then most
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recently established by the Agent at its Principal Office as its base or prime
rate, which rate may not be the lowest rate of interest charged by the Agent to
its borrowers. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect without
notice to the Borrower at the time of such change in the Base Rate.
"Base Rate Account" means a portion of a Loan that bears interest at a rate
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based upon the Base Rate.
"Base Rate Margin" has the meaning specified in Section 4.2.
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"Borrower" has the meaning set forth in the introductory paragraph of this
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Agreement.
"Borrower Security Agreement" means the Security Agreement between the
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Borrower and Agent for the benefit of itself and the Banks dated as of May 5,
1999, as the same has been or may hereafter be amended or otherwise modified
from time to time.
"Borrowing Base" means, at any time, an amount equal to the sum of (a)
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eighty percent (80%) of the aggregate face amount of Eligible Receivables due
and owing at that time; plus (b) fifty percent (50%) of Eligible Inventory
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(computed at the lesser of (i) cost determined on a FIFO (or first-in-first-out)
accounting basis and (ii) fair market value).
"Business Day" means (a) any day excluding Saturday, Sunday and any day
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which either is a legal holiday under the laws of the State of Illinois or is a
day on which banking institutions located in any such States are closed, and
(b), with respect to all borrowings, payments, Conversions, Continuations,
Interest Periods, and notices in connection with Loans subject to Libor
Accounts, any day which is a Business Day described in clause (a) above and
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Expenditures" means, for any period, all expenditures which are
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classified as capital expenditures in accordance with GAAP including the
principal portion of Capital Lease Obligations incurred during such period.
"Capital Expenditure Limit" has the meaning specified in Section 11.6.
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"Capital Lease Obligations" means, as to any Person, the obligations of
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such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
PAGE 3
"Carryover Amount" has the meaning specified in Section 11.6.
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"Clean Down Period" means a period of 15 days in length selected by
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Borrower in accordance with this definition. A Clean Down Period must occur once
every 365 days under this Agreement after the first borrowing under the
Revolving Commitments. Borrower shall have the option of selecting when each
Clean Down Period will begin and shall advise the Agent in writing of the
commencement thereof; provided that the failure to notify the Agent of the
commencement of a Clean Down Period shall not impair the ability of the Borrower
to designate any period of 15 days in length as a "Clean Down Period".
"Closing Date" means December 31, 1999.
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"Code" means the Internal Revenue Code of 1986, as amended, and the
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regulations promulgated and rulings issued thereunder.
"Collateral" means any and all Property in which any Lien has been granted
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or purported to be granted to the Agent for the benefit of the Banks pursuant to
any Loan Documents, including, without limitation, the Deeds of Trust, the
Borrower Security Agreement, the Subsidiary Security Agreements and the Pledge
Agreements, whether such Liens are now existing or hereafter arise.
"Colorations" means Colorations, Inc., an Ohio corporation.
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"Commitment Percentage" means, as to any Bank, the percentage equivalent of
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a fraction, the numerator of which is the aggregate amount of the Revolving
Commitments of such Bank and the denominator of which is the aggregate amount of
the Revolving Commitments of all of the Banks.
"Compliance Certificate" means a certificate in substantially the form of
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Exhibit "C" properly completed and executed by the president, chief operating
officer, chief financial officer, treasurer or other duly authorized officer of
the Borrower.
"Continue", "Continuation", and "Continued" shall refer to the continuation
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pursuant to Section 5.5 of a Libor Account as a Libor Account from one Interest
Period to the next Interest Period.
"Consolidated Net Worth" has the meaning set forth in Section 11.1.
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"Convert", "Conversion", and "Converted" shall refer to a conversion
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pursuant to Section 4.5 or Article 6 of one Type of Account into the other Type
of Account.
"Debt" means as to any Person at any time (without duplication): (a) all
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obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments; (c)
all obligations of such Person to pay the deferred
PAGE 4
purchase price of property or services, except trade accounts payable of such
Person arising in the ordinary course of business that are not past due by more
than ninety (90) days; (d) all Capital Lease Obligations of such Person; (e) all
Debt or other obligations of others Guaranteed by such Person; (f) all
obligations secured by a Lien existing on property owned by such Person, whether
or not the obligations secured thereby have been assumed by such Person or are
non-recourse to the credit of such Person and, in the case where such secured
obligations are not assumed by such Person and are non-recourse to such Person,
only to the extent of the fair market value of the Property so encumbered; (g)
all reimbursement obligations of such Person (whether contingent or otherwise)
in respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments; (h) all liabilities of such Person in respect of unfunded
vested benefits under any Plan; and (i) all vested obligations of such Person
for the payment of money under any noncompete, consulting or similar
arrangements providing for the deferred payment of the purchase price for an
acquisition consummated prior to the date hereof; provided, however, that the
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term "Debt" shall not include any earnout or similar contingent payments
incurred in connection with an acquisition until such amount is actually earned.
If a consulting agreement is entered into to provide actual consulting services,
and not as a mechanism to provided the deferred payment of the purchase price
for an acquisition, the obligations arising thereunder will not constitute
"Debt" hereunder.
"Debt Issuance" means any issuance by Borrower or a Subsidiary of any Debt
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of the Borrower or a Subsidiary.
"Deed of Trust" means each mortgage, deed of trust, leasehold deed of
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trust, leasehold mortgage or other agreement which creates a Lien on any of the
Mortgaged Properties for the benefit of Agent and the Banks, each of which shall
be in form and substance satisfactory to the Agent, as the same may be amended
or otherwise modified from time to time.
"Default" means an Event of Default or the occurrence of an event or
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condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means, in respect of any principal of any Loan, any
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Reimbursement Obligation, or any other amount payable by the Borrower under any
Loan Document which is not paid when due (whether at stated maturity, by
acceleration, or otherwise), a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of two percent
(2%) plus the Applicable Rate for Base Rate Accounts as in effect from time to
time (provided, that if such amount in default is principal of a Loan subject to
a Libor Account and the due date is a day other than the last day of an Interest
Period therefor, the "Default Rate" for such principal shall be, for the period
from and including the due date and to but excluding the last day of the
Interest Period therefor, two percent (2%) plus the interest rate for such Loan
for such Interest Period as provided in Section 5.1 hereof, and, thereafter, the
rate provided for above in this definition).
"Designated Information" has the meaning specified in Section 14.21.
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PAGE 5
"Dollars" and "$" mean lawful money of the United States of America.
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"EBITDA" means, for any period and any Person, the total of the following
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each calculated without duplication for such Person and its subsidiaries on a
consolidated basis for such period: (a) Net Income; plus (b) any provision for
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(or less any benefit from) income or franchise taxes included in determining Net
Income whether paid directly by such Person or distributed to its equity holders
(in the case of Borrower, for example, the Tax Distributions but only to the
extent deducted in determining Borrower's Net Income); plus (c) Interest Expense
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deducted in determining Net Income; plus (d) amortization and depreciation
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expense deducted in determining Net Income; plus (e) other noncash charges
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deducted in determining consolidated net income and not already added in
accordance with clause (d) above but not including any amounts excluded in
calculating Net Income in accordance with clauses (b) and (c) of the definition
of Net Income; plus (f) when calculating EBITDA for Borrower, the management
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fees payable by the Borrower to XXX under the Management Agreement to the extent
paid or accrued during the applicable period in accordance with Section 11.11
and to the extent deducted in calculating Net Income for the such period.
"ECN Asset Purchase Documents" means that certain Agreement of Purchase and
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Sale of Assets dated as of November 22, 1999, between the Borrower and Xxxxx Xx,
Inc., relating to the purchase by the Borrower from Xxxxx Xx, Inc. of all of the
assets, properties and business of the publication entitled "Early Childhood
News".
"Eligible Assignee" has the meaning specified in Section 14.8.
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"Eligible Inventory" means, as of the date of determination thereof, items
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of Inventory of the Borrower that are finished goods (and not raw materials or
work in process) which the Agent determines, in its reasonable discretion, to
meet the following requirements:
(a) such Inventory is owned by the Borrower or the Subsidiaries and
is free and clear of any Lien other than Liens permitted pursuant to
Section 10.2;
(b) such Inventory is in good condition and meets in all material
respects all standards imposed by any Governmental Authority having
regulatory authority over such Inventory, its use or sale;
(c) such Inventory is currently either usable or salable, at prices
approximating at least the cost of such Inventory, in the normal course of
the Borrower's or the Subsidiaries' business and is not slow moving or
stale;
(d) such Inventory is not obsolete, repossessed or used goods taken
in trade;
(e) such Inventory is located within the United States of America at
a location disclosed in writing to the Agent; and
PAGE 6
(f) such Inventory is in the possession and control of the Borrower
and not any third party at real Property owned or leased by the Borrower or
any Subsidiary and, if the Inventory is located at real Property leased by
the Borrower or any Subsidiary, the Borrower has delivered to the Agent an
agreement from the landlord relating to such real Property containing such
consents and waivers as the Agent may reasonably require; provided that if
the Borrower has not delivered such consents and waivers relating to a
parcel of real Property, Inventory located at such real Property shall
none-the-less be included in the definition of "Eligible Inventory" unless
the Borrower is 30 days or more in arrears in the payment of rent for such
real Property.
"Eligible Receivable" means a Receivable that consists of the unpaid
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portion of the obligation stated on the invoice issued to an Account Debtor with
respect to Inventory sold and shipped to or services performed for such Account
Debtor in the ordinary course of the Borrower's or the Subsidiaries' business,
net of any credits or rebates owed by the Borrower or the Subsidiaries to the
Account Debtor and net of any commissions payable by Borrower or the
Subsidiaries to third parties and that the Agent determines, in its reasonable
discretion, to meet all of the following requirements:
(a) such Receivable is owned by Borrower or the Subsidiaries,
represents a complete bona fide transaction which requires no further act
under any circumstances on the part of the Borrower or the Subsidiaries to
make such Receivable payable by the Account Debtor and the Account Debtor
is not the Borrower or any of the Subsidiaries;
(b) not more than ninety (90) days have elapsed from the date of the
original invoice;
(c) the goods the sale of which gave rise to such Receivable were
shipped or delivered to the Account Debtor on an absolute sale basis and
not on a xxxx and hold sale basis, a consignment sale basis, a guaranteed
sale basis, a sale or return basis or on the basis of any other similar
understanding (provided that 90% of the unpaid portion of the obligations
stated on the invoices for sales made on a sale or return basis by EPI in
the ordinary course of EPI's business shall be included in the definition
of "Eligible Receivable"), and no material part of such goods has been
returned or rejected;
(d) such Receivable is not evidenced by chattel paper or an
instrument of any kind unless such chattel paper or instrument (i) has been
collaterally assigned to the Agent, for the benefit of the Banks, pursuant
to an assignment in form and substance satisfactory to the Agent and (ii)
is in the possession of the Agent;
(e) the Account Debtor with respect to such Receivable is not
insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind or of any other proceeding or action, threatened or pending, which
might, in the Agent's sole judgment, have a material adverse effect on such
Account Debtor's ability to pay any amounts due and payable in
PAGE 7
respect of such Receivable, and is not, in the reasonable discretion of the
Agent, deemed ineligible for credit or other reasons (the Agent shall
notify the Borrower that any such Receivable is deemed ineligible for
credit or other reasons as soon as reasonably practicable);
(f) such Receivable is not owing by an Account Debtor having fifty
percent (50.0%) or more in face value of its then existing aggregate total
accounts owing to the Borrower or the Subsidiaries, in the aggregate, which
do not meet the requirements of clause (b) above;
(g) such Receivable is not owing by an Account Debtor whose then
existing accounts owing to the Borrower or the Subsidiaries, in the
aggregate, exceed in face amount fifteen percent (15%) of the Borrower's
and the Subsidiaries' total Eligible Receivables;
(h) such Receivable is not owing by an Account Debtor whose principal
place of business is located outside of the United States of America and is
payable in Dollars, unless such Receivable is supported by an irrevocable
letter of credit satisfactory to the Agent and assigned to, and directly
drawable by, the Agent;
(i) such Receivable is a valid, legally enforceable obligation of the
Account Debtor with respect thereto and is not, as determined by the Agent
in its reasonable discretion, subject to any present or contingent (and no
facts exist which are the basis for any future) offset, deduction or
counterclaim, dispute or other defense on the part of such Account Debtor;
(j) such Receivable is subject a perfected first priority Lien in
favor of the Agent for the benefit of the Banks and is subject to no other
Lien other than Liens permitted pursuant to Section 10.2; and
(k) such Receivable is not subject to the Assignment of Claims Act of
1940, as amended from time to time, or any applicable law now or hereafter
existing similar in effect thereto, or to any other prohibition (under
applicable law, by contract or otherwise) against its assignment or
requiring notice of or consent to such assignment, unless all such required
notices have been given, all such required consents have been received and
all other procedures have been complied with such that such Receivable
shall have been duly and validly assigned to the Agent, for the benefit of
the Banks.
"Employment Agreements" means employment agreements in form and substance
---------------------
acceptable to the Agent between the Borrower and each of the following Persons:
Xxxx Xxxxxx, Xxx Xxxxxx and Xxx Xxxxxxx.
"Environmental Laws" means any and all federal, state, and local laws,
------------------
including common law, regulations, ordinances, codes, permits, orders, decrees,
and requirements pertaining to health, safety, or the environment, as the same
may be amended or supplemented from time to time.
PAGE 8
"Environmental Liabilities" means, as to any Person, all liabilities,
-------------------------
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs, and expenses, (including, without limitation,
all fees, disbursements and expenses of counsel, expert and consulting fees and
costs of investigation and feasibility studies), fines, penalties, sanctions,
and interest incurred as a result of any claim or demand, by any Person, whether
based in contract, tort, implied or express warranty, strict liability, criminal
or civil statute, including any Environmental Law, permit, order or agreement
with any Governmental Authority or other Person, arising from environmental,
health or safety conditions or the Release or threatened Release of a Hazardous
Material into the environment.
"EPI" means Educational Products, Inc., a Texas corporation.
---
"EPI Acquisition" means the acquisition by Borrower of all the Equity
---------------
Interests of EPI.
"EPI Stock Purchase Documents" means that certain stock purchase agreement
----------------------------
dated as of the Prior Agreement Closing Date among the existing shareholders of
EPI and the Borrower, relating to, among other things, the purchase by Borrower
from such shareholders of all the Equity Interests of EPI, together with all
other documentation executed and delivered in connection therewith.
"Equity Interest" means capital stock and any and all shares, partnership
---------------
interests, membership interests, other equity interests, participations, or
other equivalents (however designated) of capital stock issued by any entity
(whether a corporation, a partnership, a limited liability company or another
entity) or other equivalents (however designated) and all options, warrants and
other rights to acquire any such capital stock and any and all shares,
partnership interests, membership interests, other equity interests,
participations, or other equivalents.
"Equity Issuance" means any issuance by the Borrower or a Subsidiary of any
---------------
Equity Interest of the Borrower or a Subsidiary, respectively.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
---------------
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Event of Default" has the meaning specified in Section 12.1.
----------------
"Excess Cash Flow" means, for any period, the total of the following, each
----------------
calculated based on the audited financial statements delivered pursuant to
Section 9.1(a) without duplication for the Borrower and the Subsidiaries on a
consolidated basis for such period: (a) EBITDA; less (b) cash income or
----
franchise taxes paid (whether paid directly or paid through a Tax Distribution);
less (c) Capital Expenditures (including, without limitation, any Internet
----
Expenditures) and the cash
PAGE 9
portion of the purchase price for any acquisitions made prior to the Closing
Date not financed by Debt other than advances under the Revolving Commitments;
less (d) scheduled amortization of Debt actually paid; less (e) any prepayments
---- ----
of principal (other than prepayments made pursuant to clauses (ii), (iii), (iv)
and (v) of Section 5.4(a)) under the Term Loans; less (f) cash interest expense
----
paid; plus (g) any extraordinary or nonrecurring cash gains, other cash gains
----
attributable to asset disposition (but excluding cash gains attributable to
asset dispositions to the extent the proceeds from the related asset disposition
have been applied as a prepayment on the Loans pursuant to Section 5.4 or are
not required to be so applied) and noncash losses or charges which were excluded
in determining Net Income; less (h) any nonrecurring cash losses or other cash
----
losses attributable to asset disposition and other cash charges which were
excluded in determining Net Income; less (i) the amount of the increase in the
----
remainder of current assets (excluding cash and cash equivalents) less current
liabilities for such period; plus (j) the amount of the decrease in the
----
remainder of current assets (excluding cash and cash equivalents) less current
liabilities for such period.
"Excess Insurance Proceeds" means any Insurance Recovery which the Borrower
-------------------------
or a Subsidiary (as applicable):
(a) has elected to not apply to the repair, construction or
replacement of the Property affected or
(b) has not both:
(i) elected to apply to the repair, construction or
replacement of the Property affected within 90 days of the event
giving rise to the Insurance Recovery and
(ii) actually applied to such repair, construction or
replacement:
(A) within 180 days after the payment of such proceeds
with respect to an Insurance Recovery which is not to be utilized
to repair or replace improvements on real property, or
(B) within the time period required for the repair or
replacement of improvements on real property with respect to an
Insurance Recovery which is to be utilized to repair or replace
improvements on real property if the repair and replacement is
commenced within 180 after the payment of such proceeds and is
continued in a reasonably prompt and diligent fashion thereafter.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers on such
PAGE 10
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published on such next succeeding Business Day, the Federal Funds Rate for any
day shall be the average rate charged to the Agent on such day on such
transactions as determined by the Agent.
"Fee Letter" means that certain letter agreement dated as of the Prior
----------
Agreement Closing Date among Paribas, the Borrower and XXX.
"Fiscal Quarter" means a three month period ending either March 31, June
--------------
30, September 30 or December 31.
"Fiscal Year" means a twelve (12) month period ending on December 31.
-----------
"Fixed Charges" has the meaning specified in Section 11.4.
-------------
"GAAP" means generally accepted accounting principles, applied on a
----
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "consistent basis" when the accounting
principles applied in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state or
----------------------
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
---------
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person or indemnifying such person for an obligation and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep-
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (b) entered into for
the purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect the obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guaranty" means the guaranty of a Subsidiary in favor of the Agent and the
--------
Banks, in substantially the form of Exhibit "D" to the Prior Agreement, as the
same may be amended or
PAGE 11
otherwise modified from time to time and includes the guaranties dated as of May
5, 1999 executed by each of EPI and Colorations pursuant to the Prior Agreement.
"Hazardous Material" means any substance, product, waste, pollutant,
------------------
material, chemical, contaminant, constituent, or other material which is or
becomes listed or regulated under any Environmental Law.
"Insurance Recovery" means, with respect to any loss, destruction or damage
------------------
to any Property, the payment by an insurance company of the proceeds of any
property or casualty insurance covering such loss, destruction or damage in an
amount in excess of $250,000.
"Interest Expense" means, for any period and any Person, the total of all
----------------
interest on Debt of such Person and its subsidiaries paid or accrued during such
period, including the interest portion of payments under Capital Lease
Obligations.
"Interest Period" means with respect to any Libor Accounts, each period
---------------
commencing on the date such Account is established or Converted from a Base Rate
Account or the last day of the next preceding Interest Period with respect to
such Libor Account, and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the Borrower may
select as provided in Section 4.5 or 5.1, except that each such Interest Period
which commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (a) each Interest Period which
would otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or if such succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); (b) any Interest
Period which would otherwise extend beyond the applicable Termination Date shall
end on the applicable Termination Date; (c) no more than 12 Interest Periods
shall be in effect at the same time; (d) no Interest Period for any Libor
Account shall have a duration of less than one (1) month and, if the Interest
Period would otherwise be a shorter period, the related Libor Account shall not
be available hereunder; and (e) no Interest Period in respect of Term Loans may
extend beyond a principal repayment date thereof unless, after giving effect
thereto, the aggregate principal amount of such Loans, as the case may be,
subject to Libor Accounts having Interest Periods that end after such principal
payment date, shall be equal to or less than such Loans to be outstanding
hereunder after such principal payment date.
"Internet Expenditures" means the development expenses and capital
---------------------
expenditures specifically identified by the Borrower in the Projections as
"Internal Allocation of Web Costs", "External Web Costs" or "Web CAP EX".
"Inventory" means all "inventory" (as such term is defined in article or
---------
chapter 9 of the UCC or any successor statute) now owned or hereafter acquired
by the Borrower or any Subsidiary wherever located and whether or not in
transit, which is or may at any time be held for sale or lease, or furnished
under any contract (exclusive of leases of real Property) for services or held
as raw
PAGE 12
materials, work in process, or supplies or materials used or consumed in the
business of the Borrower or any Subsidiary.
"Investco" means Educational Simon LLC, a Delaware limited liability
--------
company, the majority of whose membership interests are owned by XXX and its
Affiliates.
"LC Fee Rate" has the meaning specified in Section 4.2.
-----------
"Lender Party" has the meaning specified in Section 14.21.
------------
"Letter of Credit Liabilities" means, at any time, the aggregate amounts of
----------------------------
all outstanding Letters of Credit available for drawing and all unreimbursed
drawings under Letters of Credit.
"Letters of Credit" has the meaning specified in Section 2.7(a).
-----------------
"Leverage Ratio" means the ratio of Total Debt to Adjusted EBITDA
--------------
calculated in accordance with Section 11.5.
"Libor Account" means a portion of a Loan that bears interest at a rate
-------------
based upon the Adjusted Libor Rate.
"Libor Rate" means, for any Libor Account for any Interest Period therefor,
----------
the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
offered to the Agent at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two Business Days prior to the first day of such
Interest Period by leading banks in the London interbank market of Dollar
deposits in immediately available funds having a term comparable to such
Interest Period and, if applicable, in an amount comparable to the principal
amount of the Libor Account to which such Interest Period relates.
"Libor Rate Margin" has the meaning specified in Section 4.2.
-----------------
"Lien" means any lien, mortgage, security interest, tax lien, financing
----
statement (other than financing statements related to leases of equipment which
Borrower establishes, to the satisfaction of Agent, to be true leases), pledge,
charge, hypothecation, assignment, preference, priority, or other encumbrance of
any kind or nature whatsoever (including, without limitation, any conditional
sale or title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the Deeds
--------------
of Trust, the Borrower Security Agreement, the Subsidiary Security Agreements,
the Pledge Agreements, any interest rate swaps, caps, collars or other similar
agreements delivered by Borrower to any Bank, and all other promissory notes,
security agreements, deeds of trust, assignments, guaranties, letters of credit,
and other instruments, agreements and other documentation executed and delivered
by Borrower or any Obligated Party pursuant to or in connection with this
Agreement, as such
PAGE 13
instruments, agreements and other documentation may be amended or otherwise
modified, excluding however, the Prior Transaction Documents.
"Loans" means the Revolving Loans and the Term Loans.
-----
"Management Agreement" means the Executive Management Agreement dated the
--------------------
Prior Agreement Closing Date between the Borrower and XXX, as the same exists on
the Prior Agreement Closing Date without giving effect to any amendment or other
modification thereto unless modified with the consent of the Required Banks.
"Material Adverse Effect" means (a) a material adverse effect on the
-----------------------
business, condition (financial or otherwise), operations, results of operations,
assets, liabilities or properties of the Borrower and the Subsidiaries taken as
a whole; or (b) a material adverse effect on the validity, perfection, priority
or ability of the Agent to enforce the Agent=s Lien on any of the Collateral or
of the ability of the Agent or any Bank to enforce a material provision of the
Loan Documents. In determining whether any individual event could reasonably be
expected to result in a Material Adverse Effect, notwithstanding that such event
does not itself have such effect, a Material Adverse Effect shall be deemed to
have occurred if the cumulative effect of such event and all other then existing
events could reasonably be expected to result in a Material Adverse Effect.
"Maximum Rate" means, at any time and with respect to any Bank, the maximum
------------
rate of nonusurious interest under applicable law that such Bank may charge the
Borrower. The Maximum Rate shall be calculated in a manner that takes into
account any and all fees, payments, and other charges contracted for, charged or
received in connection with the Loan Documents that constitute interest under
applicable law. Each change in any interest rate provided for herein based upon
the Maximum Rate resulting from a change in the Maximum Rate shall take effect
without notice to the Borrower at the time of such change in the Maximum Rate.
"Maximum Total Debt" means, as of any date, the product obtained by
------------------
multiplying (a) the Adjusted EBITDA calculated as of the most recent month end
for which financial statements are then available and for the twelve (12) month
period then ended by (b) the number set forth below in the column entitled
"Multiplier" opposite the period in which such date falls:
========================================================================
Period
------
From Through and Including Multiplier
---- --------------------- ----------
========================================================================
Closing Date March 31, 2000 3.50
------------------------------------------------------------------------
April 1, 2000 June 30, 2000 3.25
------------------------------------------------------------------------
July 1, 2000 December 31, 2001 3.00
------------------------------------------------------------------------
------------------------------------------------------------------------
PAGE 14
------------------------------------------------------------------------
January 1, 2002 December 31, 2002 2.50
------------------------------------------------------------------------
January 1, 2003 the last Termination Date 2.00
========================================================================
"Monthly Compliance Report" means a report in substantially the form of
-------------------------
Exhibit "A" properly completed and executed by the president, chief operating
officer, chief financial officer, treasurer or other duly authorized officer of
the Borrower, setting forth computations of the ratio of Total Debt to Adjusted
EBITDA, the Borrowing Base and Internet Expenditures.
"Mortgage Policies" has the meaning specified in Section 9.12.
-----------------
"Mortgaged Properties" means, collectively, the fee-owned properties which
--------------------
are or are to be subject to the Deeds of Trust and any such after-acquired
properties which become subject to a Deed of Trust pursuant to Section 9.12
hereof.
"Multiemployer Plan" means a multiemployer plan defined as such in Section
------------------
3(37) of ERISA to which contributions have been made by the Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Income" means, for any period and any Person, such Person's and such
----------
Person's subsidiaries consolidated net income (or loss) determined in conformity
with GAAP, but excluding (to the extent otherwise included therein): (a) the
income of any other Person (other than its subsidiaries) in which such Person or
any of it subsidiaries has an ownership interest, unless received by such Person
or its subsidiaries in a cash distribution; (b) any after-tax gains or losses
attributable to asset dispositions and discontinued businesses; (c) to the
extent not included in clauses (a) and (b) above, any after-tax extraordinary,
non-cash or nonrecurring gains or non-cash losses or non-cash charges due to
changes in accounting principles required by GAAP; and (d) the income or loss of
any other Person prior to the time such other Person or its assets were
acquired.
"Net Proceeds" means, with respect to any Asset Disposition, (a) the gross
------------
amount of cash received by the Borrower or any Subsidiary from such Asset
Disposition, minus (b) the amount, if any, of all taxes paid or payable by the
-----
Borrower or any Subsidiary directly resulting from such Asset Disposition
(including the amount, if any, estimated by the Borrower in good faith at the
time of such Asset Disposition for taxes payable by the Borrower or any
Subsidiary on or measured by net income or gain resulting from such Asset
Disposition), minus (c) the reasonable out-of-pocket costs and expenses incurred
-----
by the Borrower or such Subsidiary in connection with such Asset Disposition
(including reasonable brokerage fees paid to a Person other than an Affiliate of
the Borrower or any Subsidiary) excluding any fees or expenses paid to an
Affiliate of the Borrower or any Subsidiary, minus (d) amounts applied to the
-----
repayment of indebtedness (other than the Obligations) secured by a Lien on the
Property subject to the Asset Disposition, which Lien is permitted under Section
10.2 of this Agreement. "Net Proceeds" with respect to any Asset Disposition
------------
shall also include proceeds (after deducting any amounts specified in clauses
(b), (c) and (d) of the preceding sentence) of any taking of any Property under
the power of eminent domain and
PAGE 15
condemnation awards and awards in lieu of condemnation for the taking of
Property under the power of eminent domain. "Net Proceeds" means, with respect
------------
to any Equity Issuance or Debt Issuance, (a) the gross amount of cash or cash
equivalents received from such Equity Issuance or Debt Issuance, minus (b) the
-----
reasonable out-of-pocket costs and expenses incurred by the issuer in connection
with such Equity Issuance or Debt Issuance (including reasonable underwriting
fees paid to a Person other than an Affiliate of the Borrower or any Subsidiary)
excluding any fees or expenses paid to an Affiliate of the Borrower or any
Subsidiary.
"Notes" means the Revolving Notes and the Term Loan Notes.
-----
"Obligated Party" means the Subsidiaries of the Borrower, the Pledgors or
---------------
any other Person (exclusive of the Borrower, the Agent or any Bank) who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
"Obligation" means all obligations, indebtedness, and liabilities of the
----------
Borrower to the Agent and the Banks, or any of them, arising pursuant to any of
the Loan Documents, pursuant to any interest rate swap, interest rate caps,
interest rate collars or other similar agreements entered into with the Borrower
enabling it to fix or limit its interest expense or pursuant to any foreign
exchange, currency hedging, commodity hedging or other agreement entered into
with the Borrower enabling it to limit the market risk of holding currency or a
commodity in either the cash or futures markets, whether now existing or
hereafter arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several,
including, without limitation, the obligation of the Borrower to repay the
Loans, the Reimbursement Obligations, interest on the Loans and Reimbursement
Obligations, and all fees, costs, and expenses (including attorneys' fees)
provided for in the Loan Documents or such agreements enabling the Borrower to
fix or limit its interest expense.
"Operating Agreement" means the Amended and Restated Operating Agreement of
-------------------
Borrower dated the Closing Date as the same may be amended or otherwise modified
from time to time.
"Operating Cash Flow" has the meaning specified in Section 11.4.
-------------------
"Outstanding Revolving Credit" means, at any time of determination, the sum
----------------------------
of (a) the aggregate amount of Revolving Loans then outstanding, plus (b) the
aggregate amount of Letter of Credit Liabilities (or when calculated with
respect to a particular Bank, including the Agent as a Bank, such Bank's
interest in such Revolving Loans and Letter of Credit Liabilities).
"Paribas" means Paribas, Chicago Branch, a bank organized under the laws of
-------
France acting through its Chicago Branch.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to all or any of its functions under ERISA.
PAGE 16
"Person" means any individual, corporation, business trust, association,
------
company, partnership, joint venture, Governmental Authority, or other entity.
"Plan" means any employee benefit plan established or maintained by the
----
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Pledge Agreement" means all of the pledge agreements between a Pledgor and
----------------
the Agent for the benefit of itself and the Banks, in substantially the form of
Exhibit "J" to the Prior Agreement, as each may be amended or otherwise
modified, and includes the pledge agreements dated as of May 5, 1999 executed by
each of Investco, Xx. Xxxxxx X. Xxxxxx, Xx. Xxxxxxx X. Xxxxxx and QTL pursuant
to the Prior Agreement.
"Pledgors" means Investco, QTL, Mr. Xxx Xxxxxxx, Xx. Xxxxxx X. Xxxxxx, Mr.
--------
Xxxxxxx X. Xxxxxx and any other Person who hereafter owns any Equity Interests
in Borrower.
"Preferred Equity" means the interests of the Class A members of Borrower
----------------
as described in the Operating Agreement.
"Principal Office" means the office of the Agent, located at 227 West
----------------
Monroe Street, Suite 3300, Chicago, Illinois 60606 or such other office as the
Agent may designate pursuant to a notice given in accordance with Section 14.13.
"Prior Agreement" has the meaning set forth in the Recitals hereto.
---------------
"Prior Agreement Closing Date" means May 5, 1999.
----------------------------
"Prior Transaction Documents" means the Prior Agreement, the Employment
---------------------------
Agreements, the Management Agreement, the QTL Reorganization Documents and the
EPI Stock Purchase Documents.
"Prior Transactions" means, collectively, (i) the Loans made on or after
------------------
the Prior Agreement Closing Date but prior to the Closing Date, (ii) the
consummation of the QTL Reorganization and the EPI Acquisition, (iii) the
entering into of the Prior Transaction Documents, and (iv) the payment of all
fees and expenses incurred in connection with and arising out of the Prior
Transactions.
"Prohibited Transaction" means any transaction set forth in Section 406 or
----------------------
407 of ERISA or Section 4975(c)(1) of the Code for which there does not exist a
statutory or administrative exemption.
"Projections" means Borrower's forecasted consolidated and consolidating:
-----------
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared reasonably and in good faith on
a basis consistent with the Borrower's historical financial
PAGE 17
statements, together with appropriate supporting details and a statement of
underlying assumptions (including, without limitation, Internet Expenditures and
Capital Expenditures).
"Property" means property of all kinds, real, personal or mixed, tangible
--------
or intangible (including without limitation, all rights relating thereto),
whether owned or acquired on or after the Closing Date.
"Purchase Price" means, as of any date of determination and with respect to
--------------
a proposed acquisition, the purchase price to be paid for the Target or its
assets, including all cash consideration paid or committed to be paid (whether
classified as purchase price, noncompete payments or otherwise), all fees,
expenses and other costs, directly attributable to acquisition of the Target or
its assets, and the Dollar value of all other assets (including without
limitation, the Equity Interests of the Borrower) to be transferred by the
purchaser in connection with such acquisition to the seller all valued in
accordance with the applicable purchase agreements.
"QTL" means QTL Corporation, a California subchapter s corporation.
---
"QTL Reorganization" means the following transactions consummated in the
------------------
order listed: (i) the transfer prior to the Prior Agreement Closing Date of
certain real estate assets and related liabilities of Borrower to a third
Person, (ii) the transfer by QTL of certain assets and liabilities valued at
approximately $16,875,000 to Borrower; (iii) the capital contribution of not
less than $7,559,000 in Borrower by Investco; (iv) the change of Borrower's name
to Xxxxxxxxxxxxxx.xxx LLC; and (v) the contribution by the Persons who were
members of Borrower prior to the Prior Agreement Closing Date of all their
Equity Interest in Borrower to QTL Corporation.
"QTL Reorganization Documents" means all the documentation executed and
----------------------------
delivered to consummate the QTL Reorganization, including without limitation,
the Operating Agreement, but excluding the Loan Documents.
"Quarterly Payment Date" means the last day of March, June, September, and
----------------------
December of each year, the first of which shall be March 31, 2000.
"Receivable" or "Receivables" means, as of any date of determination
---------- -----------
thereof, each and every "account" as such term is defined in article or chapter
9 of the UCC (or any successor statute) and includes, without limitation, the
unpaid portion of the obligation, as stated on the respective invoice, or, if
there is no invoice, other writing, of a customer of the Borrower or any
Subsidiary in respect of Inventory sold and shipped or services rendered by the
Borrower or any Subsidiary.
"Register" has the meaning specified in Section 14.8.
--------
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System as the same may be amended or supplemented from time to time.
PAGE 18
"Regulatory Change" means, with respect to any Bank, any change after the
-----------------
date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligation" means the obligation of the Borrower to
------------------------
reimburse the Agent for any demand for payment or drawing under a Letter of
Credit.
"Release" means, as to any Person, any release, spill, emission, leaking,
-------
pumping, injection, deposit, disposal, disbursement leaching, or migration of
Hazardous Materials into the indoor or outdoor environment or into or out of
property owned by such Person, including, without limitation, the movement of
Hazardous Materials through or in the air, soil, surface water, ground water, or
property in violation of Environmental Laws.
"Remedial Action" means all actions required to (a) cleanup, remove, treat,
---------------
or otherwise address Hazardous Materials in the indoor or outdoor environment,
(b) prevent the Release or threat of Release or minimize the further Release of
Hazardous Materials so that they do not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment, or (c)
perform pre-remedial studies and investigations and post-remedial monitoring and
care.
"Reportable Event" means any of the events set forth in Section 4043 of
----------------
ERISA.
"Required Banks" means Banks having (a) fifty-one percent (51%) or more of
--------------
the Revolving Commitments and the outstanding principal amount of the Term Loans
or (b) if all Revolving Commitments have terminated or have otherwise been
fulfilled, fifty-one percent (51%) or more of the outstanding principal amount
of the Loans and participations in the Letters of Credit.
"Reserve Requirement" means, for any Libor Account for any Interest Period
-------------------
therefor, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding One Billion Dollars against
"Eurocurrency Liabilities" as such term is used in Regulation D. Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against any category of liabilities which includes deposits by
reference to which the Adjusted Libor Rate is to be determined or any category
of extensions of credit or other assets which include Libor Accounts.
"Revolving Commitment" means, as to each Bank, the obligation of such Bank
--------------------
to make advances of funds and purchase participation interests in (or with
respect to the Agent as a Bank, hold other interests in) Letters of Credit in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount set forth opposite the name of such Bank on the
PAGE 19
signature pages hereto under the heading "Revolving Commitment", or, if such
--------------------
Bank is a party to an Assignment and Acceptance, the amount set forth in the
most recent Assignment and Acceptance of such Bank as such Bank's Revolving
Commitment, as the same may be reduced or terminated pursuant to Section 2.6,
Section 6.7 or Section 12.2. The aggregate amount of the Revolving Commitments
of all Banks equals $10,000,000.
"Revolving Loans" means, as to any Bank, the advances made by such Bank
---------------
pursuant to Section 2.1 and the advances made by such Bank pursuant to Section
2.1 of the Prior Agreement as a "Revolving Loan" which are outstanding on the
Closing Date.
"Revolving Notes" means the promissory notes provided for by Section 2.2
---------------
and all amendments or other modifications thereof.
"Revolving Termination Date" means May 5, 2004, or such earlier date on
--------------------------
which the Revolving Commitments terminate as provided in this Agreement.
"Solvent" means, with respect to any Person as of the date of any
-------
determination, that on such date (a) the fair value of the Property of such
Person (both at fair valuation and at present fair saleable value) is greater
than the total liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (d) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature, and (e) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's Property would constitute unreasonably
small capital after giving due consideration to current and anticipated future
capital requirements and current and anticipated future business conduct and the
prevailing practice in the industry in which such Person is engaged. In
computing the amount of contingent liabilities at any time, such liabilities
shall be computed at the amount which, in light of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Subsidiary" means any corporation (or other entity) of which at least a
----------
majority of the outstanding shares of stock (or other ownership interests)
having by the terms thereof ordinary voting power to elect a majority of the
board of directors (or similar governing body) of such corporation (or other
entity) (irrespective of whether or not at the time stock (or other ownership
interests) of any other class or classes of such corporation (or other entity)
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by the
Borrower or one or more of the Subsidiaries or by the Borrower and one or more
of the Subsidiaries.
PAGE 20
"Subsidiary Security Agreements" means all of the security agreements
------------------------------
between a Subsidiary and the Agent for the benefit of itself and the Banks, in
substantially the form of Exhibit "G" to the Prior Agreement, as each may be
amended or otherwise modified and includes the security agreements dated as of
May 5, 1999 executed by each of EPI and Colorations pursuant to the Prior
Agreement.
"Target" has the meaning specified in Section 10.3.
------
"Tax Distributions" means the distributions made to the members of Borrower
-----------------
to discharge their United States federal, state and local income tax liabilities
attributable to the income, losses and gains of the Borrower.
"Termination Dates" means the Revolving Termination Date and the Term Loan
-----------------
Termination Date.
"Term Loan" means, as to any Bank, the advance made by such Bank under the
---------
Prior Agreement as a "Term Loan" to the extent outstanding on the Closing Date.
The principal amount of each such advance outstanding as of January 1, 2000 is
set forth opposite the name of such Bank on the signature pages hereto under the
heading "Term Loan". As of January 1, 2000, the aggregate principal amount of
the Term Loans of all Banks equals $9,625,000.
"Term Loan Notes" means the promissory notes provided for by Section 3.1
---------------
and all amendments or other modifications thereof.
"Term Loan Termination Date" means March 31, 2004, or such earlier date on
--------------------------
which the Term Loans become due and payable as provided in this Agreement.
"Test Period" has the meaning specified in Section 11.2.
-----------
"Total Debt" has the meaning specified in Section 11.5.
----------
"Type" means either type of Account (i.e., either a Base Rate Account or
----
Libor Account).
"UCC" means the Uniform Commercial Code as in effect in the State of
---
Illinois.
"XXX" means Xxxxxxx X. Xxxxx & Sons, L.L.C.
---
"Yearly Limit" has the meaning specified in Section 11.6.
------------
Section 1.2 Other Definitional Provisions. All definitions contained in
-----------------------------
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
PAGE 21
specified, all Article and Section references pertain to this Agreement. Terms
used herein that are defined in the UCC, unless otherwise defined herein, shall
have the meanings specified in the UCC.
Section 1.3 Accounting Terms and Determinations. Except as otherwise
-----------------------------------
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Agent and the Banks hereunder
shall be prepared, in accordance with GAAP, on a basis consistent with those
used in the preparation of the financial statements referred to in Section 8.2
hereof. All calculations made for the purposes of determining compliance with
the provisions of this Agreement shall be made by application of GAAP, on a
basis consistent with those used in the preparation of the financial statements
referred to in Section 8.2 hereof. To enable the ready and consistent
determination of compliance by the Borrower with its obligations under this
Agreement, the Borrower will not change the manner in which either the last day
of its Fiscal Year or the last days of the first three Fiscal Quarters of its
Fiscal Years is calculated except as currently contemplated by the definition of
the term Fiscal Year. In the event any changes in accounting principles required
by GAAP or recommended by the Borrower's certified public accountants and
implemented by the Borrower occur and such changes result in a change in the
method of the calculation of financial covenants, standards or terms under this
Agreement, then the Borrower, the Agent and the Banks agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such changes with the desired result that the criteria for
evaluating such covenants, standards or terms shall be the same after such
changes as if such changes had not been made. Until such time as such an
amendment shall have been executed and delivered by the Agent, the Borrower and
the Banks, all financial covenants, standards and terms in this Agreement shall
continue to be calculated or construed as if such changes had not occurred.
Section 1.4 Time of Day. Unless otherwise indicated, all references in
-----------
this Agreement to times of day shall be references to Chicago, Illinois time.
Section 1.5 Exhibits and Schedules to the Prior Agreement.
---------------------------------------------
(1) Exhibits "F", "H" and "I" to the Prior Agreement are hereby
deleted in their entirety and replaced with Exhibits "A", "B" and "C" to
this Agreement, as applicable. Exhibit "C" to the Prior Agreement is hereby
deleted in its entirety and not replaced with any substitute exhibit. All
other Exhibits to the Prior Agreement shall survive this amendment and
restatement of the Prior Agreement and shall be incorporated into this
Agreement where applicable.
(2) Schedules 9.2, 9.5, 9.12, 9.14, 11.1 and 11.2 to the Prior
Agreement are hereby deleted in their entirety and replaced with Schedules
8.2, 8.5, 8.12, 8.14, 10.1 and 10.2 to this Agreement. Schedules 1.1,
1.1(a) and 1.1(b) to the Prior Agreement are hereby deleted in their
entirety and not replaced with any substitute schedule.
ARTICLE 2
PAGE 22
Revolving Credit Facility
-------------------------
Section 1.6 Revolving Commitments. Subject to the terms and conditions of
---------------------
this Agreement, each Bank severally agrees to make one or more Revolving Loans
to the Borrower from time to time from and including the Closing Date to but
excluding the Revolving Termination Date in an aggregate principal amount at any
time outstanding up to but not exceeding the amount of such Bank's Revolving
Commitment as then in effect; provided, however: (a) the Outstanding Revolving
-------- -------
Credit applicable to a Bank (including the Agent as a Bank) shall not at any
time exceed such Bank's Revolving Commitment; (b) the Outstanding Revolving
Credit shall not at any time exceed the lesser of (i) the then-existing
Borrowing Base (based on the most recently delivered Monthly Compliance Report)
or (ii) the aggregate Revolving Commitments; (c) the outstanding amount of the
Total Debt shall at no time exceed the Maximum Total Debt; and (d) during each
Clean Down Period, the Outstanding Revolving Credit shall not exceed an
aggregate amount equal to $3,500,000. Subject to the foregoing limitations, and
the other terms and provisions of this Agreement, the Borrower may borrow,
prepay, and reborrow hereunder the amount of the Revolving Commitments and may
establish Base Rate Accounts and Libor Accounts thereunder and, until the
Revolving Termination Date, the Borrower may Continue Libor Accounts established
under the Revolving Loans or Convert Accounts established under the Revolving
Loans of one Type into Accounts of the other Type. Accounts of each Type under
the Revolving Loan made by each Bank shall be established and maintained at such
Bank's Applicable Lending Office for Revolving Loans of such Type.
Section 1.7 Revolving Notes. The Revolving Loans made by a Bank shall be
---------------
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit "A" to the Prior Agreement, dated the Prior Agreement Closing Date
(or, with respect to such a promissory note payable to a Bank that becomes or
has become such pursuant to an Assignment and Acceptance, the effective date
specified in such Assignment and Acceptance), payable to the order of such Bank
in a principal amount equal to its Revolving Commitment and otherwise duly
completed.
Section 1.8 Repayment of Revolving Loans. The Borrower shall pay to the
----------------------------
Agent for the account of the Banks the outstanding principal amount of all of
the Revolving Loans on the Revolving Termination Date.
Section 1.9 Use of Proceeds. The proceeds of Revolving Loans shall be used
---------------
by the Borrower for working capital and general corporate purposes in the
ordinary course of business, including, without limitation, the satisfaction of
Reimbursement Obligations in accordance with subsection 2.7(e).
Section 1.10 Revolving Commitment Fee. The Borrower agrees to pay to the
------------------------
Agent for the account of each Bank a commitment fee equal to one-half of one
percent (0.50%) of the daily average unused amount of such Bank's Revolving
Commitment (including both Revolving Loans and Letter of Credit Liabilities as
usage) for the period from and including the Closing Date to and
PAGE 23
including the Revolving Termination Date. Accrued commitment fees under this
Section 2.5 shall be payable in arrears on each Quarterly Payment Date and on
the Revolving Termination Date.
Section 1.11 Reduction or Termination of Revolving Commitments. The
-------------------------------------------------
Borrower shall have the right to terminate or reduce in part the unused portion
of the Revolving Commitments at any time and from time to time, provided that:
(a) the Borrower shall give notice of each such termination or reduction as
provided in Section 5.3; and (b) each partial reduction shall be in an aggregate
amount at least equal to $500,000 or a multiple of $100,000 in excess thereof.
The Revolving Commitments may not be reinstated after they have been terminated
or reduced.
Section 1.12 Letters of Credit.
-----------------
(1) Commitment to Issue. The Borrower may utilize the Revolving
-------------------
Commitments by requesting that the Agent issue, and the Agent, subject to
the terms and conditions of this Agreement, shall issue, letters of credit
for the Borrower's or one of the Subsidiaries' account (such letters of
credit, together with any letters of credit that were issued under the
terms of Section 2.7 of the Prior Agreement and are outstanding on the
Closing Date, being hereinafter referred to as the "Letters of Credit");
-----------------
provided, however: (i) the aggregate amount of outstanding Letter of Credit
-------- -------
Liabilities shall not at any time exceed $2,500,000; (ii) the Outstanding
Revolving Credit shall not at any time exceed the lesser of the then-
existing Borrowing Base (based on the most recently delivered Monthly
Compliance Report) or the aggregate Revolving Commitments; (iii) the
Outstanding Revolving Credit applicable to a Bank shall not at any time
exceed such Bank's Revolving Commitment; (iv) the outstanding amount of the
Total Debt shall at no time exceed the Maximum Total Debt; and (v) during
each Clean Down Period, the Outstanding Revolving Credit shall not exceed
an aggregate amount equal to $3,500,000. Upon the date of issue of a Letter
of Credit, the Agent shall be deemed, without further action by any party
hereto, to have sold to each other Bank, and each other Bank shall be
deemed, without further action by any party hereto, to have purchased from
the Agent a participation to the extent of such Bank's Commitment
Percentage of the Revolving Commitments in such Letter of Credit and the
related Letter of Credit Liabilities.
(2) Letter of Credit Request Procedure. Except for Letters of
----------------------------------
Credit issued on the Closing Date, the Borrower shall give the Agent at
least five (5) Business Days (or such lesser time as Agent may agree)
irrevocable prior notice (effective upon receipt) specifying the date of
each Letter of Credit and the nature of the transactions to be supported
thereby. Upon receipt of such notice the Agent shall promptly notify each
other Bank of the contents thereof and of such Bank's Commitment Percentage
of the amount of the proposed Letter of Credit. Each Letter of Credit shall
have an expiration date that does not extend either beyond a date which is
thirty (30) days prior to the Revolving Termination Date or beyond a date
that is one (1) year from the date of its issuance, shall be payable in
Dollars, must support transactions entered into in the ordinary course of
the Borrower's or a Subsidiaries' business, must be reasonably satisfactory
in form and substance to the Agent, and shall be issued
PAGE 24
pursuant to such documentation as the Agent may reasonably require,
including, without limitation, the Agent's standard form letter of credit
request and reimbursement agreement; provided, that, in the event of any
--------
conflict between the terms of such agreement and the other Loan Documents,
the terms of the other Loan Documents shall control.
(3) Letter of Credit Fees. The Borrower will pay to the Agent for the
---------------------
account of each Bank a letter of credit fee on such Bank's Commitment
Percentage of the Revolving Commitments of the amount available for
drawings under each Letter of Credit, such letter of credit fee (i) to be
paid in arrears on each Quarterly Payment Date until the date of expiration
or termination thereof (each such date herein a "Payment Date") and (ii) to
------------
be calculated for the period from and including one Payment Date to and
excluding the next at a rate equal to the LC Fee Rate in effect on the date
of payment (as determined in accordance with Section 4.2). After receiving
any payment of any letter of credit fees under this clause (c), the Agent
will promptly pay to each Bank the letter of credit fees then due such
Bank. With respect to each Letter of Credit, the Borrower will also pay to
the Agent for its sole account on the date of the issuance of the Letter of
Credit an issuance fee equal to the greater of $500.00 or one quarter of
one percent (0.25%) of the maximum amount available to be drawn under the
Letter of Credit.
(4) Funding of Drawings. Upon receipt from the beneficiary of any
-------------------
Letter of Credit of any demand for payment or other drawing under such
Letter of Credit, the Agent shall promptly notify the Borrower and each
Bank as to the amount to be paid as a result of such demand or drawing and
the respective payment date. Not later than 11:00 a.m. on the applicable
payment date, each Bank will make available to the Agent, at the Principal
Office, in immediately available funds, an amount equal to such Bank's
Commitment Percentage of the Revolving Commitments in the amount to be paid
as a result of such demand or drawing even if the conditions to a Loan
under Article 7 have not been satisfied.
(5) Reimbursements. The Borrower shall be irrevocably and
--------------
unconditionally obligated to immediately reimburse the Agent for any
amounts paid by the Agent upon any demand for payment or drawing under any
Letter of Credit, without presentment, demand, protest, or other
formalities of any kind. All payments on the Reimbursement Obligations
shall be made to the Agent at the Principal Office for the account of the
Agent in Dollars and in immediately available funds, without setoff,
deduction or counterclaim not later than 2:00 pm. on the date of the
corresponding payment under the Letter of Credit by the Agent. Subject to
the other terms and conditions of this Agreement, such reimbursement may be
made by the Borrower requesting a Revolving Loan in accordance with Section
5.1 the proceeds of which shall be credited against the Borrower's
Reimbursement Obligations. The Agent will pay to each Bank such Bank's
Commitment Percentage of the Revolving Commitments of all amounts received
from the Borrower for application in payment, in whole or in part, to the
Reimbursement Obligation in respect of any Letter of Credit, but only to
the extent such Bank has made payment to the Agent in respect of such
Letter of Credit pursuant to clause (d) of this Section 2.7.
PAGE 25
(6) Reimbursement Obligations Absolute. The Reimbursement Obligations
----------------------------------
of the Borrower under this Agreement shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the terms
of the Loan Documents under all circumstances whatsoever and the Borrower
hereby waives any defense to the payment of the Reimbursement Obligations
based on any circumstance whatsoever, including without limitation, in
either case, the following circumstances: (i) any lack of validity or
enforceability of any Letter of Credit or any other Loan Document; (ii) any
amendment or waiver of or any consent to departure from any Loan Document;
(iii) the existence of any claim, set-off, counterclaim, defense or other
rights which the Borrower, any Obligated Party, or any other Person may
have at any time against any beneficiary of any Letter of Credit, the
Agent, any Bank, or any other Person, whether in connection with any Loan
Document or any unrelated transactions; (iv) any statement, draft, or other
documentation presented under any Letter of Credit proving to be forged,
fraudulent, invalid, or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever; (v) payment
by the Agent under any Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of
Credit; or (vi) any other circumstance whatsoever, whether or not similar
to any of the foregoing.
(7) Issuer Responsibility. The Borrower assumes all risks of the acts
---------------------
or omissions of any beneficiary of any Letter of Credit with respect to its
use of such Letter of Credit. Except as set forth in this subsection (g),
neither the Agent, any Bank nor any of their respective officers or
directors shall have any responsibility or liability to the Borrower or any
other Person for: (a) the failure of any draft to bear any reference or
adequate reference to any Letter of Credit, or the failure of any documents
to accompany any draft at negotiation, or the failure of any Person to
surrender or to take up any Letter of Credit or to send documents apart
from drafts as required by the terms of any Letter of Credit, or the
failure of any Person to note the amount of any instrument on any Letter of
Credit, each of which requirements, if contained in any Letter of Credit
itself, it is agreed may be waived by the Agent; (b) errors, omissions,
interruptions, or delays in transmission or delivery of any messages; (c)
the validity, sufficiency, or genuineness of any draft or other document,
or any endorsement(s) thereon, even if any such draft, document or
endorsement should in fact prove to be in any and all respects invalid,
insufficient, fraudulent, or forged or any statement therein is untrue or
inaccurate in any respect; (d) the payment by the Agent to the beneficiary
of any Letter of Credit against presentation of any draft or other document
that does not comply with the terms of the Letter of Credit; or (e) any
other circumstance whatsoever in making or failing to make any payment
under a Letter of Credit. The Borrower shall have a claim against the
Agent, and the Agent shall be liable to the Borrower, to the extent of any
direct, but not indirect, consequential or punitive, damages suffered by
the Borrower which the Borrower proves in a final nonappealable judgment
were caused by (i) the Agent's willful misconduct or gross negligence in
determining whether documents presented under any Letter of Credit complied
with the terms thereof or (ii) the Agent's willful failure to pay under any
Letter of Credit after presentation to it of documentation strictly
complying with
PAGE 26
the terms and conditions of such Letter of Credit. The Agent may accept
documents that appear on their face to be in order, without responsibility
for further investigation, regardless of any notice or information to the
contrary.
Section 1.13 Borrowing Base. Percentages used from time to time in
--------------
calculating the Borrowing Base are for the sole purpose of determining the
maximum amount of the Outstanding Revolving Credit that may be outstanding from
time to time under this Agreement, and shall not be evidentiary of or binding
upon the Agent or the Banks with respect to the market value or liquidation
value of any Collateral. Funding of Revolving Loans and issuance of Letters of
Credit hereunder shall at all times remain subject to confirmation by the Agent
of Eligible Inventory, Eligible Receivables and the Borrowing Base. Any request
for a Revolving Loan or issuance of a Letter of Credit which, if funded or
issued, as applicable, would result in the unpaid balance of the Outstanding
Revolving Credit being in excess of the amount allowed by this Agreement may be
declined by the Agent in its sole discretion. The Agent shall notify the
Borrower of any refusal of any such request for a Revolving Loan as soon as
reasonably practical and, in any event, within one Business Day after such
refusal.
ARTICLE 3
Term Loans
----------
Section 1.14 Term Loan Notes. The Term Loan made by a Bank shall be
---------------
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit "B" to the Prior Agreement, payable to the order of such Bank in a
principal amount equal to its Term Loan as outstanding on the Prior Agreement
Closing Date or, if applicable, on the date of the most recent Assignment and
Acceptance executed by such Bank after the Prior Agreement Closing Date and
otherwise duly completed.
Section 1.15 Repayment of Term Loans. The Borrower shall pay to the Agent
-----------------------
for the account of the Banks the aggregate principal amount of all of the Term
Loans, and such principal amount shall be due and payable, as follows:
(1) In sixteen (16) consecutive quarterly installments due and
payable on each Quarterly Payment Date commencing March 31, 2000 and
continuing until and including December 31, 2003 as follows:
(1) the installment due on March 31, 2000 shall be in an
amount equal to $125,000;
(2) each installment due on June 30, 2000, September 30,
2000, December 31, 2000 and March 31, 2001 shall be in an amount
equal to $187,500 each;
PAGE 27
(3) each installment due on June 30, 2001, September 30,
2001, December 31, 2001 and March 31, 2002 shall be in an amount
equal to $500,000 each;
(4) each installment due on June 30, 2002, September 30,
2002, December 31, 2002 and March 31, 2003 shall be in an amount
equal to $750,000 each; and
(5) each installment due on June 30, 2003, September 30,
2003 and December 31, 2003 shall be in an amount equal to $937,500
each; and
(2) in one final installment in the amount of all outstanding
principal of the Term Loans due and payable on the Term Loan Termination
Date.
ARTICLE 4
Interest and Fees
-----------------
Section 1.16 Interest Rate. The Borrower shall pay to the Agent for the
-------------
account of each Bank interest on the unpaid principal amount of each Loan made
by such Bank for the period commencing on the date of such Loan to but excluding
the date such Loan is due, at a fluctuating rate per annum equal to the
Applicable Rate. The term "Applicable Rate" means, with respect to any Loans:
---------------
(a) during the period that such Loans or portions thereof are subject to a Base
Rate Account, the Base Rate plus the Base Rate Margin and (b) during the period
that such Loans or portions thereof are subject to a Libor Account, the Adjusted
Libor Rate plus the Libor Rate Margin.
Section 1.17 Determinations of Margins and Fees. The margins identified in
----------------------------------
Section 4.1 and the fees payable under subsection 2.7(c) shall be defined and
determined as follows:
(1) "Base Rate Margin" shall mean, at any time, 2.00% per annum.
----------------
(2) "LC Fee Rate" shall mean, at any time, 3.25% per annum
-----------
(3) "Libor Rate Margin" shall mean, at any time, 3.25% per annum.
-----------------
Section 1.18 Payment Dates. Accrued interest on the Loans shall be due and
-------------
payable as follows: (i) in the case of Loans subject to Base Rate Accounts, on
each Quarterly Payment Date and on the applicable Termination Date; (ii) in the
case of Loans subject to Libor Accounts and with respect to each such Account,
on the last day of the Interest Period with respect thereto and, in the case of
an Interest Period greater than three months, at three-month intervals after the
first day of such Interest Period, and (iii) on the applicable Termination Date.
PAGE 28
Section 1.19 Default Interest. Notwithstanding the foregoing, the Borrower
----------------
will pay to the Agent for the account of each Bank interest at the applicable
Default Rate on any principal of any Loan made by such Bank, any Reimbursement
Obligation, and (to the fullest extent permitted by law) any other amount
payable by the Borrower under any Loan Document to or for the account of the
Agent or such Bank, that is not paid in full when due (whether at stated
maturity, by acceleration, or otherwise), for the period from and including the
due date thereof to but excluding the date the same is paid in full. Interest
payable at the Default Rate shall be payable from time to time on demand.
Section 1.20 Conversions and Continuations of Accounts. Subject to
-----------------------------------------
Sections 5.2 and 6.5 and the other provisions of this Agreement, the Borrower
shall have the right from time to time to Convert all or part of any Base Rate
Account in existence under a Loan into a Libor Account under the same Loan or to
Continue Libor Accounts in existence under a Loan as Libor Accounts under the
same Loan, provided that: (a) the Borrower shall give the Agent notice of each
such Conversion or Continuation as provided in Section 5.3; (b) a Libor Account
may only be Converted on the last day of the Interest Period therefor; (c)
except for Conversions into Base Rate Accounts, no Conversions or Continuations
shall be made while an Event of Default has occurred and is continuing; and (d)
a Libor Account established under one Loan may not be Continued as a Libor
Account under another Loan.
Section 1.21 Computations. Interest payable by the Borrower based on the
------------
Base Rate under the Loan Documents shall in all cases be computed on the basis
of a year of 365 or 366, as the case may be, days and the actual number of days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable. Interest payable by the Borrower based on the Libor
Rate and all fees payable under the Loan Documents shall be computed on the
basis of a year of 360 days and the actual number of days elapsed (including the
first day but excluding the last day) occurring in the period for which payable,
unless such calculation would result in a usurious rate of interest in which
case such calculation shall be calculated on the basis of a year of 365 or 366
days, as the case may be.
ARTICLE 5
Administrative Matters
----------------------
Section 1.22 Borrowing Procedure. The Borrower shall give the Agent, and
-------------------
the Agent will give the Banks, notice of each borrowing under any Revolving
Commitment in accordance with Section 5.3. Not later than 1:00 p.m. on the date
specified for each borrowing under the Revolving Commitment each Bank will make
available the amount of the Loan to be made by it on such date to the Agent, at
the Principal Office, in immediately available funds, for the account of the
Borrower. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by either (a)
depositing the same, in immediately available funds, in an account of the
Borrower (designated by the Borrower) maintained with the Agent at the
PAGE 29
Principal Office or (b) wire transferring such funds to a Person or Persons
designated by the Borrower in writing.
Section 1.23 Minimum Amounts. Except for prepayments pursuant to Article 6
---------------
or Section 5.4, each prepayment of principal of a Loan and each borrowing of a
Loan shall be in a minimum principal amount of $100,000 or any larger amount in
increments of $100,000. Each Libor Account applicable to a Loan shall be in a
minimum principal amount of $1,000,000 or any larger amount in increments of
$100,000.
Section 1.24 Certain Notices. Notices by the Borrower to the Agent of
---------------
terminations or reductions of Revolving Commitments, notices of borrowings and
prepayments of Loans and notices of Conversion and Continuations of Accounts
shall be irrevocable and shall be effective only if received by the Agent not
later than (a) 12:00 p.m. on the Business Day of any borrowing, prepayment or
repayment (other than scheduled payments and mandatory prepayments) of Loans
subject to Base Rate Accounts or Conversions into Base Rate Accounts and (b)
1:00 p.m. on the Business Day prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or prepayment specified below:
------------------------------------------------------------------------------
Notice Number of Business Days
Prior
Termination or reduction of Revolving Commitments 3
-------------------------------------------------------------------------------
Borrowing, prepayment or repayment (other than 3
scheduled payments and mandatory prepayments)
of Loans subject to Libor Accounts, Conversions
into or Continuations as Libor Accounts
===============================================================================
Any notices specified above which are received by the Agent after the time
specified above on a Business Day shall be deemed to be received and shall be
effective on the next Business Day. Each such notice of termination or
reduction shall specify the amount of the Revolving Commitments to be terminated
or reduced. Each such notice of borrowing, Conversion, Continuation, or
prepayment shall (a) specify the Loans to be borrowed or prepaid or the Accounts
to be Converted or Continued; (b) the amount (subject to Section 5.2 hereof) to
be borrowed, Converted, Continued or prepaid; (c) in the case of a Conversion,
the Type of Account to result from such Conversion; (d) in the case of a
borrowing, the Type of Account or Accounts to be applicable to such borrowing
and the amounts thereof; (e) in the event a Libor Account is selected, the
duration of the Interest Period therefor; and (f) the date of borrowing,
Conversion, Continuation, or prepayment (which shall be a Business Day). Each
notice of borrowing shall also certify to a calculation of the Total Debt
(calculated as if the borrowing in question had occurred) and the Maximum Total
Debt as of the most recent month end prior to the notice of borrowing. The
Agent shall notify the Banks of the contents of each such notice on the date of
its receipt of the same or, if received on or after the time required above on a
Business Day, on the next Business Day. In the event the Borrower fails to
PAGE 30
select the Type of Account applicable to a Loan, or the duration of any Interest
Period for any Libor Account, within the time period and otherwise as provided
in this Section 5.3, such Account (if outstanding as Libor Account) will be
automatically Converted into a Base Rate Account on the last day of the
preceding Interest Period for such Account or (if outstanding as a Base Rate
Account) will remain as, or (if not then outstanding) will be made as, a Base
Rate Account. The Borrower may not borrow any Loans subject to a Libor Account,
Convert any Base Rate Accounts into Libor Accounts, or Continue any Libor
Account as a Libor Account if an Event of Default exists or if the Applicable
Rate for such Libor Accounts would exceed the Maximum Rate.
Section 1.25 Prepayments.
-----------
(1) Mandatory Prepayments.
---------------------
(1) Excess Cash Flow. The Borrower shall, on July 14, 2000,
----------------
pay to the Agent as a prepayment on the Loans an aggregate amount
equal to 75% of the Excess Cash Flow calculated for the period
beginning on the Prior Agreement Closing Date and ending on the
last day of such Fiscal Year if the Leverage Ratio calculated for
such period is greater than 2.5 to 1.0. The Borrower shall, on the
date 105 days after the end of each of its Fiscal Years, commencing
with the first such date after the date referred to in the
immediately preceding sentence, pay to the Agent as a prepayment on
the Loans an aggregate amount equal to 75% of the Excess Cash Flow
for the Fiscal Year of the Borrower then most recently ended if the
Leverage Ratio calculated for such Fiscal Year is greater than 2.5
to 1.0. Concurrently with the making of any such payment, the
Borrower shall deliver to the Agent a certificate of an authorized
officer of the Borrower demonstrating its calculation of the amount
required to be paid.
(2) Insurance Recovery. The Borrower shall, on each day that
------------------
the Borrower or any Subsidiary receives, or is deemed to receive,
any Excess Insurance Proceeds, pay (or cause to be paid) to the
Agent an aggregate amount equal to such Excess Insurance Proceeds
as a prepayment on the Loans.
(3) Asset Dispositions. The Borrower shall, on each day that
------------------
the Borrower or any Subsidiary receives Net Proceeds from an Asset
Disposition, pay (or cause to be paid) to the Agent an aggregate
amount equal to 100% of the Net Proceeds from such Asset
Disposition as a prepayment on the Loans.
(4) Equity Issuances. The Borrower shall, on each day that
----------------
the Borrower or any Subsidiary receives, directly or indirectly,
Net Proceeds from any Equity Issuance made after the Closing Date,
pay (or cause to be paid) to the Agent an aggregate amount equal to
100% of the Net Proceeds from such Equity Issuance as a prepayment
on the Loans. Notwithstanding the foregoing provisions of this
Section 5.4(a)(iv), (1) the Borrower may, at its option, exclude
from the operation of this section the Net Proceeds of up to
$12,441,000 contributed, directly or indirectly, after
PAGE 31
the Prior Agreement Closing Date to the Borrower by Investco under
the terms of the Operating Agreement, but only if and so long as
such Equity Issuance occurs after the Prior Agreement Closing Date
and if no Default exists under this Agreement before and after such
Equity Issuance and (2) the Equity Issuances permitted by clause
(i) of Section 10.6 and the Equity Issuances made in connection
with Internet Expenditures shall be excluded from the application
of this Section 5.4(a)(iv).
(5) Debt Issuances. The Borrower shall, on each day that the
--------------
Borrower or any of Subsidiary receives, directly or indirectly, Net
Proceeds from any Debt Issuance (other than the issuance of Debt
permitted by Section 10.1), pay (or cause to be paid) to the Agent
an aggregate amount equal to 100% of the Net Proceeds from such
Debt Issuance as a prepayment on the Loans.
(6) Total Debt in excess of the Maximum Total Debt. If as of
----------------------------------------------
the end of any month, the Total Debt exceeds the Maximum Total Debt
as reflected in the Monthly Compliance Report then most recently
delivered, the Borrower shall within one (1) Business Day after the
determination thereof prepay the Loans by the amount of the excess.
(7) Revolving Loans. If at any time the Outstanding
---------------
Revolving Credit exceeds the lesser of (a) the aggregate Revolving
Commitments or (b) the then-existing Borrowing Base (based on the
most recently delivered Monthly Compliance Report), the Borrower
shall, within one day after the occurrence thereof, prepay the
outstanding Revolving Loans by the amount of such excess or if no
Revolving Loans are outstanding and the Outstanding Revolving
Credit exceeds the then-existing Borrowing Base (based on the most
recently delivered Monthly Compliance Report), the Borrower shall
immediately pledge to the Agent cash or cash equivalents in an
amount equal to the excess as security for the Obligations.
Prepayments of the Loans under clauses (i) through (vi) of this subsection
shall be applied as follows:
(A) during the period commencing on the Closing Date and
continuing through and including May 5, 2001, such prepayments shall be
applied as follows:
(i) first, on a pro rata basis to the unpaid installments
outstanding under the Term Loans, with each such installment being
prepaid by its pro rata portion of the amount of the prepayment,
with an installment's pro rata portion equal to a percentage
obtained by multiplying by 100 the quotient derived by dividing the
outstanding principal amount of such installment by the aggregate
outstanding principal amount of all unpaid installments outstanding
under the Term Loans until the Term Loans are paid in full, and
PAGE 32
(ii) then such prepayments shall be applied to reduce the
outstanding principal of the Revolving Loans (but with no reduction in
the Revolving Commitments); and
(B) during the period commencing on May 5, 2001 and continuing
through, but not including, the last Termination Date, such prepayments
shall be applied first on a pro rata basis to the unpaid installments
outstanding under the Term Loans, each such installment being prepaid by
its pro rata portion of the amount of the prepayment, with an installment's
pro rata portion equal to a percentage obtained by multiplying by 100 the
quotient derived by dividing the outstanding principal amount of such
installment by the aggregate outstanding principal amount of all unpaid
installments outstanding under the Term Loans, until the Term Loans are
paid in full and then to the outstanding principal amount of the Revolving
Loans. The Revolving Commitments shall be permanently reduced by the
amount of each prepayment of the Revolving Loans pursuant to this Section
5.4(a)(B).
(2) Optional. Subject to Section 5.2 and the provisions of this
--------
clause (b), the Borrower may, at any time and from time to time without
premium or penalty upon prior notice to the Agent as specified in Section
5.3, prepay or repay any Loan in full or in part. Any optional prepayment
of the Term Loans shall be accompanied with accrued interest on the amount
prepaid to the date of prepayment and any partial prepayments thereof shall
be applied pro rata (as determined in accordance with Section 5.4(a)) to
the then remaining installments of principal of such Loans. Loans subject
to a Libor Account may be prepaid or repaid only on the last day of the
Interest Period applicable thereto unless (i) the Borrower pays to the
Agent for the account of the applicable Banks any amounts due under Section
6.5 as a result of such prepayment or repayment or (ii) after giving effect
to such prepayment or repayment the aggregate principal amount of the Libor
Accounts applicable to the Loan being prepaid or repaid having Interest
Periods that end after such payment date shall be equal to or less than the
principal amount of such Loan after such prepayment or repayment.
(3) Clean Down Prepayment. Borrower shall make such prepayments under
---------------------
the Revolving Loans as is necessary so that at all times during each Clean
Down Period, the Outstanding Revolving Credit shall not exceed $3,500,000.
Section 1.26 Method of Payment. Except as otherwise expressly provided
-----------------
herein, all payments of principal, interest, and other amounts to be made by the
Borrower or any Obligated Party under the Loan Documents shall be made to the
Agent at the Principal Office for the account of each Bank's Applicable Lending
Office in Dollars and in immediately available funds, without setoff, deduction,
or counterclaim, not later than 1:00 p.m. on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). The Borrower and
each Obligated Party shall, at the time of making each such payment, specify to
the Agent the sums payable under the Loan Documents to which such payment is to
be applied (and in the event that the Borrower fails to so specify, or if an
Event of Default has occurred and is continuing, the Agent may apply such
payment
PAGE 33
and any proceeds of any Collateral to the Obligations in such order and manner
as it may elect in its sole discretion, subject to Section 6.6 hereof); provided
--------
that any payment made within ten (10) Business Days prior to a scheduled payment
date shall be deemed a "payment" rather than a "prepayment" to the extent
necessary to discharge the next due installment. Each payment received by the
Agent under any Loan Document for the account of a Bank shall be paid to such
Bank by 3:00 p.m. on the date the payment is deemed made to the Agent in
immediately available funds, for the account of such Bank's Applicable Lending
Office. Whenever any payment under any Loan Document shall be stated to be due
on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment fees, as
the case may be.
Section 1.27 Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (a) each Loan shall be made by the Banks, each payment of commitment
fees under Section 2.5 and letter of credit fees under subsection 2.7(c) shall
be made for the account of the Banks, and each termination or reduction of the
Revolving Commitments shall be applied to the Revolving Commitments of the
Banks, pro rata according to their respective applicable Commitment Percentages;
(b) the making, Conversion, and Continuation of Accounts of a particular Type
(other than Conversions provided for by Section 6.4) shall be made pro rata
among the Banks holding Accounts of such Type according to their respective
applicable Commitment Percentages; (c) each payment and prepayment of principal
of or interest on Loans or Reimbursement Obligations by the Borrower shall be
made to the Agent for the account of the Agent or the Banks holding such Loans
or Reimbursement Obligations (or participation interests therein) pro rata in
accordance with the respective unpaid principal amounts of such Loans or
participation interests held by the Agent or such Banks; (d) proceeds of
Collateral shall be shared by the Agent and the Banks pro rata in accordance
with the respective unpaid principal amounts of and interest on the Obligations
then due the Agent and the Banks; and (e) the Banks (other than the Agent) shall
purchase from the Agent participations in the Letters of Credit to the extent of
their respective Commitment Percentages calculated with respect to the Revolving
Commitments. If at any time payment, in whole or in part, of any amount
distributed by the Agent hereunder is rescinded or must otherwise be restored or
returned by Agent as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, then each Person receiving any portion of
such amount agrees, upon demand, to return the portion of such amount it has
received to the Agent.
Section 1.28 Sharing of Payments. If a Bank shall obtain payment of any
-------------------
principal of or interest on any of the Obligations due to such Bank hereunder
directly (and not through the Agent) through the exercise of any right of set-
off, banker's lien, counterclaim or similar right, or otherwise, it shall
promptly purchase from the other Banks participations in the Obligations held by
the other Banks in such amounts, and make such other adjustments from time to
time as shall be equitable to the end that all the Banks shall share the benefit
of such payment pro rata in accordance with the unpaid principal of and interest
on the Obligations then due to each of them. To such end, all of the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess payment
is thereafter rescinded or must otherwise be restored. The Borrower agrees, to
the fullest extent it may effectively do so under applicable law,
PAGE 34
that any Bank so purchasing a participation in the Obligations held by the other
Banks may exercise all rights of set-off, banker's lien, counterclaim, or
similar rights with respect to such participation as fully as if such Bank were
a direct holder of Obligations in the amount of such participation. Nothing
contained herein shall require any Bank to exercise any such right or shall
affect the right of any Bank to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness or obligation of the
Borrower.
Section 1.29 Non-Receipt of Funds by the Agent. Unless the Agent shall
---------------------------------
have been notified by a Bank or the Borrower (the "Payor") prior to the date on
-----
which such Bank is to make payment to the Agent hereunder or the Borrower is to
make a payment to the Agent for the account of one or more of the Banks, as the
case may be (such payment being herein called the "Required Payment"), which
----------------
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required Payment to the
Agent, (a) the recipient of such payment shall, on demand, pay to the Agent the
amount made available to it together with interest thereon in respect of the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal (i) to
the Federal Funds Rate for the first day of such period and thereafter at the
Base Rate plus the Base Rate Margin if the Payor is a Bank or (ii) at the Base
Rate plus the Base Rate Margin for such period if the Payor is the Borrower and
(b) Agent shall be entitled to offset against any and all sums to be paid to
such recipient, the amount calculated in accordance with the foregoing clause
(a).
Section 1.30 Withholding Taxes. All payments by the Borrower of amounts
-----------------
payable under any Loan Document shall be payable without deduction for or on
account of any present or future taxes, duties or other charges levied or
imposed by the United States of America or by the government of any jurisdiction
outside the United States of America or by any political subdivision or taxing
authority of or in any of the foregoing through withholding or deduction with
respect to any such payments (but excluding any tax imposed on or measured by
the net income or profit of a Bank pursuant to the laws of the jurisdiction in
which it is organized or in which the Principal Office or Applicable Lending
Office of such Bank is located or any subdivision thereof or therein). If any
such taxes, duties or other charges are so levied or imposed, the Borrower will
make additional payments in such amounts so that every net payment of amounts
payable by it under any Loan Document, after withholding or deduction for or on
account of any such present or future taxes, duties or other charges, will not
be less than the amount provided for herein or therein, provided that the
Borrower may withhold to the extent required by law and shall have no obligation
to pay such additional amounts to any Bank to the extent that such taxes,
duties, or other charges are levied or imposed by reason of the failure or
inability of such Bank to comply with the provisions of Section 5.10. The
Borrower shall furnish promptly to the Agent for distribution to each affected
Bank, as the case may be, official receipts evidencing any such withholding or
reduction.
PAGE 35
Section 1.31 Withholding Tax Exemption. Each Bank that is not
-------------------------
incorporated under the laws of the United States of America or a state thereof
agrees that it will, in a reasonably prompt fashion after it initially becomes a
Bank hereunder, deliver to the Borrower and the Agent two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224 (or any successor
form) , certifying in either case that such Bank is entitled to receive payments
from the Borrower under any Loan Document without deduction or withholding of
any United States federal income taxes. Each Bank which so delivers a Form 1001
or 4224 (or any successor form) further undertakes to deliver to the Borrower
and the Agent two (2) additional copies of such form (or a successor form) on or
before the date such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such Bank
is entitled to receive payments from the Borrower under any Loan Document
without deduction or withholding of any United States federal income taxes,
unless a Regulatory Change has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank advises the Borrower and the Agent that it
is not capable of receiving such payments without any deduction or withholding
of United States federal income tax.
Section 1.32 Participation Obligations Absolute; Failure to Fund
---------------------------------------------------
Participation. The obligations of a Bank to fund its participation in the
-------------
Letters of Credit in accordance with the terms hereof shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of the Loan Documents under all circumstances whatsoever, including
without limitation, the following circumstances: (a) any lack of validity of
any Loan Document; (b) the occurrence of any Default; (c) the existence of any
claim, set-off, counterclaim, defenses or other rights which such Bank, the
Borrower, any Obligated Party, or any other Person may have; (d) the occurrence
of any event that has or could reasonably be expected to have a Material Adverse
Effect; (e) the failure of any condition to a Loan under Article 7 to be
satisfied; (f) the fact that after giving effect to the funding of the
participation the Total Debt may exceed the Maximum Total Debt; or (g) any other
circumstance whatsoever, whether or not similar to any of the foregoing. If a
Bank fails to fund its participation in a Letter of Credit as required hereby,
such Bank shall, subject to the foregoing proviso, remain obligated to pay to
the Agent the amount it failed to fund on demand together with interest thereon
in respect of the period commencing on the date such amount should have been
funded until the date the amount was actually funded to the Agent at a rate per
annum equal to the Federal Funds Rate plus one-quarter of one percent (0.25%)
for such period and the Agent shall be entitled to offset against any and all
sums to be paid to such Bank hereunder the amount due the Agent under this
sentence.
Section 1.33 Tax Indemnity. The Borrower will indemnify the Agent and
-------------
each Bank (without duplication) against, and reimburse the Agent and each Bank
for, all present and future taxes, levies, duties, imposts, assessments or other
charges (including interest and penalties) levied or collected (whether or not
legally or correctly imposed, assessed, levied or collected), excluding,
however, franchise taxes and any taxes imposed on the overall net income of the
Agent or such Bank
PAGE 36
or any lending office of the Agent or such Bank by any jurisdiction in which the
Agent or such Bank or any such lending office is located, on or in respect of
this Agreement, any of the Loan Documents or the Obligations or any portion
thereof (the "reimbursable taxes"). Any such indemnification shall be on an
------------------
after-tax basis, taking into account any such reimbursable taxes imposed on the
amounts paid as indemnity.
Section 1.34 Reinstatement of Obligations. Notwithstanding anything to
----------------------------
the contrary contained in this Agreement or any other Loan Document, if the
payment of any amount of principal or of interest with respect to the Loans or
any other amount of the Obligations, or any portion thereof, is rescinded,
voided or must otherwise be refunded by the Agent or any Bank upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise for any
reason whatsoever, then each of (a) the Obligations, (b) the Loan Documents
(including, without limitation, this Agreement and the Notes), (c) the
indebtedness, liabilities and obligations of the Borrower and any other Persons
under the Loan Documents and (d) all Liens for the benefit of the Agent and the
Banks created under or evidenced by the Loan Documents, will be automatically
reinstated and become automatically effective and in full force and effect, all
as though such payment so rescinded, voided or otherwise refunded had never been
made.
ARTICLE 6
Yield Protection and Illegality
-------------------------------
Section 1.35 Additional Costs.
----------------
(1) The Borrower shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate it
for any costs incurred by such Bank which such Bank determines are
attributable to its making or maintaining of any Loans subject to Libor
Accounts or Letters of Credit hereunder or its obligation to make any of
such Loans hereunder or issue or participate in any Letter of Credit, or
any reduction in any amount receivable by such Bank hereunder in respect of
any such Loans or Letters of Credit or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
----------
Costs"), resulting from any Regulatory Change which:
-----
(1) changes the basis of taxation of any amounts payable to such
Bank under this Agreement or its Notes in respect of any of such Loans
(other than franchise taxes and taxes imposed on the overall net
income of such Bank or its Applicable Lending Office for any of such
Loans by the United States of America or the jurisdiction in which
such Bank has its Principal Office or such Applicable Lending Office);
(2) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio, or similar requirement relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, such Bank (including
PAGE 37
any of such Loans or any deposits referred to in the definition of
"Libor Rate" in Section 1.1 hereof); or
(3) imposes any other condition affecting this Agreement or the
Notes or any of such extensions of credit or liabilities or
commitments.
Each Bank will notify the Borrower (with a copy to the Agent) of any event
occurring after the date of this Agreement which will entitle such Bank to
compensation pursuant to this subsection 6.1(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such
compensation, and will designate a different Applicable Lending Office for
the Loans affected by such event if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
opinion of such Bank, violate any law, rule, or regulation or be in any way
disadvantageous to such Bank. Each Bank will furnish the Borrower with a
certificate setting forth the basis, calculation and the amount of each
request of such Bank for compensation under this subsection 6.1(a). If any
Bank requests compensation from the Borrower under this subsection 6.1(a),
the Borrower may, by notice to such Bank (with a copy to the Agent) suspend
the obligation of such Bank to issue or participate in Letters of Credit or
to make Loans subject to Libor Accounts or Continue Libor Accounts as Libor
Accounts or Convert Base Rate Accounts into Libor Accounts until the
Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 6.4 hereof shall be applicable with
respect to such Libor Accounts). A Bank may only request compensation
under this subsection 6.1(a) for Additional Cost incurred (i) at any time
after the date which is three (3) months prior to the date the Bank
requests such compensation and (ii) at any time after it has notified the
Borrower it will request compensation under this subsection 6.1(a).
(2) Without limiting the effect of the foregoing provisions of this
Section 6.1, in the event that, by reason of any Regulatory Change, any
Bank either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Bank which includes deposits by reference to which the
interest rate on the Loans subject to Libor Accounts is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Bank which includes Loans subject to Libor Accounts or (ii)
becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so elects by
notice to the Borrower (with a copy to the Agent), the obligation of such
Bank to make Loans subject to Libor Accounts or Continue Libor Accounts as
Libor Accounts or Convert Base Rate Accounts into Libor Accounts hereunder
shall be suspended until the Regulatory Change giving rise to such request
ceases to be in effect (in which case the provisions of Section 6.4 hereof
shall be applicable).
(3) Determinations and allocations by any Bank for purposes of this
Section 6.1 of the effect of any Regulatory Change on its costs of
maintaining its obligation to make Loans or issue or participate in Letters
of Credit or of making or maintaining Loans or
PAGE 38
issuing or participating in Letters of Credit or on amounts receivable by
it in respect of Loans or Letters of Credit, and of the additional amounts
required to compensate such Bank in respect of any Additional Costs, shall,
absent manifest error, be conclusive, provided that such determinations and
allocations are made on a reasonable basis.
Section 1.36 Limitation on Libor Accounts. Anything herein to the
----------------------------
contrary notwithstanding, if with respect to any Libor Accounts under a Loan for
any Interest Period therefor:
(1) The Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Libor Rate" in Section 1.1 hereof are not
being provided in the relative amounts or for the relative maturities for
purposes of determining the rate of interest for the Loans subject to such
Libor Accounts as provided in this Agreement; or
(2) Required Banks determine (which determination shall be
conclusive) and notify the Agent that the relevant rates of interest
referred to in the definition of "Adjusted Libor Rate" in Section 1.1
hereof on the basis of which the rate of interest for such Loans for such
Interest Period is to be determined do not accurately reflect the cost to
the Banks of making or maintaining such Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Libor Account and the relevant amounts or periods, and so long as such
condition remains in effect, the Banks shall be under no obligation to make
additional Loans subject to a Libor Account or to Convert Base Rate Accounts
into Libor Accounts and the Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Libor Accounts, either prepay the
Loans subject to such Libor Accounts or Convert such Libor Accounts into Base
Rate Accounts in accordance with the terms of this Agreement. Determinations
made under this Section 6.2 shall be made on a reasonable basis.
Section 1.37 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to (a) honor its obligation to make Loans subject to a Libor
Account hereunder or (b) maintain Loans subject to a Libor Account hereunder,
then such Bank shall promptly notify the Borrower (with a copy to the Agent)
thereof and such Bank's obligation to make or maintain Loans subject to a Libor
Account and to Convert Base Rate Accounts into Libor Accounts hereunder shall be
suspended until such time as such Bank may again make and maintain Loans subject
to a Libor Account (in which case the provisions of Section 7.4 hereof shall be
applicable).
Section 1.38 Treatment of Affected Loans. If the Accounts applicable to a
---------------------------
Loan of any Bank (hereinafter called "Affected Accounts") are to be Converted
-----------------
pursuant to Section 6.1 or 6.3 hereof, the Bank's Affected Accounts shall be
automatically Converted into Base Rate Accounts on the last day(s) of the then
current Interest Period(s) (or, in the case of a Conversion required by
subsection 6.1(b) or Section 6.3 hereof, on such earlier date as such Bank may
specify to the Borrower with a copy to the Agent) and, unless and until such
Bank gives notice as provided below
PAGE 39
that the circumstances specified in Section 6.1 or 6.3 hereof which gave rise to
such Conversion no longer exist: (a) to the extent that such Bank's Affected
Accounts have been so Converted, all payments and prepayments of principal which
would otherwise be applied to such Bank's Affected Accounts shall be applied
instead to its Base Rate Accounts; and (b) all Accounts which would otherwise be
established or Continued by such Bank as Libor Accounts shall be made as or
Converted into Base Rate Accounts and all Accounts of such Bank which would
otherwise be Converted into Libor Accounts shall be Converted instead into (or
shall remain as) Base Rate Accounts. If such Bank gives notice to the Borrower
(with a copy to the Agent) that the circumstances specified in Section 6.1 or
6.3 hereof which gave rise to the Conversion of such Bank's Affected Accounts
pursuant to this Section 6.4 no longer exist (which such Bank agrees to do
promptly upon such circumstances ceasing to exist) at a time when Libor Accounts
are outstanding, such Bank's Base Rate Accounts shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Libor Accounts to the extent necessary so that, after giving
effect thereto, all Accounts held by the Banks holding Libor Accounts and by
such Bank are held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their respective applicable Commitment Percentages.
Section 1.39 Compensation. The Borrower shall pay to the Agent for the
------------
account of each Bank, upon the request of such Bank, such amount or amounts as
shall be sufficient (in the reasonable opinion of such Bank) to compensate it
for any loss, cost, or expense incurred by it as a result of:
(1) Any payment or prepayment of a Loan subject to a Libor
Account or Conversion of a Libor Account for any reason (including, without
limitation, the acceleration of the outstanding Loans pursuant to
subsection 12.2(a)) on a date other than the last day of an Interest Period
for the applicable Libor Account; or
(2) Any failure by the Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified in
Article 8 to be satisfied) to borrow or prepay a Loan subject to a Libor
Account, or Convert a Base Rate Account to a Libor Account on the date for
such borrowing, Conversion, or prepayment specified in the relevant notice
of borrowing, prepayment, or Conversion under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or Converted
or not borrowed for the period from the date of such payment, Conversion, or
failure to borrow to the last day of the Interest Period for such Libor Account
(or, in the case of a failure to borrow, the Interest Period for such Libor
Account which would have commenced on the date specified for such borrowing) at
the applicable rate of interest for such Libor Account provided for herein over
(ii) the interest component of the amount such Bank would have bid in the London
interbank market for Dollar deposits of leading banks and amounts comparable to
such principal amount and with maturities comparable to such period.
PAGE 40
Section 1.40 Capital Adequacy. If after the date hereof, any Bank shall
----------------
have determined that the adoption or implementation after the date hereof of any
applicable law, rule, or regulation regarding capital adequacy, or any change
therein after the date hereof, or any change in the interpretation or
administration thereof after the date hereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by such Bank (or its parent) with any guideline, request,
or directive regarding capital adequacy (whether or not having the force of law)
of any central bank or other Governmental Authority issued after the date hereof
has or would have the effect of reducing the rate of return on such Bank's (or
its parent's) capital as a consequence of its obligations hereunder or the
transactions contemplated hereby to a level below that which such Bank (or its
parent) could have achieved but for such adoption, implementation, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within ten (10) Business Days after demand by such Bank (with a
copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank (or its parent) for such reduction. A
certificate of such Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive, provided that the determination thereof is made on a reasonable
basis. In determining such amount or amounts, such Bank may use any reasonable
averaging and attribution methods. With respect to each demand by a Bank under
this Section 6.6, no Bank shall have the right to demand compensation for
amounts attributable to any reduction in such Bank's rate of return occurring at
any time before the date which is three (3) months prior to the date the Bank
gives such demand for compensation to the Borrower.
Section 1.41 Replacement of a Bank. If (i) the obligation of a Bank
---------------------
(other than the Agent as a Bank) to make or Continue Loans subject to Libor
Accounts has been suspended pursuant to Section 6.1, 6.2 or 6.3 or (ii) a Bank
(other than the Agent as a Bank) has demanded compensation under Section 6.1 or
6.6, the Borrower shall have the right to require such Bank to assign to an
Eligible Assignee selected by the Borrower and reasonably satisfactory to the
Agent (which may be one or more of the Banks) the Notes and participation
interests in the Letter of Credit Liabilities held by such Bank pursuant to the
terms of an appropriately completed Assignment and Acceptance in accordance with
subsection 14.8(b); provided that, neither the Agent nor any Bank shall have any
--------
obligation to the Borrower to find any such Eligible Assignee and in order for
the Borrower to replace a Bank, the Borrower must require such replacement
within three (3) months of the date such obligations of the Bank were suspended
or the date the Bank demanded such compensation. Each Bank (other than the Agent
as a Bank) agrees to its replacement at the option of the Borrower pursuant to
this Section 6.7; provided that the Eligible Assignee selected by the Borrower
--------
shall purchase such Bank's interest in the Obligations of the Borrower for cash
in an aggregate amount equal to the aggregate unpaid principal thereof, all
unpaid interest accrued thereon, all unpaid commitment and letter of credit fees
accrued for the account of such Bank, any breakage costs incurred by the selling
Bank because of the prepayment of any Libor Accounts, all other fees (if any)
applicable thereto and all other amounts (including any amounts due under
Section 6.1 or 6.6) then owing to such Bank hereunder or under any other Loan
Document.
PAGE 41
ARTICLE 7
Conditions Precedent
--------------------
Section 1.42 Effectiveness of Agreement; Initial Loans and Letter of
-------------------------------------------------------
Credit. The effectiveness of this Agreement and the obligation of each Bank to
------
make its initial Loans and the obligation of the Agent to issue the initial
Letter of Credit, in each case, hereunder, are subject to the condition
precedent that the Agent shall have received on or before January 31, 2000 all
of the following, each dated (unless otherwise indicated) the date hereof, all
in form and substance satisfactory to the Agent and, in the case of actions to
be taken, evidence that the following required actions have been taken to the
satisfaction of the Agent:
(1) Execution and Ratification of Loan Documents. A copy of this
--------------------------------------------
Agreement, duly executed and delivered by the Borrower, the Agent and the
Required Banks, and the execution and delivery of the Guarantor and Pledgor
Acknowledgment attached hereto by each of Investco, Xx. Xxxxxx X. Xxxxxx,
Xx. Xxxxxxx X. Xxxxxx, QTL, EPI and Colorations.
(2) Resolutions. Resolutions of the Members (or other similar
-----------
governing body) of the Borrower certified by its Secretary, an Assistant
Secretary, other authorized officer or its members which authorize its
execution, delivery, and performance of the Loan Documents to which it is
or is to be a party.
(3) Incumbency Certificate. A certificate of incumbency certified by
----------------------
the Secretary, an Assistant Secretary, other authorized officer or members
of the Borrower, certifying the name of each of its officers (i) who is
authorized to sign the Loan Documents to which it is or is to be a party
(including the certificates contemplated herein) together with specimen
signatures of each such officer and (ii) who will, until replaced by other
officers duly authorized for that purpose, act as its representative for
the purposes of signing documentation and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby.
(4) Certification of No Change to Articles of Organization or
---------------------------------------------------------
Operating Agreement. A certificate executed by the Secretary, an Assistant
-------------------
Secretary, other authorized officer or members of the Borrower, certifying
that (i) the articles of organization, operating agreement and similar
governing documents of the Borrower have not been amended, supplemented or
otherwise modified since the Prior Agreement Closing Date, (ii) the copies
of each such document delivered to the Agent in connection with the
execution and delivery of the Prior Agreement are true, correct and
complete copies of such documents as of the Closing Date and (iii) each
such document is in full force and effect as of the Closing Date.
(5) Governmental Certificates. Certificates of the appropriate
-------------------------
government officials of the state of incorporation or organization of each
of the Borrower and the Subsidiaries, as to its existence and good standing
and certificates of the appropriate
PAGE 42
government officials of each state in which each of the Borrower and the
Subsidiaries is required to qualify to do business and where failure to so
qualify could reasonably be expected to have a Material Adverse Effect, as
to each of the Borrower and the Subsidiaries, qualification to do business
and good standing in such state, all dated a current date.
(6) Opinion of Counsel. A favorable opinion of Xxxxxx & Xxxxxxx,
------------------
legal counsel to the Borrower, as to (i) the due authorization of the
execution and delivery of this Agreement by the Borrower, (ii) the
enforceability of this Agreement, (iii) whether the execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby conflicts with certain laws, the charter documents of the Borrower
and (iv) whether the rate of interest hereunder is usurious, in form and
substance (as to such matters) satisfactory to the Agent.
(7) Monthly Compliance Report. A Monthly Compliance Report
-------------------------
calculating the Borrowing Base as of December 31, 1999.
(8) Projections. A copy of the Projections dated as of November 30,
-----------
1999 covering the period from January 1, 2000 through December 31, 2003.
(9) XXX Equity Contribution. The contribution by XXX of at least
-----------------------
$1,850,000 to the equity of the Borrower between January 1, 2000 and
January 31, 2000.
(10) Paribas North America, Inc. Equity Contribution. The
-----------------------------------------------
contribution by Paribas North America, Inc. of at least $150,000 to the
equity of the Borrower between January 1, 2000 and January 31, 2000.
(11) Fees and Expenses. The payment of an amendment fee in the amount
-----------------
of $49,062.50 and payment of all other fees, expenses and other amounts
required to be paid on or before the Closing Date pursuant to the terms of
Fee Letter and this Agreement.
(12) Attorneys' Fees and Expenses. Evidence that the costs and
----------------------------
expenses (including attorneys' fees) referred to in Section 14.1 shall have
been paid in full by the Borrower to the extent invoiced.
(13) Additional Documents. The Agent shall have received such
--------------------
additional approvals, opinions, or documentation as the Agent may
reasonably request.
Section 1.43 All Loans and Letters of Credit. The obligation of each
-------------------------------
Bank to make any Loan (including the initial Loans under this Agreement) and the
obligation of the Agent to issue any Letter of Credit (including the initial
Letter of Credit under this Agreement) are subject to each of the following
additional conditions precedent:
PAGE 43
(1) Monthly Compliance Report. Borrower shall have delivered the
-------------------------
Monthly Compliance Report most recently required by Section 9.1(c).
(2) No Default. No Default shall have occurred and be continuing, or
----------
would result from such Loan or Letter of Credit.
(3) Representations and Warranties. All of the representations and
------------------------------
warranties contained in Article 8 hereof and in the other Loan Documents
shall be true and correct on and as of the date of such Loan or Letter of
Credit with the same force and effect as if such representations and
warranties had been made on and as of such date except to the extent that
such representations and warranties relate specifically to another date.
(4) No Material Adverse Effect. No change, occurrence, event or
--------------------------
development has occurred since March 31, 1998 which has had or will have a
Material Adverse Effect.
Each notice of borrowing by the Borrower hereunder, and each request for the
issuance of a Letter of Credit, shall constitute a representation and warranty
by the Borrower that the conditions precedent set forth in Sections 7.2(b), (c)
and (d) have been satisfied (both as of the date of such notice and, unless the
Borrower otherwise notifies the Agent prior to the date of such borrowing or
Letter of Credit, as of the date of such borrowing or Letter of Credit).
ARTICLE 8
Representations and Warranties
------------------------------
To induce the Agent and the Banks to enter into this Agreement, the
Borrower represents and warrants to the Agent and the Banks that the following
statements are true, correct and complete:
Section 1.44 Corporate Existence. The Borrower and each Subsidiary (a)
-------------------
is a limited liability company, corporation or other entity (as reflected on
Schedule 8.14) duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation or organization; (b) has all
requisite power and authority to own its assets and carry on its business as now
being or as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary, except where the failure to be so qualified or in good standing will
not have a Material Adverse Effect. The Borrower and each Obligated Party has
the power and authority to execute, deliver, and perform their respective
obligations under the Loan Documents to which it is or may become a party.
Section 1.45 Financial Statements.
--------------------
(1) Financial Statements. Borrower has delivered to Agent (i)
--------------------
unaudited balance sheets of the Borrower and the Subsidiaries as of
November 30, 1999, and (ii) unaudited income statements of the Borrower and
the Subsidiaries for the nine month period ended
PAGE 44
December 31, 1999. All such financial statements have been prepared in
accordance with GAAP (subject to audit adjustments and the fact that such
financial statements do not contain footnotes), and present fairly, the
financial condition of the parties subject thereof as of the respective
dates indicated therein and the results of operations for the respective
periods indicated therein. Except as otherwise permitted by the terms
hereof, neither Borrower nor any of the Subsidiaries has any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments, or unrealized or anticipated losses from any unfavorable
commitments except as referred to or reflected in such financial
statements. There has been no Material Adverse Effect since the effective
date of the most recent financial statements delivered to Agent.
(2) Projections. The Projections delivered and to be delivered
-----------
(including the Projections annexed hereto as Schedule 8.2) have been and
will be prepared by Borrower in light of the past operation of the business
of the Borrower and the Subsidiaries. The Projections represent and will
represent as of the date thereof the good faith estimate of Borrower and
its senior management concerning the course of its business (it being
understood that projections involve substantial uncertainty and no
assurance can be given that any particular results will be achieved).
Section 1.46 Corporate Action; No Breach. The execution, delivery, and
---------------------------
performance by the Borrower and each Obligated Party of the Loan Documents and
Prior Transaction Documents (other than the Prior Agreement) to which each is or
may become a party and compliance with the terms and provisions hereof and
thereof have been duly authorized by all requisite action on the part of the
Borrower and each Obligated Party and do not and will not (a) violate or
conflict with, or result in a breach of, or require any consent not obtained
under (i) the articles of incorporation, bylaws, articles of organization,
operating agreement or similar governing document of the Borrower or any of the
Obligated Parties, (ii) any applicable law, rule, or regulation or any order,
writ, injunction, or decree of any Governmental Authority or arbitrator, or
(iii) any material agreement or instrument to which the Borrower or any of the
Subsidiaries is a party or by which any of them or any of their property is
bound or subject, or (b) constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien (except as
provided herein) upon any of the revenues or assets of the Borrower or any
Subsidiary.
Section 1.47 Operation of Business. The Borrower and each of the
---------------------
Subsidiaries possess (or will possess when required) all licenses, permits,
franchises, patents, copyrights, trademarks, and tradenames, or rights thereto,
necessary to conduct their respective businesses substantially as now conducted
and as presently proposed to be conducted, and the Borrower and each of the
Subsidiaries are not in violation of any valid rights of others with respect to
any of the foregoing.
Section 1.48 Litigation and Judgments. There is no action, suit,
------------------------
investigation, or proceeding before or by any Governmental Authority or
arbitrator pending, or to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary except (i) as disclosed on Schedule 8.5
and (ii) those actions, suits, investigations, or proceedings which are not
anticipated
PAGE 45
to have a Material Adverse Effect. There are no outstanding judgments against
the Borrower or any Subsidiary which would constitute an Event of Default under
Section 12.1(i).
Section 1.49 Rights in Properties; Liens. The Borrower and each
---------------------------
Subsidiary have good title to or valid leasehold interests in their respective
properties and assets, real and personal, including the properties, assets, and
leasehold interests reflected in the financial statements described in Section
8.2 except for those properties disposed of since such dates in the ordinary
course of business or as permitted by this Agreement, and none of the
properties, assets, or leasehold interests of the Borrower or any Subsidiary is
subject to any Lien, except as permitted by Section 10.2.
Section 1.50 Enforceability. The Loan Documents and Prior Transaction
--------------
Documents (other than the Prior Agreement) to which the Borrower or any
Obligated Party is party, when delivered, shall constitute the legal, valid, and
binding obligations of the Borrower or the Obligated Party, as applicable,
enforceable against the Borrower or the applicable Obligated Party in accordance
with their respective terms, except as limited by bankruptcy, insolvency, or
other laws of general application relating to the enforcement of creditors'
rights and general principles of equity.
Section 1.51 Approvals. No authorization, approval, or consent of, and
---------
no filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower or
any Obligated Party of the Loan Documents or the Prior Transaction Documents
(other than the Prior Agreement) to which each is or may become a party or for
the validity or enforceability thereof, except for (a) filings to perfect or
protect Liens granted by the Loan Documents, (b) consents of landlords to the
Deeds of Trust and (c) approvals and consents which have been obtained and are
specifically described in the Prior Transaction Documents. The Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 is not applicable to the QTL Reorganization
or the EPI Acquisition.
Section 1.52 Debt. The Borrower and the Subsidiaries have no Debt,
----
except as permitted by Section 10.1.
Section 1.53 Taxes. The Borrower and each Subsidiary have filed all
-----
material tax returns (federal, state, and local) required to be filed, including
all material income, franchise, employment, property, and sales tax returns, and
have paid all of their respective liabilities for taxes, assessments,
governmental charges, and other levies that are due and payable other than those
being contested in good faith by appropriate proceedings diligently pursued for
which adequate reserves have been established. The Borrower knows of no pending
investigation of the Borrower or any Subsidiary by any taxing authority or of
any pending but unassessed tax liability of the Borrower or any Subsidiary.
Section 1.54 Margin Securities. Neither the Borrower nor any Subsidiary
-----------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations T, U, or X of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Loan will be used
PAGE 46
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock.
Section 1.55 ERISA. The Borrower and each Subsidiary are in compliance
-----
with all applicable provisions of ERISA except for such events of noncompliance
(i) described in Schedule 8.12 or (ii) that will not have a Material Adverse
Effect. Neither a Reportable Event nor a Prohibited Transaction has occurred and
is continuing with respect to any Plan. No notice of intent to terminate a Plan
has been filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings. Neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn from a Multiemployer Plan. The Borrower and each ERISA
Affiliate have met their minimum funding requirements under ERISA with respect
to all of their Plans except for those instances of noncompliance with such
requirements that will not have a Material Adverse Effect. The present value of
all vested benefits under each Plan do not exceed the fair market value of all
Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with ERISA, by an amount that will
have a Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate has
incurred any liability to the PBGC under ERISA in an amount that will have a
Material Adverse Effect.
Section 1.56 Disclosure. All factual information furnished by or on
----------
behalf of QTL, EPI, the Borrower and each Subsidiary in writing to the Agent or
any Bank (including, without limitation, all information contained in the Loan
Documents and in the Prior Transaction Documents) for purposes of or in
connection with this Agreement, the other Loan Documents or the Prior
Transaction Documents, any transactions contemplated herein or therein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of QTL, EPI, the Borrower and each Subsidiary to the Agent or any
Bank, will be true and accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by omitting to state
any fact necessary to make such information not misleading in any material
respect at such time in light of the circumstances under which such information
was provided.
Section 1.57 Subsidiaries; Capitalization. As of the Closing Date,
----------------------------
Borrower has no Subsidiaries other than those listed on Schedule 8.14 hereto. As
of the Closing Date, Schedule 8.14 sets forth the jurisdiction of incorporation
or organization of each such Subsidiary, the percentage of the Borrower's
ownership of the outstanding voting stock (or other ownership interests) of each
such Subsidiary and the authorized, issued and outstanding Equity Interests of
Borrower and each Subsidiary. As of the Closing Date, Schedule 8.14 correctly
sets forth all holders of the Borrower's Equity Interests. All of the
outstanding Equity Interests of Borrower and each Subsidiary have been validly
issued, are fully paid, are nonassessable and have not been issued in violation
of any preemptive or similar rights. Except as provided for in the Operating
Agreement or as otherwise permitted hereunder, there are (a) no outstanding
subscriptions, options, warrants, calls, or rights (including preemptive rights)
to acquire, and no outstanding securities or instruments convertible into,
Equity Interests of Borrower or any Subsidiary, and (b) no shareholder
agreements, voting trusts or similar agreements in effect and binding on any
shareholder of Borrower or a
PAGE 47
Subsidiary or the Equity Interests of Borrower and a Subsidiary. All Equity
Interests of Borrower and each Subsidiary were issued in compliance with all
applicable state and federal securities laws.
Section 1.58 Agreements. Neither the Borrower nor any Subsidiary is a
----------
party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument, or subject to any charter or corporate restriction that
could have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is
in default in any material respect in the performance, observance, or
fulfillment of any of the obligations, covenants, or conditions contained in any
agreement or instrument to which it is a party.
Section 1.59 Compliance with Laws. Neither the Borrower nor any
--------------------
Subsidiary is in violation in any material respect of any law, rule, regulation,
order, or decree of any Governmental Authority or arbitrator.
Section 1.60 Investment Company Act. Neither the Borrower nor any
----------------------
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 1.61 Public Utility Holding Company Act. Neither the Borrower
----------------------------------
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 1.62 Environmental Matters. To the best of its knowledge and
---------------------
except for exceptions to the following statements set forth in this Section 8.19
that will not have a Material Adverse Effect:
(1) The Borrower, each Subsidiary, and all of their respective
properties, assets, and operations are in compliance with all Environmental
Laws. The Borrower is not aware of, nor has the Borrower received notice
of, any past, present, or future conditions, events, activities, practices,
or incidents which may prevent the compliance or continued compliance of
the Borrower and the Subsidiaries with all Environmental Laws;
(2) The Borrower and each Subsidiary have obtained all permits,
licenses, and authorizations that are required under applicable
Environmental Laws, and all such permits are in good standing and the
Borrower and the Subsidiaries are in compliance with the terms and
conditions of such permits;
(3) No Hazardous Materials exist on, about, or within or have been
used, generated, stored, transported, disposed of on, or Released from any
of the properties or assets of the Borrower or any Subsidiary except in
compliance with Environmental Laws. The use which the Borrower and the
Subsidiaries make and intend to make of their respective properties and
assets will not result in the use, generation, storage, transportation,
PAGE 48
accumulation, disposal, or Release of any Hazardous Material on, in, or
from any of their properties or assets except in compliance with
Environmental Laws;
(4) Neither the Borrower nor any of the Subsidiaries nor any of their
respective currently or previously owned or leased properties or operations
is subject to any outstanding or threatened order from or agreement with
any Governmental Authority or other Person or subject to any judicial or
administrative proceeding with respect to (i) failure to comply with
Environmental Laws, (ii) Remedial Action, or (iii) any Environmental
Liabilities arising from a Release or threatened Release;
(5) There are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the
Borrower or any of the Subsidiaries that could reasonably be expected to
give rise to any Environmental Liabilities;
(6) Neither the Borrower nor any of the Subsidiaries is a treatment,
storage, or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. ' 6901 et seq., regulations
------
thereunder or any comparable provision of state law. The Borrower and the
Subsidiaries are in compliance with all applicable financial responsibility
requirements of all Environmental Laws;
(7) Neither the Borrower nor any of the Subsidiaries has filed or
failed to file any notice required by it under applicable Environmental Law
reporting a Release; and
(8) No Lien arising under any Environmental Law has attached to any
property or revenues of the Borrower or the Subsidiaries.
Section 1.63 Solvency. The Borrower and each of the Subsidiaries as
--------
separate corporate entities and on a consolidated basis, are Solvent, both
before and after giving effect to the Loans.
Section 1.64 Labor Relations. Neither the Borrower nor any of the
---------------
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a material adverse effect on the Borrower or the Subsidiaries
taken as a whole. There is (i) no significant unfair labor practice complaint
pending against the Borrower or any of the Subsidiaries or threatened against
any of them, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against any of the Borrower or any of the Subsidiaries
or, to the Borrower's knowledge, threatened against any of them, (ii) no strike,
labor dispute, slowdown or stoppage pending against the Borrower or any of the
Subsidiaries or threatened against any of them, (iii) no union representation
question existing with respect to the employees of the Borrower or any of the
Subsidiaries, except (with respect to any matter specified in clause (i), (ii)
or (iii) above, either individually or in the aggregate) those matters which
could not reasonably be expected to have a Material Adverse Effect.
ARTICLE 9
PAGE 49
Positive Covenants
------------------
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Revolving Commitment hereunder,
the Borrower will perform and observe the following covenants:
Section 1.65 Reporting Requirements. The Borrower will furnish to the
----------------------
Agent and each Bank:
(1) Annual Financial Statements. As soon as available, and in any
---------------------------
event within ninety (90) days after the end of each Fiscal Year of the
Borrower, beginning at the end of the Fiscal Year in existence as of the
Closing Date, a copy of the annual audit report of the Borrower and the
Subsidiaries for such Fiscal Year containing, on a consolidated basis (and
on an unaudited consolidating basis), balance sheets and statements of
income, retained earnings, and cash flow as at the end of such Fiscal Year
and for the Fiscal Year then ended, in each case setting forth in
comparative form the actual figures for the preceding Fiscal Year, all in
reasonable detail and audited and certified by KPMG LLP or other
independent certified public accountants of recognized standing acceptable
to the Agent, to the effect that such report has been prepared in
accordance with GAAP.
(2) Monthly Financial Statements. As soon as available, and in any
----------------------------
event within thirty (30) days after the end of each month commencing with
the month ending January 31, 2000, a copy of an unaudited financial report
of the Borrower and the Subsidiaries as of the end of such month and for
the portion of the Fiscal Year then ended containing, on a consolidated and
consolidating basis, balance sheets and statements of income, retained
earnings, and cash flow, in each case setting forth in comparative form the
actual figures for the corresponding period of the preceding Fiscal Year
and the corresponding figures from the Projections for such period and for
the portion of the Fiscal Year then ended. The monthly financial statements
shall be in reasonable detail and certified by the president, chief
operating officer, chief financial officer, treasurer or other duly
authorized officer of the Borrower to have been prepared in accordance with
GAAP and to fairly present (subject to year-end audit adjustments) the
financial condition and results of operations of the Borrower and the
Subsidiaries, on a consolidated and consolidating basis, at the date and
for the periods indicated therein;
(3) Monthly Compliance Report and Compliance Certificate. Within
----------------------------------------------------
thirty (30) days after (i) the end of each month, a Monthly Compliance
Report, and (ii) the end of each Fiscal Quarter, a Compliance Certificate.
Borrower shall also deliver a Compliance Certificate simultaneously with
the delivery of each of the audited financial statements pursuant to
Section 9.1(a)(i) along with a comparison, in reasonable detail, of the
figures in such financial statements with the corresponding figures from
the Projections for the
PAGE 50
applicable Fiscal Year certified by the president, chief operating officer,
chief financial officer, treasurer or other duly authorized officer of the
Borrower.
(4) Projections. As soon as available and in any event within forty-
-----------
five (45) days after the first day of each Fiscal Year of the Borrower
commencing with the Fiscal Year beginning in 2001, Projections for such
Fiscal Year set forth on a month by month basis and a proforma projection
of the Borrower's compliance with the financial covenants in this Agreement
for the same period;
(5) Management Letters. Promptly upon receipt thereof, a copy of any
------------------
management letter or written report submitted to the Borrower or any
Subsidiary by independent certified public accountants with respect to the
business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower or any Subsidiary;
(6) Notice of Litigation. Promptly after the commencement thereof,
--------------------
notice of all actions, suits, and proceedings before any Governmental
Authority or arbitrator affecting the Borrower or any Subsidiary which, if
determined adversely to the Borrower or such Subsidiary, could result in a
judgment greater than $250,000 or have a Material Adverse Effect;
(7) Notice of Default. As soon as possible and in any event within
-----------------
five (5) Business Days after an officer of the Borrower or any Subsidiary
has knowledge of the occurrence of each Default, a written notice setting
forth the details of such Default and the action that the Borrower has
taken and proposes to take with respect thereto;
(8) ERISA Reports. If requested by the Agent, promptly after the
-------------
filing or receipt thereof, copies of all reports, including annual reports,
and notices which the Borrower or any Subsidiary files with or receives
from the PBGC or the U.S. Department of Labor under ERISA with respect to
any Plan; and as soon as possible and in any event within five (5) Business
Days after the Borrower or any Subsidiary knows or has reason to know that
any Reportable Event or Prohibited Transaction has occurred with respect to
any Plan or that the PBGC or the Borrower or any Subsidiary has instituted
or will institute proceedings under Title IV of ERISA to terminate any
Plan, a certificate of the chief financial officer of the Borrower setting
forth the details as to such Reportable Event or Prohibited Transaction or
Plan termination and the action that the Borrower or such Subsidiary
proposes to take with respect thereto;
(9) Reports to Other Creditors. Promptly after the furnishing
--------------------------
thereof, copies of any statement or report furnished to any other party
pursuant to the terms of any indenture, loan, or credit or similar
agreement requiring the payment of principal during the term thereof in an
amount no less than Five Hundred Thousand Dollars ($500,000) and not
otherwise required to be furnished to the Agent and the Banks pursuant to
any other clause of this Section;
PAGE 51
(10) Notice of Material Adverse Effect. As soon as possible and in any
---------------------------------
event within five (5) Business Days after an officer of the Borrower or any
Subsidiary has knowledge of the occurrence thereof, written notice of any
matter that could reasonably be expected to have a Material Adverse Effect;
(11) Notice of New Properties and Subsidiaries. Concurrently with the
-----------------------------------------
delivery of each of the financial statements referred to in Sections 9.1(a)
and 9.1(b), notice of the occurrence of any of the following after the
Closing Date: (i) any real property acquired by the Borrower or any of the
Subsidiaries or any lease of real property by the Borrower or any of the
Subsidiaries, (ii) any additional patents, copyrights and trademarks of a
material nature, and any other intellectual property of a material nature
of which the Agent should be aware in order to ensure its Lien thereon,
acquired by the Borrower or any of the Subsidiaries and (iii) the creation
or acquisition of any Subsidiary.
(12) General Information. Promptly, such other information concerning
-------------------
the Borrower or any Subsidiary as the Agent or any Bank may from time to
time reasonably request.
Section 1.66 Maintenance of Existence; Conduct of Business. The Borrower
---------------------------------------------
will, and will cause each Subsidiary to, preserve and maintain (i) its corporate
existence (except as permitted under Section 10.3) and (ii) all of its leases,
privileges, licenses, permits, franchises, qualifications, and rights that are
necessary or desirable in the ordinary conduct of its business.
Section 1.67 Maintenance of Properties. The Borrower will, and will cause
-------------------------
each Subsidiary to, maintain, keep, and preserve all of its material properties
necessary in the conduct of its business in good working order and condition
(exclusive of ordinary wear and tear).
Section 1.68 Taxes and Claims. The Borrower will, and will cause each
----------------
Subsidiary to, pay or discharge at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and governmental charges imposed
on it or its income or profits or any of its Property, and (b) all lawful claims
for labor, material, and supplies, which, if unpaid, might become a Lien upon
any of its Property; provided, however, that neither the Borrower nor any
--------
Subsidiary shall be required to pay or discharge any tax, levy, assessment, or
governmental charge or claim which is being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves have
been established in accordance with GAAP.
Section 1.69 Insurance. The Borrower will, and will cause each Subsidiary
---------
to, maintain insurance with financially sound and reputable insurance companies
in such amounts and covering such risks as are both satisfactory to Agent in its
reasonable discretion and are usually carried by corporations engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower and the Subsidiaries operate, provided that in any event the Borrower
will maintain and cause each Subsidiary to maintain worker's compensation
insurance, property
PAGE 52
insurance, comprehensive general liability insurance and product liability
insurance reasonably satisfactory to the Agent. Each general liability insurance
policy shall name the Agent as additional insured, each insurance policy
covering Collateral shall name the Agent as loss payee and shall provide that
such policy will not be canceled or materially changed without thirty (30) days
prior written notice to the Agent.
Section 1.70 Inspection Rights. Upon one (1) Business Day's prior notice
-----------------
prior to a Default and at any time after the occurrence and during the
continuance of a Default, the Borrower will, and will cause each Subsidiary to,
permit representatives of the Agent and each Bank to examine, copy, and make
extracts from its books and records, to visit and inspect its properties, and to
discuss its business, operations, and financial condition with its officers,
employees, and upon notice to the Borrower or such Subsidiary, as appropriate,
independent certified public accountants (with an officer of Borrower present).
Section 1.71 Keeping Books and Records. The Borrower will, and will cause
-------------------------
each Subsidiary to, maintain proper books of record and account in which full,
true, and correct entries in conformity with GAAP shall be made of all dealings
and transactions in relation to its business and activities.
Section 1.72 Compliance with Laws. The Borrower will, and will cause each
--------------------
Subsidiary to, comply with all applicable statutes, laws (including, without
limitation, all Environmental Laws), rules, regulations, orders, and decrees of
any Governmental Authority or arbitrator in respect of the conduct of its
business and the ownership of its Property except such noncompliance as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 1.73 Compliance with Agreements. The Borrower will, and will cause
--------------------------
each Subsidiary to, comply in all material respects with all agreements,
contracts, and instruments binding on it or affecting its properties or
business.
Section 1.74 Further Assurances; Post Closing Matters. The Borrower will,
----------------------------------------
and will cause each Subsidiary to, execute and deliver such further
documentation and take such further action as may be reasonably requested by the
Agent to carry out the provisions and purposes of the Loan Documents and to
create, preserve, and perfect the Liens of the Agent for the benefit of itself
and the Banks in the Collateral; provided that prior to the Agent's request,
neither Borrower nor any Subsidiary shall be required to:
(1) file any financing statements to perfect the Agent's
Lien in fixtures with respect to any one parcel of property if the
aggregate book value of the fixtures located on such parcel of
property do not exceed Five Thousand Dollars ($5,000) (Borrower
represents to the Agent and the Banks that no parcel of property owned
or leased by Borrower or any Subsidiaries has fixtures owned by
Borrower or a Subsidiary with a book value of Five Thousand Dollars
($5,000) as of the Closing Date); nor
PAGE 53
(2) cause the Agent's Lien to be noted on any certificate of
title evidencing any equipment that, as of the Closing Date or as of
the Borrower's or a Subsidiaries' acquisition thereof, (i) is subject
to a lease or (ii) has a book value of less than Thirty Thousand
Dollars ($30,000) (Borrower represents to the Agent and the Banks that
as of the Closing Date, no single piece of equipment which is not
subject to a lease and for which a certificate of title has been
issued has a book value equal to or greater than Thirty Thousand
Dollars ($30,000)).
If the Agent requests, then Borrower shall take such action as the Agent
may request to perfect and protect the Liens of the Agent in any of the
equipment or fixtures of Borrower and the Subsidiaries excluded from the
perfection requirements as provided above.
Section 1.75 New Subsidiaries. In addition to the requirements of Section
----------------
9.10, upon the creation or acquisition of any Subsidiary, the Borrower shall
cause such Subsidiary to execute and deliver a Guaranty, a Subsidiary Security
Agreement and such other documentation as the Agent may reasonably request to
cause such Subsidiary to evidence, perfect or otherwise implement the guaranty
and security for repayment of the Obligations contemplated by a Guaranty and
Subsidiary Security Agreement. If any Subsidiary is created or acquired after
the Closing Date, the Borrower shall (a) (i) execute and deliver to the Agent an
amendment to the Borrower Security Agreement describing as collateral thereunder
the stock of or other ownership interests in the new Subsidiary and the Borrower
shall deliver the certificates representing such stock or other interests to the
Agent together with undated stock or other powers duly executed in blank or (ii)
if the new Subsidiary is not directly owned by the Borrower, the Borrower shall
cause the Subsidiary who owns the new Subsidiary directly to pledge the stock of
or other interests in such new Subsidiary to the Agent pursuant to a pledge
agreement in similar form to the Borrower Security Agreement and to deliver the
certificates representing such stock or other interests to the Agent together
with undated stock or other powers duly executed in blank; and (b) cause the
Subsidiary to execute and deliver a promissory note evidencing all intercompany
indebtedness owed by such Subsidiary to the Borrower or any other Subsidiary, as
the case may be, and such promissory note shall be pledged to the Agent for the
benefit of itself and the other Banks as security for the Obligations under the
applicable Borrower Security Agreement, Subsidiary Security Agreement or other
security agreement.
Section 1.76 Mortgaged Properties.
--------------------
(i) Appraisals. If required by applicable law, Borrower shall
----------
deliver or cause to be delivered from time to time to Agent a current
appraisal of each Mortgaged Property, such appraisals to be in form and
substance satisfactory to Agent.
(ii) Additional Mortgage Property. If required by the Agent, the
----------------------------
Borrower will, and will cause each of the Subsidiaries, to execute,
acknowledge and deliver to the Agent within 60 days of its request, the
following: (i) Deed of Trusts covering any fee real property acquired after
the Closing Date with a fair market value in excess of $500,000 (or
covering all fee real properties if the aggregate fair market value of such
fee properties acquired after
PAGE 54
the Closing Date is in excess of $500,000) or any lease of real property
entered into after the Closing Date (other than the leases relating to the
Mortgaged Property) where inventory of the Borrower or any of such
Subsidiaries in excess of $1,000,000 is or will be located; and (ii) such
other documentation as the Agent may require.
Section 1.77 ERISA. The Borrower will, and will cause each Subsidiary to,
-----
comply with all minimum funding requirements and all other requirements of
ERISA, if applicable, so as not to give rise to any liability which will have a
Material Adverse Effect.
Section 1.78 Interest Rate Protection. Borrower will maintain acceptable
------------------------
interest rate protection in the form of an interest rate swap, cap, collar or
other similar mechanism satisfactory to the Agent, designed to protect the
Borrower against increases in interest rates, for a minimum notional amount of
50% of the aggregate amount of the outstanding Term Loans, for a minimum term of
three (3) years and protecting against increases in interest rates above a rate
equivalent to the then existing one month Libor plus 2.00% per annum.
ARTICLE 10
Negative Covenants
------------------
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Revolving Commitment hereunder,
the Borrower will perform and observe the following covenants:
Section 1.79 Debt. The Borrower will not, and will not permit any
----
Subsidiary to, incur, create, assume, or permit to exist any Debt, except:
(1) Debt to the Banks pursuant to the Loan Documents;
(2) Debt described on Schedule 10.1 hereto;
(3) Debt of a Subsidiary to Borrower; provided that (i) the
--------
obligations of each obligor of such Debt shall be subordinated (pursuant to
a subordination agreement satisfactory to the Agent in form and substance)
in right of payment to the applicable Subsidiary's obligations under the
Loan Documents from and after such time as any portion of such obligations
shall become due and payable (whether at stated maturity, by acceleration
or otherwise) and a default in such payment shall exist; and (ii) the
Subsidiary shall utilize the proceeds of such Debt to finance its working
capital and capital expenditure needs only;
(4) Debt of Borrower owed to a Subsidiary; provided that the
--------
obligations of Borrower for such Debt shall be subordinated (pursuant to a
subordination agreement satisfactory to the Agent in form and substance) in
right of payment to the Obligations from
PAGE 55
and after such time as any portion of the Obligations shall become due and
payable (whether at stated maturity, by acceleration or otherwise) and a
default in such payment shall exist;
(5) Guaranties incurred in the ordinary course of business with
respect to surety and appeal bonds, performance and return-of-money bonds
and other similar obligations not exceeding at any time outstanding
$100,000 in aggregate liability;
(6) Debt (including Capital Lease Obligations) incurred to finance
the purchase price of equipment up to an aggregate amount outstanding at
any time not to exceed $500,000;
(7) Debt in addition to the Debt described in the forgoing clauses
(a) through (f) (the "Additional Debt"), which may be incurred if no
---------------
Default exists or would result therefrom; provided that the aggregate
amount of the Additional Debt at any one time outstanding shall never
exceed $250,000.
Section 1.80 Limitation on Liens and Restrictions on Subsidiaries. The
----------------------------------------------------
Borrower will not, and will not permit any Subsidiary to, incur, create, assume,
or permit to exist any Lien upon any of its Property whether now owned or
hereafter acquired, except the following, none of which shall encumber the
Collateral other than those Liens described in clauses (b), (c), (d) and (e):
(1) Liens disclosed on Schedule 10.2 hereto;
(2) Liens in favor of the Agent for the benefit of itself and the
Banks pursuant to the Loan Documents;
(3) Encumbrances consisting of minor easements, zoning restrictions,
or other restrictions on the use of real property that do not (individually
or in the aggregate) materially affect the value of the assets encumbered
thereby or materially impair the ability of the Borrower or the
Subsidiaries to use such assets in their respective businesses, and none of
which is violated in any material respect by existing or proposed
structures or land use;
(4) Liens (other than Liens relating to Environmental Liabilities or
ERISA) for taxes, assessments, or other governmental charges that are not
delinquent or which are being contested in good faith and for which
adequate reserves have been established to the satisfaction of the Agent;
(5) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that are
not more than 60 days past due or which are being contested in good faith
and for which adequate reserves have been established to the satisfaction
of the Agent and are incurred in the ordinary course of business;
PAGE 56
(6) Liens resulting from good faith deposits to secure payments of
workmen's compensation or other social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, contracts (other than for payment of Debt) and leases;
(7) Liens for purchase money obligations or Capital Lease
Obligations; provided that: (i) the purchase of the asset subject to any
--------
such Lien is permitted under Section 11.6; (ii) the Debt secured by any
such Lien is permitted under Section 10.1(f); and (iii) any such Lien
encumbers only the asset so purchased and proceeds thereof; and
(8) Liens arising from filing UCC financing statements regarding
leases permitted by this Agreement as to which the Borrower or a Subsidiary
(as applicable) is lessee.
Neither the Borrower nor any Subsidiary shall enter into or assume any agreement
(other than the Loan Documents) prohibiting the creation or assumption of any
Lien upon its Properties, whether now owned or hereafter acquired; provided
--------
that, in connection with (i) the creation of purchase money Liens or leases
(including Capital Lease Obligations), the Borrower or the Subsidiary may agree
that it will not permit any other Liens to encumber the asset subject to such
purchase money Lien or leases (including Capital Lease Obligations) and (ii) the
sale of an asset permitted hereby, the Borrower or the Subsidiary may agree that
it will not permit any Lien to encumber the asset to be sold prior to the sale
date. Except as provided herein, the Borrower will not and will not permit any
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary's Equity Interests owned by the Borrower
or any Subsidiary of the Borrower; (2) pay any Debt owed to the Borrower or any
other Subsidiary; (3) make loans or advances to the Borrower or any other
Subsidiary; or (4) transfer any of its Property or assets to the Borrower or any
other Subsidiary.
Section 1.81 Mergers, Etc. The Borrower will not, and will not permit any
------------
Subsidiary to, become a party to a merger or consolidation, or purchase or
otherwise acquire all or a substantial part of the business or assets of any
Person or any shares or other evidence of beneficial ownership of any Person, or
wind-up, dissolve, or liquidate itself; provided, however, as long as no Default
-------- -------
exists or would result therefrom and provided the Borrower gives the Agent and
the Banks prior written notice:
(1) the Borrower (or, if approved by the Agent, a wholly-owned
Subsidiary directly owned by the Borrower) may acquire all or a substantial
part of the business of assets of any Person or all or substantially all of
the shares or other evidence of beneficial ownership of any Person (the
"Target") if, with respect to such acquisition:
(1) the purchase price of the proposed acquisition does not
exceed $500,000;
PAGE 57
(2) the Borrower and XXX have completed due diligence on the
Target and the assets to be acquired (which due diligence shall be
satisfactory to the Required Banks), including, without limitation, if
applicable, a due diligence investigation as to the compliance with
all Environmental Laws with respect to the Target and the assets to be
acquired;
(3) the Target is involved in the same general type of business
activities as the Borrower and the Subsidiaries and is organized under
the laws of the United States of America or a jurisdiction located
therein;
(4) if the proposed acquisition is an acquisition of the stock
of a Target, the acquisition will be structured so that the Target
will become a wholly-owned direct Subsidiary of the Borrower or, if
the Agent consents, a wholly-owned direct Subsidiary of another
wholly-owned direct Subsidiary of the Borrower; if the proposed
acquisition is an acquisition of assets, the assets must be located in
the United States of America and the acquisition will be structured so
that the Borrower or a wholly-owned direct Subsidiary of the Borrower
shall acquire the assets;
(5) neither the Target nor its assets shall be subject to any
contingent obligations (including contingent obligations arising from
any Environmental Liabilities), Environmental Liabilities, unsatisfied
judgments or any pending action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration that
could reasonably be expected to have a Material Adverse Effect;
(6) the Borrower shall have provided to the Agent and each Bank,
within five (5) Business Days after the closing of the proposed
acquisition, evidence that the following criteria are satisfied:
(A) if the proposed acquisition is an acquisition of stock
of a Target, the Borrower shall have provided to the Agent and
each Bank (i) copies of the financial statements of the Target
for the twelve (12) month period prior to the closing of the
proposed acquisition for which financial statements are available
(but in any event financial statements for the most recently
completed fiscal year of such Target, to the extent available)
containing at a minimum, a balance sheet, statement of income and
statement of cash flow prepared in accordance with GAAP, (ii) if
the financial statements of the Target are not audited by an
independent certified public accountant of recognized national
standing or otherwise acceptable to the Agent, a review or other
analysis of such Target and its financial condition prepared by a
third party acceptable to the Agent, with such analysis to be in
form and substance acceptable to the Agent, and (iii) a pro forma
Projection (including the Target) prepared on a month by month
basis for the first 12
PAGE 58
months following the acquisition and on a yearly basis for the
period following the date of the consummation of the proposed
acquisition through the last Termination Date, which reflects
compliance with the financial covenants in this Agreement;
(B) the Adjusted Target EBITDA of the Target or, as
applicable, the Adjusted Target EBITDA of the Target attributable
to such assets acquired, for the most recently completed twelve
(12) month period prior to the closing of the proposed
acquisition for which financial statements are available shall be
positive. The term "Adjusted Target EBITDA" means, for any
----------------------
period, the sum of the following, each calculated without
duplication for the Target or the assets acquired for such period
in a manner acceptable to the Borrower: (1) Adjusted EBITDA; plus
(2) all of those expenses which have been deducted in calculating
Adjusted EBITDA for such period and which will be eliminated in
the future upon the consummation of the proposed acquisition by
the Borrower as approved by the Borrower; minus (3) all income or
gains which have been added in calculating Adjusted EBITDA for
such period and which will be eliminated in the future upon the
consummation of the proposed acquisition by the Borrower as
approved by the Borrower;
(C) a certificate of the chief financial officer or chief
executive officer of the Borrower certifying to the calculations
demonstrating compliance with clause (B) immediately above;
----------
(7) the board of directors or similar governing body of the
Target has approved the proposed acquisition; and
(8) the consideration paid by the Borrower or the applicable
Subsidiary in connection with such acquisition is made up of Equity
Interests of the Borrower issued in accordance with Section 10.6;
(2) the Borrower may consummate the repurchases of stock, options and
warrants in accordance with Section 10.4; and
(3) if no Default exists and the Borrower provides the Agent at least
ten (10) days prior written notice, any Subsidiary may merge or consolidate
with the Borrower (provided the Borrower is the surviving entity) or with
any wholly-owned Subsidiary directly owned by the Borrower that, in each
case is or becomes, simultaneously with such transaction, an Obligated
Party (by execution of a Guaranty, Subsidiary Security Agreement and
related documents as required by Section 9.11) and a wholly-owned
Subsidiary directly owned by the Borrower.
PAGE 59
Section 1.82 Restricted Payments. The Borrower will not and will not
-------------------
permit any Subsidiary to directly or indirectly declare, order, pay, make or set
apart any sum for (a) any dividend or other distribution, direct or indirect, on
account of any Equity Interests of the Borrower or any Subsidiary now or
hereafter outstanding, except a dividend or distributions payable solely in
shares of that class of Equity Interests to the holders of that class; (b) any
redemption, conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any Equity
Interests of the Borrower or any Subsidiary now or hereafter outstanding; or (c)
any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire any Equity Interests of the
Borrower or any Subsidiaries now or hereafter outstanding except that:
(1) Subsidiaries may make, declare and pay dividends and
make other distributions with respect to their Equity Interests;
(2) Borrower may repurchase or redeem (A) its Equity
Interests pursuant to the repurchase rights and obligations set out in
the Employment Agreements and (B) its Equity Interests from other
employees of the Borrower upon termination of employment, provided
--------
that, notwithstanding anything in the Employment Agreements, this
----
Agreement or elsewhere to the contrary, (1) Borrower shall not make
any such purchase pursuant to this clause (ii) if an Event of Default
exists at the time of or after giving effect to such purchase and (2)
the sum of the aggregate amount of all purchases made under the
permissions of this clause (ii) and the purchases made pursuant to
clause (g) of Section 10.5 shall not exceed $100,000 in any Fiscal
Year, provided that such purchases shall not exceed $75,000 in the
Fiscal Year ending December 1999; and
(3) Borrower may make the "Tax Liability Distributions"
provided for in Section 6.3 of the Operating Agreement.
Section 1.83 Investments. The Borrower will not, and will not permit any
-----------
Subsidiary to, make or permit to remain outstanding any advance, loan, extension
of credit, or capital contribution to or investment in any Person, or purchase
or own any stock, bonds, notes, debentures, or other securities of any Person,
or be or become a joint venturer with or partner of any Person, except:
(1) Borrower may make loans to and own notes payable by
Subsidiaries in accordance with the restrictions set forth in Section
10.1 and may own Equity Interests of Subsidiaries;
(2) readily marketable direct obligations of the United States of
America or any agency thereof with maturities of one year or less from
the date of acquisition;
PAGE 60
(3) fully insured certificates of deposit with maturities of one
year or less from the date of acquisition issued by any commercial bank
operating in the United States of America having capital and surplus in
excess of $1,000,000,000;
(4) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest rating categories of
Standard and Poor's Corporation or Xxxxx'x Investors Service, Inc.;
(5) the advances to QTL contemplated by the promissory note
executed by QTL in connection with the QTL Reorganization and pursuant to
the QTL Reorganization Documents; and
(6) Borrower may purchase stock of QTL pursuant to the purchase
rights set forth in the Employment Agreement entered into with Xxx Xxxxxxx,
provided that (A) Borrower shall not make any such purchase if an Event of
Default exists at the time of or after giving effect to such purchase and
(B) the aggregate amount of the purchases made pursuant to this clause (i)
and pursuant to Section 11.4(ii) shall not exceed $100,000 in any Fiscal
Year.
Section 1.84 Limitation on Issuance of Equity Interests. Borrower will not
------------------------------------------
permit any Subsidiary to, at any time, issue, sell, assign, or otherwise dispose
of (a) any of its Equity Interest, (b) any securities exchangeable for or
convertible into or carrying any rights to acquire any of its Equity Interests,
or (c) any option, warrant, or other right to acquire any of its Equity
Interests; except:
(1) Borrower may issue or make adjustments to, its Equity
Interests pursuant to Section 3.3 of the Operating Agreement;
(2) Borrower may offer and issue its Equity Interests
subject to compliance with Section 5.4 and only if no Event of
Default under Sections 12.2(m) or 12.2(n) occurs or results
therefrom; and
(3) Any Subsidiary may issue Equity Interests to the
Borrower or to any wholly-owned Subsidiary.
Section 1.85 Transactions With Affiliates. The Borrower will not, and will
----------------------------
not permit any Subsidiary to, enter into any transactions, including, without
limitation, the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate of the Borrower or such Subsidiary, except in the
ordinary course of and pursuant to the Borrower's or such Subsidiary's business
and upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than would be obtained in a comparable arms-length transactions with
a Person not an Affiliate of the Borrower or such Subsidiary. Notwithstanding
the foregoing provisions of this Section 10.7, the Borrower may (a) make the
payments permitted by Section 10.11, (b) pay reasonable compensation (including
base compensation, bonus payments and stock options) to its officers and
directors in
PAGE 61
amounts approved by the Management Committee of Borrower (including a majority
of the disinterested members of the Management Committee Borrower), (c) enter
into transactions among Borrower and wholly-owned Subsidiaries otherwise
permitted, or not restricted, hereunder and (d) make loans and other advances
contemplated by Section 10.5(f).
Section 1.86 Disposition of Assets. The Borrower will not, and will not
---------------------
permit any Subsidiary to, sell, assign, transfer or otherwise dispose of any of
its assets, except (a) dispositions of inventory in the ordinary course of
business; (b) dispositions of unnecessary, obsolete or worn out equipment; (c)
sales, leases or other dispositions of vehicles or other equipment so long as
the Borrower or Subsidiary, as the case may be, uses the net proceeds of such
sales to acquire replacement vehicles or other manufacturing or distribution
equipment; and (d) dispositions of assets other than those described in the
foregoing clauses (a), (b) and (c) if all the following conditions are
satisfied: (i) the aggregate amount of the proceeds from such asset dispositions
do not exceed $100,000 in any Fiscal Year; provided that the aggregate amount of
such proceeds shall not exceed $75,000 in the Fiscal Year ending December 31,
1999; (ii) no Default exists or would result therefrom; (iii) the consideration
received is at least equal to the fair market value of such assets; (iv) the
sole consideration received is cash; and (v) the Net Proceeds of such
disposition are applied as a prepayment on the Loans as and to the extent
required by Section 5.4.
Section 1.87 Sale and Leaseback. The Borrower will not, and will not
------------------
permit any Subsidiary to, enter into any arrangement with any Person pursuant to
which it leases from such Person real or personal property that has been or is
to be sold or transferred, directly or indirectly, by it to such Person.
Section 1.88 Lines of Business. The Borrower will not, and will not permit
-----------------
any Subsidiary to, engage in any line or lines of business activity other than
the businesses in which they are engaged on the date hereof and any businesses
ancillary or complementary to or which utilize processes similar to those
utilized by the Borrower or is otherwise reasonably related to the businesses
conducted on the Closing Date.
Section 1.89 Management Fees and Compensation. Borrower will not and will
--------------------------------
not permit any Subsidiaries directly or indirectly to pay any management,
consulting or similar fees to any Affiliate or to any director, officer or
employee of any Obligated Party except Borrower may make payments under the
Management Agreement to XXX in an aggregate amount not to exceed in any one
Fiscal Year the sum of the following (or such greater amount as the Required
Banks may approve) (A) $300,000 in any Fiscal Year; provided that the amount
permitted pursuant to this clause (A) shall be $225,000 for the Fiscal Year
ending December 31, 1999 (provided that the transaction fees and expenses paid
to XXX upon the consummation of the Prior Transactions in an aggregate amount
not exceeding $600,000 shall not be included in the computation of fees paid
during the Fiscal Year ending December 31, 1999 for purposes of this clause (A))
plus (B) reasonable, out-of-pocket expenses incurred in connection with services
rendered pursuant to the Management Agreement; provided that such management
--------
fees shall not be paid at any time there exists a Default or if a Default would
result therefrom and provided further that such management fees shall be paid
-------- -------
PAGE 62
in cash and may not be paid on any basis other than on a quarterly basis in
arrears and, in the event the payment of such management fees is not permitted
due to the existence of a Default, the payment of such management fees shall be
immediately allowed upon the cure of such Default and with the written consent
of the Agent to such payments if such Default is waived.
Section 1.90 Modification to Operating Agreement; Management Agreement.
---------------------------------------------------------
Borrower will not change or amend the terms of the Operating Agreement if the
effect of such amendment is to: (a) increase the amount or nature of the
dividends or other distribution payable with respect thereto unless payable
solely in the form of additional Equity Interests; (b) accelerate the dates upon
which distributions are paid on the Preferred Equity; (c) impose any redemption
provisions; (d) change or amend the definitions of the terms "Paribas" or
"Permitted Transferee" in the Operating Agreement or Sections 3.3, 4.1, 6.2,
9.1, 9.2, 10.3 or 13.2 of the Operating Agreement; or (e) change or amend any
other term if such change or amendment would materially increase the obligations
of the obligor or confer additional material rights on the holder thereof in a
manner adverse to Borrower, any Subsidiary, Agent or any Bank. Borrower will
not change or amend the terms of the subordination provisions of the Management
Agreement.
Section 1.91 Acquisition Agreements. Borrower will not, and will not
----------------------
permit any Subsidiary to: (a) amend or modify the terms and conditions of the
indemnities and licenses furnished pursuant to any of QTL Reorganization
Documents, the EPI Stock Purchase Documents or the ECN Asset Purchase Documents
such that after giving effect thereto such indemnities or licenses shall be
materially less favorable to the interests of the Borrower and the Obligated
Parties or the Agent and the Bank in any material respect or (b) otherwise amend
or modify the other terms and conditions of any of such documents except to the
extent that any such amendment or modification could not reasonably be expected
to have an adverse effect on the interests of the Borrower, any Subsidiary, any
Pledgor, Agent or any Bank in any material respect.
ARTICLE 11
Financial Covenants
-------------------
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Revolving Commitment hereunder,
the Borrower will perform and observe the following financial covenants (each as
computed on a consolidated basis, unless stated otherwise):
Section 1.92 Consolidated Net Worth. The Borrower will at all times
----------------------
maintain Consolidated Net Worth in an amount not less than the sum of (a)
$8,700,000 plus (b) fifty percent (50%) of the Borrower's positive Net Income
for each Fiscal Quarter, beginning with the Fiscal Quarter ended on December 31,
1999, to the extent the Fiscal Quarter has been completed plus (c) one hundred
percent (100%) of the Net Proceeds of any Equity Issuances made on or after the
Closing Date. The phrase "Consolidated Net Worth" means, at any particular time,
----------------------
all amounts
PAGE 63
which, in conformity with GAAP, would be included as stockholders equity on a
consolidated balance sheet of the Borrower and the Subsidiaries.
Section 1.93 Minimum Adjusted EBITDA. As of the end of each Fiscal
-----------------------
Quarter set forth below, the Borrower shall not permit the Adjusted EBITDA of
the Borrower for the four Fiscal Quarters (or portion thereof since the Prior
Agreement Closing Date) to be less than the amount set forth opposite the
applicable Fiscal Quarter end:
============================================================
Fiscal Quarter End Required Amount
------------------ ---------------
December 31, 1999 $4,750,000
------------------------------------------------------------
each of March 31, June 30, $4,400,000
September 30 and December 31,
2000
------------------------------------------------------------
each of March 31, June 30, $5,000,000
September 30 and December 31,
2001
------------------------------------------------------------
each of March 31, June 30, $5,750,000
September 30 and December 31,
2002
------------------------------------------------------------
each of March 31, June 30, $6,500,000
September 30 and December 31,
2003
============================================================
Section 1.94 Interest Coverage. As of the end of each Fiscal Quarter, the
-----------------
Borrower shall not permit the ratio of the Adjusted EBITDA of Borrower for the
four (4) Fiscal Quarters then ending to the Borrower's Interest Expense for the
four (4) Fiscal Quarters then ending to be less 3.00 to 1.00; provided, however,
-------- -------
that if less than four (4) Fiscal Quarters have elapsed since the Prior
Agreement Closing Date, EBITDA and Interest Expense shall be measured from the
Prior Agreement Closing Date.
Section 1.95 Fixed Charge Coverage. As of the end of each Fiscal Quarter
---------------------
during the periods set forth below, the Borrower shall not permit the ratio of
Operating Cash Flow to Fixed Charges to be less than ratio set forth below
opposite the applicable period computed on the basis of the Operating Cash Flow
and Fixed Charges for the four (4) Fiscal Quarters then ended; provided,
--------
however, that if less than four (4) Fiscal Quarters have elapsed since the Prior
-------
Agreement Closing Date, Operating Cash Flow and Fixed Charges shall be measured
from the Prior Agreement Closing Date. The phrase "Operating Cash Flow" means,
-------------------
for any period, the total of the following for the Borrower and the Subsidiaries
calculated on a consolidated basis without duplication for such
PAGE 64
period: (a) Adjusted EBITDA, minus (b) all Capital Expenditures which were not
-----
financed with Debt permitted by Section 10.1(f). The phrase "Fixed Charges"
-------------
means, for any period, the total of the following for the Borrower and the
Subsidiaries calculated on a consolidated basis without duplication for such
period: (i) the Interest Expense, plus (ii) scheduled amortization of Debt paid
----
or payable (excluding, to the extent included, nonpermanent principal repayments
under the Revolving Loans), plus (iii) cash federal and state income taxes paid
----
whether paid directly or paid through a Tax Distribution, plus (iv) the Dollar
----
amount paid in connection with the repurchase of Equity Interests consummated in
accordance with Section 10.4.
========================================================================
Period
------ Minimum Ratio
-------------
From Through and Including
---- ---------------------
========================================================================
Closing Date June 30, 2000 1.35 to 1.00
------------------------------------------------------------------------
July 1, 2000 December 31, 2001 1.60 to 1.00
------------------------------------------------------------------------
January 1, 2002 December 31, 2002 1.50 to 1.00
------------------------------------------------------------------------
January 1, 2003 the last Termination Date 1.30 to 1.00
========================================================================
Section 1.96 Total Debt to Adjusted EBITDA Ratio. As of the end of each
-----------------------------------
Fiscal Quarter during the periods set forth below, the Borrower shall not permit
the ratio of Total Debt as of such date to Adjusted EBITDA for the four Fiscal
Quarters then ended to exceed the ratio set forth opposite the applicable period
below:
========================================================================
Period
------ Minimum Ratio
-------------
From Through and Including
---- ---------------------
========================================================================
Closing Date March 31, 2000 3.50 to 1.00
------------------------------------------------------------------------
April 1, 2000 June 30, 2000 3.25 to 1.00
------------------------------------------------------------------------
July 1, 2000 December 31, 2001 3.00 to 1.00
------------------------------------------------------------------------
January 1, 2002 December 31, 2002 2.50 to 1.00
------------------------------------------------------------------------
January 1, 2003 the last Termination Date 2.00 to 1.00
========================================================================
PAGE 65
The phrase "Total Debt" means, at any date of determination, the sum of (i)
----------
all the Debt of Borrower and the Subsidiaries determined on a consolidated basis
outstanding on such date; plus (ii) the amount of the total deferred tax
----
liabilities of the Borrower arising as a result of the adjustment in the method
utilized by EPI to account for its inventory, returns or costs of goods sold and
which remain unpaid on such date.
Section 1.97 Capital Expenditure Limits. During any Fiscal Year, the
--------------------------
aggregate amount of all Capital Expenditures of the Borrower and the
Subsidiaries will not exceed the applicable Capital Expenditure Limit for such
Fiscal Year; provided that, to the extent that a corresponding Equity Issuance
--------
has been made by the Borrower equal to at least the amount of Internet
Expenditures, those Internet Expenditures which would otherwise constitute
capital expenditures will be deducted from Capital Expenditures for purposes of
this Section 11.6. In addition, for the period beginning January 1, 2000 and
ending June 30, 2000 the aggregate amount of all Capital Expenditures of the
Borrower and the Subsidiaries will not exceed $1,500,000 unless a corresponding
Equity Issuance has been made by the Borrower equal to at least the amount of
such excess. The term "Capital Expenditure Limit" means the sum of the
-------------------------
following: (i) for each Fiscal Year set forth in the table below, the Dollar
Amount set forth in the table below opposite the applicable Fiscal Year;
---------------------------------------------------------------
Fiscal Year Dollar Amount
---------------------------------------------------------------
2000 $2,000,000
---------------------------------------------------------------
2001 $1,000,000
---------------------------------------------------------------
2002 $1,000,000
---------------------------------------------------------------
2003 $1,000,000
---------------------------------------------------------------
2004 $1,000,000
---------------------------------------------------------------
(the amount determined in accordance with this clause (i) for each Fiscal Year
is herein called the "Yearly Limit") plus (ii) the portion of the Yearly Limit
------------ ----
from the immediately preceding Fiscal Year which was not expended by the
Borrower and the Subsidiaries for Capital Expenditures in such preceding Fiscal
Year (the "Carryover Amount"). In calculating the Carryover Amount for any
----------------
Fiscal Year, the Yearly Limit applicable to the previous Fiscal Year shall be
deemed to have been utilized first by any Capital Expenditures made in such
Fiscal Year.
Section 1.98 Internet Expenditures. Within three (3) Business Days after
---------------------
the commencement of each Fiscal Quarter, the Borrower will cause an Equity
Issuance to be made at least equal to the amount of Internet Expenditures to be
made during such Fiscal Quarter (as set forth in the most recently delivered
Projections pursuant to Sections 7.1(h) and 9.1(d)) (the "Quarterly Equity
----------------
Issuance"). If, as of the end of any month during such Fiscal Quarter, the
--------
actual aggregate amount of Internet Expenditures made during such Fiscal Quarter
exceeds the Quarterly Equity
PAGE 66
Issuance, the Borrower will cause an Equity Issuance to be made, within three
(3) Business Days of the delivery of the Monthly Compliance Report delivered for
such month, equal to at least (a) the amount of such excess plus (b) the amount
----
of Internet Expenditures estimated by the Borrower, in good faith, to be made
during the remainder of such Fiscal Quarter.
ARTICLE 12
Default
-------
Section 1.99 Events of Default. Each of the following shall be deemed an
-----------------
"Event of Default":
----------------
(1) The Borrower shall (a) fail to make any payment of interest, fees
or other amounts (other than principal) due hereunder within three (3)
Business Days of the date due or (b) fail to pay when due the principal of
Obligations or any part thereof.
(2) Any representation or warranty made or deemed made by the
Borrower or any Obligated Party (or any of their respective officers) in
any Loan Document or in any certificate, report, notice, or financial
statement furnished at any time in connection with this Agreement shall be
false, misleading, or erroneous in any material respect when made or deemed
to have been made.
(3) The Borrower shall fail to perform, observe, or comply with any
covenant agreement or term contained: (i) in Sections 9.1(d), 9.1(e),
9.1(f), 9.1(h) through 9.1(k), 9.2(ii), 9.3, 9.4, 9.5, 9.7, 9.8, 9.9, 9.10,
9.11, 9.12 or 9.13 hereof and such failure shall continue for a period of
30 days after an officer of the Borrower has knowledge of such failure;
(ii) in Sections 9.1 (a), 9.1(b), 9.1(c) and such failure shall continue
for a period of 10 days; and (iii) in Section 9.1(g), 9.1(l), 9.2(i), 9.6,
9.14, Article 10 and Article 11.
(4) The Borrower, any Subsidiary, or any Obligated Party shall fail
to comply with any provision contained in this Credit Agreement or any
other Loan Document, other than as set forth in Sections 12.1(a), 12.1(b)
and 12.1(c), and such failure shall continue for 30 days.
(5) The Borrower, any Subsidiary, or any Obligated Party shall admit
in writing its inability to, or be generally unable to, pay its debts as
such debts become due.
(6) The Borrower, any Subsidiary, or any Obligated Party shall (i)
apply for or consent to the appointment of, or the taking of possession by,
a receiver, custodian, trustee, examiner, liquidator or the like of itself
or of all or a substantial part of its Property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in
effect, the "Bankruptcy Code"), (iv) institute any proceeding or file a
---------------
petition seeking to take advantage of any other law
PAGE 67
relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, winding-up, or composition or readjustment of debts, (v) fail
to controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate or other action for the purpose
of effecting any of the foregoing.
(7) A proceeding or case shall be commenced, without the application,
approval or consent of the Borrower, any Subsidiary, or any Obligated
Party, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of the
Borrower or such Subsidiary or Obligated Party or of all or any substantial
part of its Property, or (iii) similar relief in respect of the Borrower or
such Subsidiary or Obligated Party under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against the Borrower, any Subsidiary, or any
Obligated Party shall be entered in an involuntary case under the
Bankruptcy Code.
(8) The Borrower, any Subsidiary, or any Obligated Party shall fail
to discharge any attachment, sequestration, forfeiture, or similar
proceeding or proceedings involving an aggregate amount in excess of
$250,000 against any of its Property.
(9) A final judgment or judgments for the payment of money in excess
of $250,000 in the aggregate shall be rendered by a court or courts against
the Borrower, any of the Subsidiaries, or any Obligated Party and the same
shall remain undischarged, unvacated, unbonded or unstayed for a period of
thirty (30) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder.
(10) The Borrower, any Subsidiary, or any Obligated Party shall fail
to pay when due any principal of or interest on any Debt in excess of
$250,000 (other than the Obligations), or the maturity of any such Debt
shall have been accelerated, or any such Debt shall have been required to
be prepaid prior to the stated maturity thereof as a result of any default,
or any event shall have occurred that permits any holder or holders of such
Debt or any Person acting on behalf of such holder or holders to accelerate
the maturity thereof or require any such prepayment.
(11) This Agreement or any other Loan Document shall cease to be in
full force and effect in accordance with their terms or shall be declared
null and void or the validity or enforceability thereof shall be contested
or challenged by the Borrower, any Subsidiary, any Obligated Party or any
of their respective shareholders, or the Borrower or any Obligated Party
shall deny that it has any further liability or obligation under any of the
Loan
PAGE 68
Documents, or any lien or security interest created by the Loan Documents
shall for any reason cease to be a valid, first priority perfected security
interest in and lien upon any material portion of the Collateral purported
to be covered thereby.
(12) Any of the following events shall occur or exist with respect to
the Borrower or any ERISA Affiliate: (i) any Prohibited Transactions
involving any Plan; (ii) any Reportable Event with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by the
PBGC of any such proceedings; or (v) complete or partial withdrawal under
Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other events
or conditions, if any, have subjected or could in the reasonable opinion of
Required Banks subject the Borrower to any tax, penalty, or other liability
to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed or could reasonably be expected to
exceed $100,000.
(13) Any Person or group (as defined in Section 13(d)(3) or 14(d)(2)
of the Exchange Act but excluding Investco, WES and its Affiliates and QTL)
shall become the direct or indirect beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of more than 17% of all classes of Equity
Interest of Borrower.
(14) Either (1) XXX and its Affiliates ceases to beneficially own and
control, directly or indirectly, and free and clear of all Liens, at least
21% of the issued and outstanding Equity Interests of Borrower, or (2) XXX
and its Affiliates shall fail, for any reason, to have the power to appoint
the majority of the members of the management committee of Borrower.
(15) Any material damage to, or loss, theft or destruction of, a
material portion of any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty which, in any of the forgoing circumstances, causes, for
more than thirty (30) days beyond the coverage period of any applicable
business interruption insurance, the cessation or substantial curtailment
of revenue producing activities at any facility of the Borrower or any
Subsidiary if any such event or circumstance (or series of events or
circumstances) has had, or could reasonably be expected to have, a Material
Adverse Effect as compared to the Closing Date.
Section 1.100 Remedies. If any Event of Default shall occur and be
--------
continuing, the Agent may (and if directed by Required Banks, shall) do any one
or more of the following:
PAGE 69
(1) Acceleration. By written notice to the Borrower, declare all
------------
outstanding principal of and accrued and unpaid interest on the Notes and
all other amounts payable by the Borrower under the Loan Documents
immediately due and payable, and the same shall thereupon become
immediately due and payable, without any further notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent
to accelerate, protest, or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(2) Termination of Revolving Commitments. By written notice to the
------------------------------------
Borrower, terminate the Revolving Commitments.
(3) Judgment. Reduce any claim to judgment.
--------
(4) Foreclosure. Foreclose or otherwise enforce any Lien granted to
-----------
the Agent for the benefit of itself and the Banks to secure payment and
performance of the Obligations in accordance with the terms of the Loan
Documents.
(5) Rights. Exercise any and all rights and remedies afforded by the
------
laws of the State of Illinois, the State of California or any other
jurisdiction, by any of the Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under Section
12.1(f) or (g), the Revolving Commitments of all of the Banks shall
automatically terminate (including, without limitation, the obligation of the
Agent to issue Letters of Credit), and the outstanding principal of and accrued
and unpaid interest on the Notes and all other amounts payable by the Borrower
under the Loan Documents shall thereupon become immediately due and payable
without notice, demand, presentment, notice of dishonor, notice of acceleration,
notice of intent to accelerate, protest, or other formalities of any kind, all
of which are hereby expressly waived by the Borrower.
Section 1.101 Rescission of Acceleration. After acceleration of the
--------------------------
maturity of the Loans, if the Borrower pays all accrued interest and all
principal due (other than by reason of the acceleration) and all Defaults are
otherwise remedied or waived in accordance with Section 14.11, the Required
Banks may elect, in their sole discretion, to rescind the acceleration and
return any cash collateral. (This Section is intended only to bind all of the
Banks to a decision of the Required Banks and not to confer any right on the
Borrower, even if the described conditions for the Required Banks' election may
be met.)
Section 1.102 Performance by the Agent. If the Borrower shall fail to
------------------------
perform any covenant or agreement in accordance with the terms of the Loan
Documents, the Agent may perform or attempt to perform such covenant or
agreement on behalf of the Borrower unless otherwise directed by Required Banks.
In such event, the Borrower shall, at the request of the Agent, promptly pay any
amount expended by the Agent or the Banks in connection with such performance or
attempted performance to the Agent at the Principal Office, together with
interest thereon at the applicable Default Rate from and including the date of
such expenditure to but excluding the date
PAGE 70
such expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that neither the Agent nor any Bank shall have any liability or
responsibility for the performance of any obligation of the Borrower, any
Subsidiary or any Obligated Party under this Agreement or any of the other Loan
Documents.
Section 1.103 Cash Collateral. If an Event of Default shall have occurred
---------------
and be continuing the Borrower shall, if requested by the Agent or Required
Banks, pledge to the Agent as security for the Obligations an amount in
immediately available funds equal to the then outstanding Letter of Credit
Liabilities, such funds to be held in a cash collateral account at the Agent
without any right of withdrawal by the Borrower.
Section 1.104 Setoff. If an Event of Default shall have occurred and be
------
continuing, each Bank is hereby authorized at any time and from time to time,
without notice to the Borrower or (any such notice being hereby expressly waived
by the Borrower), to set off and apply any and all deposits (general, time,
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Bank to or for the credit or the account of the Borrower or
any Subsidiary against any and all of the obligations of such party now or
hereafter existing under any Loan Document, irrespective of whether or not the
Agent or such Bank shall have made any demand under such Loan Documents and
although such obligations may be unmatured. Each Bank agrees promptly to notify
the Borrower (with a copy to the Agent) after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights and remedies of each Bank hereunder are
in addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Bank may have.
Section 1.105 Continuance of Default. For purposes of all Loan Documents,
----------------------
a Default shall be deemed to have continued and exist until the Agent shall have
actually received evidence satisfactory to Agent that such Default shall have
been remedied.
ARTICLE 13
The Agent
---------
Section 1.106 Appointment, Powers and Immunities. Each Bank hereby
----------------------------------
appoints and authorizes Paribas to act as its agent hereunder and under the
other Loan Documents with such powers as are specifically delegated to the Agent
by the terms of the Loan Documents, together with such other powers as are
reasonably incidental thereto. Neither the Agent nor any of its Affiliates,
officers, directors, employees, attorneys, or agents shall be liable for any
action taken or omitted to be taken by any of them hereunder or otherwise in
connection with any Loan Document or any of the other Loan Documents except for
its or their own gross negligence or willful misconduct. Without limiting the
generality of the preceding sentence, the Agent (i) may treat the payee of any
Note as the holder thereof until it receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent;
(ii) shall have no duties or responsibilities except those expressly set forth
in the Loan Documents, and shall not by reason of any Loan
PAGE 71
Document be a trustee or fiduciary for any Bank; (iii) shall not be required to
initiate any litigation or collection proceedings under any Loan Document except
to the extent requested by Required Banks and subject to Section 13.9; (iv)
shall not be responsible to the Banks for any recitals, statements,
representations or warranties contained in any Loan Document, or any certificate
or other documentation referred to or provided for in, or received by any of
them under, any Loan Document, or for the value, validity, effectiveness,
enforceability, or sufficiency of any Loan Document or any other documentation
referred to or provided for therein or for any failure by any Person to perform
any of its obligations thereunder; (v) may consult with legal counsel,
independent public accountants, and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, or experts; and (vi)
shall incur no liability under or in respect of any Loan Document by acting upon
any notice, consent, certificate, or other instrument or writing believed by it
to be genuine and signed or sent by the proper party or parties. As to any
matters not expressly provided for by any Loan Document, the Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by Required Banks, and such instructions of
Required Banks and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks; provided, however, that the Agent shall not be
-------- -------
required to take any action which, in its judgment, exposes it to personal
liability or which is contrary to any Loan Document or applicable law.
Section 1.107 Rights of Agent as a Bank. With respect to its Revolving
-------------------------
Commitment, the Loans made by it and the Note issued to it, Paribas (and any
successor acting as Agent) in its capacity as a Bank hereunder shall have the
same rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to, provide merchant banking
services to, and generally engage in any kind of banking, trust, or other
business with the Borrower, any of the Subsidiaries, any Obligated Party, and
any other Person who may do business with or own securities of the Borrower, any
Subsidiary, or any Obligated Party, all as if it were not acting as the Agent
and without any duty to account therefor to the Banks.
Section 1.108 Defaults. The Agent shall not be deemed to have knowledge
--------
or notice of the occurrence of a Default (other than the non-payment of
principal of or interest on the Loans or of commitment fees) unless the Agent
has received notice from a Bank or the Borrower specifying such Default and
stating that such notice is a "Notice of Default." In the event that the Agent
receives such a notice of the occurrence of a Default, the Agent shall give
prompt notice thereof to the Banks (and shall give each Bank prompt notice of
each such non-payment). The Agent shall (subject to Section 13.1 and Section
13.9) take such action with respect to such Default as shall be directed by
Required Banks, provided that unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
seem advisable and in the best interest of the Banks.
PAGE 72
Section 1.109 Indemnification. THE BANKS HEREBY AGREE TO INDEMNIFY THE
---------------
AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED
UNDER SECTIONS 14.1 AND 14.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SECTIONS 14.1 AND 14.2), RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENT PERCENTAGES OF ALL OF THE REVOLVING COMMITMENTS, ANY AND
ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED
BY, OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY
OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY THE AGENT
UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED, THAT NO BANK SHALL
--------
BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT
IS THE EXPRESS INTENTION OF THE BANKS THAT THE AGENT SHALL BE INDEMNIFIED
HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS,
EXPENSES (INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE AGENT. WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION,
EACH BANK AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA
SHARE (CALCULATED ON THE BASIS OF THE COMMITMENTS PERCENTAGES) OF ANY AND ALL
OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS' FEES) 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, THE LOAN DOCUMENTS, TO THE EXTENT THAT THE AGENT IS NOT
REIMBURSED FOR SUCH EXPENSES BY THE BORROWER.
Section 1.110 Independent Credit Decisions. Each Bank agrees that it has
----------------------------
independently and without reliance on the Agent or any other Bank, and based on
such documentation and information as it has deemed appropriate, made its own
credit analysis of the Borrower and decision to enter into any Loan Document and
that it will, independently and without reliance upon the Agent or any other
Bank, and based upon such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under any Loan Document. Except as otherwise specifically set
forth herein, the Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower or any Obligated Party of any Loan
Document or to inspect the properties or books of the Borrower or any Obligated
Party. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder or under
the other Loan Documents,
PAGE 73
the Agent shall not have any duty or responsibility to provide any Bank with any
credit or other financial information concerning the affairs, financial
condition or business of the Borrower or any Obligated Party (or any of their
Affiliates) which may come into the possession of the Agent or any of its
Affiliates.
Section 1.111 Several Commitments. The Revolving Commitments and other
-------------------
obligations of the Banks under any Loan Document are several. The default by
any Bank in making a Loan in accordance with its Revolving Commitment shall not
relieve the other Banks of their obligations under any Loan Document. In the
event of any default by any Bank in making any Loan, each nondefaulting bank
shall be obligated to make its Loan but shall not be obligated to advance the
amount which the defaulting Bank was required to advance hereunder. No Bank
shall be responsible for any act or omission of any other Bank.
Section 1.112 Successor Agent. Subject to the appointment and acceptance
---------------
of a successor Agent as provided below, the Agent may resign at any time. The
Agent shall give notice of its resignation to the Banks and the Borrower. At
the request of the Borrower, the Agent shall resign if the sum of its unused
Revolving Commitments, the amount of the Letter of Credit Liabilities multiplied
by the Agent's Commitment Percentage, and the principal amount of the
outstanding Loans made by it to the Borrower is less than twenty percent (20%)
of the sum of the total unused Revolving Commitments, the Letter of Credit
Liabilities, and the principal amount of all outstanding Loans made by the
Banks. The Agent may only be removed by Required Banks for gross negligence or
wilful misconduct. Upon any such resignation or removal, Required Banks will
have the right to appoint a successor Agent with the Borrower's consent, which
shall not be unreasonably withheld; provided, however, that the Borrower's
-------- -------
consent shall not be required at any time after the occurrence and during the
continuation of a Default. If no successor Agent shall have been so appointed
by Required Banks and shall have accepted such appointment within thirty (30)
days after the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may (on behalf of
the Banks and with the Borrower's consent, which shall not be unreasonably
withheld; provided, however, that the Borrower's consent shall not be required
-------- -------
at any time after the occurrence and during the continuation of a Default)
appoint a successor Agent, which shall be a commercial bank organized under the
laws of the United States of America or any State thereof and having combined
capital and surplus of at least $100,000,000. Upon the acceptance of its
appointment as successor Agent, such successor Agent shall thereupon succeed to
and become vested with all rights, powers, privileges, immunities, contractual
obligation and duties of the resigning or removed Agent including all
obligations under any Letters of Credit and the resigning or removed Agent shall
be discharged from its duties and obligations under the Loan Documents,
including, without limitation, its obligations under all Letters of Credit.
After any Agent's resignation or removal as Agent, the provisions of this
Article 13 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was the Agent.
Section 1.113 Reliance by Agent. The Agent shall be entitled to rely upon
-----------------
any certification, notice or other communication (including any thereof by
telephone, telecopy, telegram
PAGE 74
or cable) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Agent. As to any matters not expressly provided for by this Agreement or
any other Loan Document, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Required Banks, and such instructions of such Banks
and any action taken or failure to act pursuant thereto shall be binding on all
of the Banks.
Section 1.114 Failure to Act. The Agent shall in all cases be fully
--------------
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction from the Banks of their
indemnification obligations under Section 13.4 against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action.
Section 1.115 Agent Fee. On each six month anniversary of the Prior
---------
Agreement Closing Date, the Borrower shall pay to the Agent the agency fee
described in the Fee Letter; it being acknowledged that as of the Closing Date
the Borrower is not in breach of the Fee Letter in respect of the payment of any
such agency fees.
ARTICLE 14
Miscellaneous
-------------
Section 1.116 Expenses. The Borrower hereby agrees to pay on demand: (a)
--------
all reasonable costs and expenses of the Agent arising in connection with the
preparation, negotiation, execution, and delivery of the Loan Documents and the
documents referred to herein executed and delivered on the Closing Date,
including, without limitation, the reasonable fees and expenses of legal counsel
for the Agent (including, without limitation, Jenkens and Xxxxxxxxx, a
Professional Corporation); (b) all reasonable costs and expenses of the Agent
arising in connection with the preparation, negotiation, execution and delivery
of any of the Loan Documents and the documents referred to herein executed and
delivered after the Closing Date and any and all amendments, waivers, consents
or other modifications to the Loan Documents, including, without limitation, the
reasonable fees and expenses of legal counsel for the Agent (including, without
limitation, Jenkens and Xxxxxxxxx, a Professional Corporation); (c) all
reasonable fees, costs and expenses of the Agent arising in connection with any
Letter of Credit, including the Agent's customary fees for amendments, transfers
and drawings on Letters of Credit; (d) all reasonable costs and expenses of the
Agent and the Banks in connection with any Event of Default and the enforcement
of any Loan Document, including, without limitation, the reasonable fees and
expenses of legal counsel for the Agent and the Banks; (e) all costs, expenses,
assessments, and other charges incurred in connection with any filing,
registration, recording, or perfection of any security interest or Lien
contemplated by any Loan Document; and (f) all other reasonable costs and
expenses incurred by the Agent in connection with any Loan Document, including,
without limitation, all costs, expenses, and other
PAGE 75
charges incurred in connection with obtaining any audit or appraisal in respect
of the Collateral while an Event of Default exists.
Section 1.117 Indemnification. NOTWITHSTANDING ANYTHING ELSE HEREIN OR
---------------
ELSEWHERE TO THE CONTRARY, THE BORROWER SHALL INDEMNIFY THE AGENT AND EACH BANK
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME
SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF
ANY OF THE LOAN DOCUMENTS OR ANY OTHER DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY THE BORROWER OR ANY
OBLIGATED PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS OR ANY OF THE OTHER DOCUMENTS, (D) THE
PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES
OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY, (E) THE USE OR PROPOSED USE OF ANY
LETTER OF CREDIT OR ANY PAYMENT OR FAILURE TO PAY WITH RESPECT TO ANY LETTER OF
CREDIT, (F) ANY AND ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED ON THE
AGENT OR ANY BANK IN RESPECT OF ANY LETTER OF CREDIT, OR (G) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING;
PROVIDED THAT THE PERSON ENTITLED TO BE INDEMNIFIED UNDER THIS SECTION SHALL NOT
BE INDEMNIFIED FROM OR HELD HARMLESS AGAINST ANY LOSSES, LIABILITIES, CLAIMS,
DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS OR EXPENSES ARISING OUT OF
OR RESULTING FROM ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITING
ANY PROVISION OF ANY LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES
HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES
(INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR
CONTRIBUTORY NEGLIGENCE OF SUCH PERSON.
Section 1.118 Limitation of Liability. None of the Agent, any Bank, or
-----------------------
any Affiliate, officer, director, employee, attorney, or agent thereof shall
have any liability with respect to, and the Borrower and, by the execution of
the Loan Documents to which it is a party, each Obligated Party, hereby waives,
releases, and agrees not to xxx any of them upon, any claim for any special,
indirect,
PAGE 76
incidental, consequential or punitive damages suffered or incurred by the
Borrower or any Obligated Party in connection with, arising out of, or in any
way related to any of the Loan Documents, or any of the transactions
contemplated by any of the Loan Documents.
Section 1.119 No Duty. All attorneys, accountants, appraisers, and other
-------
professional Persons and consultants retained by the Agent or any Bank shall
have the right to act exclusively in the interest of the Agent and the Banks and
shall have no duty of disclosure, duty of loyalty, duty of care, or other duty
or obligation of any type or nature whatsoever to the Borrower or any of the
Borrower's shareholders or any other Person.
Section 1.120 No Fiduciary Relationship. The relationship between the
-------------------------
Borrower and the Obligated Parties on the one hand and the Agent and each Bank
on the other is solely that of debtor and creditor, and neither the Agent nor
any Bank has any fiduciary or other special relationship with the Borrower or
any Obligated Parties, and no term or condition of any of the Loan Documents
shall be construed so as to deem the relationship between the Borrower and the
Obligated Parties on the one hand and the Agent and each Bank on the other to be
other than that of debtor and creditor.
Section 1.121 Equitable Relief. The Borrower recognizes that in the event
----------------
the Borrower or any Obligated Party fails to pay, perform, observe, or discharge
any or all of the obligations under the Loan Documents, any remedy at law may
prove to be inadequate relief to the Agent and the Banks. The Borrower therefore
agrees that the Agent and the Banks, if the Agent or the Required Banks so
request, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
Section 1.122 No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
The Agent or any Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in the Loan Documents are
cumulative and not exclusive of any rights and remedies provided by law.
Without limiting the generality of the foregoing, the Agent and the Banks
expressly reserve all rights and remedies afforded to them under any and all
applicable federal and state bankruptcy and insolvency laws.
Section 1.123 Successors and Assigns.
----------------------
(1) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
--------
however, the Borrower may not assign or transfer any of its rights or
-------
obligations hereunder without the prior written consent of the Agent and
all of the Banks. Any Bank may sell participations to one or more banks or
other institutions in or to all or a portion of its rights and obligations
under the Loan Documents (including, without limitation, all or a portion
of its Revolving Commitments,
PAGE 77
the Loans owing to it and the Letter of Credit Liabilities which it has
made or in which it has a participating interest); provided, however, that
-------- -------
(i) such Bank's obligations under the Loan Documents (including, without
limitation, its Revolving Commitments) shall remain unchanged, (ii) such
Bank shall remain solely responsible to the Borrower for the performance of
such obligations, (iii) such Bank shall remain the holder of its Notes and
owner of its participation or other interests in Letter of Credit
Liabilities for all purposes of any Loan Document, (iv) the Borrower shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under the Loan Documents, and (v) such Bank
shall not sell a participation that conveys to the participant the right to
vote or give or withhold consents under any Loan Document, other than the
right to vote upon or consent to (1) any increase of such Bank's Revolving
Commitments to the extent such participant would be effected thereby, (2)
any reduction of the principal amount of, or interest to be paid on, the
Loans or other Obligations of such Bank to the extent such participant
would be effected thereby, (3) any reduction of any commitment fee, letter
of credit fee, or other amount payable to such Bank under any Loan Document
to the extent such participant would be effected thereby, or (4) any
postponement of any date for the payment of any amount payable in respect
of the Loans or other Obligations of such Bank.
(2) The Borrower and each of the Banks agree that any Bank (the
"Assigning Bank") may at any time assign to one or more commercial bank,
--------------
savings and loan association, savings bank, finance company, insurance
company, pension fund, mutual fund, or other financial institution (whether
a corporation, partnership, or other entity) which has a combined capital
and surplus of at least $1 billion (herein an "Eligible Assignee") all, or
part of all, of its rights and obligations under the Loan Documents
(including, without limitation, its Revolving Commitments and Loans and
participation interests) (each an "Assignee"); provided, however, that (i)
-------- -------- -------
except in the case of an assignment of all of a Bank's rights and
obligations under the Loan Documents, the amount of the Revolving
Commitments of the assigning Bank being assigned or if any Revolving
Commitment has terminated, the outstanding principal amount of the related
Loans, pursuant to each assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than $5,000,000.00, (ii) the parties to each such assignment
shall execute and deliver to the Agent for its acceptance and recording in
the Register (as defined below), an Assignment and Acceptance, together
with the Notes subject to such assignment, and a processing and recordation
fee of $5,000.00 payable by the assignor or assignee (and not the
Borrower); (iii) the Agent must consent to the assignment; (iv) the
proposed Assignee of any portion of a Revolving Loan must be a lender which
makes revolving loans in the ordinary course of its business; (v) the
Borrower must consent to the proposed assignee, provided, however, that the
-------- -------
consent of the Borrower will not be required if an Event of Default has
occurred and is continuing. Such consents shall be evidenced by the
Borrower's and the Agent's execution of the Assignment and Acceptance. Upon
such execution, delivery, acceptance, and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least five (5) Business Days after the execution thereof,
or, if so specified in such Assignment and
PAGE 78
Acceptance, the date of acceptance thereof by the Agent, (x) the assignee
thereunder shall be a party hereto as a "Bank" and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and under the Loan Documents and (y) the Bank that is an assignor
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents
(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of a Bank's rights and obligations under the Loan
Documents, such Bank shall cease to be a party thereto).
(3) The Agent shall maintain at its Principal Office a copy of each
Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Banks and the
Revolving Commitments of, and principal amount of the Loans owing to and
Letter of Credit Liabilities participated in by, each Bank from time to
time (the "Register"). The entries in the Register shall be conclusive and
---------
binding for all purposes, absent manifest error, and the Borrower, the
Agent, and the Banks may treat each Person whose name is recorded in the
Register as a Bank hereunder for all purposes under the Loan Documents. The
Register shall be available for inspection by the Borrower or any Bank at
any reasonable time and from time to time upon reasonable prior notice.
(4) Upon its receipt of an Assignment and Acceptance executed by an
Assigning Bank and as Assignee representing that it is an Eligible
Assignee, together with any Notes subject to such assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit "B" hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the
Register, and (iii) give prompt written notice thereof to the Borrower.
Within five (5) Business Days after its receipt of such notice the
Borrower, at its expense, shall execute and deliver to the Agent in
exchange for the surrendered Notes new Notes to the order of such Eligible
Assignee in an amount equal to the Revolving Commitments or Loans assumed
by it pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained Revolving Commitments or Loans, Notes to the order of the
assigning Bank in an amount equal to the Revolving Commitments and Loans
retained by it hereunder (each such promissory note shall constitute a
"Note" for purposes of the Loan Documents). Such new Notes shall be in an
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such Assignment and Acceptance, and shall otherwise be in
substantially the form of the applicable Exhibit hereto.
(5) Any Bank may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower or the Subsidiaries furnished to such
Bank by or on behalf of the Borrower or the Subsidiaries, subject, however,
to compliance with Section 14.21.
PAGE 79
Section 1.124 Survival. All representations and warranties made in any
--------
Loan Document or in any document, statement, or certificate furnished in
connection with any Loan Document shall survive the execution and delivery of
the Loan Documents and no investigation by the Agent or any Bank or any closing
shall affect the representations and warranties or the right of the Agent or any
Bank to rely upon them. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the obligations of the Borrower under
Article 6 and Sections 14.1 and 14.2 shall survive repayment of the Notes and
termination of the Revolving Commitments and the Letters of Credit.
Section 1.125 ENTIRE AGREEMENT; Amendment and Restatement. THIS AGREEMENT,
-------------------------------------------
THE NOTES, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES THERETO. This Agreement amends and restates in its entirety the
Prior Agreement. The execution of this Agreement, the Revolving Notes, the Term
Notes and the other Loan Documents executed in connection herewith does not
extinguish the indebtedness outstanding in connection with the Prior Agreement
nor does it constitute a novation with respect to such indebtedness. The
Borrower, Agent and the Banks ratify and confirm each of the Loan Documents
entered into prior to the Closing Date (but excluding the Prior Agreement) and
agree that such Loan Documents continue to be legal, valid, binding and
enforceable in accordance with their respective terms. Borrower represents and
warrants that as of the Closing Date there are no claims or offsets against or
defenses or counterclaims to its obligations under the Prior Agreement or any of
the other Loan Documents. TO INDUCE THE BANKS AND AGENTS TO ENTER INTO THIS
AGREEMENT, BORROWER WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE CLOSING DATE AND
RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. Without limiting the generality of the foregoing and notwithstanding
any Loan Document to the contrary, Borrower, Agent and the Banks agree and
acknowledge that:
(a) the term "Credit Agreement" as used in each Loan Document means
----------------
this Agreement;
(b) the term "Guaranteed Indebtedness" as used in each Guaranty
-----------------------
includes the Obligations as defined herein; and
(c) the term "Obligations" as used in the Borrower Security
-----------
Agreement, the Subsidiary Security Agreements and the Pledge Agreements
means the Obligations as defined herein.
PAGE 80
Section 1.126 Amendments. No amendment or waiver of any provision of any
----------
Loan Document to which the Borrower is a party, nor any consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be agreed or consented to by Required Banks and the Borrower, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, that no amendment, waiver, or
--------
consent shall, unless in writing and signed by all of the Banks and the
Borrower, do any of the following: (a) increase Revolving Commitments of the
Banks; (b) reduce the principal of, or interest on, the Notes, the Reimbursement
Obligations, or any fees or other amounts payable hereunder; (c) postpone any
date fixed for any payment of principal of, or interest on, the Notes, the
Reimbursement Obligations, or any fees or other amounts payable hereunder; (d)
change the percentage of the Revolving Commitments or of the aggregate unpaid
principal amount of the Notes or the Letter of Credit Liabilities or the number
of Banks which shall be required for the Banks or any of them to take any action
under any Loan Document; (e) extend the maturity date of any Note; (f) change
any provision contained in this Section 14.11; or (g) release all or
substantially all of the Collateral, release the Borrower or any Obligated Party
from liability, or amend any Guaranty; and provided further, notwithstanding the
-------- -------
foregoing provisions of this Section 14.11, the Agent may in its sole discretion
unilaterally release any Liens on equipment subject to purchase money Liens
permitted under this Agreement and Collateral which is authorized to be sold
under the permissions of this Agreement. Notwithstanding anything to the
contrary contained in this Section, no amendment waiver, or consent shall be
made with respect to Sections 2.7 or Article 13 hereof without the prior written
consent of the Agent.
Section 1.127 Maximum Interest Rate.
---------------------
(1) No interest rate specified in any Loan Document shall at any time
exceed the Maximum Rate. If at any time the interest rate (the "Contract
--------
Rate") for any Obligation shall exceed the Maximum Rate, thereby causing
----
the interest accruing on such Obligation to be limited to the Maximum Rate,
then any subsequent reduction in the Contract Rate for such Obligation
shall not reduce the rate of interest on such Obligation below the Maximum
Rate until the aggregate amount of interest accrued on such Obligation
equals the aggregate amount of interest which would have accrued on such
Obligation if the Contract Rate for such Obligation had at all times been
in effect.
(2) No provision of any Loan Document shall require the payment or
the collection of interest in excess of the maximum amount permitted by
applicable law. If any excess of interest in such respect is hereby
provided for, or shall be adjudicated to be so provided, in any Loan
Document or otherwise in connection with this loan transaction, the
provisions of this Section shall govern and prevail and neither the
Borrower nor the sureties, guarantors, successors, or assigns of the
Borrower shall be obligated to pay the excess amount of such interest or
any other excess sum paid for the use, forbearance, or detention of sums
loaned pursuant hereto. In the event any Bank ever receives, collects, or
applies as interest any such sum, such amount which would be in excess of
the maximum amount
PAGE 81
permitted by applicable law shall be applied as a payment and reduction of
the principal of the Obligations; and, if the principal of the Obligations
has been paid in full, any remaining excess shall forthwith be paid to the
Borrower. In determining whether or not the interest paid or payable
exceeds the Maximum Rate, the Borrower and each Bank shall, to the extent
permitted by applicable law, (a) characterize any non-principal payment as
an expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate,
and spread in equal or unequal parts the total amount of interest
throughout the entire contemplated term of the Obligations so that interest
for the entire term does not exceed the Maximum Rate.
Section 1.128 Notices. All notices and other communications provided for
-------
in any Loan Document to which the Borrower or any Obligated Party is a party
shall be given or made in writing and telefaxed, mailed by certified mail return
receipt requested, or delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof and, if to an
Obligated Party, at the address for notices for the Borrower; or, as to any
party at such other address as shall be designated by such party in a notice to
each other party given in accordance with this Section. Except as otherwise
provided in any Loan Document, all such communications shall be deemed to have
been duly given when transmitted by telefax, subject to telephone confirmation
of receipt, or when personally delivered or, in the case of a mailed notice,
three (3) Business Days after being duly deposited in the mails, in each case
given or addressed as aforesaid; provided, however, notices to the Agent
pursuant to Section 2.7 or 5.3 shall not be effective until received by the
Agent.
Section 1.129 GOVERNING LAW; SUBMISSION TO JURISDICTION. EXCEPT AS MAY BE
-----------------------------------------
EXPRESSLY STATED TO THE CONTRARY IN CERTAIN LOAN DOCUMENTS, THIS AGREEMENT, THE
NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE U.S. THE BORROWER HEREBY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF THE U.S. DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS AND OF ANY ILLINOIS STATE COURT SITTING IN CHICAGO,
ILLINOIS, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
PAGE 82
Section 1.130 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 1.131 Severability. Any provision of any Loan Document held by
------------
a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of any Loan Document and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 1.132 Headings. The headings, captions, and arrangements used
--------
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 1.133 Construction. The Borrower, each Obligated Party (by its
------------
execution of the Loan Documents to which its is a party) the Agent and each Bank
acknowledges that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review the Loan Documents with
its legal counsel and that the Loan Documents shall be construed as if jointly
drafted by the parties thereto.
Section 1.134 Independence of Covenants. All covenants under the Loan
-------------------------
Documents shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of a Default if such action is taken or
such condition exists.
Section 1.135 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF THE AGENT OR ANY BANK IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF.
Section 1.136 Confidentiality. Agent and each Bank (each a "Lending
--------------- -------
Party") agrees to keep any Designated Information (as defined below) delivered
-----
or made available by the Borrower to it confidential from anyone other than
Persons employed or retained by such Lending Party who are, or are expected to
be, engaged in evaluating, approving, structuring or administering the credit
facility provided herein; provided that nothing herein shall prevent any Lending
Party from disclosing such Designated Information (a) to any other Lending
Party, (b) to any other Person (including, without limitation, legal and
financial representatives or consultants of any Bank) if reasonably incidental
to the administration of the credit facility provided herein, (c) upon the order
of any court or administrative agency, (d) upon the request or demand of any
regulatory agency or authority, (e) which had been publicly disclosed other than
as a result of a disclosure by any Lending
PAGE 83
Party prohibited by this Agreement, (f) in connection with any litigation to
which such Lending Party or any of its Affiliates may be a party relating to the
Prior Transactions, the Loan Documents or the Prior Transaction Documents, (g)
to the extent necessary in connection with the exercise of any remedy hereunder,
(h) to such Lending Party's legal counsel and independent auditors, (i) to any
Affiliate of such Lending Party, solely in connection with this Agreement who
agrees to be bound by this Section, and (j) subject to provisions substantially
similar to those contained in this Section, to any actual or proposed
participant or assignee of any of its rights and obligations under the Loan
Documents in accordance with the terms hereof. The term "Designated Information"
----------------------
means any information which has been delivered by the Borrower hereunder which
is not otherwise publicly available.
Section 1.137 Approvals and Consent. Except as may be expressly
---------------------
provided to the contrary in this Agreement or in the other Loan Documents (as
applicable), in any instance under this Agreement or the other Loan Documents
where the approval or consent of the Agent or any Bank is requested or required,
(a) the decision whether to grant or deny such approval or consent shall be made
by the Agent or such Bank, respectively, in good faith, based on their own
judgment, and based on information which in their judgment supports such
determination, and (b) no approval or consent of the Agent or any Bank shall in
any event be effective unless the same shall be in writing and the same shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 1.138 Agent for Services of Process. The Borrower hereby
-----------------------------
irrevocably designates Illinois Corporation Service Company, whose address is
000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxx 00000 to receive, for and on
behalf of the Borrower, service of process in the State of Illinois, such
service being hereby acknowledged by the Borrower to be effective and binding
service in every respect. In the event that Illinois Corporation Service Company
resigns or ceases to serve as the Borrower's agent for service of process
hereunder, the Borrower agrees forthwith (a) to designate another agent for
service of process in Illinois, and (b) to give prompt written notice to the
Agent of the name and address of such agent. The Borrower agrees that the
failure of its agent for service of process to give any notice of any such
service of process to the Borrower shall not impair or affect the validity of
such service or of any judgment based thereon. If, despite the foregoing, there
is for any reason no agent for service of process of the Borrower available to
be served, then the Borrower further irrevocably consents to the service of
process by the mailing thereof by the Agent or the Required Banks by registered
or certified mail, postage prepaid, to the Borrower at its address listed on the
signature pages hereof. Nothing in this Section 14.23 shall affect the right of
the Agent or the Banks to serve legal process in any other manner permitted by
law or affect the right of the Agent or any Bank to bring any action or
proceeding against the Borrower or its Property in the court of any
jurisdiction.
[remainder of page has been intentionally left blank]
PAGE 84
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BORROWER:
--------
XXXXXXXXXXXXXX.XXX LLC
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
Address for Notices:
0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Mr. Xxxx Xxxxx
with a copy to:
Xxxxxxx X. Xxxxx & Sons, L.L.C.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Mr. Xxxxx Xxxxxx
PAGE 85
AGENT:
-----
Revolving Commitment: PARIBAS, CHICAGO BRANCH,
--------------------
individually as a Bank and as the Agent
$2,000,000.00
Term Loan: By:
--------- ---------------------------------
Name:
---------------------------------
$1,925,000.00 Title:
---------------------------------
By:
---------------------------------
Name:
---------------------------------
Title:
Address for Notices and Applicable Lending
-------------------------------------------
Office for all Types of Accounts
--------------------------------
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Merchant Banking Group
PAGE 86
OTHER BANKS:
-----------
Revolving Commitment: XXXXXXX XXXXX BUSINESS FINANCIAL
-------------------- SERVICES INC., as a Bank
$2,000,000.00
Term Loan: By:
--------- --------------------------------
Name:
--------------------------------
$1,925,000.00 Title:
--------------------------------
Address for Notices and Applicable Lending Office
-------------------------------------------------
for all Types of Accounts
-------------------------
Xxxxxxx Xxxxx Business Financial Services Inc.
000 X. XxXxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Xx. Xxxxxx Xxxxx
PAGE 87
OTHER BANKS:
-----------
Revolving Commitment: BANK UNITED, as a Bank
--------------------
$1,875,000.00
Term Loan: By:
--------- ------------------------------
Name:
------------------------------
$1,804,687.50 Title:
------------------------------
Address for Notices and Applicable Lending Office
-------------------------------------------------
for all Types of Accounts
-------------------------
Bank United
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Mr. Xxxx Xxxxx
PAGE 88
OTHER BANKS:
-----------
Revolving Commitment: SANWA BANK CALIFORNIA, as a Bank
--------------------
$1,875,000.00
Term Loan: By:
--------- ----------------------------------
Name:
--------------------------------
$1,804,687.50 Title:
-------------------------------
Address for Notices and Applicable Lending Office
-------------------------------------------------
for all Types of Accounts
-------------------------
Sanwa Bank California
00000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Xx. Xxxxx Xxxxxxxxxxxx
PAGE 89
OTHER BANKS:
-----------
Revolving Commitment: U.S. BANK NATIONAL ASSOCIATION f/k/a Santa
-------------------- Xxxxxx Bank, as a Bank
$1,500,000.00
Term Loan: By:
--------- ---------------------------------
Name:
-------------------------------
$1,443,750.00 Title:
-------------------------------
Address for Notices and Applicable Lending Office
-------------------------------------------------
for all Types of Accounts
-------------------------
Santa Xxxxxx Bank
0000 Xxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Xx. Xxxxxxx Xxxxxxx, Vice President
PAGE 90
OTHER BANKS:
-----------
Revolving Commitment: PACIFIC CENTURY BANK N.A., as a Bank
--------------------
$750,000.00
Term Loan: By:
--------- ---------------------------------
Name:
-------------------------------
$721,875.00 Title:
-------------------------------
Address for Notices and Applicable Lending Office
-------------------------------------------------
for all Types of Accounts
-------------------------
Pacific Century Bank N.A.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Mr. Xxxxxx Xxxx
PAGE 91
GUARANTOR AND PLEDGOR ACKNOWLEDGMENT
------------------------------------
Each of the undersigned Guarantors and each of the undersigned Pledgors
consents and agrees to this Agreement and the transactions contemplated hereby.
Each of the Guarantors and each of the Pledgors hereby ratifies and confirms
each of the Loan Documents to which it is a party entered into prior to the date
hereof and agrees that such Loan Documents continue to be legal, valid, binding
and enforceable in accordance with their respective terms.
Witness due execution hereof by the undersigned as of the date first
written above.
GUARANTORS:
----------
COLORATIONS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EDUCATIONAL PRODUCTS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
PLEDGORS:
--------
EDUCATIONAL SIMON LLC
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
QTL CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
XX. XXXXXX X. XXXXXX
By:
--------------------------------
XX. XXXXXXX X. XXXXXX
By: --------------------------------
PAGE 92
INDEX TO EXHIBITS
-----------------
Exhibit Description of Exhibit
------- ----------------------
"A" Monthly Compliance Report
"B" Assignment and Acceptance
"C" Compliance Certificate
INDEX TO SCHEDULES
------------------
Schedule Description of Schedule
-------- -----------------------
0.1 Existing Assignments
8.2 Projections
8.5 Existing
8.12 ESOP Matters
8.14 Subsidiaries and Capitalization
10.1 Existing Debt
10.2 Existing Liens
PAGE 93
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------------------
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated effective as of April 14, 2000, is by and among
---------
XXXXXXXXXXXXXX.XXX LLC., a limited liability company, duly organized and validly
existing under the laws of the State of California ("Borrower"), each of the
--------
banks or other lending institutions which is or which may from time to time
become a signatory hereto or any successor or assignee thereof (individually, a
"Bank" and collectively, the "Banks") and PARIBAS, CHICAGO BRANCH, a bank
---- -----
organized under the laws of France acting through its Chicago Branch,
individually as a Bank and as agent for itself and the other Banks (in its
capacity as agent, together with its successors in such capacity, the "Agent").
-----
RECITALS:
--------
A. Borrower, Agent and the Banks have entered into that certain Amended
and Restated Credit Agreement dated as of December 31, 1999 (the "Credit
------
Agreement").
---------
B. Borrower has requested, and Agent and the Banks have agreed, to amend
the Credit Agreement, subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
-----------
Section 1.1 Definitions. Capitalized terms used in this Amendment, to the
-----------
extent not otherwise defined herein, shall have the same meanings as in the
Credit Agreement, as amended hereby.
ARTICLE 2
Amendments
----------
Section 2.1 Amendment to Section 11.7. Section 11.7 of the Credit
-------------------------
Agreement is amended and restated in its entirety as follows:
Section 11.7 Internet Expenditures. Within three (3) Business Days
---------------------
after the commencement of each Fiscal Quarter, the Borrower will cause an
Equity Issuance to be made at least equal to the amount of Internet
Expenditures to be made
during such Fiscal Quarter (as set forth in the most recently delivered
Projections pursuant to Sections 7.1(h) and 9.1(d)) (the "Quarterly Equity
----------------
Issuance"); provided, however, that the required amount of the Quarterly
-------- -------- -------
Equity Issuance may (in the sole discretion of the Administrative Agent) be
reduced as follows: (a) if the Borrower delivers an updated schedule of
Internet Expenditures to the Administrative Agent subsequent to the
delivery of Projections pursuant to Sections 7.1(h) and 9.1(d), which
updated schedule of Internet Expenditures decreases the amount of Internet
Expenditures to be made during such Fiscal Quarter, by an amount up to the
amount of such decrease, or (b) if the Borrower has not made Internet
Expenditures during the period from the Closing Date through the
commencement of such Fiscal Quarter ("Total Internet Expenditures") in
---------------------------
an amount equal to the amount of prior Equity Issuances made in accordance
with Sections 7.1(i) and (j) and with this Section 11.7 (collectively, the
"Internet Equity Issuances"), by an amount up to the difference between
-------------------------
Internet Equity Issuances made and Total Internet Expenditures made. If,
as of the end of any month during such Fiscal Quarter, the actual aggregate
amount of Internet Expenditures made during such Fiscal Quarter exceeds the
Quarterly Equity Issuance, the Borrower will cause an Equity Issuance to be
made, within three (3) Business Days of the delivery of the Monthly
Compliance Report delivered for such month, equal to at least (a) the
amount of such excess plus (b) the amount of Internet Expenditures
----
estimated by the Borrower, in good faith, to be made during the remainder
of such Fiscal Quarter.
ARTICLE 3
Waiver
------
Section 3.1 Waiver. Agent and the Banks hereby waive the Event of
------
Default resulting directly from Borrower's failure furnish a copy of the annual
audit report to the Agent and each Bank within 90 days after the end of the
Fiscal Year ending December 31, 1999, as required by Section 9.1(a) of the
Credit Agreement (the "Violated Covenant"). To induce the Agent and the Banks
-----------------
to make the waiver contained in this Section 3.1, the Borrower hereby agrees (a)
-----------
to furnish a copy of the annual audit report for such Fiscal Year meeting the
requirement of Section 9.1(a) of the Credit Agreement to the Agent and each Bank
on or before April 20, 2000, and (b) that the failure of the Borrower to furnish
such annual audit report shall constitute an Event of Default under the Credit
Agreement. The waiver contained in this Section 3.1 shall be limited strictly
-----------
as written and shall not be deemed to constitute a (a) waiver of, or any consent
to noncompliance with, any term or provision of the Credit Agreement (including,
without limitation, the Violated Covenant after the date hereof) or the other
Loan Documents; (b) waiver of any other Default or Event of Default; or (c) a
waiver of any rights or remedies arising as a result of such other Defaults or
Events of Default.
ARTICLE 4
Miscellaneous
-------------
Section 4.1 Ratifications. Except as expressly modified and superseded by
-------------
this Amendment, the terms and provisions of the Credit Agreement and the other
Loan Documents are ratified and confirmed and shall continue in full force and
effect. Borrower, Agent and the Banks agree that the Credit Agreement as
amended hereby shall continue to be legal, valid, binding and enforceable in
accordance with their respective terms.
Section 4.2 Representations and Warranties. Borrower hereby represents
------------------------------
and warrants to Agent and the Banks that after giving effect to this Amendment
(a) no Default or Event of Default has occurred and is continuing, and (b) the
representations set forth in the Loan Documents are true and correct in all
material respects on and as of the date hereof with the same effect as though
made on and as of such date except with respect to any representations and
warranties limited by their terms to a specific date.
Section 4.3 Survival of Representation and Warranties. All
-----------------------------------------
representations and warranties made in this Amendment or any other Loan Document
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by Agent or any Bank shall affect the
representations and warranties or the right of Agent or any Bank to rely upon
them.
Section 4.4 Reference to Credit Agreement. Each of the Loan Documents,
-----------------------------
including the Credit Agreement and any and all other agreements or documents now
or hereafter executed and/or delivered pursuant to the terms hereof or pursuant
to the terms of the Credit Agreement as amended hereby, is hereby amended so
that any reference in such Loan Document to the Credit Agreement shall mean a
reference to the Credit Agreement as amended hereby.
Section 4.5 Severability. Any provision of this Amendment held by a court
------------
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 4.6 Applicable Law. This Amendment shall be governed by and
--------------
construed in accordance with the laws of the State of Illinois and the
applicable laws of the United States of America.
Section 4.7 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of Borrower, Agent and the Banks and their respective
successors and permitted assigns, except Borrower may not assign or transfer any
of its rights or obligations hereunder without the prior written consent of
Agent and the Required Banks.
Section 4.8 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
agreement.
Section 4.9 Headings. The headings, captions and arrangements used in
--------
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 4.10 Entire Agreement. This Amendment and all other instruments,
----------------
documents and agreements executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto and
supersede any and all prior commitments, agreements, representations and
understandings, whether written or oral, relating to the Amendment, and may not
be contradicted or varied by evidence of prior, contemporaneous or subsequent
oral agreements or discussions of the parties hereto. There are no oral
agreements among the parties hereto.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the day and year first written above.
BORROWER:
--------
XXXXXXXXXXXXXX.XXX LLC
By:____________________________________
Name:__________________________________
Title:_________________________________
AGENT AND A BANK:
----------------
PARIBAS, CHICAGO BRANCH
as Agent and as a Bank
By:____________________________________
Name:__________________________________
Title:_________________________________
By:____________________________________
Name:__________________________________
Title:_________________________________
OTHER BANKS:
-----------
XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES
INC., as a Bank
By:____________________________________
Name:__________________________________
Title:_________________________________
BANK UNITED, as a Bank
By:____________________________________
Name:__________________________________
Title:_________________________________
SANWA BANK CALIFORNIA, as a Bank
By:____________________________________
Name:__________________________________
Title:_________________________________
U.S. BANK NATIONAL ASSOCIATION, as a Bank
By:____________________________________
Name:__________________________________
Title:_________________________________
PACIFIC CENTURY BANK, N.A., as a Bank
By:____________________________________
Name:__________________________________
Title:_________________________________
GUARANTOR ACKNOWLEDGMENT
------------------------
Each of the undersigned Guarantors consents and agrees to this Amendment
and the transactions contemplated hereby. Each of the Guarantors hereby ratifies
and confirms each of the Loan Documents to which it is a party entered into
prior to the date hereof and agrees that such Loan Documents continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
Witness due execution hereof by the undersigned as of the date first
written above.
GUARANTORS:
----------
COLORATIONS, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
EDUCATIONAL PRODUCTS, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
