1
Exhibit 10.1
EXECUTION COPY
--------------
--------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
BALLY TOTAL FITNESS HOLDING CORPORATION,
as Borrower
The Several Banks and other Financial Institutions
Parties Hereto
AND
THE CHASE MANHATTAN BANK,
as Agent
Dated as of November 18, 1997
--------------------------------------------------------------------------------
CHASE SECURITIES INC.,
as Arranger
2
TABLE OF CONTENTS
-----------------
Page
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMINOLOGY.................................... 1
1.01 CERTAIN DEFINITIONS............................................................................... 1
1.02 FINANCIAL STANDARDS............................................................................... 20
1.03 INTERPRETATION.................................................................................... 20
ARTICLE II.
THE CREDIT.................................................. 21
2.01 THE REVOLVING CREDIT.............................................................................. 21
2.02 REQUESTS FOR ADVANCES; CONVERSION AND CONTINUATION OPTIONS........................................ 21
2.03 LENDING BRANCH AND EVIDENCE OF CREDIT............................................................. 22
2.04 COMPUTATION OF AND PAYMENT OF INTEREST............................................................ 23
2.05 PAYMENT OF ADVANCES............................................................................... 24
2.06 PAYMENTS.......................................................................................... 24
2.07 OPTIONAL PREPAYMENTS.............................................................................. 25
2.08 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS................................................... 25
2.09 FEES .......................................................................................... 26
2.10 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENT AMOUNT............................................ 26
2.11 ARRANGEMENT COMPENSATION; AGENCY FEES............................................................. 27
2.12 TAXES .......................................................................................... 27
2.13 INCREASED COSTS; ILLEGALITY; INDEMNITY............................................................ 29
2.14 CAPITAL ADEQUACY.................................................................................. 30
2.15 LETTERS OF CREDIT................................................................................. 30
ARTICLE III.
SECURITY................................................... 36
3.01 SECURITY.......................................................................................... 36
3.02 COLLATERAL DOCUMENTS.............................................................................. 37
3.03 PRIORITY OF SECURITY INTEREST..................................................................... 37
3.04 NEW GUARANTORS.................................................................................... 37
3.05 REAL PROPERTY MATTERS............................................................................. 37
ARTICLE IV.
CONDITIONS PRECEDENT............................................. 38
4.01 CONDITIONS PRECEDENT TO CLOSING DATE.............................................................. 38
4.02 CONDITIONS PRECEDENT TO EACH ADVANCE AND LETTER OF CREDIT......................................... 43
ARTICLE V.
REPRESENTATIONS AND WARRANTIES........................................ 43
-i-
3
PAGE
----
5.01 BORROWER'S EXISTENCE.............................................................................. 43
5.02 SUBSIDIARIES' EXISTENCE........................................................................... 43
5.03 BORROWER'S POWERS................................................................................. 44
5.04 POWER OF OFFICERS................................................................................. 44
5.05 GOVERNMENT APPROVALS.............................................................................. 44
5.06 COMPLIANCE WITH LAWS.............................................................................. 44
5.07 ENFORCEABILITY OF AGREEMENT....................................................................... 44
5.08 TITLE TO PROPERTY................................................................................. 44
5.09 LITIGATION........................................................................................ 44
5.10 EVENTS OF DEFAULT................................................................................. 44
5.11 COMPLIANCE WITH MARGIN REQUIREMENTS............................................................... 45
5.12 SUBSIDIARIES...................................................................................... 45
5.13 FINANCIAL INFORMATION............................................................................. 45
5.14 ERISA .......................................................................................... 45
5.15 INVESTMENT COMPANY ACT OF 1940.................................................................... 45
5.16 NO RESTRICTIONS ON SUBSIDIARIES................................................................... 45
5.17 SENIOR INDEBTEDNESS............................................................................... 46
5.18 ENVIRONMENTAL MATTERS............................................................................. 46
5.19 COLLATERAL DOCUMENTS.............................................................................. 46
5.20 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. ............................................... 47
ARTICLE VI.
AFFIRMATIVE COVENANTS............................................ 47
6.01 USE OF PROCEEDS AND LETTERS OF CREDIT............................................................. 48
6.02 NOTICES .......................................................................................... 48
6.03 FINANCIAL STATEMENTS, REPORTS, ETC. .............................................................. 49
6.04 FURTHER ASSURANCES................................................................................ 51
6.05 EXISTENCE, ETC. .................................................................................. 51
6.06 OWNERSHIP OF STOCK OF SUBSIDIARIES................................................................ 51
6.07 PAYMENT OF OBLIGATIONS............................................................................ 51
6.08 COMPLIANCE WITH LAWS.............................................................................. 51
6.09 INSURANCE AND CONDEMNATION........................................................................ 52
6.10 ADEQUATE BOOKS.................................................................................... 54
6.11 ERISA .......................................................................................... 54
6.12 INTEREST COVERAGE................................................................................. 54
6.13 1997 SUBORDINATED NOTES........................................................................... 55
6.14 HAZARDOUS MATERIALS............................................................................... 55
6.15 LEVERAGE RATIO.................................................................................... 56
6.16 REAL ESTATE TAXES................................................................................. 56
6.17 ADDITIONAL REAL ESTATE COLLATERAL................................................................. 57
6.18 CONDITIONS SUBSEQUENT............................................................................. 57
ARTICLE VII.
NEGATIVE COVENANTS.............................................. 57
7.01 INVESTMENTS AND RESTRICTED PAYMENTS............................................................... 57
7.02 OTHER OBLIGATIONS................................................................................. 58
-ii-
4
PAGE
----
7.03 OTHER SECURITY.................................................................................... 59
7.04 SUBORDINATED DEBT................................................................................. 59
7.05 LIQUIDATION; MERGER............................................................................... 60
7.06 CAPITAL EXPENDITURES.............................................................................. 60
7.07 CHANGE IN BUSINESS................................................................................ 60
7.08 DISPOSAL OF ASSETS................................................................................ 60
7.09 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT INSTRUMENTS AND
RECEIVABLES PROGRAM DOCUMENTS............................................................. 62
7.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES........................................................ 63
7.11 LIMITATION ON SALES AND LEASEBACKS................................................................ 63
7.12 LIMITATION ON CHANGES IN FISCAL YEAR.............................................................. 63
7.13 FUNDING CORP...................................................................................... 63
7.14 UNRESTRICTED SUBSIDIARIES......................................................................... 63
7.15 TAX ALLOCATION AND INDEMNITY AGREEMENT............................................................ 64
7.16 HEALTH & TENNIS (UK) LIMITED...................................................................... 64
ARTICLE VIII.
EVENTS OF DEFAULT.............................................. 64
8.01 NONPAYMENT........................................................................................ 64
8.02 REPRESENTATION OR WARRANTY........................................................................ 64
8.03 LIENS .......................................................................................... 64
8.04 JUDGMENTS......................................................................................... 64
8.05 VOLUNTARY BANKRUPTCY.............................................................................. 65
8.06 INVOLUNTARY BANKRUPTCY............................................................................ 65
8.07 REGULATORY ACTION................................................................................. 65
8.08 CHANGE OF CONTROL EVENT........................................................................... 65
8.09 GOVERNMENT APPROVALS.............................................................................. 65
8.10 CROSS DEFAULT..................................................................................... 65
8.11 ERISA .......................................................................................... 65
8.12 SPECIFIC DEFAULTS................................................................................. 66
8.13 GUARANTEE AND COLLATERAL AGREEMENT; IMPAIRMENT OF COLLATERAL DOCUMENTS............................ 66
8.14 CONDEMNATION...................................................................................... 66
8.15 PAYOUT EVENT...................................................................................... 66
8.16 ACTUAL OR ASSERTED INVALIDITY..................................................................... 66
8.17 OTHER DEFAULTS.................................................................................... 67
ARTICLE IX.
MISCELLANEOUS................................................ 67
9.01 NOTICES .......................................................................................... 67
9.02 SUCCESSORS AND ASSIGNS............................................................................ 68
9.03 BANKS' OBLIGATIONS SEVERAL........................................................................ 68
9.04 ASSIGNMENTS; PARTICIPATIONS....................................................................... 68
9.05 DELAYS AND WAIVERS................................................................................ 70
9.06 COSTS AND EXPENSES................................................................................ 70
9.07 TELEPHONE INDEMNITY............................................................................... 70
9.08 OTHER INDEMNITY................................................................................... 71
-iii-
5
PAGE
----
9.09 CHOICE OF LAW..................................................................................... 72
9.10 PERSONAL JURISDICTION............................................................................. 72
9.11 SERVICE OF PROCESS................................................................................ 72
9.12 WAIVER OF JURY TRIAL.............................................................................. 72
9.13 SECTION HEADINGS.................................................................................. 72
9.14 SEVERABILITY...................................................................................... 72
9.15 COUNTERPARTS...................................................................................... 73
9.16 NO RELIANCE BY BANKS.............................................................................. 73
9.17 ENTIRE AGREEMENT.................................................................................. 73
9.18 CONFIDENTIALITY................................................................................... 73
9.19 RECEIVABLES PROGRAM SAVINGS CLAUSE................................................................ 73
ARTICLE X.
RELATION OF BANKS.............................................. 74
10.01 AGENT AND COLLATERAL AGENT; ENFORCEMENT OF GUARANTIES............................................ 74
10.02 PRO RATA SHARING................................................................................. 74
10.03 SET-OFF.......................................................................................... 74
10.04 LIABILITY OF AGENT............................................................................... 75
10.05 RELIANCE BY AGENT................................................................................ 76
10.06 APPROVALS; AMENDMENTS............................................................................ 76
10.07 NOTICE OF DEFAULT................................................................................ 76
10.08 CREDIT DECISION.................................................................................. 77
10.09 BANKS' INDEMNITY................................................................................. 77
10.10 AGENT AS BANK.................................................................................... 77
10.11 NOTICE OF TRANSFER............................................................................... 78
10.12 RESIGNATION OF AGENT............................................................................. 78
10.13 COLLATERAL MATTERS............................................................................... 78
10.14 COLLATERAL AGENT................................................................................. 80
-iv-
6
Schedules
Schedule 1.01 Existing Liens
Schedule 1.01(b) List of Scandinavian Partnerships
Schedule 1.01(c) Unrestricted Subsidiaries
Schedule 4.01(l) Initial Mortgaged Properties
Schedule 5.09 Litigation
Schedule 5.14 ERISA Matters
Schedule 5.16 Restrictions on Subsidiaries
Schedule 5.18 Environmental Matters
Schedule 5.20 Trademark Disputes
Schedule 6.02(a) Additional Disclosed Litigation
Schedule 6.17 Additional Mortgaged Properties
Schedule 7.02(b) Existing Debt
Schedule 7.09(a) Prepayable Debt
Schedule 9.01 Address for Notices
Exhibits
Exhibit A. Form of Guarantee and Collateral Agreement
Exhibit B. Form of Collateral Agency Agreement
Exhibit C. List of Commitment Percentages
Exhibit D. List of Subsidiaries
Exhibit E. Form of Operating Bank Guaranty
Exhibit F. List of Real Estate Documents
Exhibit G. [Reserved].
Exhibit H. Form of Revolving Note
Exhibit I. [Reserved].
Exhibit J. Form of Opinions of Borrower's Counsel
Exhibit K. Form of Opinion of General Counsel
Exhibit L. Conditions Subsequent
Exhibit M. Form of Assignment and Acceptance
-v-
7
CREDIT AGREEMENT
This Credit Agreement, dated as of November 18, 1997 (the
"Credit Agreement"), among BALLY TOTAL FITNESS HOLDING CORPORATION, a Delaware
corporation ("Borrower"), the banks and other financial institutions named on
the signature pages of this Agreement (collectively, "Banks" and individually, a
"Bank") and THE CHASE MANHATTAN BANK, as agent for Banks (in such capacity,
"Agent"), is entered into with respect to the following:
WHEREAS, the Borrower is party to the Existing Credit
Agreement (as hereafter defined); and
WHEREAS, in order to refinance and replace the Existing Credit
Agreement and for the other purposes described in Section 6.01, the Banks have
agreed to make available to the Borrower the $70,000,000 revolving credit
facility described herein;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMINOLOGY
--------------------------------------
1.01 CERTAIN DEFINITIONS. In addition to the terms defined
elsewhere in this Agreement, the following terms have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"ADVANCE" means a borrowing under the Revolving Credit
pursuant to Section 2.01 or 2.15(c)(ii) hereof.
"AFFILIATE" of any Person means any other Person directly or
indirectly Controlling or Controlled by or under direct or indirect
common Control with such Person.
"AGREEMENT" shall mean the Credit Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"APPLICABLE MARGIN" means, at any time, the rate per annum
based on the Leverage Ratio of the Borrower, set forth in the following
matrix which shall apply to each Type of Revolving Credit Advance, the
Letter of Credit fee payable pursuant to Section 2.09(a)(i) and the
commitment fee payable pursuant to Section 2.09(b), as applicable:
8
2
=================================================================================================================================
EURODOLLAR REFERENCE LETTER OF
LEVERAGE RATIO MARGIN RATE MARGIN CREDIT RATE COMMITMENT FEE
---------------------------------------------------------------------------------------------------------------------------------
x greater than or equal to 3.00 3.00% 2.00% 2.00% .50%
---------------------------------------------------------------------------------------------------------------------------------
2.00 less than or equal to x less than 3.00 2.75% 1.75% 1.75% .50%
---------------------------------------------------------------------------------------------------------------------------------
x less than 2.00 2.50% 1.50% 1.50% .375%
=================================================================================================================================
Changes in the Applicable Margin resulting from changes in the Leverage
Ratio shall become effective on the date (the "ADJUSTMENT DATE") on
which financial statements are delivered to the Lenders pursuant to
Section 6.03 (but in any event not later than the 50th day after the
end of each of the first three quarterly periods of each fiscal year or
the 105th day after the end of each fiscal year, as the case may be)
and shall remain in effect until the next change to be effected
pursuant to this paragraph. Each determination of the Leverage Ratio
pursuant to this definition shall be made with respect to the period of
four consecutive fiscal quarters of the Borrower ending at the end of
the period covered by the relevant financial statements. For the period
from the Closing Date to the date financial statements are delivered
pursuant to Section 6.03(a) with respect to the quarter ending
September 30, 1997, the Leverage Ratio shall be presumed to be greater
than 3:00 to 1 for purposes of this definition.
"BANKING DAY" means a day other than Saturday or Sunday on
which (i) banks are open for business in New York City and (ii) for any
calculation, determination or other matter with respect to Eurodollar
Rate Advances, dealings in foreign currencies and exchange between
banks may be carried on in London, England.
"BANKS" shall have the meaning set forth in the recitals
hereto.
"BORROWING DATE" means, with respect to each Advance, the date
such Advance is made.
"CAPITAL EXPENDITURES" means, without duplication, with
respect to Borrower and any Subsidiary of Borrower: any amounts
expended or incurred during or in respect of a period for any purchase,
exchange or other acquisition for value of any asset that is classified
on the consolidated balance sheet of Borrower prepared in accordance
with GAAP as a fixed or capital asset; provided that in no event shall
Capital Expenditures include amounts (a) expended in respect of
replacements and maintenance consistent with the business practices of
Borrower in respect of plant facilities, machinery, exercise equipment,
fixtures and other like capital assets utilized in the ordinary conduct
of business (to the extent such amounts are not capitalized in
preparing a consolidated balance sheet in accordance with GAAP), (b)
expended in the replacement, repair or reconstruction of any fixed or
capital asset which was destroyed, damaged or taken by eminent domain
or in lieu of condemnation, in whole or in part, to the extent of
insurance proceeds or condemnation awards received or due to be
received by Borrower or any such Subsidiary in respect of such
destruction, damage or taking, (c) expended or incurred in the
replacement of any fixed or capital asset to the extent such amounts
constitute Reinvestment Proceeds or (d) any interest which is
capitalized in accordance with GAAP. Capital Expenditures shall also
include amounts deemed to be Capital Expenditures in accordance with
Section 7.01(e).
9
3
"CAPITALIZED LEASE" means any lease which is or should be, in
accordance with GAAP, capitalized on the balance sheet of the lessee.
"CAPITAL STOCK" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of
such Person's capital stock or other equity interests whether now
outstanding or issued after the Closing Date.
"CASH EQUIVALENTS" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (PROVIDED that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than 12 months from the date of
acquisition, (ii) Dollar denominated time deposits, certificates of
deposit and bankers acceptances of any Bank or any bank whose
short-term commercial paper rating from Standard & Poor's Ratings
Group, a division of XxXxxx-Xxxx ("S&P"), is at least A-1 or the
equivalent thereof or from Xxxxx'x Investors Service, Inc. ("XXXXX'X")
is at least P-1 or the equivalent thereof (any such bank, an "APPROVED
BANK"), with maturities of not more than 12 months from the date of
acquisition, (iii) repurchase obligations with a term of not more than
seven days for underlying securities of the type described in clause
(i) entered into with an Approved Bank, (iv) commercial paper issued
by, or guaranteed by, any Approved Bank or by the parent company of any
Approved Bank or commercial paper issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper
rating of at least A-1 or the equivalent thereof by S&P or at least P-1
or the equivalent thereof by Moody's, or issued by, or guaranteed by,
any industrial company with a long term unsecured debt rating of at
least A or A2, or the equivalent of each thereof, from S&P or Moody's,
respectively, and in each case maturing within 12 months after the date
of acquisition and (v) any fund or funds making substantially all of
their investments in investments of the type described in clauses (i)
through (iv) above.
"CHANGE OF CONTROL EVENT" means, without limitation, (a) the
acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person (other than Xxxxxx Xxxxxxxx or Xxx X. Xxxxxxx or
their respective estates or descendants) or group (within the meaning
of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of
shares representing more than 30% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of the
Borrower; (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were
neither (i) nominated by the board of directors of the Borrower nor
(ii) appointed by directors so nominated; or (c) the acquisition of
direct or indirect Control of the Borrower by any Person (other than
Xxxxxx Xxxxxxxx or Xxx X. Xxxxxxx or their respective estates or
descendants) or group.
"CHASE" means The Chase Manhattan Bank, a New York banking
corporation.
"CLOSING DATE" means the date on which all of the conditions
in Section 4.01 are satisfied.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"COLLATERAL" means all real, personal and mixed property and
interests in property and proceeds thereof now owned or hereafter
acquired by Borrower or any Guarantor and their respective Subsidiaries
in or upon which a security interest, pledge, lien or mortgage is
granted to the Banks or the Collateral Agent pursuant to the Collateral
Documents for the benefit of
10
4
the Secured Creditors whether under this Agreement or under any other
documents, instruments or writings executed by any such Persons in
connection with Advances or other credit extensions made hereunder and
delivered to the Collateral Agent or the Banks.
"COLLATERAL AGENCY AGREEMENT" means the Collateral Agency
Agreement among the Collateral Agent and the Secured Creditors in the
form of Exhibit B hereto, as amended, supplemented or otherwise
modified.
"COLLATERAL AGENT" means Chase or any successor agent thereto
acting as Collateral Agent for the Secured Creditors pursuant to the
Collateral Agency Agreement.
"COLLATERAL DOCUMENTS" means, collectively, (i) the Guarantee
and Collateral Agreement, the Collateral Agency Agreement, the
Mortgages, the Operating Bank Guaranty and all other security
agreements, mortgages, deeds of trust, patent and trademark
assignments, certificates of title, lease assignments, guarantees and
other agreements between Borrower or any Guarantor and their respective
Subsidiaries and any of the Banks or the Collateral Agent for the
benefit of the Banks or the Secured Creditors, now or hereafter
delivered to any of the Banks or the Collateral Agent pursuant to or in
connection with the transactions contemplated hereby, and all financing
statements (or comparable documents) now or hereafter filed in
accordance with the Uniform Commercial Code (or comparable law) against
Borrower or any Guarantor or any Subsidiaries in favor of any of the
Banks or the Collateral Agent for the benefit of the Banks or the
Secured Creditors and (ii) any amendments, supplements, modifications,
renewals, replacements, consolidations, substitutions and extensions of
any of the foregoing.
"COMMITMENT" means, as to any Bank, such Bank's Revolving
Credit Commitment and Letter of Credit Commitment; collectively, as to
all the Banks, the "COMMITMENTS".
"COMMITMENT AMOUNT" means $70,000,000 LESS any Commitment
Reductions.
"COMMITMENT PERCENTAGE" means, as to each Bank, the percentage
set opposite such Bank's name on Exhibit C hereto or, if such Bank
shall have acquired or disposed of any interest in the Credit pursuant
to Section 9.04(a), on the applicable instrument of assignment.
"COMMITMENT PERIOD" means the period from and including the
date of this Agreement to but excluding the Termination Date.
"COMMITMENT REDUCTIONS" shall mean the amount of the permanent
reductions of the Commitment Amount resulting from the application of
Sections 2.08, 2.10 or 7.08 or any other provision contained herein.
"CONSOLIDATED" or "CONSOLIDATED" means (i) when used herein
with reference to financial statements, ratios, assets, liabilities,
operating accounts or operations of Borrower and its Subsidiaries, that
any calculations have been made by combining the assets and liabilities
of Borrower and its Subsidiaries after eliminating all intercompany
items; and (ii) when used herein with reference to a Subsidiary, a
Subsidiary the financial statements of which have been presented
together with those of Borrower.
"CONSOLIDATED ADJUSTED EBITDA" means GAAP EBITDA of the
Borrower and its Subsidiaries, calculated in accordance with GAAP as in
effect from time to time, adding back (to the extent deducted in
calculating GAAP EBITDA) for all New Clubs, in the aggregate, the
11
5
actual GAAP EBITDA loss incurred by such New Clubs during a trailing
12-month period ending on the date of determination (the "NEW CLUBS
ADJUSTMENT"); PROVIDED that such New Club Adjustment may not exceed
$3,000,000 during any such twelve (12) month period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the
aggregate amount of interest that, in accordance with GAAP, would be
set forth opposite the caption "interest expense" or any like caption
on a consolidated income statement of the Borrower and its Subsidiaries
(including, but not limited to, imputed interest on Capitalized Leases,
all commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing, the net costs
associated with hedging obligations, amortization of other financing
fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other
non-cash interest expense (other than previously capitalized interest
amortized to cost of sales)) plus, without duplication, all interest
accrued or paid by the Borrower or any of its Subsidiaries under any
Guaranty of Debt (including a Guaranty of principal, interest or any
combination thereof) of any Person for such period, in each case
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" of the Borrower means, for any
period, the consolidated net income (or loss) of the Borrower and its
Subsidiaries for such period as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (or
loss), by excluding (i) all extraordinary gains or losses (less all
fees and expenses relating thereto), (ii) the portion of net income (or
loss) of the Borrower and its Subsidiaries allocable to minority
interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by the Borrower or one
of its Subsidiaries, (iii) net income (or loss) of any Person combined
with the Borrower or any of its subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss, net of taxes, realized upon the
termination of any Plan, (v) any gains or losses (less all fees and
expenses relating thereto) in respect of dispositions of assets other
than in the ordinary course of business, and (vi) the net income of any
Subsidiary to the extent that the declaration of the dividends or
similar distributions by that Subsidiary of that income is not at the
time permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulations applicable to that Subsidiary
or its stockholders.
"CONSOLIDATED TOTAL FUNDED DEBT" means for the Borrower for
any period, the sum (without duplication) of (i) all indebtedness of
the Borrower and its Subsidiaries for borrowed money (excluding
indebtedness under the Receivables Program Documents), including,
without limitation, reimbursement obligations with respect to letters
of credit, whether or not matured or whether or not such letters of
credit have been drawn (excluding reimbursement obligations to the
extent that any letter of credit has been cash collateralized on terms
satisfactory to the issuer of such letter of credit), (ii) all
obligations of the Borrower and its Subsidiaries with respect to
Capitalized Leases determined in accordance with GAAP, (iii) all
Guarantees (without duplication of any amount of Debt included in
another clause of this definition) made by the Borrower and its
Subsidiaries, (iv) all obligations of the Borrower and its Subsidiaries
representing the deferred purchase price of real or personal property
or of services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), and (v) all indebtedness arising under any Interest Expense
Hedging Arrangement of the Borrower and its Subsidiaries (excluding to
the extent otherwise included in (i), (a) any Interest Expense Hedging
Arrangement with respect to the Receivables Program and (b) up to
$25,000,000 of recourse Indebtedness under the Credit Card Program
Agreement), in each case calculated on a consolidated basis.
12
6
"CONTRACT RECEIVABLES" means, during any period of
determination, gross accounts receivable of Borrower and its
Subsidiaries created from the sale to customers, on an installment
payment basis, of membership contracts for the use of fitness or
exercise centers, other than Receivables Program Receivables.
"CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of
a Person, whether through the ability to exercise voting power, by
contract or otherwise. "CONTROLLING" and "CONTROLLED" have meanings
correlative thereto.
"CREDIT" means the credit available to Borrower under Article
II hereof.
"CREDIT CARD PROGRAM AGREEMENT" means the Credit Card Program
Agreement dated December 21, 1995 between the Borrower, Renaissance
Bankcard Services Inc. and Orchard Federal Savings Bank (or a
substitute agreement with a substitute provider), including the
attachments thereto.
"CREDIT AGREEMENT" has the meaning assigned in the recitals
hereto.
"CREDIT DOCUMENTS" means, collectively, this Agreement, the
Notes and the Collateral Documents.
"DEBT" means for any Person (i) all indebtedness of such
Person for borrowed money (including, without limitation, reimbursement
and all other obligations with respect to letters of credit, whether or
not matured), (ii) all obligations of such Person representing the
deferred purchase price of real or personal property or of services
(other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (iii)
the amount of all obligations of such Person under Capitalized Leases
determined in accordance with GAAP, (iv) all indebtedness arising under
any Interest Expense Hedging Arrangement, and (v) without duplication
of any amount of Debt included in clause (i), (ii), (iii) or (iv) of
this definition, all Guaranties made by such Person. Notwithstanding
the foregoing, "Debt" shall not include up to $25,000,000 of recourse
Indebtedness under the Credit Card Program Agreement.
"DEFAULT" shall mean an event which with the giving of notice,
passage of time or both would constitute an Event of Default.
"DEMAND DEPOSIT ACCOUNTS" means the demand deposit accounts
listed on Annex 1 to the Operating Bank Guaranty maintained by Borrower
and/or any of its Subsidiaries with the respective Banks identified on
such Annex, and other demand deposit accounts established by Borrower
or any of its Subsidiaries with any Bank after the date hereof which
shall be promptly identified by such Bank in writing to Agent, Borrower
and the Guarantors.
"DESIGNATED SENIOR INDEBTEDNESS" means Designated Senior
Indebtedness of Borrower as defined in each of 1993 Indenture and the
1997 Indenture.
"DOLLARS" and "$" mean United States dollars.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the United States.
13
7
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any regulations promulgated
thereunder.
"ERISA AFFILIATE" means any corporation, trade or business
that is, along with Borrower, a member of a controlled group of
corporations or a controlled group of trades or businesses, as
described in Section 414 of the Code or Section 4001 of ERISA.
"EUROCURRENCY RESERVE REQUIREMENTS" means, for any day as
applied to a Eurodollar Rate Advance, the aggregate (without
duplication) of the rates (expressed as a decimal) of reserve
requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or
other governmental authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of such System.
"EURODOLLAR BASE RATE" means, with respect to each day during
each Interest Period pertaining to a Eurodollar Rate Advance, the rate
per annum equal to the rate per annum for Dollar deposits with a
maturity comparable to such Interest Period which appears on the
Telerate British Bankers Assoc. Interest Settlement Rates Page at
approximately 10:00 a.m., London time, two Banking Days prior to the
commencement of such Interest Period; PROVIDED that if there shall no
longer exist a Telerate British Bankers Assoc. Interest Settlement
Rates Page (or if such page is not available on the relevant Banking
Day), the Eurodollar Base Rate shall mean an interest rate per annum
equal to the rate at which Dollar deposits (in an amount comparable to
the amount of Chase's Eurodollar Advances to be outstanding during such
Interest Period and for a maturity comparable to such Interest Period)
are offered to Chase in immediately available funds by prime banks in
the interbank market where Chase's eurodollar and foreign currency and
exchange operations are then being conducted at approximately 11:00
a.m., London time, two Banking Days prior to the commencement of such
Interest Period. "TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT
RATES PAGE" shall mean the display designated as Page 3750 on
Teleratesystem Incorporated (or such other replacement page thereof
used to display London interbank offered rates of major banks).
"EURODOLLAR RATE" means, with respect to each day during each
Interest Period pertaining to a Eurodollar Rate Advance, a rate per
annum determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
EURODOLLAR BASE RATE
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EURODOLLAR RATE ADVANCES" means Advances the rate of interest
applicable to which is based upon the Eurodollar Rate.
"EVENT OF DEFAULT" means any event listed in Article VIII.
"EXCHANGEABLE TRANSFEROR CERTIFICATE" shall have the meaning
attributed to such term in the Pooling & Servicing Agreement.
"EXISTING CREDIT AGREEMENT" means the Third Amended and
Restated Credit Agreement, dated as of June 26, 1995, as amended prior
to the date hereof, among the Borrower, the lenders party thereto and
Chase, as Agent.
14
8
"FAIR MARKET VALUE" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length
transaction between an informed and willing seller under no compulsion
to sell and an informed and willing buyer under no compulsion to buy.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Banking
Day, for the next preceding Banking Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a
Banking Day, the average of the quotations for such day on such
transactions received by the Agent from three (3) Federal funds brokers
of recognized standing selected by it.
"FOREIGN SUBSIDIARIES" means (x) C.Z.W. Health Limited, a
corporation organized under the laws of Ontario, Canada, Bally Matrix
Fitness Centre Ltd., a corporation organized under the laws of Ontario,
Canada, and Health & Tennis (UK) Limited, a corporation organized under
the Companies Act of England, and (y) any other Subsidiary of the
Borrower organized under the laws of any jurisdiction outside the
United States of America, which is created or acquired in accordance
with the terms of this Agreement.
"FUNDING CORP." means H&T Receivable Funding Corporation, a
Delaware corporation and a wholly-owned Subsidiary of HTCA.
"FRANCHISE PROGRAM" means a program under which the Borrower
or its Subsidiaries grant franchises to third parties which require
franchisees, among other things, to pay fees to the Borrower and/or its
Subsidiaries, make use of certain collection and administrative
services of the Borrower and its Subsidiaries and contribute to a
national advertising program and which entitle the franchisees, among
other things, to receive training from the Borrower and its
Subsidiaries, to have nonexclusive licenses to use on a limited basis
certain service marks, trademarks and trade names and other
intellectual property of or licensed to the Borrower and its
Subsidiaries, and to sell memberships to use facilities of the
franchisee and the Borrower and its Subsidiaries. A Franchise Program
may include the conversion of certain facilities owned by the Borrower
or its Subsidiaries to franchised facilities, so long as such
conversions are consummated on terms and conditions permitted under
this Agreement.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"GAAP EBITDA" means with respect to the Borrower and its
Subsidiaries on a consolidated basis, without duplication, for any
period of determination, (i) Consolidated Net Income (loss), PLUS, to
the extent deducted in determining Consolidated Net Income (loss), (ii)
provision for taxes, (iii) Consolidated Interest Expense, and (iv)
depreciation and amortization, all calculated in accordance with GAAP.
"GUARANTORS" means collectively, the Subsidiaries listed on
Exhibit D hereto (other than the Foreign Subsidiaries, Lincoln
Indemnity Company and Funding Corp.) and any other Subsidiary which
hereafter becomes a Guarantor pursuant to Section 3.04 (each
individually a "GUARANTOR").
"GUARANTY" means, as applied to any Debt, (i) a guaranty
(other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect,
15
9
in any manner, of any part or all of such obligation and (ii) an
agreement, direct or indirect, contingent or otherwise, the practical
effect of which is to assure in any way the payment or performance (or
payment of damages in the event of non-performance) of any part or all
of such obligation, including, without limiting the foregoing, the
payment of amounts drawn under letters of credit.
"H&T MASTER TRUST" means the trust created by the Pooling &
Servicing Agreement.
"HTCA" means Health & Tennis Corporation of America, a
Delaware corporation, which from and after June 1, 1995 is named Bally
Total Fitness Corporation.
"HAZARDOUS MATERIALS" means any (i) "hazardous substance" or
"toxic substances," as those terms are defined by the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"), 42
U.S.C. Section 9601 ET SEQ. and the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1802, all as amended or hereafter amended; (ii)
"hazardous waste", as defined by the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. Section 6901 ET SEQ., as amended or hereafter
amended; (iii) pollutant or contaminant or hazardous, dangerous or
toxic chemical, material, or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance, or
requirement (including consent decrees and administrative orders)
relating to protection of health, safety or the environment, as amended
or hereafter amended; (iv) crude oil or any fraction thereof which is
liquid at standard conditions of temperature and pressure (60 degrees
Fahrenheit and 14.7 pounds per square inch absolute); (v) any
radioactive material, including any source, special nuclear or
by-product material as defined at 42 U.S.C. Section 2011 ET SEQ., as
amended or hereafter amended; (vi) asbestos or asbestos containing
material ("ACM") in any form or condition and (vii) polychlorinated
biphenyls ("PCBs") or substances or compounds containing PCBs.
"HAZARDOUS MATERIALS CLAIMS" has the meaning ascribed to it in
Section 6.02(f).
"HAZARDOUS MATERIALS LAWS" means any federal, state or local
statute, regulation, ordinance or other legal requirement (including
consent decrees and administrative orders) relating to protection of
health, safety or environment, including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 ET SEQ.; the Clean
Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Clean Water Act, 33 U.S C.
Section 1251 ET SEQ.; the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 ET SEQ.; the Toxic Substances Control Act
("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; any similar state oR local
laws; any regulations promulgated pursuant to any of the foregoing; and
all of the foregoing as amended or hereafter amended.
"INDENTURE" means both the 1993 Indenture and the 1997
Indenture.
"INTANGIBLE ASSET" means any asset which is treated as an
intangible asset in conformity with GAAP, including, without
limitation, leasehold rights, franchise rights, non-compete agreements,
goodwill, unamortized debt discounts, patents, patent applications,
trademarks, trade names, copyrights and licenses.
"INTEREST EXPENSE HEDGING ARRANGEMENT" means an interest rate
swap, cap or collar agreement or similar arrangement entered into with
the intent of protecting against fluctuations in interest rates or the
exchange of notional interest obligations, either generally or under
specific contingencies.
16
10
"INTEREST PAYMENT DATE" means (a) as to any Reference Rate
Advance, the last Banking Day of each March, June, September and
December, (b) as to any Eurodollar Rate Advance having an Interest
Period of three months or less, the last day of such Interest Period,
and (c) as to any Eurodollar Rate Advance having an Interest Period
longer than three months, (i) each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and
(ii) the last day of such Interest Period.
"INTEREST PERIOD" means with respect to any Eurodollar Rate
Advance:
(a) initially, the period commencing on the borrowing
or conversion date, as the case may be, with respect to such
Eurodollar Rate Advance and ending one, two, three or six
months thereafter, as selected by the Borrower in its notice
of borrowing or notice of conversion, as the case may be,
given with respect thereto; and
(b) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such
Eurodollar Rate Advance and ending one, two, three or six
months thereafter, as selected by the Borrower by irrevocable
notice to the Agent not less than three Banking Days prior to
the last day of the then current Interest Period with respect
thereto;
PROVIDED that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar
Rate Advance would otherwise end on a day that is not a
Banking Day, such Interest Period shall be extended to the
next succeeding Banking Day unless the result of such
extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end
on the immediately preceding Banking Day;
(2) any Interest Period that would otherwise extend
beyond the Termination Date shall end on the Termination Date;
and
(3) any Interest Period pertaining to a Eurodollar
Rate Advance that begins on the last Banking Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Banking Day of a
calendar month.
"INVESTMENT" means any direct or indirect loans, advances,
capital contributions or transfers of assets, and any direct or
indirect purchases and other acquisitions of, or a beneficial interest
in, any capital stock or other securities; PROVIDED, HOWEVER, that the
allocation of corporate overhead to Foreign Subsidiaries shall not
constitute an "Investment". The amount of any Investment not consisting
of cash shall equal the Fair Market Value of such Investment at the
time it is made.
"ISSUING BANK" means Chase and other Banks acceptable to the
Agent and the Borrower.
"LENDING BRANCH" means with respect to each Bank the branches
or offices specified on the signature pages hereto or such other of its
branches or offices as such Bank may from time to time designate in
writing to Agent and Borrower.
17
11
"LETTER OF CREDIT" means any letter of credit issued by an
Issuing Bank pursuant to Section 2.15.
"LEVERAGE RATIO" means at any time the ratio of Consolidated
Total Funded Debt at such time to Consolidated Adjusted EBITDA for the
period of four consecutive fiscal quarters of the Borrower most
recently ended.
"L/C COMMITMENTS" means the commitments of Banks to issue or
participate in Letters of Credit and to make L/C Advances pursuant to
Section 2.15 in the aggregate maximum amount specified in Section
2.15(a)(i), as such amount may be reduced or terminated from time to
time hereunder.
"L/C COMMITMENT AMOUNT": at any time, means the difference
between (i) the lesser of (a) the Commitment Amount at such time and
(b) $30,000,000 and (ii) any L/C Commitment Reductions.
"L/C COMMITMENT REDUCTIONS" shall mean the amount of the
permanent reductions of the L/C Commitment Amount resulting from the
application of Sections 2.08 or 7.08 or any other provision contained
herein.
"LIEN" means a mortgage, security interest, pledge, deed of
trust, encumbrance, lien, option, tax lien, mechanics' lien,
materialmen's lien or charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code).
"MAJORITY BANKS" means at any time Banks having aggregate
Commitment Percentages of 66-2/3% or more.
"MARGIN REGULATIONS" means Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System, as amended from time
to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as
whole, (b) the validity or enforceability of (i) this Agreement, any of
the Notes or any of the other Credit Documents or (ii) the rights or
remedies of the Agent and the Banks hereunder or thereunder or (c) the
ability of the Borrower and its Subsidiaries to perform their
respective obligations under the Credit Documents.
"MORTGAGES" means all fee mortgages, leasehold mortgages,
assignments of leases, mortgage deeds, deeds of trust, deeds to secure
debt, security agreements, and other similar instruments described on
Exhibit F attached hereto, executed or to be executed by Borrower, the
Scandinavian Partnerships or the various Guarantors which shall provide
the Collateral Agent, for the benefit of the Secured Creditors, a Lien
on or other interest in any portion of any real property in which
Borrower or any Guarantor owns an interest.
"MULTIEMPLOYER PLAN" has the meaning ascribed to it in Section
3(37) of ERISA.
"NET CASH PROCEEDS OF SALE" shall mean cash proceeds
(including any cash received by way of deferred payments, purchase
price adjustments or otherwise, but only as and when so received)
received by Borrower or any of its Subsidiaries from the sale, lease,
assignment or
18
12
other disposition (but excluding any such disposition permitted by
Sections 7.08(a), (b), (c), (e) or (f) or the proviso to Section
7.08(d), and excluding any such proceeds to the extent they constitute
Reinvestment Proceeds) of any asset or property of such Person or any
insurance or condemnation awards net of (i) the reasonable and
customary costs directly incurred in connection with such transaction,
(ii) taxes actually paid or in good faith estimated to be payable as a
result thereof and (iii) amounts applied to the repayment of other Debt
secured by a Permitted Lien on the asset disposed of. If in determining
"Net Cash Proceeds of Sale", amounts are deducted for estimated taxes
payable, and such amounts are not actually paid when due by Borrower in
cash in accordance with all applicable laws, then such deducted amounts
shall constitute "Net Cash Proceeds of Sale".
"NEW CLUBS" means, with respect to any date, the collective
reference to each health and fitness club (i) owned and operated by the
Borrower or any Subsidiary and (ii) opened within 18-months prior to
such date.
"NEW VENTURES" means the collective reference to each Person
(other than Subsidiaries and Unrestricted Subsidiaries) in which the
Borrower or any Subsidiary makes its initial Investment after the date
hereof.
"1996-1 CERTIFICATES" means the certificates executed by
Funding Corp. and authenticated by the trustee under the Pooling &
Servicing Agreement representing interests in Series 1996-1 of the H&T
Master Trust.
"1996-1 SUPPLEMENT" means the Series 1996-1 Supplement, dated
as of December 16, 1996, by and among Funding Corp., HTCA and Texas
Commerce Bank National Association, as trustee, supplementing the
Pooling & Servicing Agreement, as the same may be amended, supplemented
or otherwise modified in accordance with the terms of this Agreement.
"1997 INDENTURE" means that certain Indenture, dated as of
October 7, 1997, between Borrower and First Trust National Association,
as trustee (and any successor trustee thereto) relating to the 1997
Subordinated Notes;
"1997 SUBORDINATED NOTES" has the meaning ascribed to it in
the definition of Subordinated Debt in Section 1.01.
"1993 INDENTURE" means that certain Indenture, dated as of
January 25, 1993, between Borrower and Amalgamated Bank of Chicago, as
trustee (and any successor trustee thereto), as in effect on the date
hereof;
"1993 SUBORDINATED NOTES" has the meaning ascribed to it in
the definition of Subordinated Debt in Section 1.01.
"OBLIGATIONS" means all loans, advances, debts, liabilities,
obligations, covenants and duties owing to Agent, the Collateral Agent,
any Bank, any Issuing Bank or any of them or any of their respective
successors and assigns, of any kind or nature, present or future,
arising under this Agreement or under the Notes or under any Collateral
Document, whether or not for the payment of money, whether arising by
reason of an extension of credit, opening or amendment of a letter of
credit (or payment of any draft drawn thereunder), loan, guaranty,
indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses,
19
13
fees, reasonable attorneys' fees and disbursements and paralegals'
fees, and any other sums chargeable to Borrower or any Guarantor under
this Agreement or any other Collateral Document.
"OPERATING BANK GUARANTY" means the Guaranty Agreement in the
form of Exhibit E hereto, as amended, supplemented or otherwise
modified, pursuant to which each of the Guarantors shall guaranty the
payment of the Operating Bank Obligations to the extent set forth
therein.
"OPERATING BANK OBLIGATIONS" means, collectively at any time,
up to Ten Million Dollars ($10,000,000) in the aggregate (including,
without limitation, principal, interest, fees, costs and expenses) of
the obligations of Borrower and/or any of its Subsidiaries to one or
more of the Operating Banks (including, without limitation, Chase in
its individual capacity) at such time under or by reason of any
customary banking deposit or disbursement transaction or service
performed for Borrower or any of its Subsidiaries in connection with
the Demand Deposit Accounts.
"OPERATING BANKS" means the Banks listed on Annex 1 to the
Operating Bank Guaranty and other Banks at which Borrower or any of its
Subsidiaries may from time to time establish Demand Deposit Accounts.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" means any one or more of the following:
(i) Liens for taxes, assessments, governmental
charges or levies either not yet delinquent (or, if
delinquent, in an aggregate amount not in excess of $100,000)
or the validity of which is being contested in good faith in
an appropriate manner diligently pursued and as to which
adequate reserves for the unpaid amount shall have been set
aside in conformity with GAAP;
(ii) Deposits or pledges to secure the payment of,
or to secure the Borrower's obligations with respect to
letters of credit that secure the payment of, workers'
compensation, unemployment insurance or social security or
other retirement benefits or obligations (exclusive of liens
arising under ERISA), or to secure the performance of bids,
trade contracts, leases, public or statutory obligations,
surety or appeal bonds and other obligations of a like nature
incurred in the ordinary course of business;
(iii) Materialmen's, mechanics', landlords',
workmen's, repairmen's, employees' or other like liens arising
in the ordinary course of business to secure obligations not
yet delinquent or being contested in good faith and as to
which adequate reserves for the unpaid amount shall have been
set aside in conformity with GAAP or as to which adequate
bonds shall have been obtained;
(iv) Purchase money liens, purchase money security
interests, mortgages or title retention arrangements upon or
in any property (real or personal) acquired or held by
Borrower or its Subsidiaries in the ordinary course of
business to secure Debt (including, without limitation,
Capitalized Leases) permitted hereunder (provided that the
security agreement or conditional sales or other title
retention contract pursuant to
20
14
which the Lien on such property is created shall be entered
into within 120 days after the purchase or substantial
completion of the construction of such property) and incurred
solely for the purpose of financing the acquisition of such
property or improvements upon such property, or renewals,
extensions or refinancing thereof; PROVIDED, that any renewal,
extension or refinancing thereof shall not consist of any
capitalization of interest on the original Debt and such Liens
do not extend to any property of Borrower or any Subsidiary
other than the property acquired or financed with the original
purchase money Debt;
(v) Other Liens, so long as the aggregate amount
of all such other Liens does not exceed at any time an
aggregate amount of One Million Dollars ($1,000,000);
(vi) Other non-monetary Liens which do not have a
material adverse effect on the value or use of the property
subject to such Liens;
(vii) Precautionary UCC filings executed by
Borrower or any Subsidiary, as lessee, in the ordinary course
of business, on equipment, leasehold improvements and
furnishings;
(viii) Liens under the Collateral Documents;
(ix) Liens related to credit card processing
agreements, so long as the aggregate amount of such Liens does
not exceed at any time an aggregate amount of Three Million
Dollars ($3,000,000);
(x) Other existing Liens listed on Schedule 1.01;
(xi) Liens created after the Closing Date securing
Debt of the Borrower or any Subsidiary of the type described
in clause (iii) of the definition of "Debt", the incurrence of
which Debt is in the ordinary course of business of the
Borrower or such Subsidiary, and any renewals, extensions or
refinancings of such Debt permitted hereunder that do not
consist of any capitalization of interest on the original
Debt, PROVIDED that such Liens shall not extend to or encumber
any property other than the property financed by such Debt;
(xii) Liens on the Collateral securing revolving
credit commitments or letter of credit commitments from other
banks or financial institutions during the Commitment Period
permitted under Section 7.02(e); PROVIDED that Liens are pari
passu or subordinated to the Liens of the Collateral Agent and
the Banks hereunder and under the Collateral Documents; and
(xiii) Liens on the Receivables Program Receivables
created pursuant to the Receivables Program Documents.
"PERSON" means an individual, a corporation, a partnership,
limited liability company, a joint venture, an association, a trust or
any other entity or organization, including a governmental or political
subdivision or an agent or instrumentality thereof.
"PLAN" means, at any date, any employee pension benefit plan
(as defined in Section 3(2) of ERISA) which is subject to Title IV of
ERISA (other than a Multiemployer Plan) and to which Borrower or any
ERISA Affiliate may have any liability, including any liability by
21
15
reason of having been a substantial employer within the meaning of
Section 4063 of ERISA at any time during the preceding five years, or
by reason of being deemed to be a contributing sponsor under Section
4069 of ERISA.
"POOLING & SERVICING AGREEMENT" means the Pooling & Servicing
Agreement, dated as of June 26, 1995, as amended and restated by the
Amended and Restated Pooling and Servicing Agreement dated as of
December 16, 1996, among Funding Corp., HTCA, and Texas Commerce Bank
National Association, as trustee, as the same may be amended,
supplemented or otherwise modified in accordance with the terms of this
Agreement.
"PROPERTIES" means all real properties owned in fee by
Borrower or its Subsidiaries or the Scandinavian Partnerships and all
real properties in which Borrower or its Subsidiaries hold a leasehold
interest.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of
June 26, 1995, as amended and restated by the Amended and Restated
Purchase Agreement dated as of December 16, 1996, between Funding Corp.
and HTCA, as the same may be amended, supplemented or otherwise
modified in accordance with the terms of this Agreement.
"RECEIVABLES PROGRAM" means the program of sales of
Receivables Program Receivables from time to time by the Borrower and
its Subsidiaries to the H&T Master Trust pursuant to, and in accordance
with the terms and conditions of, the Receivables Program Documents.
"RECEIVABLES PROGRAM CERTIFICATES" means, collectively, the
1996-1 Certificates and all other certificates issued pursuant to the
Pooling & Servicing Agreement or any supplement thereto representing
interests in any series of the H&T Master Trust (other than any such
certificate held by Funding Corp. or any other Subsidiary of the
Borrower), as the same may be amended, supplemented or otherwise
modified in accordance with the terms of this Agreement.
"RECEIVABLES PROGRAM DOCUMENTS" means, collectively, the
Pooling & Servicing Agreement, the 1996-1 Supplement, the 1996-1
Certificates, all other supplements to the Pooling & Servicing
Agreement (including, without limitation, any supplement relating to
any series of Refinancing Certificates), all other Receivables Program
Certificates, the Purchase Agreement, all other purchase agreements
with respect to Receivables Program Receivables entered into in
connection with the Pooling & Servicing Agreement, and all other
agreements entered into in connection with the Receivables Program,
including, without limitation, any servicing agreements entered into
with any servicer of the Receivables Program Receivables, as any of the
same may be amended, supplemented or otherwise modified in accordance
with the terms of this Agreement.
"RECEIVABLES PROGRAM RECEIVABLE" means all right, title and
interest transferred to the H&T Master Trust for the benefit of the
holders of the Receivable Program Certificates, pursuant to the
Receivables Program Documents, in (a) the right to payment of amounts
in respect of the membership fee (including any sales tax thereon) and
finance charges relating thereto under an agreement made by HTCA or
another Subsidiary of HTCA, in the form of a written retail installment
sale contract, for membership in and the right to use facilities at,
and obtain services from, one or more health clubs owned by HTCA or
another Subsidiary of HTCA, (b) prior to the release thereof pursuant
to Section 2.2(b) of the Pooling & Servicing Agreement from the Trust
Property (as defined in the Pooling & Servicing Agreement), all
22
16
amounts paid from time to time pursuant to such written retail
installment sale contract in respect of monthly dues, nsf fees, late
payment fees, cancellation fees for relocation cancellations, transfer
fees to transfer a membership, lost membership card replacement fees,
or other payments not constituting Collections or Transferor
Collections (as defined in the Pooling & Servicing Agreement), and
proceeds thereof (including without limitation amounts held in accounts
for the benefit of the H&T Master Trust and investments of such
amounts), and (c) such written retail installment sale contract and any
rights against the originator or seller thereof under the Purchase
Agreement or the other purchase agreements included in the Receivables
Program Documents, PROVIDED that any such right, title or interest in
any of the property identified in the foregoing clauses (a), (b) or (c)
of this definition shall automatically cease to constitute "Receivables
Program Receivables" at such time as each of the following conditions
is satisfied: (i) all Receivables Program Certificates are paid in
full, (ii) the H&T Master Trust is terminated pursuant to Section 12.1
of the Pooling & Servicing Agreement and, pursuant to Section 12.4 of
the Pooling & Servicing Agreement, the Exchangeable Transferor
Certificate is surrendered to the trustee in connection with the
reconveyance by the trustee to Funding Corp. of all right, title and
interest of the H&T Master Trust in the Receivables Program Receivables
and other property of the H&T Master Trust (except for amounts held by
the trustee pursuant to Section 12.3(b) of the Pooling & Servicing
Agreement), and (iii) in accordance with GAAP, the accounts receivable
constituting Receivables Program Receivables prior to such reconveyance
are upon such reconveyance properly included within Contract
Receivables on the consolidated balance sheet of the Borrower and its
consolidated Subsidiaries.
"REFERENCE RATE" means, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "PRIME RATE"
shall mean the rate of interest per annum publicly announced from time
to time by Chase as its prime rate in effect at its principal office in
New York City (each change in the Prime Rate to be effective on the
date such change is publicly announced); "BASE CD RATE" shall mean the
sum of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) a fraction, the numerator of which is one and the denominator of
which is one minus the C/D Reserve Percentage and (b) the C/D
Assessment Rate; "THREE-MONTH SECONDARY CD RATE" shall mean, for any
day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the "BOARD") through the
public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on
such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business Day) by the Agent
from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it; "C/D ASSESSMENT RATE" shall mean,
for any day, the net annual assessment rate (rounded upward to the
nearest 1/100th of 1%) determined by Chase to be payable on such day to
the Federal Deposit Insurance Corporation or any successor ("FDIC") for
FDIC's insuring time deposits made in Dollars at offices of Chase in
the United States; "C/D RESERVE PERCENTAGE" shall mean, for any day,
that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board, for determining the maximum reserve
requirement for a member bank of the Federal Reserve System in New York
City with deposits exceeding one billion Dollars
23
17
in respect of new non-personal time deposits in Dollars in New York
City having a maturity of three months and in an amount of $100,000 or
more; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Agent from three federal
funds brokers of recognized standing selected by it. If for any reason
the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the
Base CD Rate or the Federal Funds Effective Rate, or both, for any
reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms thereof, the
Reference Rate shall be determined without regard to clause (b) or (c),
or both, of the first sentence of this definition, as appropriate,
until the circumstances giving rise to such inability no longer exist.
Any change in the Reference Rate due to a change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall
be effective on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"REFERENCE RATE ADVANCE" means an Advance the rate of interest
applicable to which is based upon the Reference Rate.
"REFINANCING CERTIFICATES" shall have the meaning set forth in
Section 7.09(d).
"REINVESTMENT PROCEEDS" means, at any time, all net proceeds
of dispositions of any assets by Borrower and its Subsidiaries (but
excluding any such dispositions permitted by Sections 7.08(a), (b),
(c), (e) or (f) or the proviso to Section 7.08(d)), to the extent that
(i) such net proceeds have not yet been applied to the acquisition of
like-kind replacement assets or to the permanent reduction of the
Commitment Amount and the Revolving Credit Commitment Amount and the
prepayment of the Advances and cash collateralization of the Letters of
Credit, and with respect to which less than 360 days has elapsed since
the disposition giving rise to such proceeds, or (ii) an amount equal
to or greater than such net proceeds has been applied to the
acquisition of like-kind replacement assets within 180 days prior to
the disposition giving rise to such proceeds, PROVIDED that, to the
extent that the Borrower and its Subsidiaries dispose of assets the net
proceeds of the disposal of which exceed $10,000,000 (but excluding any
such dispositions permitted by Sections 7.08(a), (b), (c), (e) or (f)
or the proviso to Section 7.08(d)) in any fiscal year of the Borrower,
any net proceeds of assets disposed of during such fiscal year in
excess of such aggregate amount shall not be Reinvestment Proceeds.
"REINVESTMENT PROCEEDS AMOUNT" means, at any time, the
aggregate amount of Reinvestment Proceeds at such time.
"REPORTABLE EVENT" shall be as defined in Section 4043 of
ERISA.
"RESTRICTED PAYMENT" means with respect to any Person (a) any
dividend or other distribution of assets, properties, cash, rights,
obligations or securities, direct or indirect, on account of any shares
of any class of the capital stock or other equity interests of such
Person; or (b) any amount paid in redemption, retirement, repurchase,
direct or indirect, of (x) any shares of any class of capital stock or
other equity interests or (y) any warrants, options or other rights to
acquire any shares of any class of capital stock or other equity
interests of such Person.
24
18
"REVOLVING CREDIT" means the credit described in Section 2.01
hereof.
"REVOLVING CREDIT COMMITMENT" has the meaning ascribed to it
in Section 2.01(a).
"REVOLVING CREDIT COMMITMENT AMOUNT": means (i) the lesser of
(a) the Commitment Amount and (b) $70,000,000 (ii) less any Revolving
Credit Commitment Reductions.
"REVOLVING CREDIT COMMITMENT REDUCTIONS" shall mean the amount
of the permanent reductions of the Revolving Credit Commitment Amount
resulting from the application of Sections 2.08, 2.10 or 7.08 or any
other provision contained herein.
"REVOLVING NOTE" or "NOTE" means the master promissory note of
Borrower payable to the order of a Bank in substantially the form of
Exhibit H hereto; and "REVOLVING NOTES" or "NOTES" means all of such
Revolving Notes.
"SCANDINAVIAN PARTNERSHIPS" means those certain partnerships
listed on Schedule 1.01(b) hereto.
"SECURED CREDITORS" means, collectively, Chase (as successor
to Manufacturers Hanover Trust Company and Chemical Bank) and the
Operating Banks in their separate financial arrangements with Borrower,
and the Agent, the Collateral Agent, the Banks and the Issuing Banks,
each in connection with the Secured Obligations.
"SECURED OBLIGATIONS" means, collectively, the Obligations and
the Operating Bank Obligations.
"SENIOR INDEBTEDNESS" means Senior Indebtedness of Borrower as
defined in each of 1993 Indenture and the 1997 Indenture.
"SUBORDINATED DEBT" means (a) Borrower's 13% Senior
Subordinated Notes ("1993 Subordinated Notes") due January 15, 2003,
issued under and pursuant to the 1993 Indenture, (b) Borrower's 9-7/8%
Senior Subordinated Notes due 2007, issued under and pursuant to the
1997 Indenture ("1997 Subordinated Notes", and together with the 1993
Subordinated Notes, the "Subordinated Notes"), and (c) any other Debt
of Borrower which is subordinated to the Debt created under this
Agreement and the Notes in a manner and containing terms and provisions
satisfactory to Majority Banks.
"SUBORDINATED NOTES" has the meaning ascribed to it in the
definition of Subordinated Debt in Section 1.01.
"SUBSIDIARY" means any corporation, association or other
business entity of which a Person owns, directly or indirectly, more
than fifty percent (50%) of the voting securities thereof or which such
Person otherwise controls; PROVIDED that, other than for purposes of
Sections 6.08 and 7.14, the definition of "Subsidiary" shall not
include any Unrestricted Subsidiary. Unless the reference is
specifically otherwise, "Subsidiary" shall refer to a Subsidiary of
Borrower.
"SUBSTANTIAL SUBSIDIARY" means any Subsidiary of Borrower with
respect to which (a) the aggregate book value of its assets, determined
in accordance with GAAP at such time, is greater than 1% of the
aggregate book value of the assets of Borrower and its Subsidiaries
taken as a whole or (b) the aggregate gross revenues of such
Subsidiary, determined in
25
19
accordance with GAAP for the immediately preceding fiscal quarter, is
greater than 1% of the aggregate gross revenues of Borrower and its
Subsidiaries taken as a whole, for such period.
"TAX ALLOCATION AND INDEMNITY AGREEMENT" means the Tax
Allocation and Indemnity Agreement, dated as of January 9, 1996, among
Bally Entertainment Corporation, a Delaware corporation, the Borrower
and their respective direct and indirect subsidiaries.
"TERMINATION DATE" means the earliest to occur of
(a) the date the Commitment Amount is terminated by
the Borrower pursuant to Section 2.10 or is otherwise
terminated or reduced to zero pursuant to the terms of this
Agreement, PROVIDED that all amounts payable under this
Agreement and the Notes are fully repaid on or prior to such
date,
(b) the date the Credit hereunder is terminated or
accelerated pursuant to Article VIII, and
(c) November 18, 2000.
"TERMINATION EVENT" means (i) the institution of steps by
Borrower, an ERISA Affiliate, PBGC or any other Person under Section
4041 or 4042, as applicable, of ERISA to terminate a Plan, (ii) the
occurrence of a Reportable Event which is a basis under Section 4042 of
ERISA for PBGC to institute steps to terminate a Plan, (iii) the
occurrence of a contribution failure with respect to a Plan sufficient
to give rise to a lien under Section 302(f) of ERISA, (iv) the
withdrawal by Borrower or any ERISA Affiliate from a Plan as to which
it is a substantial employer under Sections 4062(e) and 4063 of ERISA
or (v) the withdrawal by Borrower or any ERISA Affiliate from a
Multiemployer Plan under Section 4203 or 4205 of ERISA.
"TRANSFEREE" has the meaning ascribed to it in Section
9.04(c).
"TYPE" means, as to any Advance, its nature as a Reference
Rate Advance or a Eurodollar Rate Advance.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the
Borrower that exists on the Closing Date and is so designated as an
Unrestricted Subsidiary on Schedule 1.01(c), (ii) any subsidiary of the
Borrower that at the time of determination shall be an Unrestricted
Subsidiary (as designated by the Board of Directors of the Borrower, as
provided below), and (iii) any subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any subsidiary of the
Borrower (including any newly acquired or newly formed subsidiary) to
be an Unrestricted Subsidiary if all of the following conditions apply:
(a) neither the Borrower nor any of its Subsidiaries provides credit
support for Debt or other obligations of such Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Debt or obligations), (b) such Unrestricted Subsidiary is not liable,
directly or indirectly, with respect to any Debt other than
Unrestricted Subsidiary Indebtedness, (c) any Investment by the
Borrower in such Unrestricted Subsidiary made as a result of
designating such subsidiary an Unrestricted Subsidiary shall not
violate the provisions described under Section 7.01 and such
Unrestricted Subsidiary is not party to any agreement, contract,
arrangement or understanding at such time with the Borrower or any
other Subsidiary of the Borrower unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable
to the Borrower or such other Subsidiary than those that might be
obtained at the time from Persons
26
20
who are not Affiliates of the Borrower or, in the event such condition
is not satisfied, the value of such agreement, contract, arrangement or
understanding to such Unrestricted Subsidiary shall be deemed an
Investment, and (d) such Unrestricted Subsidiary does not own any
Capital Stock in any Subsidiary of the Borrower which is not
simultaneously being designated an Unrestricted Subsidiary. Any such
designation by the Board of Directors shall be evidenced to the Agent
by filing with the Agent a resolution of the Board of Directors of the
Borrower giving effect to such designation and an officer's certificate
certifying that such designation complies with the foregoing conditions
and any Investment by the Borrower in such Unrestricted Subsidiary
shall be deemed the making of an Investment on the date of designation
in an amount equal to the greater of (1) the net book value of such
Investment or (2) the Fair Market Value of such Investment as
determined in good faith by the Board of Directors (and evidenced by a
resolution of the Board of Directors). The Board of Directors may
designate any Unrestricted Subsidiary as a Subsidiary; PROVIDED (i)
that, if such Unrestricted Subsidiary has any Debt, immediately after
giving effect to such designation, no Default or Event of Default would
result, and (ii) that all Debt of such Subsidiary shall be deemed to be
incurred on the date such Unrestricted Subsidiary becomes a Subsidiary.
"UNRESTRICTED SUBSIDIARY INDEBTEDNESS" of any Unrestricted
Subsidiary means Debt of such Unrestricted Subsidiary (a) as to which
neither the Borrower nor any Subsidiary is directly or indirectly
liable (by virtue of the Borrower or any such Subsidiary being the
primary obligor on, guarantor of, or otherwise liable in any respect
to, such Debt), and (b) which, upon the occurrence of a default with
respect thereto, does not result in, or permit any holder of any Debt
of the Borrower or any Subsidiary to declare, a default on such Debt of
the Borrower or any Subsidiary or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
1.02 FINANCIAL STANDARDS. All accounting terms not expressly
defined herein shall be construed, except where the context otherwise requires
or if it has otherwise been indicated herein, in accordance with GAAP. If any
changes in accounting principles are hereafter occasioned by promulgation of
rules, regulations, pronouncements or opinions by or are otherwise required by
the Securities and Exchange Commission, the Financial Accounting Standards Board
or the American Institute of Certified Public Accountants (or successors thereto
or agencies with similar functions), and any of such changes result in a change
in the method of calculation of, or affect the results of such calculation of,
any of the financial covenants and the definitions relating to such financial
covenants, then the parties hereto agree to enter into and diligently pursue
negotiations in order to amend such financial covenants or terms so as to
equitably reflect such changes, with the desired result that the criteria for
evaluating Borrower's financial condition and results of operations shall be the
same after such changes as if such changes had not been made.
1.03 INTERPRETATION. References to Exhibits and Schedules are
to those to this Agreement, unless otherwise indicated. References to agreements
and other contractual instruments shall be deemed to include all exhibits and
appendices attached thereto and all amendments, supplements and other
modifications to such instruments, but only to the extent such amendments,
supplements and other modifications are not prohibited by the terms of this
Agreement; and references to Persons include their respective permitted
successors and assigns and, in the case of governmental authorities, Persons
succeeding to their respective functions and capacities.
ARTICLE II.
27
21
THE CREDIT
----------
2.01 THE REVOLVING CREDIT. (a) From time to time during the
Commitment Period and subject to the terms and conditions of this Agreement,
each Bank severally agrees to lend to Borrower sums at any one time outstanding
not in excess of an aggregate amount equal to such Bank's Commitment Percentage
of the Revolving Credit Commitment Amount (as to each Bank its "Revolving Credit
Commitment") PROVIDED, that no Bank shall make any Advance if, after giving
effect to such Advance, the aggregate outstanding principal amount of all
Advances plus the aggregate undrawn amount of all Letters of Credit then
outstanding plus the aggregate amount of all unreimbursed drawings under Letters
of Credit would exceed the Commitment Amount. Each Bank's maximum obligation
under the Revolving Credit at any time is the amount derived by multiplying its
Commitment Percentage by the Revolving Credit Commitment Amount.
(b) The Revolving Credit is a revolving credit and Borrower
may, prior to the Termination Date, borrow, repay and reborrow amounts repaid up
to the maximum amount available under Section 2.01(a), subject to the reductions
required by Section 2.08 hereof and the reductions permitted by Section 2.10
hereof.
(c) The Revolving Credit may from time to time consist of (i)
Eurodollar Rate Advances, (ii) Reference Rate Advances or (iii) a combination
thereof, as determined by the Borrower and notified to the Agent in accordance
with Section 2.02, PROVIDED that no Advance shall be made as a Eurodollar Rate
Advance after the day that is one month prior to the Termination Date.
2.02 REQUESTS FOR ADVANCES; CONVERSION AND CONTINUATION
OPTIONS. (a) Each Advance shall be made upon the irrevocable request of Borrower
received by Agent by 12:00 p.m. noon, New York time, on the Borrowing Date
therefor in the case of Reference Rate Advances and three (3) Banking Days prior
to the Borrowing Date therefor in the case of Eurodollar Rate Advances,
specifying: (i) the Borrowing Date for such Advance, which shall be a Banking
Day; (ii) the amount of such Advance; (iii) whether the Advance is to be of
Reference Rate Advances, Eurodollar Rate Advances or a combination thereof; (iv)
if the Advance is to consist entirely or partly of Eurodollar Rate Advances, the
amount of such Eurodollar Rate Advances and the length of the initial Interest
Period therefor; and (v) the account of Borrower with Agent for the deposit of
the proceeds of such Advance.
(b) Each request for an Advance may be made in writing or by
telephone, provided, however, that any such telephonic request shall be
confirmed immediately by telecopier and also in writing delivered to Agent by
Borrower not more than three (3) Banking Days after the date such telephonic
request is made, PROVIDED, HOWEVER, that telephonic requests shall be subject to
the indemnity provisions set forth in Section 9.07 hereof.
(c) Upon receipt of such borrowing request, Agent shall
promptly notify Banks thereof.
(d) Each Reference Rate Advance hereunder shall be in the
minimum aggregate amount of One Million Dollars ($1,000,000) or in integral
multiples of Five Hundred Thousand Dollars ($500,000) in excess thereof (or, if
the excess of the Revolving Credit Commitments then in effect over the aggregate
principal amount of all Advances then outstanding is less than $1,000,000, such
lesser amount). Each Eurodollar Rate Advance shall be in the minimum aggregate
amount of Five Million Dollars ($5,000,000) or in integral multiples of One
Million Dollars ($1,000,000) in excess thereof.
28
22
(e) Each Advance shall be made on a pro rata basis by all
Banks, and each Bank's portion of each Advance shall be equal to its Commitment
Percentage of such Advance.
(f) The Borrower may elect from time to time to convert
Eurodollar Rate Advances to Reference Rate Advances by giving the Agent at least
two Banking Days' prior irrevocable notice of such election, PROVIDED that any
such conversion of Eurodollar Rate Advances may only be made on the last day of
an Interest Period with respect thereto. The Borrower may elect from time to
time to convert Reference Rate Advances to Eurodollar Rate Advances by giving
the Agent at least three Banking Days' prior irrevocable notice of such
election. Any such notice of conversion to Eurodollar Rate Advances shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Agent shall promptly notify each Bank
thereof. All or any part of outstanding Eurodollar Rate Advances or Reference
Rate Advances may be converted as provided herein, PROVIDED that (i) no Advance
may be converted into a Eurodollar Rate Advance when any Default or Event of
Default has occurred and is continuing and the Agent or the Majority Banks have
determined that such a conversion is not appropriate, and (ii) no Advance may be
converted into a Eurodollar Rate Advance after the date that is one month prior
to the Termination Date.
(g) Any Eurodollar Rate Advances may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Borrower's giving notice to the Agent, in accordance with the applicable
provisions of the term "Interest Period" set forth in Section 1.01, of the
length of the next Interest Period to be applicable to such Advance, PROVIDED
that no Eurodollar Rate Advance may be continued as such (i) when any Default or
Event of Default has occurred and is continuing and the Agent or the Majority
Banks have determined that such a continuation of a Eurodollar Rate Advance is
not appropriate, or (ii) after the date that is one month prior to the
Termination Date and PROVIDED, FURTHER, that if the Borrower shall fail to give
any required notice as described above in this paragraph or if such continuation
is not permitted pursuant to the preceding proviso such Advances shall be
automatically converted to Reference Rate Advances on the last day of such then
expiring Interest Period.
2.03 LENDING BRANCH AND EVIDENCE OF CREDIT. (a) Each Bank's
proportionate interest in the Revolving Credit shall be evidenced by a Revolving
Note. Each such Revolving Note shall be executed by Borrower, dated the Closing
Date and provide for the payment of interest and principal in accordance with
the terms of this Agreement. Each Bank shall record in its records, or at its
option on the schedule attached to its respective Revolving Note, the date,
amount and Type of each Advance made by such Bank and each repayment thereof,
each continuation thereof, each conversion of all or a portion thereof to
another Type and, in the case of Eurodollar Rate Advances, the length of each
Interest Period with respect thereto. The aggregate unpaid principal amount so
recorded shall constitute PRIMA FACIE evidence of the principal amount owing and
unpaid on such Revolving Note absent manifest error. The failure so to record
any such amount or any error in so recording any such amount shall not, however,
limit or otherwise affect the obligations of Borrower hereunder or under any
Revolving Note to repay the principal amount of the Advances together with all
interest accruing thereon and fees accruing with respect thereto.
(b) Each Bank's proportionate interest in each Advance and
each payment to such Bank under this Agreement and the Revolving Notes shall be
made for the account of such Bank's Lending Branch.
2.04 COMPUTATION OF AND PAYMENT OF INTEREST. (a) From and
including the relevant Borrowing Date to the Termination Date, the outstanding
principal balance of each Advance hereunder, subject to Section 2.04(d), shall
bear interest until paid in full at a rate per annum equal to:
29
23
(i) with respect to Reference Rate Advances, at the
Reference Rate for each day plus the Applicable Margin; and
(ii) with respect to Eurodollar Rate Advances, for each
day during an Interest Period therefor, at the Eurodollar Rate for such
day plus the Applicable Margin;
(b) Interest on each Advance shall be paid in arrears on each
Interest Payment Date. Interest shall also be payable on the date of any
prepayment of Advances pursuant to Section 2.08 or 2.09(b) for the portion of
the Advances so prepaid and upon payment (including prepayment) in full thereof
and, after the occurrence and during the continuance of any Event of Default,
interest shall be payable on demand.
(c) Interest on Reference Rate Advances calculated on the
basis of the Prime Rate shall be computed on the basis of a year of three
hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may
be; otherwise, interest and fees payable hereunder shall be computed on the
basis of a year of three hundred sixty (360) days, in each case for actual days
elapsed, including the first day and excluding the last day.
(d) During the period (i) from and including the stated due
date for payment of any amount under this Agreement or the date of acceleration
of any amount pursuant to Article VIII which Borrower fails to pay on such due
date or date of acceleration and (ii) to but excluding the date on which such
amount is paid in full, Borrower shall, on demand and to the extent permitted by
applicable law, pay interest on such unpaid amount at a rate per annum equal to
(A) in the case of overdue principal of Revolving Credit, the sum of the rate of
interest otherwise applicable to such unpaid amount plus two percent (2%) or (B)
in the case of any other overdue amount, the Reference Rate plus the Applicable
Margin plus 2%; PROVIDED, HOWEVER, that upon the occurrence and during the
continuation of an Event of Default under Section 8.01(a), the entire principal
amount of the Advances outstanding hereunder and under the Notes shall bear
interest as provided in this Section 2.04(d). Interest under this Section
2.04(d) shall be computed on the basis of a three hundred sixty (360) day year
and actual days elapsed.
(e) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Banks in the absence of manifest error. The Agent shall, at
the request of the Borrower, deliver to the Borrower a statement showing the
quotations used by the Agent in determining any interest rate pursuant to
Section 2.04(a).
(f) If prior to the first day of any Interest Period:
(i) the Agent shall have determined (which determination
shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(ii) the Agent shall have received notice from the Majority
Banks that the Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to such
Banks (as conclusively certified by such Banks) of making or
maintaining their affected Advances during such Interest Period,
then the Agent shall give telecopy or telephonic notice thereof to the Borrower
and the Banks as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Rate Advances requested to be made on the first day of such Interest
Period shall be made as Reference Rate Advances, (y) any
30
24
Advances that were to have been converted on the first day of such Interest
Period to Eurodollar Rate Advances shall be converted to or continued as
Reference Rate Advances and (z) any outstanding Eurodollar Rate Advances shall
be converted, on the first day of such requested Interest Period, to Reference
Rate Advances. Until such notice has been withdrawn by the Agent, no further
Eurodollar Rate Advances shall be made or continued as such, nor shall the
Borrower have the right to convert Advances to Eurodollar Rate Advances. The
Agent shall give telecopy or telephonic notice of such withdrawal to the
Borrower and the Banks as soon as practicable thereafter.
2.05 PAYMENT OF ADVANCES. Borrower shall repay the outstanding
amount of all Advances made pursuant to the Revolving Credit on the Termination
Date.
2.06 PAYMENTS. (a) Each payment to Borrower hereunder, and
each payment of principal, interest and other sums due from Borrower under this
Agreement shall be made in immediately available funds at Agent's address for
payments indicated on the signature page of this Agreement.
(b) Each Bank agrees that upon receipt of notice from Agent,
it will make the funds which it is to advance hereunder available to Agent at
Agent's address for payments indicated on the signature page of this Agreement
not later than 1:00 p.m., New York time, on the date of disbursement, and Agent
will thereupon advance to Borrower the amount so received from Banks.
(c) Payment of all sums under this Agreement shall be made by
Borrower to Agent for the account of Banks, and the Agent shall promptly
distribute to each Bank its share of such payments by wire transfer of
immediately available funds. Each payment by Borrower shall be made without
setoff, deduction or counterclaim not later than 1:00 p.m., New York time, on
the day such payment is due. All sums received after such time shall be deemed
received on the next Banking Day and such extension of time shall be included in
the computation of payment of interest, fees or other sums, as the case may be.
(d) Unless Agent shall have been notified by telephone
(confirmed in writing), by any Bank prior to a borrowing date, that such Bank
will not make available to Agent the amount which would constitute its
Commitment Percentage of the Advances to be made on such date, Agent may assume
that such Bank has made such amount available to Agent and, in reliance thereon,
may (but shall not be required to) make available to Borrower a corresponding
amount. If such Bank makes its Commitment Percentage of an Advance available to
Agent after a borrowing date, such Bank shall pay to Agent on demand an amount
equal to the product of (i) the daily average Federal Funds Rate from and
including the borrowing date to but excluding the date the Commitment Percentage
of such Advance was made available to Agent (the "Out of Funds Period")
multiplied by (ii) an amount equal to its Commitment Percentage of such Advance
multiplied by (iii) the quotient of the number of days in the Out of Funds
Period divided by 365 or 366, as the case may be. A certificate from Agent
submitted to any Bank with respect to any amounts owing under this paragraph (d)
shall be conclusive in the absence of manifest error. If any Bank's Commitment
Percentage of an Advance is not in fact made available to Agent by such Bank
within one (1) Banking Day after a borrowing date, Agent shall be entitled to
recover such amount, with interest thereon at the rate per annum then applicable
to the Advances hereunder, on demand from Borrower, without prejudice to Agent's
and Borrower's rights against such defaulting Bank.
(e) Unless Agent shall have been notified by telephone
(confirmed in writing), by Borrower, prior to any date on which a payment is due
hereunder, that Borrower will not make the required payment on such date, Agent
may assume that Borrower will make such payment to Agent and, in reliance upon
such assumption, may (but shall not be required to) make available to each Bank
31
25
the amount due to it on such date. If such amount is not in fact paid to Agent
by Borrower within one (1) Banking Day after such payment is due, Agent shall be
entitled to recover from each Bank the amount paid to it by Agent, together with
interest thereon in the amount equal to the product of (i) the daily average
Federal Funds Rate from and including the payment date to but excluding the date
the payment was made available to Agent (the "Out of Funds Interval") multiplied
by (ii) an amount equal to such Bank's Commitment Percentage of the amount paid
multiplied by (iii) the quotient of the number of days in the Out of Funds
Interval divided by 365 or 366, as the case may be. A certificate from Agent
submitted to any Bank with respect to any amounts owing under this paragraph (e)
shall be conclusive in the absence of manifest error.
2.07 OPTIONAL PREPAYMENTS. Upon written notice (or telephone
notice confirmed promptly in writing) received by Agent not later than 12:00
noon, New York City time, on the date thereof, Borrower may at any time prepay
any Reference Rate Advance in full or in part, without premium or penalty, in
the amount of One Million Dollars ($1,000,000) or an integral multiple of Five
Hundred Thousand Dollars ($500,000) in excess thereof (or, if the outstanding
principal amount of all Reference Rate Advances is less that $1,000,000, such
lesser amount). Upon written notice (or telephone notice confirmed promptly in
writing) received by Agent not later than 12:00 noon, New York time, received at
least three (3) Banking Days prior to the date of prepayment, which notice shall
specify the date and amount of prepayment and the amount of Eurodollar Rate
Advances being prepaid, Borrower may on the last day of any Interest Period with
respect thereto prepay any Eurodollar Rate Advance in full or in part, without
premium or penalty (other than costs required to be paid pursuant to Section
2.13(d)), in the amount of Five Million Dollars ($5,000,000) or an integral
multiple of One Million Dollars ($1,000,000) in excess thereof. Each such
prepayment made pursuant to this Section 2.07 may be reborrowed subject to the
terms and conditions of this Agreement. Any prepayments made pursuant to this
Section 2.07 shall be applied FIRST to Reference Rate Advances then outstanding
and THEN to Eurodollar Rate Advances then outstanding, subject to Section
2.13(d).
2.08 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS. (a)
Within ten (10) days of the date of receipt by Borrower or any of its
Subsidiaries of any Net Cash Proceeds of Sale, Borrower shall make a mandatory
prepayment, without premium or penalty (other than costs required to be paid
pursuant to Section 2.13(d)), of the outstanding Advances or, to the extent that
at such time no Advances are outstanding, shall cash collateralize any
outstanding Letters of Credit, in an amount equal to 100% of such Net Cash
Proceeds of Sale. In the event a mandatory prepayment or cash collateralization
is required to be made under this Section 2.08(a), the Commitment Amount shall
be permanently reduced immediately by the amount thereof.
(b) If at any time (A) the sum of the aggregate principal
amount of the outstanding Advances plus the aggregate undrawn amount of all
outstanding Letters of Credit plus the aggregate amount of all unreimbursed
drawings under Letters of Credit shall exceed (B) the excess of Commitment
Amount over the Reinvestment Proceeds Amount, Borrower shall, without demand or
notice, prepay Advances or cash collateralize or replace Letters of Credit in
such amount as may be necessary to eliminate such excess, and Borrower shall
take such action on the Banking Day on which Borrower learns or is notified of
the excess, if Borrower so learns or is so notified prior to 1:00 p.m. (New York
City time) on such day, and otherwise on the immediately succeeding Banking Day.
Notwithstanding any contrary provision contained herein, the prepayment of any
Advance or cash collateralization or replacement of any Letter of Credit
hereunder (including, without limitation, pursuant to this Section 2.08 or
Section 2.10) as a result of the termination or permanent reduction of the
Commitment Amount, the Revolving Credit Commitment Amount or the L/C Commitment
Amount shall be accompanied by the payment of accrued interest on the amount
prepaid to the date of payment.
32
26
(c) Any prepayments made pursuant to this Section 2.08 shall
be applied first to Reference Rate Advances to the extent then outstanding and
then to Eurodollar Rate Advances to the extent then outstanding, subject to
Section 2.13(d).
2.09 FEES. Borrower shall pay to Agent for the ratable benefit
of each Bank (except as otherwise provided):
(a) (i) in respect of each Letter of Credit, a commission on
the maximum amount available for drawing under such Letter of Credit,
calculated at the rate per annum equal to the Letter of Credit Rate (as
set forth under the definition of Applicable Margin in Section 1.01) on
the face amount of such Letter of Credit, computed for the period from
the date such Letter of Credit is issued to the date upon which the
next payment is due under this subsection (and, thereafter, from the
date of payment under this subsection to the date upon which the next
payment is due under this subsection), and payable quarterly in arrears
(calculated on the basis of a three hundred sixty (360) day year for
the actual days elapsed) on the last Banking Day of each March, June,
September and December after the issuance of such Letter of Credit and
on the Termination Date;
(ii) a fronting fee in an amount equal to one-quarter
percent (1/4%) of the face amount of such Letter of Credit, computed
for the period from the date such Letter of Credit is issued to the
date upon which the next payment is due under this subsection (and,
thereafter, from the date of payment under this subsection to the date
upon which the next payment is due under this subsection), and payable
quarterly in arrears (calculated on the basis of a three hundred sixty
(360) day year for the actual days elapsed) on the last Banking Day of
each March, June, September and December after the issuance of such
Letter of Credit and on the Termination Date; PROVIDED that such fee
shall be for the Issuing Bank's sole account; and
(iii) all customary and normal costs and expenses as are
incurred or charged by the Issuing Bank in negotiating, issuing,
effecting payment under, amending or otherwise administering any Letter
of Credit, provided that payment of such costs and expenses shall be
for the Issuing Bank's sole account; and
(b) a commitment fee at the rate per annum equal to the
commitment fee (as set forth in the definition of Applicable Margin in
Section 1.01) on the difference between (i) the average daily
Commitment Amount, and (ii) the average daily principal amount of the
outstanding Advances plus the undrawn amount of all outstanding Letters
of Credit. The commitment fees under this Section 2.09(b) shall be
payable quarterly in arrears (calculated on the basis of a three
hundred sixty (360) day year for the actual days elapsed) payable on
the last Banking Day of each March, June, September and December and on
the Termination Date.
2.10 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENT AMOUNT.
The Borrower shall have the right, upon not less than five Banking Days' notice
to the Agent, to terminate the Commitments or, from time to time, to reduce the
Commitment Amount. Any such reduction shall be in an amount equal to $2,000,000
or a whole multiple thereof and shall reduce permanently the Commitment Amount
then in effect; PROVIDED HOWEVER, that the Commitment Amount may not at any time
be reduced (after giving effect to any prepayments made on the date of such
reduction pursuant to Section 2.08(b)) below the sum of (i) the principal amount
of the outstanding Advances, (ii) the Reinvestment Proceeds Amount at such time,
(iii) the undrawn amount of all outstanding Letters of Credit and (iv) the
aggregate amount of all unreimbursed drawings under Letters of Credit on the
date
33
27
of reduction or termination. Any Commitment Reduction pursuant to this Section
2.10 shall be permanent.
2.11 ARRANGEMENT COMPENSATION; AGENCY FEES. Borrower agrees to
compensate Chase, for Chase's sole use and benefit, for Chase's arrangement and
agency services in the amounts and at the times as may be from time to time
agreed in writing between Borrower and Chase.
2.12 Taxes.
-----
(a) All payments or reimbursements under this Agreement and
any instrument or agreement required hereunder shall be made free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
EXCLUDING,
(i) in the case of each Bank and Agent, taxes imposed
on its net income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank or Agent (as the case
may be) is organized or any political subdivision thereof,
(ii) in the case of each Bank, taxes imposed on its net
income, and franchise taxes imposed on it, by the jurisdiction of such
Bank's Lending Branch or any political subdivision thereof, and
(iii) in addition to (i) and (ii), in the case of each
Bank organized under the laws of a jurisdiction outside the United
States, United States federal withholding tax payable with respect to
payments by Borrower that would not have been imposed had such Bank, to
the extent then required thereunder, delivered to Borrower and Agent
the form(s) required by Section 2.12(d),
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If Borrower or Agent
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Bank or Agent,
(i) the sum payable by Borrower shall be increased as
may be necessary so that after Borrower or Agent has made all required
deductions (including deductions applicable to additional sums payable
under this Section 2.12) such Bank or Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made,
(ii) Borrower or Agent shall make such deductions and
(iii) Borrower or Agent shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made by Borrower or by Agent
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as "Other Taxes").
(c) Borrower will indemnify each Bank and Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.12) paid by such Bank or Agent (as the case may be) and any
34
28
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Bank or Agent (as the case may be) makes written demand therefor. Any
such demand shall show in reasonable detail the amount payable and the
calculations used to determine such amount and shall provide reasonably
acceptable evidence of payment of such Tax or Other Tax.
(d) Each Bank which is a foreign person (a person other than a
United States person for United States Federal income tax purposes) hereby
agrees that:
(i) it shall, no later than the Closing Date (or, in
the case of a Bank which becomes a party hereto pursuant to Section
9.04(a) after the Closing Date, the date upon which such Bank becomes a
party hereto) deliver to Borrower through Agent:
(A) if any Lending Branch is located in the United
States, two (2) accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224"), and/or
(B) if any Lending Branch is located outside the
United States, two (2) accurate and complete signed originals
of Internal Revenue Service Form 1001 or any successor thereto
("Form 1001"),
in each case certifying that such Bank is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such Lending Branch under this Agreement free from
withholding of United States Federal income tax;
(ii) if at any time such Bank changes its Lending Branch
or selects an additional Lending Branch as herein provided, it shall at
the same time or reasonably promptly thereafter, deliver to Borrower
through Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder:
(A) if such changed or additional Lending Branch is
located in the United States, two (2) accurate and complete
signed originals of Form 4224; or
(B) otherwise, two accurate and complete signed
originals of Form 1001,
in each case indicating that such Bank is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such changed or additional Lending Branch under this
Agreement free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence
of any event (including the passing of time but excluding any event
mentioned in (ii) above) requiring a change in the most recent Form
4224 or Form 1001 previously delivered by such Bank and if the delivery
of the same be lawful, deliver to Borrower through Agent two (2)
accurate and complete original signed copies of Form 4224 or Form 1001
in replacement for the forms previously delivered by such Bank, in each
case indicating that such Bank is on the date of delivery thereof
entitled to receive payments of principal, interest and fees free from
withholding of United States Federal income tax;
(iv) it shall, promptly upon Borrower's or Agent's
reasonable request to that effect, deliver to Borrower such other forms
or similar documentation as may be required from
35
29
time to time by any applicable law, treaty, rule or regulation in order
to establish such Bank's tax status for withholding purposes; and
(v) it shall, promptly upon Agent's request to that
effect, deliver copies of any documents delivered by it to the Agent
(or any predecessor agent) or the Borrower prior to the Closing Date.
Unless Borrower and Agent have received forms or other documents satisfactory to
them indicating that payments under this Agreement are not subject to United
States withholding tax, Borrower or Agent shall in the case of payments to or
for any Bank organized under the laws of a jurisdiction outside the United
States, withhold taxes from such payments at the applicable statutory rate, or
at a rate reduced by any applicable tax treaty (provided that Borrower and Agent
have received forms or other documents satisfactory to them indicating that such
reduced rate applies) and pay such Bank such payment net of any taxes withheld.
(e) Any Bank claiming any additional amounts payable pursuant
to this Section 2.12 shall use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Lending Branch if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank.
(f) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.12 shall survive the payment in full of principal and interest
under this Agreement and the Notes and all other Obligations under this
Agreement.
2.13 INCREASED COSTS; ILLEGALITY; INDEMNITY. (a) Borrower
shall reimburse or compensate each Bank, upon demand by such Bank, for all costs
incurred, losses suffered (including lost profit) or payments made by such Bank
which are applied or allocated by such Bank to the Credit (all as determined by
such Bank in its sole and absolute discretion) by reason of:
(i) any Bank's being subject to any tax of any kind
whatsoever with respect to this Agreement, any Note or any Advance made
by it, or change in the basis of taxation of payments to such Bank in
respect thereof (except for taxes covered by Section 2.12 and changes
in the rate of tax on the overall net income of such Bank);
(ii) the imposition, modification or holding applicable
of any reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Bank which is not
otherwise included in the determination of the Eurodollar Rate; or
(iii) compliance by such Bank with any direction,
requirement or request from any regulatory authority, whether or not
having the force of law.
(b) Any Bank seeking (i) reimbursement from Borrower for the
costs incurred, losses suffered or payments made as described in subsection (a)
of this Section 2.13, or (ii) payment from Borrower under Section 2.14 hereof,
may recover such sums from Borrower by delivering to Borrower a statement
setting forth the amount owed to such Bank and showing how such calculation was
made, signed by a duly authorized officer of such Bank, which statement shall be
conclusive evidence of the amount owed absent manifest error; provided, however,
that (A) reimbursement or payment under this
36
30
subsection (b) shall not be demanded by any Bank for the period prior to the
Closing Date, and (B) each Bank shall notify Borrower as promptly as practicable
of any event occurring after the date of this Agreement that would entitle such
Bank to reimbursement or payment under this subsection (b).
(c) Notwithstanding any other provision herein, if the
adoption of or any change in any requirement of law or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Advances as contemplated by this Agreement, (A) the commitment
of such Bank hereunder to make Eurodollar Rate Advances, continue Eurodollar
Rate Advances as such and convert Reference Rate Advances to Eurodollar Rate
Advances shall forthwith be cancelled and (B) such Bank's Advances then
outstanding as Eurodollar Rate Advances, if any, shall if required by law, be
converted automatically to Reference Rate Advances on the respective last days
of the then current Interest Periods with respect to such Advances or within
such earlier period as required by law. If any such conversion of a Eurodollar
Rate Advance occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Bank such
amounts, if any, as may be required pursuant to paragraph (d) below.
(d) The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from any loss or expense which such Bank may sustain or incur
as a consequence of (A) default by the Borrower in payment when due of the
principal amount of or interest on any Eurodollar Rate Advance, (B) default by
the Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Rate Advances after the Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (C) default by the
Borrower in making any prepayment after the Borrower has given a notice thereof
in accordance with the provisions of this Agreement or (D) the making of a
prepayment of Eurodollar Rate Advances on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, in each
case, any such loss or expense arising from the reemployment of funds obtained
by it or from fees payable to terminate the deposits from which such funds were
obtained. The covenants contained in Subsections (b) and (d) of this Section
2.13 shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder.
2.14 CAPITAL ADEQUACY. If any Bank shall have determined that,
after the date hereof, the adoption of any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending Branch or any
corporation controlling such Bank) with any direction, requirement or request
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, affects or would affect the amount
of capital required or expected to be maintained by such Bank or any corporation
controlling such Bank and such Bank (taking into consideration such Bank's
policies with respect to capital adequacy and such Bank's targeted return on
capital) determines that the amount of such capital is increased or required to
be increased as a consequence of such Bank's obligations under this Agreement,
then, upon demand by such Bank, Borrower shall immediately pay to such Bank,
from time to time as specified by such Bank, additional amounts sufficient to
compensate such Bank for such increase.
2.15 LETTERS OF CREDIT. (a) THE LETTERS OF CREDIT. (i) From
time to time during the Commitment Period, each Issuing Bank agrees on the terms
and conditions set forth herein to issue Letters of Credit for the account of
the Borrower; PROVIDED, that no Issuing Bank shall issue any Letter of Credit if
after giving effect to such issuance, the aggregate undrawn amount of all
Letters of Credit then outstanding plus the aggregate amount of all unreimbursed
drawings under Letters of Credit would exceed the L/C Commitment Amount and
PROVIDED, FURTHER, that no Bank shall issue any Letters of Credit if, after
giving effect to such issuance, the sum of the aggregate undrawn amount of
37
31
all Letters of Credit then outstanding plus the aggregate outstanding principal
amount of all Advances plus the Reinvestment Proceeds Amount plus the aggregate
amount of unreimbursed drawings under Letters of Credit would exceed the
Commitment Amount.
(ii) No Issuing Bank shall be under any obligation to issue any
Letter of Credit if:
(A) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or
restrain such Issuing Bank from issuing such Letter of Credit or any
legal requirement applicable to such Issuing Bank or any request or
directive (whether or not having the force of law) from any
governmental authority with jurisdiction over such Issuing Bank shall
prohibit, or request that such Issuing Bank refrain from the issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon such Issuing Bank with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which
such Issuing Bank is not otherwise compensated) not in effect on the
Closing Date, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Issuing Bank on the Closing Date
and which such Issuing Bank in good xxxxx xxxxx material to it; or
(B) such Issuing Bank has received notice from Agent, or from
Agent at the request of any Bank, on or prior to the Banking Day
immediately prior to the requested date of issuance of such Letter of
Credit that one or more of the conditions contained in Section 4.02 is
not then satisfied; or
(C) such requested Letter of Credit has an expiration date
which is after the earlier of (x) five Banking Days prior to the
Termination Date and (y) one year (or such later date agreed to by the
Issuing Lender) after the date of issuance.
(iii) Subject to Section 2.15(g), Letters of Credit with a
one-year tenor may be by their terms automatically renewable (such automatically
renewable Letters of Credit hereby referred to as "RENEWABLE LETTERS OF CREDIT")
for additional one-year periods (which shall in no event extend beyond the date
referred to in clause (x) of the preceding paragraph (a)(ii)(C)). The Issuing
Bank shall notify all beneficiaries of Renewable Letters of Credit that such
Letters of Credit shall not be renewed or extended unless the Agent and the
Issuing Bank shall have received the request from the Borrower required under
Section 2.15(g) and all conditions precedent to the issuance of Letters of
Credit set forth in Section 4.02 are satisfied at the time of such renewal or
extension (which time, for purposes of this Section and Section 4.02, shall be
deemed to be the time of such renewal or extension and not the expiry date of
such Letters of Credit).
(b) Issuance of Letters of Credit.
-----------------------------
(i) Each Letter of Credit shall be issued upon the
irrevocable written request of Borrower, received by Agent at least seven (7)
days (or such shorter time as Agent may agree in a particular instance) prior to
the proposed date of issuance. Each Letter of Credit outstanding under the
Existing Credit Agreement which survives the Closing Date shall be deemed to be
reissued under this Agreement on the Closing Date.
(ii) Each request for issuance of a Letter of Credit
shall be by telecopy, confirmed immediately in writing, on the form specified by
the Issuing Bank as being its then customary form for letter of credit
applications and shall specify: (A) the proposed date of issuance
(which shall be a Banking Day); (B) the face amount of the Letter of Credit; (C)
the date of expiration of the Letter of Credit; (D) the purpose of such Letter
of Credit, (E) the name and address of the
38
32
beneficiary thereof; (F) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; and (G) the full text of any
certificate to be presented by the beneficiary in case of any drawing
thereunder.
(iii) No Letter of Credit shall be issued (or renewed or
extended) if such Letter of Credit would thereupon have an expiration date which
is after the date which is five Banking Days prior to the Termination Date.
(iv) Unless an Issuing Bank has received notice on or
before the Banking Day immediately preceding the date such Issuing Bank is to
issue a requested Letter of Credit (A) from the Agent directing such Issuing
Bank not to issue such Letter of Credit because the amount specified in Section
2.15(a)(i) would be exceeded and/or (B) from any Bank that one or more
conditions specified in Section 4.02 are not then satisfied, then subject to the
terms and conditions of this Section 2.15 and provided that the applicable
conditions set forth in Section 4.02 hereof have been satisfied, such Issuing
Bank shall, on the requested date, issue a Letter of Credit for the account of
Borrower in accordance with the Issuing Bank's usual and customary business
practices. Prior to issuing any Letter of Credit, the Issuing Bank of such
Letter of Credit will consult with the Agent to confirm that the amount
specified in Section 2.15(a)(i) would not be exceeded, and that the conditions
specified in Section 4.02 have been satisfied.
(v) Promptly after issuance of each Letter of Credit, the
Issuing Bank shall deliver to Borrower and Agent a copy of such Letter of
Credit. Agent shall promptly deliver a copy thereof to each other Bank. Each
Letter of Credit shall provide that, except as otherwise determined in the sole
discretion of the Issuing Bank, payment thereunder shall not be made earlier
than two (2) business days after receipt of any requisite documents demanding
such payment.
(c) Participations, Drawings and Reimbursements.
-------------------------------------------
(i) Immediately upon the issuance of each Letter of
Credit, each Bank (other than the Issuing Bank) shall be deemed to, and hereby
agrees to, have irrevocably purchased from the Issuing Bank a participation in
such Letter of Credit and each drawing thereunder in a percentage equal to the
Commitment Percentage of such Bank.
(ii) The Borrower shall reimburse the Agent for the
full amount of any drawing under the Letter of Credit on the same date such
drawing is honored by the Issuing Bank. In the event Borrower shall fail to
reimburse Agent for the full amount of any drawing on the same date such drawing
is honored by the Issuing Bank under any Letter of Credit, the Issuing Bank
shall promptly notify Agent and Agent shall as promptly as possible notify each
Bank thereof and Borrower shall be deemed to have requested that a Reference
Rate Advance be made by the Banks to be disbursed on the date of payment by the
Issuing Bank under such Letter of Credit, subject to the amount of the
unutilized portion of the Revolving Credit Commitment Amount on such date and
subject to the conditions set forth in Section 4.02. Any notice given by the
Issuing Bank or Agent pursuant hereto may be oral if immediately confirmed in
writing (including telecopy or telex); PROVIDED that the lack of such an
immediate confirmation shall not affect the conclusiveness and binding effect of
such notice. The proceeds of such Advances shall be paid to the Agent which
will, in turn, disburse such proceeds to the Issuing Bank as reimbursement for
such drawings. Notwithstanding the foregoing, if at any time an Event of Default
described in Section 8.05 or 8.06 has occurred and is continuing, such drawings
shall be reimbursed by the Banks' purchasing pro rata participation interests in
such Letter of Credit.
39
33
(iii) Any unreimbursed Letter of Credit drawing which
shall not be converted into an Advance pursuant to Section 2.15(c)(ii) in whole
or in part because such conversion would have caused the Revolving Credit
Commitment Amount to be exceeded or because of Borrower's failure to satisfy the
conditions set forth in Section 4.02, shall become due and payable upon the date
such drawing is paid by the Issuing Bank. Agent shall promptly notify Borrower
and Banks of the occurrence of any unreimbursed drawing under a Letter of
Credit.
(iv) Each Bank will, promptly upon receipt of notice of
an unreimbursed drawing under a Letter of Credit pursuant to Section
2.15(c)(iii), make available to Agent for the account of the Issuing Bank an
amount in immediately available funds equal to its Commitment Percentage of the
amount of the such unreimbursed drawing. If any Bank so notified shall fail to
make available to Agent for the account of the Issuing Bank the amount of its
Commitment Percentage of any such unreimbursed drawing on the date the relevant
Letter of Credit drawing was honored by the Issuing Bank (the "PARTICIPATION
DATE"), then interest shall accrue on such Bank's obligation to make such
payment, (i) from the Participation Date to but not including the second Banking
Day after the Participation Date at a rate per annum equal to the Federal Funds
Rate, and (ii) from the second Banking Day after the Participation Date at the
same rate specified in Section 2.04(a) for Reference Rate Advances. Agent will
as promptly as practicable (but in no event later than two (2) Banking Days
after the occurrence thereof) give notice of the occurrence of the Participation
Date, but failure of Agent to give any such notice on the Participation Date or
in sufficient time to enable any Bank to effect such payment on such date shall
not relieve such Bank from its obligations under this Section 2.15(c)(iv).
(v) The obligation of each Bank to provide Agent with
such Bank's Commitment Percentage of the amount of any payment or disbursement
made by any Issuing Bank under any outstanding Letter of Credit shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which such Bank may have or have
had against such Issuing Bank (or any other Bank), including, without
limitation, any defense based on the failure of the demand for payment under
such Letter of Credit to conform to the terms of such Letter of Credit or the
legality, validity, regularity or enforceability of such Letter of Credit or any
defense based on the identity of the transferee of such Letter of Credit or the
sufficiency of the transfer if such Letter of Credit is transferable; PROVIDED,
HOWEVER, that Banks shall not be obligated to reimburse such Issuing Bank for
any wrongful payment or disbursement made under any Letter of Credit as a result
of acts or omissions constituting gross negligence or willful misconduct on the
part of such Issuing Bank or any of its officers, employees or agents. Further,
each Bank agrees to perform its obligations under Section 2.15(c)(iv) despite
the occurrence of a Default or an Event of Default or any inability of Borrower
to require such Bank to fulfill its other obligations hereunder including,
without limitation, any inability resulting from the operation of Bankruptcy
Code Section 365(c)(2) (11 U.S.C. Section 365(c)(2)) or otherwise.
(d) Repayment of Participations.
----------------------------
(i) Upon and only upon receipt by Agent for the account
of the Issuing Bank of funds from Borrower,
(A) in reimbursement of any payment made under a Letter of
Credit with respect to which any Bank has theretofore paid Agent for
the account of the Issuing Bank for such Bank's participation in the
Letter of Credit pursuant to Section 2.15(c)(iv); or
(B) in payment of interest thereon;
40
34
Agent will pay to each Bank which has funded its participating interest
therein, in the same funds as those received by Agent for the account
of the Issuing Bank, such Bank's Commitment Percentage of such funds.
(ii) If Agent or the Issuing Bank is required at any
time to return to Borrower or to a trustee, receiver, liquidator, custodian or
other similar official any portion of the payments made by Borrower to Agent for
the account of the Issuing Bank pursuant to paragraph (i) in reimbursement of
payment made under the Letter of Credit or interest thereon, each Bank shall, on
demand of Agent, forthwith return to Agent or the Issuing Bank its Commitment
Percentage of any amounts so returned by Agent or the Issuing Bank plus interest
thereon from the date such demand is made to but not including the date such
amounts are returned by such Bank to Agent or the Issuing Bank, at a rate per
annum equal to the Federal Funds Rate.
(e) ROLE OF ISSUING BANK. (i) Each Issuing Bank will exercise
and give the same care and attention to any Letter of Credit as it gives to its
other letters of credit and similar obligations.
(ii) Each Bank participating in a Letter of Credit
agrees that, in paying any drawing under any Letter of Credit, the Issuing Bank
shall not have any responsibility to obtain any document (other than the sight
draft and certificates required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person delivering any such document. Neither the Issuing Bank nor any of its
representatives, officers, employees or agents shall be liable to any Bank for:
(A) any action taken or omitted in connection herewith at the
request or with the approval of the Majority Banks;
(B) any action taken or omitted in the absence of gross
negligence or wilful misconduct; or
(C) the execution, effectiveness, genuineness, validity or
enforceability of any Letter of Credit or any other document
contemplated hereby or thereby.
(f) OBLIGATIONS ABSOLUTE. The obligations of Borrower under
this Agreement and any other agreements or instrument relating to any Letter of
Credit to reimburse each Issuing Bank shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement and
such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances:
(A) any lack of validity or enforceability of this Agreement,
any Letter of Credit, or any other agreement or instrument relating
thereto (collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of Borrower in
respect of any Letter of Credit or any other amendment or waiver of or
any consent to departure from all or any of the L/C Related Documents;
(C) the existence of any claim, set-off, defense or other
right that Borrower may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or
any
41
35
other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(D) any statement and other document 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;
(E) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral,
or any release or amendment or waiver of or consent to departure from
any Collateral Document, for all or any of the obligations of Borrower
in respect of any Letter of Credit;
(G) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, Borrower or any Guarantor but excluding any
action constituting the Issuing Bank's gross negligence or willful
misconduct; or
(H) the occurrence of a Default or an Event of Default.
(g) REQUESTS REGARDING RENEWALS AND EXTENSIONS OF RENEWABLE
LETTERS OF CREDIT. The Borrower shall deliver to the Agent and the applicable
Issuing Bank, not earlier than thirty (30) days, and not later than fourteen
(14) days, before notice of non-renewal or non-extension is required under the
Renewable Letters of Credit issued by such Issuing Bank, a written request for
renewal or extension of each Renewable Letter of Credit which the Borrower
desires to renew or extend. Such request shall specify the required date for
notice by the Issuing Bank of non-renewal or non-extension under the Renewable
Letters of Credit and include a certification by the Borrower that as of the
date of such request, no Default or Event of Default shall have occurred and be
continuing and all of the representations and warranties contained in this
Agreement and the Collateral Documents are true and correct in all material
respects, except as to representations and warranties contained in Section 5.09
and which expressly relate to an earlier date and for changes which are
contemplated or permitted by this Agreement. No such request shall be made by
the Borrower which would cause the expiry date of such Renewable Letter of
Credit to extend beyond the Termination Date, except as otherwise provided under
Sections 2.15(a)(ii)(C) and (b)(iii). For purposes of this Section 2.15(g),
valid delivery by the Borrower of the required request shall be deemed to have
occurred only upon actual receipt of such notice by the Agent and the Issuing
Bank. If the Borrower fails to deliver such a notice within such period with
respect to such Renewable Letter of Credit, the Issuing Bank of such Renewable
Letter of Credit shall deliver appropriate notices of non-extension or
non-renewal with respect to such Renewable Letter of Credit.
(h) If any change in any requirement of law shall either (i)
impose, modify or deem or make applicable any reserve, special deposit,
assessment or similar requirement against Letters of Credit issued by any
Issuing Bank or against a Bank's participation in such Letter of Credit or (ii)
impose on any Issuing Bank or any Bank participating in such Letter of Credit (a
"PARTICIPATING BANK") any other condition regarding this Agreement or any Letter
of Credit, and the result of any event referred to in clause (i) or (ii) above
shall be to increase the cost to such Issuing Bank of issuing or maintaining any
Letter of Credit, or to such Participating Bank of purchasing or maintaining
such participating interest in any Letter of Credit (which increase in cost
shall be the result of such Issuing Bank's, or participating Bank's, as the case
may be, reasonable allocation of the aggregate of such cost increases resulting
from such events), then from time to time following notice by such Issuing Bank
42
36
(or such Participating Bank, as the case may be) to the Borrower, the Borrower
shall pay to such Person, as specified by such Person, additional amounts which
shall be sufficient to compensate such Person for such increased cost, together
with interest on each such amount from the date demanded until payment in full
thereof at a rate per annum equal to the Reference Rate plus the Applicable
Margin plus 2% per annum. A certificate submitted by such Issuing Bank or
Participating Bank to the Borrower concurrently with any such demand by such
Person, shall be conclusive, absent manifest error, as to the amount thereof.
ARTICLE III.
SECURITY
--------
3.01 Security.
---------
(a) As security for the prompt payment and performance of all
Secured Obligations of Borrower, Borrower has heretofore granted and assigned or
shall grant and assign, in accordance with the provisions of the Collateral
Documents applicable to Borrower, to the Collateral Agent for the benefit of the
Secured Creditors with respect to all of Borrower's Secured Obligations, all of
its right, title and interest in and to all of the Collateral. Additionally, all
Secured Obligations shall be guaranteed by each Guarantor under the Guarantee
and Collateral Agreement and the Operating Bank Guaranty, to the extent provided
therein, and the obligations of the Guarantors under the Guarantee and
Collateral Agreement shall be secured pursuant to the terms of the Collateral
Documents required to be executed and delivered by them hereunder. Upon the sale
of all of the stock owned by Borrower or any Subsidiary of, or the sale of all
of the assets of, any Guarantor permitted hereunder and upon Agent's receipt of
the Net Cash Proceeds of Sale thereof to the extent required under Section
2.08(a), such Guarantor shall be released from all obligations under the
Guarantee and Collateral Agreement.
(b) Upon the application by the Borrower or any Subsidiary of any
Reinvestment Proceeds to the acquisition of any new property or assets, the
Borrower or such Subsidiary at its expense shall immediately cause such acquired
property or assets to become subject to Liens and security interests in favor of
the Collateral Agent to secure the Secured Obligations to the same extent, and
with the same priority, as the Liens and security interests to which were
subject the property or assets the disposition of which gave rise to such
Reinvestment Proceeds, PROVIDED, however, that if any portion of the gross
proceeds realized upon the disposition of such asset were applied to discharge
any Debt or other obligations secured by a Lien on such assets which was prior
to the Liens granted under the Collateral Documents, then there shall not be
permitted to be any Lien on the replacement property, other than Liens under the
Collateral Documents, except for Liens permitted pursuant to clause (iv) of the
definition of "Permitted Liens" in connection with the acquisition of such
replacement assets, PROVIDED that such Liens do not secure Debt or other
obligations in an amount in excess of the Debt or other obligations discharged
with respect to the asset disposed of (except for acquisitions of individual
items of replacement exercise equipment which may be subject to purchase money
financing on customary terms in accordance with the practices of the Borrower
and its Subsidiaries, and except that, with respect to dispositions of not more
than two health clubs during the term of this Agreement on which the Collateral
Agent held Liens of second priority, the Debt and other obligations secured by
Liens on the replacement property having priority over the Liens under the
Collateral Documents may exceed the amount of the Debt or other obligations with
respect to the assets disposed of by not more than (i) $3,000,000 with respect
to either such replacement property or (ii) $5,000,000 for both such replacement
properties). Upon any such acquisition, such acquired property or assets shall
be deemed to constitute Collateral for all purposes of this Agreement and the
Collateral Documents, any collateral documents executed and delivered by the
Borrower or any of its Subsidiaries to grant the liens and
43
37
security interests required by this Section shall be deemed to be Collateral
Documents for all purposes of this Agreement and the other Credit Documents, and
any such application of Reinvestment Proceeds and acquisition of such property
or assets shall be deemed a representation and warranty that, as of the date of
such acquisition, all representations and warranties contained in this Agreement
and the Collateral Documents applicable to such Collateral are true and correct
in all material respects.
3.02 COLLATERAL DOCUMENTS. The Borrower and certain of the
Guarantors have heretofore executed and delivered or will execute and deliver to
the Collateral Agent certain Collateral Documents, and the Borrower shall
execute and deliver to the Collateral Agent for the benefit of the Secured
Creditors (and shall cause each Guarantor to so execute and deliver) all such
further Collateral Documents and such other collateral documents as may be
reasonably requested by the Collateral Agent in order to perfect and protect
Collateral Agent's security interest in the Collateral granted pursuant to the
Collateral Documents, all in form and substance reasonably acceptable to the
Collateral Agent.
3.03 PRIORITY OF SECURITY INTEREST. The lien and security
interest of the Collateral Agent in the Collateral shall, to the extent
permissible by applicable law, at all times, be and continue to be a first lien
in all jurisdictions, whether state, federal or foreign, subject to no other
Lien of any kind (except Permitted Liens).
3.04 NEW GUARANTORS. Borrower shall cause each Domestic
Subsidiary which is hereafter created or acquired (but in any event excluding
Lincoln Indemnity Company and H&T Receivable Funding Corporation) to promptly
execute and deliver a supplement or addendum to each of the Guarantee and
Collateral Agreement and the Operating Banks Guaranty, in form and substance
satisfactory to the Collateral Agent, pursuant to which such Subsidiary shall
become a party to such agreements as a Guarantor, together with such Collateral
Documents and other documents, instruments and opinions reasonably requested by
Agent or the Collateral Agent in order to perfect and protect the Collateral
Agent's security interest in the Collateral granted pursuant to such Collateral
Documents, all in form and substance reasonably satisfactory to Agent and the
Collateral Agent.
3.05 REAL PROPERTY MATTERS. As additional security for the
Secured Obligations, Borrower and the Guarantors have heretofore executed,
delivered and recorded, and will execute, deliver and record, certain mortgages,
deeds of trust, leasehold mortgages and leasehold deeds of trust, and Borrower
agrees, as of the Closing Date, to execute, deliver and record and to cause each
Guarantor to execute, deliver and record, any new mortgages, deeds of trust,
leasehold mortgages and leasehold deeds of trust and similar instruments, or
amendments to any existing mortgages, deeds of trust, leasehold mortgages and
leasehold deeds of trust and similar instruments (collectively, such existing
and new instruments are called the "REAL PROPERTY SECURITY DOCUMENTS"), relating
to all of such Person's right, title and interest in all of those plots, pieces
or parcels of land now owned or leased by such Person (the "REAL PROPERTY") and
more particularly described in the Collateral Documents and Exhibit F hereto,
which Real Property Security Documents are or shall be in form and substance
reasonably satisfactory to Agent and grant Liens on the Real Property to the
Collateral Agent. Borrower agrees from time to time (x) upon the reasonable
request of the Agent during the occurrence and continuation of a Default or an
Event of Default, to provide or cause the applicable Guarantor to provide, to
the Collateral Agent (a) surveys or survey recertifications of its Real Property
acceptable to Agent and (b) mortgagee title insurance policies and/or
endorsements thereto in form and amount acceptable to Agent covering its Real
Property and (y) to perform the other actions required by Section 6.16 and
Exhibit L. In addition, Borrower agrees, upon the reasonable request of the
Agent during the occurrence and continuation of a Default or Event of Default,
to deliver promptly to the Agent (at the Borrower's sole cost and expense)
appraisals, or updates of appraisals previously delivered to the Agent and the
Banks, of substantially all of the real properties and other Property
44
38
owned or leased by the Borrower or its Subsidiaries (as agreed to by the
Borrower and the Agent) by an appraiser reasonably satisfactory to the Agent.
As additional security for the Secured Obligations, Borrower
agrees that in the event Borrower or any Guarantor acquires any real property or
enters into any lease for real property upon which Borrower or any Guarantor
shall own the improvements, then, from time to time, upon request of the Agent,
Borrower shall, or shall cause such Guarantor to, execute, deliver and record
Real Property Security Documents encumbering such owned or ground-leased
property (provided that the lease permits the granting of such security interest
in favor of Collateral Agent; PROVIDED, HOWEVER, that before entering into any
said ground lease, Borrower or such Guarantor shall request that the ground
lessor agree to permit such security interest in favor of the Collateral Agent
in the provisions of the ground lease), which Real Property Security Documents
shall be substantially in the same form as the Real Property Security Documents
provided on and/or in effect as of the date hereof. In connection with such
hereafter owned, leased or otherwise acquired real property, Borrower agrees to
provide, or cause the applicable Guarantor to provide, to the Collateral Agent
(a) surveys of said real property reasonably acceptable to Agent and (b)
mortgagee title insurance policies in form and amount reasonably acceptable to
Agent covering said real property.
ARTICLE IV.
CONDITIONS PRECEDENT
--------------------
4.01 CONDITIONS PRECEDENT TO CLOSING DATE. This Agreement
shall become effective as of the Closing Date, subject to the conditions
precedent that Agent shall have received, for its account and the accounts of
the respective lenders party to the Existing Credit Agreement in accordance with
their interests, on or before the Closing Date, payment of all accrued and
unpaid interest, fees, expenses, and other amounts payable under the Existing
Credit Agreement in respect of the period prior to the Closing Date and subject
to the further conditions precedent that on or prior to the Closing Date:
(a) OPINIONS OF COUNSEL TO BORROWER, ETC. There shall have
been delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and its counsel, an
opinion, dated the Closing Date, of (i) Benesch, Friedlander, Xxxxxx &
Xxxxxxx LLP, counsel for Borrower and the Guarantors, substantially in
the form of Exhibit J-1 hereto and (ii) Winston & Xxxxxx, special
counsel for the Borrower and the Guarantors, substantially in the form
of Exhibit J-2 hereto;
(b) OTHER OPINIONS. There shall have been delivered to Agent
(with sufficient copies for distribution to all Banks), in form and
substance satisfactory to Agent and its counsel, an opinion, dated the
Closing Date, of Xxxx Gaan, Esq., or other acceptable in-house counsel,
substantially in the form of Exhibit K hereto;
(c) BORROWER'S INCORPORATION PAPERS. There shall have been
delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and its counsel, a
copy of Borrower's certificate of incorporation, certified by the
Secretary of State of Delaware, as of a recent date, and a copy of the
Borrower's by-laws, certified by the Secretary or an Assistant
Secretary of Borrower;
(d) BORROWER'S CORPORATE RESOLUTION. There shall have been
delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and
45
39
its counsel, a copy of a resolution or resolutions passed by the Board
of Directors of Borrower, certified by the Secretary or an Assistant
Secretary of Borrower as being in full force and effect on the Closing
Date, authorizing the borrowing provided for herein and the execution,
delivery and performance of this Agreement, the Notes, the Collateral
Documents to which it is a party and any other instrument or agreement
required hereunder;
(e) BORROWER'S INCUMBENCY CERTIFICATE. There shall have been
delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and its counsel, a
certificate, signed by the Secretary or an Assistant Secretary of
Borrower and dated the Closing Date, as to the incumbency, and
containing the specimen signature or signatures (not photocopied), of
the person or persons authorized to execute and deliver this Agreement,
the Notes, the Collateral Documents to which it is a party and any
other instrument or agreement required hereunder on behalf of Borrower;
(f) GUARANTORS' INCORPORATION PAPERS. There shall have been
delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and its counsel,
with respect to each Guarantor, a copy of each such Guarantor's
certificate of incorporation or articles of association and by-laws or
partnership agreement, as the case may be, certified by the Secretary
or an Assistant Secretary of such Guarantor;
(g) GUARANTORS' RESOLUTIONS. There shall have been delivered
to Agent (with sufficient copies for distribution to all Banks), in
form and substance satisfactory to Agent and its counsel, a copy of a
resolution or resolutions passed by the Board of Directors (or similar
body) of each Guarantor (or, with respect to a Guarantor which is a
partnership, of such Guarantor's general partner), certified by the
Secretary or an Assistant Secretary of such Guarantor (or general
partner) as being in full force and effect on the Closing Date,
authorizing the execution, delivery and performance of the Collateral
Documents to which it is a party;
(h) GUARANTORS' INCUMBENCY CERTIFICATES. There shall have been
delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and its counsel, a
certificate, signed by the Secretary or an Assistant Secretary of each
Guarantor (or, with respect to a Guarantor which is a partnership, of
such Guarantor's general partner) and dated the Closing Date, as to the
incumbency, and containing the specimen signature or signatures (not
photocopied), of the person or persons authorized to execute and
deliver the Collateral Documents to which it is a party on behalf of
such Guarantor (or on behalf of such general partner for such
Guarantor);
(i) APPROVALS AND CONSENTS. There shall have been delivered to
Agent (with sufficient copies for distribution to all Banks), in form
and substance satisfactory to Agent and its counsel, certified copies
of all approvals, consents, exemptions and other actions by, and
notices to and filings with, any governmental authority or any other
Person and any trustee or holder of any indebtedness or obligation of
Borrower or of any Guarantor which are required in connection with any
transaction contemplated hereby (other than landlords under leases and
first mortgage holders constituting Permitted Liens, but subject to
Section 6.16);
(j) AGREEMENT. There shall have been delivered to Agent (with
sufficient copies for distribution to all Banks), in form and substance
satisfactory to Agent and its counsel, sufficient counterparts of this
Agreement, duly executed by an authorized officer of Borrower;
46
40
(k) NOTES. There shall have been delivered to the Agent, for
the account of each Bank, a Revolving Note, each with appropriate
insertions and completions and conforming to the requirements hereof
and executed by a duly authorized officer of the Borrower;
(l) COLLATERAL DOCUMENTS. There shall have been delivered to
Agent (with sufficient copies for distribution to all Banks), in form
and substance satisfactory to Agent and its counsel, sufficient
counterparts of (i) the Guarantee and Collateral Agreement, executed by
a duly authorized officer of each of the Borrower and the Guarantors,
(ii) Mortgages covering each of the Properties listed on Schedule
4.01(l), executed by a duly authorized officer of each of the Borrower
and each of the Guarantors which holds an interest in the applicable
Property and (iii) the other Collateral Documents, executed by a duly
authorized officer of each of the Borrower and the Guarantors party to
such Collateral Documents;
(m) PLEDGE OF SHARES. The Collateral Agent shall have received
(x) (i) the certificates representing the certificated shares of
Funding Corp. and each of the Guarantors listed on Exhibit D hereto and
(ii) the certificates representing 65% of the certificated shares of
the Foreign Subsidiaries (other than Health & Tennis U.K. Limited),
which certificates are to be pledged pursuant to the Guarantee and
Collateral Agreement, together with (y) an undated stock power for each
such certificate executed in blank by a duly authorized officer of the
pledgor thereof;
(n) [Intentionally Left Blank]
(o) ACKNOWLEDGEMENTS. If requested by the Agent, there shall
have been delivered to Agent (with sufficient copies for distribution
to all Banks), in form and substance satisfactory to Agent and its
counsel, sufficient counterparts of an amendment and/or acknowledgment
from each Person which executed a consent or acknowledgement in
connection with the Existing Credit Agreement and any other document or
agreement identified by the Agent (including landlord's consents and
consents by other partners in partnerships to the liens on certain
interests in such partnerships created by the Collateral Documents
confirming that such consent or acknowledgement remains effective after
giving effect to the refinancing of the Existing Credit Agreement by
this Agreement, but excluding those consents and acknowledgements
specified in Exhibit L);
(p) SURVEYS. The Agent shall have received, and the Title
Insurance Company (defined below) shall have received, (A) an as-built
survey of the sites of the property covered by each Mortgage (including
leasehold mortgages) certified to the Agent and the Title Insurance
Company in a manner satisfactory to them, dated a date satisfactory to
the Agent and the Title Insurance Company by an independent
professional licensed land surveyor satisfactory to the Agent and the
Title Insurance Company, and the surveys on which they are based shall
be made in accordance with the Minimum Standard Detail Requirements for
Land Title Surveys jointly established and adopted by the American Land
Title Association and the American Congress on Surveying and Mapping in
1992, and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats or surveys the
following: (i) the locations on such sites of all the buildings,
structures and other improvements and the established building setback
lines; (ii) the lines of streets abutting the sites and width thereof;
(iii) all access and other easements appurtenant to the sites or
necessary or desirable to use the sites; (iv) all roadways, paths,
driveways, easements, encroachments and overhanging projections and
similar encumbrances affecting the site, whether recorded, apparent
from a physical inspection of the sites or otherwise known to the
surveyor; (v) any encroachments on any adjoining property by the
building structures and improvements on the sites; and (vi) a
47
41
legend relating to the survey, or (B) in lieu of an as-built survey,
the Borrower or its Subsidiaries shall have delivered any affidavits or
other documents required by the Title Insurance Company to insure the
state of facts set forth in a survey which was previously included in a
title insurance policy delivered by the Borrower or a Subsidiary to the
Agent.
(q) TITLE INSURANCE POLICY. The Agent shall have received in
respect of each parcel covered by each Mortgage covering the real
property set forth on Schedule 4.01(l) a mortgagee's title policy (or
policies) or marked up unconditional binder for such insurance dated
the Closing Date. Each such policy shall (i) be in an amount
satisfactory to the Agent; (ii) be issued at ordinary rates; (iii)
insure that the Mortgage insured thereby creates a valid first Lien on
such parcel free and clear of all defects and encumbrances, except such
as may be approved by the Agent; (iv) name the Agent for the benefit of
the Banks as the insured thereunder; (v) be in the form of ALTA Loan
Policy - 1970 (Amended 10/17/70); (vi) contain such endorsements and
affirmative coverage as the Agent may request and (vii) be issued by a
title company (the "TITLE INSURANCE COMPANY") satisfactory to the
Agent. The Agent shall have received evidence satisfactory to it that
all premiums in respect of each such policy, and all charges for
mortgage recording tax, if any, have been paid.
(r) FLOOD INSURANCE. If requested by the Agent, the Agent
shall have received (i) a policy of flood insurance which (A) covers
any parcel of improved real property which is encumbered by any
Mortgage, (B) is written in an amount not less than the outstanding
principal amount of the indebtedness secured by such Mortgage which is
reasonably allocable to such real property or the maximum limit of
coverage made available with respect to the particular type of property
under the National Flood Insurance Act of 1968, whichever is less, and
(C) has a term ending not earlier than the maturity of the indebtedness
secured by such Mortgage and (ii) confirmation that the Borrower has
received the notice required pursuant to Section 208(e)(3) of
Regulation H of the Board of Governors of the Federal Reserve System.
(s) COPIES OF DOCUMENTS. The Agent shall have received a copy
of all recorded documents referred to, or listed as exceptions to title
in, the title policy or policies referred to in Section 4.01(q) and a
copy, certified by such parties as the Agent may deem appropriate, of
all other documents affecting the property covered by each Mortgage
covering the real property listed on Schedule 4.01(l).
(t) LOCAL COUNSEL OPINIONS. The Agent shall have received
opinions of local counsel in Georgia, Maryland, Pennsylvania, Virginia
and Washington relating to the Mortgages in form and substance
satisfactory to Agent and its counsel.
(u) NO LITIGATION. No litigation, inquiry, injunction or
restraining order shall be pending, entered or threatened (including
any proposed statute, rule or regulation) which, in the reasonable
opinion of the Majority Banks, could have a Material Adverse Effect;
(v) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
since December 31, 1996 any change or development, which in either case
in the opinion of the Majority Banks could have a Material Adverse
Effect;
(w) FILINGS. Any filings and other actions required to create
and perfect the appropriate security interests in all Collateral
(including, without limitation, the filing of duly executed financing
statements on Form UCC-1 in the jurisdictions set forth in Schedule 3
to the Guarantee and Collateral Agreement and in any other
jurisdiction, in the opinion of the Agent, desirable to perfect the
Liens on the Collateral) shall have been duly made or taken (or,
48
42
in the case of UCC-1s, executed and delivered in proper form for
filing), and all Collateral shall be free and clear of other liens
other than Permitted Liens.
(x) GOOD STANDING CERTIFICATES. There shall have been
delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and its counsel,
good standing certificates (or bring-down telexes or other evidence of
good standing) for Borrower and for each Guarantor from the Secretary
of State of the state of incorporation of each such Person and good
standing certificates (or similar authorization to conduct business as
a foreign corporation) for Borrower and each Guarantor from the
Secretary of State of each state with respect to which Borrower makes
the representations contained in Sections 5.01 and 5.02 hereof;
(y) PAYMENT OF FEES AND EXPENSES. The Agent shall have
received, for the account of the Banks and for its own account, payment
by Borrower of all fees and expenses (including reasonable legal fees
and expenses) required to be paid hereunder, including without
limitation, under Sections 2.09, 2.11 and 9.06, to the extent invoices
therefor have been presented to Borrower prior to the Closing Date;
(z) OFFICER'S CERTIFICATE. There shall have been delivered to
Agent (with sufficient copies for distribution to all Banks), in form
and substance satisfactory to Agent and its counsel, a certificate
signed by a Senior Vice President of Borrower, dated as of the Closing
Date, certifying that:
(i) the representations and warranties
contained in Article V and in each Collateral Document are
true and correct in all material respects on and as of such
date, as though made on and as of such date;
(ii) no event has occurred and is continuing,
or would result from the transactions provided for herein,
which has or would constitute an Event of Default; and
(iii) there has occurred since December 31,
1996, no development, event or circumstance which has had or
is reasonably likely to have a Material Adverse Effect;
(aa) INSURANCE POLICIES. There shall have been delivered to
the Agent a certificate evidencing the Borrower's insurance coverage in
form and substance reasonably satisfactory to the Agent;
(ab) PROJECTIONS. There shall have been delivered to Agent
(with sufficient copies for distribution to all Banks), in form and
substance satisfactory to Agent and its counsel, the consolidated plan
and financial forecast for the then current and next succeeding two (2)
fiscal years of Borrower and its Subsidiaries, including, without
limitation, (i) a forecasted consolidated balance sheet and a
consolidated statement of income and cash flows of Borrower for each
such fiscal year, and (ii) forecasted consolidated statements of income
and cash flows of Borrower for each quarter of the first such fiscal
year. Such plan and forecast for the current fiscal year shall include
a summary of significant assumptions. The Banks acknowledge that
projections satisfying the condition in this Section 4.01(ab) have
previously been delivered by the Borrower;
49
43
(ac) OTHER EVIDENCE AGENT MAY REQUIRE. There shall have been
delivered to Agent (with sufficient copies for distribution to all
Banks), in form and substance satisfactory to Agent and its counsel,
such other evidence or documents as Agent may reasonably request
consistent with the other terms of this Agreement to establish the
consummation of the transactions contemplated hereby, the taking of all
proceedings in connection herewith and compliance with the conditions
set forth in this Agreement.
4.02 CONDITIONS PRECEDENT TO EACH ADVANCE AND LETTER OF
CREDIT. The obligation of each Bank to make any Advance or to issue any Letter
of Credit (or to renew or extend any Letter of Credit) hereunder is subject to
the following conditions precedent:
(a) No Default or Event of Default has occurred and is
continuing on the date of each Advance or the date of issuance (or the
date of renewal or extension, as the case may be) of each Letter of
Credit or would result from the incurring of obligations by Borrower
under this Agreement;
(b) The representations and warranties contained herein, in
the Collateral Documents and in any guaranty hereafter executed and
delivered by a new Guarantor pursuant to Section 3.04, shall be true
and correct in all material respects on the date of each Advance or the
date of issuance (or the date of renewal or extension, as the case may
be) of each Letter of Credit, except for the representations and
warranties contained in Section 5.09 and except as to representations
and warranties which expressly relate to an earlier date and except for
changes which are expressly permitted by this Agreement; and
(c) there has occurred since the date hereof, no event,
development or circumstance which has had or is reasonably likely to
have a Material Adverse Effect.
Each borrowing by or credit extension to Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of each such borrowing or
credit extension that the conditions in Section 4.02 have been satisfied.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to each Bank that:
5.01 BORROWER'S EXISTENCE. Borrower is a corporation duly
organized and validly existing under the laws of the State of Delaware, and is
in good standing and properly licensed to conduct business in every jurisdiction
in which the nature of the business conducted by it makes such license and good
standing necessary and where failure to so comply would have a material adverse
effect on the consolidated financial condition or the business of Borrower and
its Subsidiaries.
5.02 SUBSIDIARIES' EXISTENCE. Each Substantial Subsidiary is
duly organized and validly existing under the laws of the jurisdiction of its
formation, and is in good standing and properly licensed to conduct business in
the State in which its principal operations are located and in every
jurisdiction in which the nature of the business conducted by it makes such
compliance necessary and where failure to comply would have a material adverse
effect on the business of any such Subsidiary.
50
44
5.03 BORROWER'S POWERS. The execution, delivery and
performance of this Agreement, the Notes, the other Credit Documents and any
other instrument or agreement required to be executed and delivered by Borrower
hereunder are within Borrower's corporate powers, have been duly authorized, and
are not in conflict with the terms of any charter, by-law or other organization
papers of Borrower, or any material instrument or agreement to which Borrower or
any Subsidiary is a party or by which Borrower or any Subsidiary is bound or
affected (including, but not limited to, the Indenture).
5.04 POWER OF OFFICERS. The officers of Borrower executing
this Agreement, the Notes, the other Credit Documents and any other certificate,
instrument or agreement required to be delivered hereunder are duly authorized
to execute same.
5.05 GOVERNMENT APPROVALS. No approval, consent, exemption or
other action by, or notice to or filing with, any governmental authority is
necessary in connection with the execution, delivery, performance or enforcement
of this Agreement, the Notes, the other Credit Documents or any other instrument
or agreement required hereunder, except as may have been obtained and certified
copies of which have been delivered to Agent or except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect.
5.06 COMPLIANCE WITH LAWS. There is no law, rule or
regulation, nor is there any judgment, decree or order of any court or
governmental authority binding on Borrower or any Subsidiary, which would be
contravened by the execution, delivery, performance or enforcement of this
Agreement, the Notes, the other Credit Documents or any instrument or agreement
required hereunder, except where the failure to so comply would not reasonably
be expected to have a Material Adverse Effect.
5.07 ENFORCEABILITY OF AGREEMENT. Each of this Agreement, the
Notes and each of the other Credit Documents to which the Borrower or any of its
Subsidiaries is a party are legal, valid and binding agreements and obligations
of Borrower, or such Subsidiary, as the case may be, enforceable against
Borrower or such Subsidiary, as the case may be, in accordance with their
respective terms, and any other instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and enforceable,
subject, in each case, to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
5.08 TITLE TO PROPERTY. Borrower and its Subsidiaries have
good title to their respective personal properties and assets, and good and
marketable title to their respective real properties, free and clear of all
Liens, except for Permitted Liens on such properties and assets. The execution,
delivery or performance of this Agreement, the Notes, the other Credit Documents
or any instrument or agreement required hereunder will not result in the
creation of any Lien, other than in favor of the Secured Creditors pursuant to
the Collateral Documents.
5.09 LITIGATION. Except as disclosed on Schedule 5.09, there
are no suits, proceedings, claims or disputes pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any Subsidiary or their
respective property, the adverse determination of which could reasonably be
expected to have a Material Adverse Effect.
5.10 EVENTS OF DEFAULT. No event has occurred and is
continuing or would result from the incurring of obligations by Borrower under
this Agreement and the other Credit Documents which is a Default or an Event of
Default.
51
45
5.11 COMPLIANCE WITH MARGIN REQUIREMENTS. Borrower is not in
violation of any provision of Section 7 of the Securities Exchange Act of 1934
or any Margin Regulation, nor will Borrower's activities cause it to violate
such provision or any Margin Regulation.
5.12 SUBSIDIARIES. All of Borrower's Subsidiaries are listed
on Exhibit D hereto or on an amendment thereto delivered pursuant to Section
6.03(d) hereof.
5.13 FINANCIAL INFORMATION. The audited consolidated financial
statements of Borrower and its Subsidiaries for the fiscal year ending December
31, 1996 and the unaudited consolidated financial statements of the Borrower and
its subsidiaries for the fiscal quarter ending June 30, 1997 have been furnished
by Borrower to Banks. Such financial statements have been prepared in accordance
with GAAP and practices consistently applied and accurately and fairly present
in all material respects the consolidated financial condition and results of
operations of the entities referred to therein as of such dates. Since the date
of the most recent audited financial statements referred to above, there has
been no change in Borrower's consolidated financial condition or results of
operations sufficient to impair Borrower's ability to repay the Credit in
accordance with the terms hereof. Neither Borrower nor any Subsidiary has any
contingent obligations, liabilities for taxes or other outstanding financial
obligations which are material in the aggregate, except those for which adequate
reserves are established or as disclosed in such statements or in the statements
or reports delivered or to be delivered for the period in which such obligations
were incurred pursuant to Section 6.03.
5.14 ERISA. Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and any other
applicable federal or state law, and except as listed on Schedule 5.14 no event
or condition is occurring nor is there any present intent to cause any such
event or condition to occur with respect to any Plan or Multiemployer Plan with
respect to which Borrower would be under an obligation to furnish a report to
Banks in accordance with Section 6.02(d) hereof and which, taking all such
events or conditions arising within the last twelve-month period, in the
aggregate would result in liability to Borrower or an ERISA Affiliate in excess
of One Million Dollars ($1,000,000). For purposes of this representation and
warranty, Borrower, or any ERISA Affiliate if not the Plan administrator, shall
be deemed to have knowledge of all facts attributable to the Plan administrator
designated pursuant to ERISA; provided, however, that the foregoing
representation with respect to Multiemployer Plans is made with respect to
matters of which Borrower or any ERISA Affiliate has actual knowledge. The
aggregate withdrawal liability under Section 4201 of ERISA which could be
incurred by Borrower and each ERISA Affiliate, collectively, upon a complete
withdrawal, within the meaning of Section 4203 of ERISA, from each and all
Multiemployer Plans to which each is contributing or has contributed within the
past five calendar years, plus the aggregate of the excess of benefit
liabilities, within the meaning of Section 4001(a)(16) of ERISA, of each Plan
upon termination of such Plan over the assets of such Plan, does not exceed Five
Million Dollars ($5,000,000).
5.15 INVESTMENT COMPANY ACT OF 1940. Neither Borrower nor any
of its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
5.16 NO RESTRICTIONS ON SUBSIDIARIES. No Subsidiary is
prohibited by the terms of any agreement to which it is a party or by which it
is bound or affected from paying dividends to or making loans or advances to
Borrower or any Subsidiary directly controlling it, except (a) as disclosed in
Schedule 5.16; (b) restrictions imposed by this Agreement or any Collateral
Agreement; (c) customary non-assignment provisions restricting subletting or
assignment of any lease or assignment of any contract of any Subsidiary;
customary net worth provisions contained in leases and other agreements entered
into by a Subsidiary in the ordinary course of business; and customary
provisions
52
46
in instruments or agreements relating to a Lien created, incurred or assumed in
accordance with this Agreement prohibiting the transfer of the property subject
to such Lien, in each case in existence on the Closing Date; (d) restrictions on
Debt secured by any Permitted Lien described in clauses (iv), (xii), (xiii) or
(xiv) of the definition of "Permitted Lien" limiting the right of such
Subsidiaries to dispose of the assets securing such Debt to the extent that the
agreement governing such Debt prohibits the transfer of such assets as a
Restricted Payment; (e) customary restrictions with respect to a Subsidiary
pursuant to an agreement that has been entered into for the sale or disposition
of all or substantially all of the capital stock or assets of such Subsidiary;
and (f) any restrictions pursuant to any agreement that extends, refinances,
renews or replaces any agreement containing any of the restrictions described in
the foregoing clauses (a) through (e), provided that the terms and conditions of
any such restrictions are not less favorable to the Banks than those under or
pursuant to the agreement extended, refinanced, renewed or replaced.
5.17 SENIOR INDEBTEDNESS. All sums outstanding under this
Agreement and the Revolving Notes and all other monetary obligations of the
Borrower under this Agreement will constitute Senior Indebtedness and Designated
Senior Indebtedness.
5.18 ENVIRONMENTAL MATTERS. As of the Closing Date:
(a) except as disclosed on Schedule 5.18, the property, assets
and operations of Borrower and the Subsidiaries and the Scandinavian
Partnerships comply in all material respects with all applicable
Hazardous Materials Laws and all governmental permits relating to the
use and/or operation thereof (except to the extent that failure to
comply with such Hazardous Materials Laws or applicable permits would
not have a material adverse effect on the financial condition or
business of Borrower and its Subsidiaries taken as a whole);
(b) to the best knowledge of Borrower, after reasonable
inquiry, (i) none of the real property owned in fee, or the assets or
operations of Borrower and the Subsidiaries related thereto is the
subject of federal or state investigation mandating any remedial
action, involving expenditures, which is needed to respond to a release
of any Hazardous Materials into the environment, (ii) there are no
underground storage tanks present on or under the Properties owned in
fee, and (iii) there are no pending or threatened: (A) actions or
proceedings from any governmental agency or any other person or entity
regarding the disposal of Hazardous Materials, or regarding any
Hazardous Materials Laws or evaluation, or (B) liens or governmental
actions, notices of violations, notices of noncompliance or other
proceedings of any kind relating to any of the Hazardous Materials Laws
with respect to the Properties; and
(c) neither Borrower nor any Subsidiary has any material
liability (material to the Borrower and its Subsidiaries taken as a
whole) in connection with any release of any Hazardous Materials into
the environment.
5.19 COLLATERAL DOCUMENTS. (a) The provisions of each of the
Collateral Documents (other than the Mortgages, subject to (b) below, and the
collateral assignments of tenant's rights in leases) are effective to create in
favor of the Collateral Agent, for the benefit of the Secured Creditors, a
legal, valid and enforceable security interest in all right, title and interest
of Borrower and its Subsidiaries in the Collateral described therein; and
financing statements have been filed (or, in the case of UCC-1 financing
statements delivered on the Closing Date, executed and delivered in the proper
form for filing) in the offices in all of the jurisdictions listed in the
schedules to the Guarantee and Collateral Agreement.
53
47
(b) Each Mortgage when delivered will be effective to grant to
the Collateral Agent for the benefit of the Secured Creditors, a legal, valid
and enforceable mortgage lien on all the right, title and interest of the
mortgagor under such Mortgage in the real property and fixtures described
therein. When each such Mortgage is duly recorded in the appropriate land
records offices and the mortgage recording fees and taxes in respect thereof are
paid and compliance is otherwise had with the formal requirements of state law
applicable to the recording of real estate mortgages generally, each such
Mortgage shall constitute a perfected mortgage lien on such mortgaged property,
subject to the encumbrances and exceptions to title set forth therein and except
as noted in the title policies and title endorsements thereto delivered to the
Collateral Agent and described in Exhibit F, and such Mortgage also creates a
legal, valid, enforceable and perfected first lien on, and security interest in,
all right, title and interest of Borrower or such Subsidiary under such Mortgage
in all fixtures which are covered by such Mortgage, subject to no other Liens,
except the encumbrances and exceptions to title set forth therein and except as
noted in the title policies and title endorsements thereto delivered to the
Collateral Agent and described in Exhibit F and Permitted Liens.
(c) The provisions of the Guarantee and Collateral Agreement,
after giving effect to (i) the delivery to the Collateral Agent of the
certificates representing the certificated shares of the capital stock and other
equity interests of the Subsidiaries described in the Guarantee and Collateral
Agreement (the "Pledged Stock") accompanied by appropriate undated stock powers
executed in blank, (ii) the registration of the Pledged Partnership Interests
(as defined in the Guarantee and Collateral Agreement and, together with the
Pledged Stock, the "Pledged Securities") pursuant to the forms attached as
exhibits to the Guarantee and Collateral Agreement and (iii) the filing of UCC-1
financing statements in the offices set forth on the schedules to such Guarantee
and Collateral Agreement, shall be effective to create, in favor of the
Collateral Agent, for the ratable benefit of the Secured Creditors, a fully
perfected first Lien on, and security interest in, all right, title and interest
of Borrower and the Guarantors in the "Collateral", as defined in the Guarantee
and Collateral Agreement (except for Permitted Liens), and the Pledged Stock has
been delivered, where applicable, to the Collateral Agent or its nominee.
5.20 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. Except
as disclosed in Schedule 5.20, Borrower and its Subsidiaries own or are licensed
or otherwise have the right to use all of the patents, trademarks, service
marks, trade names, copyrights and franchises that are reasonably necessary for
the operations of their respective businesses as currently conducted, without
conflict with the rights of any other Person with respect thereto and except
where the failure to be in compliance with this sentence would not have a
material adverse effect on Borrower or any Substantial Subsidiary. To the best
knowledge of Borrower, no slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated to
be employed by Borrower or any of its Subsidiaries infringes upon any rights
obtained by any other Person, except where the failure to be in compliance with
this sentence would not have a material adverse effect on Borrower or any
Substantial Subsidiary, and no claim or litigation regarding any of the
foregoing is pending or threatened.
ARTICLE VI.
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that so long as the Credit shall
remain available, and until the full and final payment of all Obligations, it
will, and with respect to Sections 6.04, 6.05, 6.06, 6.07, 6.08, 6.09, 6.10,
6.11, 6.14, 6.16, 6.17 and 6.18, it will cause each Subsidiary to, unless
Majority Banks waive compliance in writing:
54
48
6.01 USE OF PROCEEDS AND LETTERS OF CREDIT. Use (a) the
proceeds of the Advances solely (i) to refinance and replace Indebtedness under
the Existing Credit Agreement, (ii) to finance expansions and investments
permitted hereunder and (iii) for working capital purposes in the ordinary
course of business; and (b) the Letters of Credit (i) to provide security as
required under applicable state consumer protection statutes and for utility
deposits, (ii) to provide credit support for insurance, construction bonds, rent
deposits and utility bonds, (iii) to secure the payment of workers' compensation
benefits and obligations, (iv) for the purposes described in clause (ii) of the
definition of "Permitted Liens" and to provide credit support for the
obligations described therein, and (v) for the general corporate purposes of the
Borrower and its Subsidiaries in the ordinary course of business. For purposes
of this Section 6.01, a "hostile takeover" of another entity or a "tender offer"
in furtherance of same is not a proper purpose.
6.02 NOTICES. Promptly, but within five (5) Banking Days,
unless otherwise provided below, give written notice to Agent of:
(a) except for matters previously disclosed on Schedule 5.09
and Schedule 6.02(a) (unless there is a significant development with
respect to these matters), any litigation affecting Borrower or any
Subsidiary, the adverse determination of which could materially and
adversely affect the financial condition or business of Borrower and
its Subsidiaries taken as a whole, or where the amount Borrower or such
Subsidiary expects to pay the other parties to the litigation is more
than One Million Dollars ($1,000,000);
(b) (i) any dispute which may exist between Borrower or any
Subsidiary and any governmental regulatory body or law enforcement
authority which has not been previously disclosed and could have a
material adverse effect on its operations, and (ii) any lien for taxes
(other than taxes unless such taxes are due), assessments, governmental
charges, or levies, in each case in excess of One Million Dollars
($1,000,000), immediately upon the filing thereof or the attachment
thereof to any property of Borrower or any of its Subsidiaries;
(c) any labor controversy resulting in or reasonably likely to
result in a strike against Borrower or any Subsidiary which could have
a Material Adverse Effect;
(d) the occurrence of a Reportable Event with respect to any
Plan which could result in the incurrence by Borrower or any ERISA
Affiliate of any liability, fine or penalty; the institution of any
steps to terminate any Plan (together with copies of any communication
between the PBGC and Borrower or any ERISA Affiliate related to such
termination); the institution of any steps to withdraw from any Plan,
within the meaning of Section 4062(e) or 4063 of ERISA, or any
Multiemployer Plan, within the meaning of Section 4203 or 4205 of
ERISA; the incurrence of any material increase in the contingent
liability of Borrower or any ERISA Affiliate with respect to any
post-retirement welfare benefits; the failure of Borrower or any other
Person to make a required contribution to a Plan if such failure is
sufficient to give rise to a lien under Section 302(f) of ERISA; or the
adoption of an amendment to any Plan that pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA would require Borrower
or an ERISA Affiliate to provide security to the Plan in accordance
with the provisions of such Sections;
(e) any Default or Event of Default, specifying the nature and
the period of existence thereof and what action Borrower has taken or
proposes to take with respect thereto;
(f) upon, but in no event later than ten (10) days after,
becoming aware of (i) any and all enforcement, cleanup, removal or
other governmental or regulatory actions instituted,
55
49
completed or threatened against Borrower or any Subsidiary or any of
their properties pursuant to any applicable Hazardous Materials Laws
which has the reasonable likelihood of subjecting Borrower or any
Subsidiary to environmental liability of One Million Dollars
($1,000,000) or more, (ii) all claims made or threatened by any third
party against Borrower or any Subsidiary with respect to or because of
its or their property relating to damage, responsibility, contribution,
cost recovery, compensation, loss or injury resulting from any
Hazardous Materials which has the reasonable likelihood of subjecting
Borrower or any Subsidiary to environmental liability of One Million
Dollars ($1,000,000) or more (the matters set forth in clauses (i) and
(ii) above are hereinafter referred to as "Hazardous Materials
Claims"), and (iii) any environmental or similar condition on any real
property adjoining or in the vicinity of the property of Borrower or
any Subsidiary that could reasonably be anticipated to cause the
property owned by Borrower or any Subsidiary or any part thereof to be
subject to any restrictions on the ownership, occupancy,
transferability or use of such property under any Hazardous Materials
Laws, together with copies of all inquiries, reports or notices
relating to the matters set forth in clauses (i), (ii) and (iii);
(g) following receipt by Borrower of a material notice from
any holder or representative of Subordinated Debt, a copy of such
notice and, concurrently with the sending of any notice by Borrower to
the holder or representative of any Subordinated Debt, a copy of such
notice; and
(h) any other matter which has resulted or is reasonably
likely to result in a Material Adverse Effect.
6.03 FINANCIAL STATEMENTS, REPORTS, ETC. Deliver or cause to
be delivered to each Bank:
(a) As soon as available but no later than fifty (50) days
after the close of each of the first three fiscal quarters of each of
Borrower's fiscal years, Borrower's unaudited consolidated statement of
income and retained earnings as of the close of such quarter, its
consolidated balance sheet and statement of income and retained
earnings for that portion of the fiscal year ending with such quarter,
and its unaudited consolidated statement of cash flows for such quarter
and that portion of the fiscal year ending with such quarter. Each of
such financial statements shall be certified by a responsible officer
of Borrower as being prepared in accordance with GAAP; PROVIDED, that
the delivery to each Bank of a Form 10-Q Quarterly Report of the
Borrower within the time period set forth above shall satisfy the
Borrower's obligations pursuant to this paragraph (a);
(b) as soon as available but no later than one hundred five
(105) days after the close of each of its fiscal years, a copy of the
unqualified, audited financial statements of Borrower and such other
audited financial statements of Subsidiaries of Borrower that have been
prepared (if any). Such financial statements shall include at least the
balance sheet of Borrower as of the close of such year and statements
of income and retained earnings and of changes in financial position
and cash flows for such year, prepared (in the case of Borrower) on a
consolidated basis, and such consolidated financial statements shall be
certified by Ernst & Young or by other independent public accountants
of national reputation selected by Borrower and reasonably satisfactory
to Banks. The delivery to each Bank of a Form 10-K Annual Report within
the time period set forth above shall satisfy the Borrower's
obligations pursuant to the preceding portion of this Section 6.03(b);
PROVIDED that the consolidated financial statements included in such
Form 10-K shall be certified by Ernst & Young or by other independent
public accountants of national reputation selected by Borrower and
56
50
reasonably satisfactory to Banks. The accountants' certification (x)
shall not be qualified or limited because of restricted or limited
examination by such accountants of any material portion of the records
of Borrower or any such Subsidiary for which audited financial
statements have been prepared and (y) shall not contain a "going
concern" or like qualification or exception. Such accountants for
Borrower shall state in a letter to Banks that in the course of their
examination such accountants, without undertaking any special
procedures for the purpose of such certificate, have obtained no
knowledge of the occurrence of any condition, event or act which would
constitute a Default or an Event of Default, or, if such accountants
shall have obtained knowledge of any such violation, condition, event
or act, they shall specify in such letter all such violations,
conditions, events and acts and the nature and status thereof. If any
of the materials required to be delivered pursuant to paragraph (c) of
this Section 6.03 are delivered in connection with the delivery of the
financial statements pursuant to this Section 6.03(b), the Borrower
shall not be required to deliver separately such statements pursuant to
such paragraph (c). Borrower shall promptly deliver to Agent a copy of
any management letters from such accountants to Borrower;
(c) promptly after filing with the Securities and Exchange
Commission, a copy of each Form 8-K Current Report, Form 10-K Annual
Report, Form 10-Q Quarterly Report and Form 11-K Annual Report, Annual
Report to Shareholders, Proxy Statement and Registration Statement of
(i) Borrower and (ii) Borrower's Subsidiaries;
(d) not later than fifty (50) days after the close of each of
the first three (3) quarters of the fiscal year of Borrower nor later
than one hundred five (105) days after the close of each of the
Borrower's fiscal years, a quarterly certificate executed by any of the
chief financial officer, vice president, treasurer or controller of
Borrower, stating that such officer is familiar with this Agreement and
the business and operations of Borrower and (i) showing Borrower's
compliance with Sections 6.12, 6.15, 7.01, 7.02, 7.06, 7.08 and 7.11
(ii) if Borrower or any Subsidiary is not in compliance therewith,
showing such failure to comply, the amount thereof and explaining the
reason therefor, (iii) specifying changes during such quarter in the
list of Subsidiaries previously delivered by the Borrower to the Banks,
other than changes previously reported to the Agent during such
quarter, (iv) stating that Borrower has performed all its obligations
hereunder and under any judgment, decree or order of any court or
governmental authority binding on Borrower except as may be contested
in good faith upon advice of counsel and for the possible payment of
which adequate reserves are being maintained, (v) stating that no event
has occurred which constitutes a Default or an Event of Default, or, if
such event has occurred, the nature and status thereof and the steps
that Borrower is taking or has taken to cure the same and (vi) stating
the name and jurisdiction of organization of each Unrestricted
Subsidiary created during such quarter;
(e) not later than forty (40) days after the end of each month
(other than the last month in each fiscal quarter), Borrower's
unaudited consolidated statement of income for that portion of the
fiscal year ending with such month. Such item shall be certified by a
responsible officer of Borrower as being complete and correct and
fairly presenting its results of operations and shall include a
comparison to the same period for the prior fiscal year;
(f) commencing March 1, 1998, on such date and on the first
day of each March thereafter, projections which are similar in form and
substance to the projections delivered pursuant to Section 4.01(ab);
(g) such other statements, lists of property and accounts,
budgets, forecasts or reports as Agent or any Bank may reasonably
request;
57
51
(h) within 10 Banking Days after (i) the receipt of proceeds
from a disposition of assets which receipt causes the amount of
Reinvestment Proceeds not theretofore reinvested or applied to
prepayment of Advances and cash collateralization of Letters of Credit
to exceed $1,000,000 or (ii) the receipt of proceeds from the
disposition of assets when the Reinvestment Proceeds not theretofore
reinvested or applied to prepayment of Advances and cash
collateralization of Letters of Credit exceeds $1,000,000, a statement
of a responsible officer of the Borrower certifying the amount of such
proceeds and the amount of Reinvestment Proceeds as of such date of
receipt;
(i) concurrently with the delivery thereof pursuant to the
Receivables Program Documents, a copy of (A) each Settlement Statement
(as defined in the Pooling & Servicing Agreement) delivered pursuant to
Section 3.4 of the Pooling & Servicing Agreement and (B) upon the
request of any Bank, through Agent, each officer's certificate
delivered pursuant to Section 3.5 of the Pooling & Servicing Agreement,
each independent accountant's report and management letter delivered
pursuant to Section 3.6 of the Pooling & Servicing Agreement and such
other information relating to the Receivables Program as shall be
requested by any Bank; and
(j) at each time financial statements of the Borrower are
required to be delivered pursuant to paragraph (a) or (b) above, copies
of the combined balance sheet of the Unrestricted Subsidiaries as of
the close of the applicable quarter or fiscal year and combined
statements of income and retained earnings of the Unrestricted
Subsidiaries for the portion of the fiscal year then ended, all set
forth in a format which reconciles such financial statements of the
Unrestricted Subsidiaries to the corresponding financial statements
delivered pursuant to paragraphs (a) and (b).
6.04 FURTHER ASSURANCES. Borrower shall execute and deliver,
or cause to be executed and delivered, to Banks, Agent or the Collateral Agent,
such documents and agreements, and shall take or cause to be taken such actions,
as Agent, the Collateral Agent or the Majority Banks may, from time to time
reasonably request to carry out the terms and conditions of this Agreement and
all of the Collateral Documents.
6.05 EXISTENCE, ETC. Subject to Section 7.05, maintain and
preserve its existence and all rights, privileges and franchises now enjoyed and
necessary for use in its business, and keep all its properties material to its
operations consistent with industry practice in good working order and
condition.
6.06 OWNERSHIP OF STOCK OF SUBSIDIARIES. Subject to Sections
7.05 and 7.08, maintain at least the same ownership of the capital stock or
other equity interests of each of its Subsidiaries as in effect on the Closing
Date.
6.07 PAYMENT OF OBLIGATIONS. Pay all material obligations,
including tax claims, when due, except such as may be diligently contested in
good faith and by appropriate proceedings or as to which a bona fide dispute may
exist and for which adequate reserves are being maintained.
6.08 COMPLIANCE WITH LAWS. At all times comply with all laws,
rules, regulations, orders and directions of any governmental authority
applicable to or having jurisdiction over it or its business, the violation of
which could have a material adverse effect on its financial condition or
continued operation, or on the validity or enforceability of this Agreement, any
of the Notes or any of the other Credit Documents, or the rights or remedies of
the Agent and the Banks hereunder or thereunder.
58
52
6.09 INSURANCE AND CONDEMNATION. Maintain at all times
substantially the same type of insurance coverage in respect of its properties
and assets as that maintained in respect thereof immediately prior to the
execution of this Agreement:
(a) in amounts not less than the amount of the coverage
immediately prior to the execution of this Agreement for all insurance
other than that described in clause (b) below including, without
limitation, fire and extended coverage insurance for the full and
insurable replacement value of all buildings and other improvements
located on its properties and business interruption and workmen's
compensation insurance. All such insurance (other than workmen's
compensation insurance) relating to assets of Borrower or its
Subsidiaries shall name the Collateral Agent as loss payee (and in the
case of each item of real property on which the Collateral Agent has a
security interest, mortgage loss payee) and an additional insured for
the interests relating to the assets of Borrower and its Subsidiaries,
for the benefit of the Collateral Agent and each Bank, as their
interests may appear, and shall not be modified, reduced or cancelled
in the absence of thirty (30) days prior written notice to the
Collateral Agent. Borrower shall promptly notify Agent of any loss,
damage, or destruction to the Collateral in excess of $500,000 for each
such casualty, whether or not covered by insurance. The Collateral
Agent is hereby authorized to collect all insurance proceeds directly.
With respect to insurance proceeds arising from loss, damage or other
casualty to any of the Collateral or any part thereof, such proceeds
shall be applied as hereinafter provided. Destruction or damage to any
real or personal property of Borrower or any Subsidiary which gives
rise to insurance proceeds shall be deemed to be a disposition of such
property for purposes of Section 7.08(d); PROVIDED, HOWEVER, that if
the total amount of the proceeds from such casualty is reasonably
expected to be less than $3,500,000 and neither an Event of Default nor
a Default shall have occurred and be continuing, Borrower shall have
the exclusive right to negotiate a settlement regarding such proceeds
with the applicable insurance company and the Collateral Agent shall
promptly forward such proceeds to Borrower and the Borrower shall use
such proceeds to pay for the repair or replacement (it being agreed
that a destroyed or damaged fitness center may be replaced at any site
within five miles of the site of such fitness center) of the Collateral
subject to such casualty; PROVIDED, FURTHER, however, that if an Event
of Default or a Default shall have occurred and be continuing, or the
proceeds of insurance from such casualty are reasonably expected to be
equal to or greater than $3,500,000, Borrower shall not enter into any
settlement agreement with the applicable insurance company without the
prior written consent of Agent, which consent shall not be unreasonably
withheld, and if a determination has been made to utilize such proceeds
to replace or rebuild the Collateral affected by such casualty, the
Collateral Agent shall release such proceeds to Borrower from time to
time during the course of said reconstruction, repair or restoration,
but not more often than once each thirty (30) day interval, in
accordance with the Collateral Agent's customary practices for
disbursements of construction loans, including, without limitation,
customary conditions precedent to disbursement, PROVIDED that:
(i) at the time of any requested release of
funds, no Event of Default or Default shall have occurred and
be continuing (to the extent such Event of Default or Default
is cured or waived, Borrower may again request the release of
such funds);
(ii) if at the time of any such request by
Borrower the cost of completing the repair, replacement or
reconstruction, lien-free and ready for use, is in excess of
insurance proceeds and other sums then in the Collateral
Agent's hand pursuant to this Section 6.09, funds to cover
such excess shall either (x) be promptly deposited by Borrower
with the Collateral Agent and shall be disbursed under this
Section 6.09 in the same manner as insurance proceeds or (y)
to the extent some or all of such amount
59
53
is available to be borrowed pursuant to Section 2.01(a)
hereof, Borrower may, in lieu of the deposit set forth in
subsection (x) above, elect to borrow such amounts as an
Advance in accordance with the terms of Article II hereof when
and as needed to complete the repair;
(iii) costs of administering this disbursement
procedure shall be paid by Borrower out of funds on deposit
with the Collateral Agent or otherwise;
(iv) when repair, replacement or reconstruction
has been completed and paid for, all insurance proceeds then
remaining in the Collateral Agent's hands shall be applied to
the payment of the Obligations in accordance with Section
7.08(d) and Section 2.08(a);
(v) the Collateral Agent shall be satisfied
that, upon release of such proceeds, it shall have for the
ratable benefit of the Secured Creditors, a first priority
perfected security interest on all property acquired (or to be
acquired), but subject to Permitted Liens, with such proceeds;
and
(vi) each release of funds shall be conditioned
upon receipt by Agent of such documentation as Agent may
reasonably require such as bills of sale, other evidences of
ownership by the Borrower (or a Subsidiary) of property
acquired with such proceeds, completion certificates, waivers
of mechanic's liens, etc.
The Collateral Agent shall, pending disbursement or
application of funds in accordance with the terms of this Section 6.09,
hold any insurance proceeds (and other funds deposited with it pursuant
to clause (ii) above) deposited with it in an interest bearing account
as to which the Collateral Agent shall not be liable in any respect to
Borrower for any investment results. Interest thereon shall be held and
disposed of in the same manner as other monies held by the Collateral
Agent under this Section 6.09. On each anniversary date of this
Agreement, Borrower shall provide Agent with a summary of each
insurance policy satisfactory to Agent reflecting the insurance
coverage required under this Section 6.09 (together with complete
copies of any insurance policies which Agent may request promptly after
such request but not later than six months after such request). In the
event of foreclosure of any mortgage or deed of trust in favor of
Collateral Agent encumbering the Properties or transfer of title to the
Properties in lieu of foreclosure, all right, title and interest of
Borrower in and to any insurance policies then in force with respect to
the Properties (other than liability policies of Borrower) shall pass
to the purchaser, grantee or assignee. In the event of any taking of
any portion of any of the Properties by condemnation, seizure or
appropriation by any governmental authority which does not constitute
an Event of Default hereunder, all awards or proceeds on account of
said taking shall be collected and applied in the same manner and shall
be subject to the same conditions precedent to the disbursement thereof
as applicable to insurance proceeds under this Section 6.09.
Notwithstanding the foregoing, the rights of the Agent and the Banks
under this paragraph (a) with respect to property and casualty
insurance proceeds relating to loss, destruction or damage, or a taking
of, real property (x) leased by the Borrower or any of its Subsidiaries
or (y) which is subject to a mortgage lien which is prior to the lien
of any Mortgage in favor of the Collateral Agent thereon, and for which
in either case the Collateral Agent is named as loss payee, shall be
subordinate to the rights, if any, of the owner of such real property
or the holder of such prior mortgage lien to the extent such owner or
holder is also named as loss payee; and
60
54
(b) in an amount not less than One Hundred Million Dollars
($100,000,000) for general liability coverage, including both bodily
injury and property damage, on a per occurrence basis (the "Minimum
Liability Coverage"), provided, however, that the Minimum Liability
Coverage may be reduced from time to time to a coverage limit of not
less than Twenty-Five Million Dollars ($25,000,000) on a per occurrence
basis (the "Lowered Coverage") if, within thirty (30) days prior to the
expiration of any Minimum Liability Coverage policy, and thereafter
within thirty (30) days after the end of each fiscal year of Borrower
until the Minimum Liability Coverage is reinstated, Borrower delivers
to Agent a certificate signed by the chief operating officer of
Borrower stating that Borrower has obtained a lesser amount of
coverage, setting forth the amount thereof, and that Borrower was
unable to obtain Minimum Liability Coverage and was able to obtain
general liability coverage only in the amount set forth in the
Borrower's certificate; provided, further, however, that the Lowered
Coverage may be reduced from time to time to a coverage limit of not
less than Twenty-Five Million Dollars ($25,000,000) on a "claims made"
basis if, within thirty (30) days prior to the expiration of any
Lowered Coverage policy and thereafter within thirty (30) days after
the end of each fiscal year of Borrower until the Minimum Liability
Coverage is reinstated, Borrower delivers to Agent a certificate signed
by the chief operating officer of Borrower stating that Borrower has
obtained a lesser amount of coverage, setting forth the amount thereof,
and that Borrower was unable to obtain Minimum Liability Coverage or
Lowered Coverage and was able to obtain general liability coverage only
in the amount set forth in the Borrower's certificate.
6.10 ADEQUATE BOOKS. Maintain adequate books, accounts and
records in accordance with GAAP, and at any reasonable time upon reasonable
notice, during normal business hours, permit employees or agents of each Bank at
any reasonable time to inspect its properties and examine or audit its books,
accounts and records and make copies and memoranda thereof.
6.11 ERISA. Make prompt payment contributions required to meet
the minimum funding standards of ERISA (including any funding waivers granted
thereunder) or as required pursuant to a collective bargaining agreement and to
maintain, and cause each of its ERISA Affiliates to maintain, each employee
benefit plan (as defined in Section 3(3) of ERISA) as to which it may have any
liability in material compliance with all applicable requirements of law and
regulations.
6.12 INTEREST COVERAGE. At the end of any fiscal quarter of
the Borrower set forth below, maintain a ratio of (i) Consolidated Adjusted
EBITDA to (ii) Consolidated Interest Expense, for any period of four consecutive
fiscal quarters of the Borrower then ended, commencing with such period ending
December 31, 1997, equal to or greater than the following:
=============================================================================
QUARTER ENDING MINIMUM REQUIRED
-----------------------------------------------------------------------------
December 31, 1997 through 1.40x
September 30, 1998
-----------------------------------------------------------------------------
December 31, 1998 through 1.70x
September 30, 1999
-----------------------------------------------------------------------------
December 31, 1999 through 1.95x
September 30, 2000
-----------------------------------------------------------------------------
61
55
December 31, 2000 and 2.20x
thereafter
=============================================================================
6.13 1997 SUBORDINATED NOTES. To the extent that any 1993
Subordinated Notes remain outstanding on the date of this Agreement, such
remaining 1993 Subordinated Notes shall be redeemed and cancelled by the
Borrower prior to January 31, 1998.
6.14 HAZARDOUS MATERIALS. (a) Conduct, and cause each
Subsidiary to conduct, its operations and keep and maintain its property in
compliance with all Hazardous Materials Laws (except to the extent that failure
to comply with such Hazardous Materials Laws would not have a material adverse
effect on the business, operations, properties, assets or financial condition of
Borrower and its Subsidiaries taken as a whole).
(b) Conduct, and cause to be conducted, the ongoing operations
of Borrower and its Subsidiaries in a manner that will not give rise to the
imposition of liability, or require expenditures, under or in connection with
any Hazardous Materials Law (except for any liabilities or expenditure which, in
the aggregate, would not have a material adverse effect on the business,
operations, properties, assets or financial condition of Borrower and its
Subsidiaries taken as a whole).
(c) Agent and its agents and representatives shall have the
right at any reasonable time to enter and visit the property (whether owned or
leased) of Borrower or any of its Subsidiaries for the purpose of observing such
property. Agent is under no duty, however, to visit or observe any such
property, and any such acts by Agent shall be solely for the purposes of
protecting Banks' security and preserving Banks' rights under the Collateral
Documents. No site visit or observation by Agent shall result in a waiver of any
default of Borrower or any Subsidiary or impose any liability on Agent or Banks.
In no event shall any site visit or observation by Agent be a representation
that Hazardous Materials are or are not present in, on, or under such property,
or that there has been or shall be compliance with any Hazardous Materials Laws.
Neither the Borrower nor any other party is entitled to rely on any site visit
or observation by Agent. Agent owes no duty to inform Borrower or any other
party of any Hazardous Materials or any other adverse condition affecting any
such property. Agent shall not be obligated to disclose to Borrower or any other
party any report or findings made as a result of, or in connection with, any
site visit or observation by Agent. In each instance, Agent shall give Borrower
reasonable notice before entering any such property. Agent shall make reasonable
efforts to avoid interfering with the use of any such property in exercising any
rights provided in this Section 6.14.
(d) At the Collateral Agent's reasonable request, which the
Collateral Agent may make at all reasonable times and from time to time,
Borrower shall cause Phase I environmental audits of the Properties on which the
Collateral Agent has Liens to be conducted by technical consultants acceptable
to the Collateral Agent and detailed written reports thereof to be furnished to
the Collateral Agent, for its benefit, all in a form acceptable to the
Collateral Agent, PROVIDED that no more than one such audit may be required for
any property unless at any time the Collateral Agent reasonably determines that
a material change in the environmental condition of such property may have
occurred. In the event said Phase I environmental audits disclose any
environmental condition of any of the Properties which could cause a material
violation of the Hazardous Materials Laws, Borrower shall cause a Phase II
environmental audit of the applicable Property to be conducted by said technical
consultant acceptable to the Collateral Agent and a detailed written report
thereof to be furnished to the Collateral Agent. Borrower shall take all
reasonable remedial measures indicated in said Phase II environmental audit
necessary to be in compliance with law. If Borrower fails to obtain said Phase I
62
56
or Phase II environmental audits as aforesaid, the Collateral Agent may, but
shall not be obligated to, cause said Phase I or Phase II environmental audits
to be conducted at Borrower's sole cost.
(e) Borrower hereby acknowledges that nothing in this Section
is either intended to or actually does give Collateral Agent or the Banks
control of Borrower's or its Subsidiaries' or the Scandinavian Partnerships'
Properties or business or any of its or their business decisions.
6.15 LEVERAGE RATIO. Maintain the Leverage Ratio at the end of
each fiscal quarter of the Borrower set forth below at a level not to exceed the
level set forth opposite such period:
=============================================================================
QUARTER ENDING MAXIMUM REQUIRED
-----------------------------------------------------------------------------
December 31, 1997 through 3.90x
September 30, 1998
-----------------------------------------------------------------------------
December 31, 1998 through 3.60x
September 30, 1999
-----------------------------------------------------------------------------
December 31, 1999 through 2.75x
September 30, 2000
-----------------------------------------------------------------------------
December 31, 2000 and thereafter 2.50x
=============================================================================
For the purpose of calculating the Leverage Ratio for the
fiscal quarter ending December 31, 1997, Consolidated Total Funded Debt shall
exclude the aggregate principal amount of any 1993 Subordinated Notes which were
outstanding on the date hereof.
6.16 REAL ESTATE TAXES. Borrower shall pay and discharge, and
shall cause its Subsidiaries and the Scandinavian Partnerships to pay and
discharge, as and when due and payable, before any penalty attaches, all
charges, impositions, levies, assessments and taxes (whether general, special or
otherwise), water charges, sewer service charges and all other municipal or
governmental charges, impositions, levies, assessments and taxes of any kind or
nature that may be at any time levied, assessed or imposed upon or against any
real property owned in fee by any Subsidiary or the Scandinavian Partnerships or
in which any Subsidiary has a leasehold interest (but only to the extent
Borrower or any Subsidiary is required to pay such taxes in accordance with the
terms of the lease), and shall promptly deliver to Collateral Agent upon
Collateral Agent's request therefor, duplicate receipts evidencing payment
thereof prior to delinquency. Notwithstanding anything to the contrary in the
foregoing, Borrower may contest any tax imposed, assessed, levied or due with
respect to or from said real property, by instituting and diligently and in good
faith prosecuting by appropriate judicial proceedings the validity or amount of
a tax, charge, imposition or assessment (said tax, charge, imposition or
assessment being hereinafter referred to in this Section as "impositions") if
(i) the contest or decision relating thereto will not and cannot result in the
forfeiture of said real property or the Subsidiary's leasehold interest therein
prior to or pending resolution of such contest and the invalidity, forfeiture,
loss of priority or unenforceability of Collateral Agent's mortgage lien on said
real property or the Subsidiary's leasehold interest therein will not and cannot
result from such contest or failure to pay such impositions, (ii) no Event of
Default shall exist hereunder, and (iii) prior to commencement and during the
duration of such proceeding, Borrower shall maintain adequate reserves on
account of the failure to pay such imposition and/or the contest of the amount
and/or validity thereof. Upon resolution of such contest, Borrower shall
promptly pay the impositions then due. If, at any time during the continuance of
the contest described in the preceding sentence, said real property or the
63
57
Subsidiary's leasehold interest therein is, in Collateral Agent's reasonable
determination, in imminent danger of being forfeited, lost or rendered invalid
or unenforceable, then, in any of said events, Borrower shall, at Collateral
Agent's demand, use the aforesaid reserve to pay such impositions and if such
reserve is insufficient to pay in full the required payment, Borrower promptly
shall pay the amount of such insufficiency.
6.17 ADDITIONAL REAL ESTATE COLLATERAL. Within 60 days of the
date hereof, Borrower and the Subsidiaries shall have met each of the
requirements set forth in Sections 4.01(p)-(t) in connection with the real
property set forth on Schedule 6.17.
6.18 CONDITIONS SUBSEQUENT. Within the time periods specified
in Exhibit L, Borrower and the Subsidiaries shall perform the actions set forth
in such Exhibit L.
ARTICLE VII.
NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that so long as the Credit shall
remain available, and until full and final payment of all Obligations, it will
not, and with respect to Sections 7.01, 7.02, 7.03, 7.04, 7.05, 7.06, 7.07,
7.08, 7.09, 7.10, 7.11, 7.13, 7.14 and 7.16, it will not permit any Subsidiary
to, unless Majority Banks waive compliance in writing:
7.01 INVESTMENTS AND RESTRICTED PAYMENTS. Except as otherwise
permitted herein, make any Investments in any Person or any Restricted Payments
except:
(a) Borrower or any Subsidiary may make Investments in any
Guarantor or in the Borrower;
(b) Any Subsidiary may make Restricted Payments to Borrower or
any Guarantor;
(c) Borrower may make Investments in Cash Equivalents;
(d) Investments may be made in the ordinary course of business
related to employees, such as payments in respect of relocation, travel
advances, and loans to employees to exercise stock options, all of
which Investments do not exceed in the aggregate at any one time One
Million Dollars ($1,000,000);
(e) Borrower or any Subsidiary may acquire on a friendly basis
at least 51% of each class of capital stock of any fitness center
located in the United States, provided that (i) such fitness center
shall immediately become a Guarantor and shall comply with Section 3.04
hereof, and (ii) the amount of any such acquisition shall be deemed a
Capital Expenditure for purposes of this Agreement (except to the
extent that the same represents the reinvestment of Reinvestment
Proceeds). As used in this Section 7.01(e), "fitness center" means any
corporation whose business is comparable to any of the businesses
currently operated by Borrower or any of its Subsidiaries (other than a
finance company);
(f) Borrower and its Subsidiaries may make mandatory
Investments in Funding Corp., and Funding Corp. may make required
Investments in the H&T Master Trust and HTCA, in each case pursuant to
and in accordance with the Receivables Program Documents;
64
58
(g) (i) Investments in Foreign Subsidiaries and Lincoln
Indemnity Company existing on the Closing Date and (ii) additional
Investments in Foreign Subsidiaries and Lincoln Indemnity Company made
after the Closing Date in an aggregate amount (valued at the time of
the making thereof, and after taking into account any return after the
Closing Date from dividends, distributions and repayments in respect of
such Investments), at any time outstanding, not to exceed $5,000,000;
(h) Investments by the Borrower and its Subsidiaries in New
Ventures, Foreign Subsidiaries, Lincoln Indemnity Company,
non-Consolidated Subsidiaries and Unrestricted Subsidiaries after the
date hereof; PROVIDED that the aggregate amount of such Investments
made after the Closing Date (valued at the time of the making thereof,
and after taking into account any return after the Closing Date from
dividends, distributions and repayments in respect of such Investments)
does not exceed, at any one time outstanding, $20,000,000; PROVIDED
FURTHER that the cumulative outstanding Investment in any Subsidiary on
the date that such Subsidiary is converted to an Unrestricted
Subsidiary in accordance with the terms hereof shall be deemed an
Investment made on such conversion date in an Unrestricted Subsidiary
for purposes of determining compliance with this Section 7.01(h);
(i) Investments to the extent funded by common stock of the
Borrower or the proceeds thereof; and
(j) Investments consisting of cash reserves established, in
the ordinary course of the Borrower's and its Subsidiaries' business
and consistent with past practice, pursuant to the Credit Card Program
Agreement.
7.02 OTHER OBLIGATIONS. Except as provided in this Agreement,
create, incur, assume or permit to exist any Debt, or create, incur or enter
into any Guaranty of any Debt of any other Person, other than:
(a) the Secured Obligations;
(b) Any Debt existing on the Closing Date listed on Schedule
7.02(b) hereto, and any renewal, extension or refinancing of any
purchase money Debt listed on such Schedule (and identified as such on
such Schedule) that does not consist of any capitalization of interest
on the original Debt; PROVIDED, that the principal amount of such
renewal, extension or refinancing Debt (the "REFINANCING DEBT") shall
not exceed the principal amount of the original Debt listed on such
Schedule, the maturity date of each installment or principal of such
Refinancing Debt shall not be earlier than the maturity date of the
corresponding installment of the original Debt, and the Liens securing
the Refinancing Debt constitute "Permitted Liens" under clause (iv) of
the definition of such term;
(c) Standby letters of credit obtained in the ordinary course
of business;
(d) Debt of Borrower to any of its Subsidiaries and of any
Guarantor to Borrower or any other Guarantor;
(e) Debt under revolving credit commitments or letter of
credit commitments made available by banks or other financial
institutions otherwise than under this Agreement to the extent that the
Commitment Amount shall have been permanently reduced by the amount of
such revolving
65
59
credit commitments or letter of credit commitments on the date such
revolving credit commitments or letter of credit commitments are
incurred and the terms of such revolving credit commitments or letter
of credit commitments are reasonably satisfactory to the Majority Banks
in all material respects;
(f) additional Debt (including Guarantees of Debt permitted
under paragraph (g) of Section 7.02 to the extent such Guarantee would
be in excess of the amount permitted by paragraphs (g) hereof) incurred
or assumed by the Borrower and its Subsidiaries in an aggregate
principal amount not to exceed $30,000,000; PROVIDED that (x) if the
Leverage Ratio of the Borrower at the end of any fiscal quarter of the
Borrower after the Closing Date is less than 2.75 to 1.00, the
foregoing limitation shall thereafter be $40,000,000 and (y) if the
Leverage Ratio of the Borrower at the end of any fiscal quarter of the
Borrower after the Closing Date is less than 2.00 to 1.00, the
foregoing limitation shall thereafter be $50,000,000; PROVIDED,
FURTHER, that (i) such Debt is not secured by any property constituting
Collateral under the Collateral Documents (except to the extent that
such Debt may be secured by Liens described under clause (iv) of the
definition of "Permitted Liens") and (ii) before and after giving
effect to the incurrence of such Debt, no Default or Event of Default
shall have occurred and be continuing and PROVIDED, FURTHER, that
Guarantees of such Debt shall not be considered Debt for the purposes
of this paragraph (f) of this Section 7.02;
(g) Guarantees of Debt permitted under paragraph (b) of this
Section 7.02 in an aggregate amount not to exceed $7,000,000; and
(h) Debt incurred as an Investment permitted by Section 7.01.
7.03 OTHER SECURITY. Other than as expressly permitted under
Section 7.08, create, assume or suffer to exist any Lien on any of its or its
Subsidiaries' property, real or personal or mixed (including without limitation,
any leasehold interests), whether now owned or hereafter acquired, except
Permitted Liens and licenses of intellectual property pursuant to a Franchise
Program.
7.04 SUBORDINATED DEBT. (a) Pay interest, principal, or
premium on any Subordinated Debt (other than the Subordinated Notes) if at the
time of such payment or proposed payment there has occurred and is continuing
under this Agreement, or if as a result of any such payment or proposed payment
there would occur, a Default or an Event of Default;
(b) Pay interest, principal or premium on the 1997
Subordinated Notes in violation of Article Thirteen of the 1997 Indenture, or
make any payment thereunder or with respect to any other Subordinated Debt to
any holder or the trustee named therein prior to one (1) Banking Day preceding
the times set forth therein for the payment of same, or make any payment,
purchase or redemption of the 1997 Subordinated Notes pursuant to Article Four,
Five, Ten, Eleven, Twelve or Thirteen of the 1997 Indenture or deliver any
notice to the trustee under the Indenture or the holders of the 1997
Subordinated Notes of its intention to make any such payment, purchase or
redemption, or make any "Company Request" under Section 12.1 of the 1997
Indenture;
(c) Amend or waive the Indenture, the Subordinated Notes or
any other agreement relating to Subordinated Debt without first obtaining the
consent of Majority Banks; or
(d) Prepay, redeem, defease, purchase or repurchase all or any
part of any Subordinated Debt including, but not limited to, the Subordinated
Notes (other than as permitted by Section 7.09(a) hereof), or take any action to
effect the foregoing, without the consent of all the Banks; PROVIDED that,
notwithstanding any other provision contained in this Section 7.04, the Borrower
shall redeem and
66
60
cancel the 1993 Subordinated Notes prior to January 31, 1998 pursuant to the
terms of the 1993 Indenture.
7.05 LIQUIDATION; MERGER. Liquidate or dissolve, or enter into
any consolidation, merger, partnership, joint venture or other combination, or
sell, lease or dispose of its business or assets as a whole or in an amount
which constitutes a substantial portion thereof; PROVIDED, HOWEVER, that (a) any
Subsidiary may merge into, consolidate with or transfer its business or assets
to Borrower or any other Subsidiary (so long as such acquiring Subsidiary is a
Guarantor) pro rata, to the extent owned by Borrower or such Subsidiary, (b)
Borrower may merge with any other corporation so long as Borrower is the
surviving corporation and no Default or Event of Default would exist under this
Agreement after giving effect to such merger, (c) any Subsidiary may liquidate
or dissolve if upon such liquidation or dissolution all or substantially all of
the business or assets of such Subsidiary are distributed to Borrower or any
other Subsidiary (so long as such transferee Subsidiary is also a Guarantor) pro
rata, to the extent owned by Borrower or such Subsidiary, and (d) in the event
that a Subsidiary has distributed its business or assets to Borrower or any
Subsidiary pursuant to Section 7.05(c), neither Borrower nor any Subsidiary
shall be required to preserve any right, license, or franchise of such
Subsidiary or the corporate existence of such Subsidiary if the Board of
Directors of Borrower or the Subsidiary to which the business or assets of such
Subsidiary were distributed shall determine that the preservation thereof is no
longer desirable and that the loss thereof is not adverse in any material
respect to Banks.
7.06 CAPITAL EXPENDITURES. During any fiscal year of Borrower,
permit the aggregate amount of Capital Expenditures (including amounts expended
for acquisitions permitted by Section 7.01(e)) of Borrower and its Subsidiaries
to exceed $50,000,000; PROVIDED that (i) up to $5,000,000 of any unused amount
in any fiscal year may be carried forward to the next year only and (ii) up to
$5,000,000 for any fiscal year may be carried backward to the immediately
preceding fiscal year (provided that any amounts so carried backward from a
fiscal year shall be deducted from the amount of Capital Expenditures allowed
pursuant to this Section 7.06 during such fiscal year); PROVIDED FURTHER that
Capital Expenditures financed with the capital stock of the Borrower (or the
proceeds from the sale thereof) shall be excluded in determining the foregoing
limitation.
7.07 CHANGE IN BUSINESS. Engage in any business activities or
operations substantially and materially different from or unrelated to business
activities existing on the Closing Date; PROVIDED, HOWEVER, that this Section
7.07 shall not prohibit the Borrower or its Subsidiaries from managing non-owned
fitness centers or providing payment, processing and collection services for
non-owned fitness centers, or from commencing and operating a Franchise Program,
or from operating a captive insurance company.
7.08 DISPOSAL OF ASSETS. Dispose of any accounts receivable,
any fixed or capital assets (including, without limitation, the entering into of
any sale and leaseback agreement covering any of its fixed or capital assets),
any Capital Stock of Subsidiaries or any Intangible Assets, or enter into any
license, franchise or sublease arrangements; PROVIDED, however, that:
(a) dispositions of assets among and between Borrower and the
Guarantors shall not be prohibited hereunder;
(b) the Borrower and its Subsidiaries may dispose of the
Receivables Program Receivables on the terms and subject to the
conditions set forth in the Receivables Program Documents, PROVIDED
that none of such Receivables Program Receivables may be so disposed of
for the purpose of supporting any series of Receivables Program
Certificates other than the 1996-1 Certificates or other Receivables
Program Certificates permitted under this Agreement without the prior
consent of the Majority Banks;
67
61
(c) to the extent the Borrower or any Subsidiary may at any
time be a party to the Credit Card Program Agreement, licensing
arrangements contemplated by the Credit Card Program Agreement shall
not be prohibited under this Section 7.08;
(d) Borrower or any Subsidiary may dispose of accounts
receivable, fixed or capital assets (including, but not limited to (i)
disposition of any interest in the Exchangeable Transferor Certificate
(including, but not limited to, any such disposition in connection with
any issuance of any additional series of Receivables Program
Certificates permitted under this Agreement) and (ii) dispositions by
sale and leaseback agreements covering fixed or capital assets),
capital stock or Intangible Assets, or enter into any license,
franchise or sublease arrangement (other than pursuant to a Franchise
Program), so long as the proceeds of such disposition, to the extent
the same constitutes Reinvestment Proceeds, shall be applied to the
acquisition of replacement assets of a like kind as the assets so
disposed of, and otherwise the proceeds of such disposition shall be
applied to the permanent reduction of the Commitment Amount, the
Revolving Credit Commitment Amount and L/C Commitment Amount, and the
prepayment of the Advances and the cash collateralization of the
Letters of Credit, as set forth in Section 2.08; PROVIDED, HOWEVER,
that (i) Borrower or any Subsidiary may dispose of surplus or obsolete
equipment or fixtures in the ordinary course of business, and up to One
Million Dollars ($1,000,000) per year of the proceeds of such
dispositions shall not be subject to the requirements of this Section
7.08(d) and (ii) Borrower and its Subsidiaries may license certain
rights with respect to its trade name or other intellectual property
pursuant to franchising arrangements permitted by Section 7.08(e) and
the proceeds of such license and franchise activities shall not be
subject to the requirements of this Section 7.08(d);
(e) Borrower and its Subsidiaries may license certain rights
with respect to its trade name and other intellectual property (i) to
franchisees for the operation of health clubs pursuant to a Franchise
Program and (ii) for other purposes intended to generate proceeds to
the Borrower; and
(f) Borrower and its Subsidiaries may sell assets (and related
liabilities) consisting of health and fitness clubs to Persons which
simultaneously become franchisees pursuant to a Franchise Program;
PROVIDED that (i) such assets are sold at their net fair market value
(taking into account the amount of such liabilities) and (ii) the
aggregate net cash proceeds arising from such sales does not exceed
$2,000,000.
7.09 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS AND RECEIVABLES PROGRAM DOCUMENTS. Without limitation of any
obligation under any other Section of this Article VII:
(a) make any optional payment or prepayment on or redemption
or purchase or defeasance of any Debt or make or set aside any sinking
fund payments with respect to any Debt (other than the Advances and
reimbursement obligations in respect of any Letter of Credit);
PROVIDED, HOWEVER, Borrower or its Subsidiaries may prepay or make
optional payments on any purchase money Debt or Capitalized Leases
where the Agent, for the benefit of the Banks, is granted a Lien in the
relevant asset of the Borrower or its Subsidiary, as the case may be,
in the amount of such prepayment or optional payment; PROVIDED FURTHER,
HOWEVER, the Borrower shall be permitted to redeem or prepay (i) the
1993 Subordinated Notes pursuant to Section 7.04(d), (ii) the 1997
Subordinated Notes from the proceeds of a public offering of the
Borrower's common stock after the Closing Date, to the extent permitted
by the "equity clawback" provision set forth in Section 11.1(b) of the
1997 Indenture, and (iii) Debt existing on the date hereof and
identified on Schedule 7.09(a);
68
62
(b) amend, modify or change in any material respect, or
consent or agree to any such amendment, modification or change to, any
of the terms of any such Debt (other than any such amendment,
modification or change to the terms of any Debt which would extend the
maturity or reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment of interest
thereon); or
(c) amend, modify or change, or consent or agree to any
amendment, modification or change to the Receivables Program Documents
which would affect the amortization of the Receivables Program
Certificates thereunder, the collateral thereunder, the sale of
Receivables Program Receivables at a discount, or the interest rate
applicable to the Receivables Program Certificates or the Exchangeable
Transferor Certificate (other than any such amendment, modification or
change which would extend the maturity or reduce the amount of payment
of principal on the affected Receivables Program Certificates or which
would reduce the rate or extend the time of payment of any interest
thereon, or would not increase any amount of schedulized amortization
for any period prior to the Termination Date); PROVIDED that the
aggregate principal amount of the Receivable Program Certificates can
be increased if (i) such increase is in connection with a corresponding
increase in the amount of Receivable Program Receivables sold in the
Receivables Program, (ii) the terms governing such additional
Receivable Program Certificates are substantially similar to, or no
less favorable to the Borrower and its Subsidiaries than, the existing
Receivable Program Certificates and (iii) no part of such increased
amount has a scheduled amortization prior to the Termination Date; or
(d) permit any series of Receivables Program Certificates to
be issued other than the 1996-1 Certificates or as contemplated by the
proviso to the preceding paragraph (c), except that a series of
Receivables Program Certificates may be issued to replace or refinance
the 1996-1 Certificates in whole or in part (such new series of
Receivables Program Certificates, a "REFINANCING SERIES" and such new
Receivables Program Certificates, "REFINANCING CERTIFICATES") if (y)
such Refinancing Series contains no material covenants and no Payout
Events not applicable to the 1996-1 Certificates and each of the
covenants and defaults contained in the supplement creating such
replacement series are not materially more burdensome or restrictive
than those covenants contained in the 1996-1 Supplement and (z) no
scheduled amortization of such replacement series shall be scheduled to
occur prior to the Termination Date in amounts in excess, for any
period prior to the Termination Date, than that scheduled for the
1996-1 Certificates.
7.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate (other
than a Subsidiary) unless such transaction is (a) otherwise permitted under this
Agreement, and (b) upon fair and reasonable terms no less favorable to the
Borrower or such Subsidiary, as the case may be, than it would obtain in a
comparable arm's length transaction with a Person which is not an Affiliate.
7.11 LIMITATION ON SALES AND LEASEBACKS. Enter into
arrangements providing for the leasing by the Borrower or any Subsidiary of real
or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to a third person on the security of such property
or rental obligations of the Borrower or such Subsidiary if the net proceeds
from sale or transfer with respect to such arrangements exceed, in the
aggregate, $10,000,000.
7.12 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal
year of the Borrower to end on a day other than December 31.
69
63
7.13 FUNDING CORP. (a) Permit Funding Corp. to (i) assume,
guarantee or otherwise become liable in any manner with respect to any Debt
other than Debt arising under the Purchase Agreement, (ii) consolidate or merge
with any Person, (iii) purchase or acquire any business or property other than
receipt or purchase of Receivables Program Receivables under the Purchase
Agreement for transfer to the H&T Master Trust under the Pooling & Servicing
Agreement, (iv) make any Investment in any Person other than Investments in the
H&T Master Trust and HTCA pursuant to the Receivables Program Documents, (v)
conduct any business other than the transactions required to be performed by it
under the Receivables Program Documents, or (vi) create, assume or suffer to
exist any Lien on any of its property (including, without limitation, any
Released Amounts (as defined in the Pooling & Servicing Agreement)), whether now
owned or hereafter acquired, except Liens pursuant to, and in accordance with
the terms of, the Receivables Program Documents.
(b) Fail to cause the management, business and affairs of
Funding Corp. to be conducted in a manner as required by the Receivables Program
Documents and consistent with the assumptions set forth in the opinion of
Winston & Xxxxxx delivered in connection with the Pooling & Servicing Agreement
relating to the issue of whether Funding Corp. would be substantively
consolidated with HTCA in a bankruptcy of HTCA.
7.14 UNRESTRICTED SUBSIDIARIES. (a) Create or otherwise
designate any Subsidiary as an Unrestricted Subsidiary unless the terms set
forth in the definition of Unrestricted Subsidiary are complied with respect to
such Subsidiary and no Default or Event of Default then exists (unless the
creation or designation of the Unrestricted Subsidiary would cure the Default or
Event of Default) or would result from the designation, creation and operation
of such Unrestricted Subsidiary.
(b) Without the prior written consent of the Majority Banks,
change the characterization of a Subsidiary from a Subsidiary to an Unrestricted
Subsidiary or an Unrestricted Subsidiary to a Subsidiary; PROVIDED HOWEVER, the
prior written consent of the Majority Banks shall not be required if (A) no
Default or Event of Default shall have occurred and be continuing at such time
or would result therefrom, (B) after giving effect to such re-characterization,
each of the representations and warranties made by in the Borrower in or
pursuant to this Agreement or the Collateral Documents shall be true and correct
in all material respects as of the date of such re-characterization, (C) if
re-characterized as a Subsidiary, such Subsidiary shall have complied with the
provisions of Article III as if it were a new Subsidiary and (D) the Borrower
provides the Agent five Banking Days advance written notice of its intent to
re-characterize such Subsidiary.
(c) Permit any Unrestricted Subsidiary to fail to comply with
the requirements set forth in the definition of "Unrestricted Subsidiary."
7.15 TAX ALLOCATION AND INDEMNITY AGREEMENT. Amend, modify or
change, or consent or agree to any amendment, modification or change to the Tax
Allocation and Indemnity Agreement in any manner which is materially adverse to
the Banks.
7.16 HEALTH & TENNIS (UK) LIMITED. For so long as Health &
Tennis (UK) Limited is a Subsidiary, permit Health & Tennis (UK) Limited to own
assets with a value in excess of $100,000 unless, prior to owning such assets,
65% of the Capital Stock of Health & Tennis (UK) Limited is pledged to the
Collateral Agent for the benefit of the Banks and the Operating Banks pursuant
to documentation reasonably acceptable to the Collateral Agent.
ARTICLE VIII.
70
64
EVENTS OF DEFAULT
-----------------
If one or more of the following events (herein called "Events
of Default") shall occur and be continuing:
8.01 NONPAYMENT. (a) Borrower shall fail to pay, when due, any
portion of principal or interest due hereunder or under the Notes in accordance
with the terms hereof or thereof; or
(b) Borrower shall fail to pay, when due, any fees,
commissions or any other sum due hereunder in accordance with the terms hereof.
8.02 REPRESENTATION OR WARRANTY. Any representation or
warranty made by Borrower or any Subsidiary herein or in any other Credit
Document or in any agreement, instrument or certificate executed or delivered to
Banks, Agent or the Collateral Agent pursuant hereto or in connection with any
transaction contemplated here shall prove to have been false or misleading in
any material respect when made or when deemed to have been made;
8.03 LIENS. (a) Any involuntary lien or liens securing payment
of the aggregate sum of One Million Dollars ($1,000,000) or more, of any kind or
character, except for Permitted Liens, shall attach to any assets or property of
Borrower or any Subsidiary, if such lien is not discharged or execution thereon
is not stayed within thirty (30) days after the date of the notice of
attachment, or (b) any lien or liens for taxes, assessments, governmental
charges or levies, in the aggregate sum of One Million Dollars ($1,000,000) or
more shall attach to any assets or property of Borrower or any Subsidiary if
such lien is not discharged within thirty (30) days after the date of the filing
thereof or attachment (or in the case of real estate tax liens, the date on
which such real estate taxes are due);
8.04 JUDGMENTS. There shall be entered against Borrower or any
of its Subsidiaries one or more judgments (or any judgment against an ERISA
Affiliate, if such judgment is in favor of a Multiemployer Plan) in excess of
One Million Dollars ($1,000,000) in the aggregate at any one time outstanding
excluding those judgments (i) that have been outstanding less than thirty (30)
calendar days from the entry thereof, (ii) for not more than Five Million
Dollars ($5,000,000) during the time which a stay of enforcement of such
judgment is in effect by reason of a pending appeal or otherwise or (iii) for
and to the extent which Borrower or such Subsidiary is insured and with respect
to which the insurer has admitted liability in writing.
8.05 VOLUNTARY BANKRUPTCY. Borrower or any Guarantor shall
fail to pay, or admit in writing its inability to pay, its debts generally as
they come due, or shall file any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors, or Borrower or any Guarantor
shall take any corporate action to authorize, or in furtherance of, any of the
foregoing.
8.06 INVOLUNTARY BANKRUPTCY. Involuntary petition shall be
filed under any bankruptcy statute against Borrower or any Guarantor, or a
custodian, receiver, trustee, assignee for the benefit of creditors (or other
similar official) shall be appointed to take possession, custody or control of
the properties of Borrower or any Guarantor, unless such petition or appointment
is set aside or withdrawn or ceases to be in effect within sixty (60) days from
the date of said filing or appointment.
8.07 REGULATORY ACTION. Any governmental regulatory authority
shall take action which will materially and adversely affect Borrower's
consolidated condition, operations or ability to repay the Obligations unless
such action is set aside, dismissed or withdrawn within sixty (60) days of its
institution or such action is being contested in good faith and its effect is
stayed during such contest.
71
65
8.08 CHANGE OF CONTROL EVENT. A Change of Control Event shall
occur.
8.09 GOVERNMENT APPROVALS. Any approval, consent, exemption or
other action of any governmental authority or any other Person required under
this Agreement is withdrawn or becomes ineffective and the absence thereof would
materially and adversely affect Borrower's consolidated condition, operations or
ability to repay the Obligations and no reinstatement of same shall occur within
thirty (30) days after such withdrawal or ineffectiveness.
8.10 CROSS DEFAULT. Any breach or default shall occur with
respect to any Debt or any operating lease agreement in excess of Two Million
Dollars ($2,000,000) (except with respect to Debt under this Agreement)
individually or in the aggregate, under which Borrower or any of its
Subsidiaries may be obligated as borrower or guarantor, if such breach or
default consists of the failure to pay any such indebtedness when due whether by
acceleration or otherwise (and remains uncured or continues beyond any
applicable grace period) or if such breach or default results in or permits (or,
with the passage of time, the giving of notice or both, may permit) the
acceleration of any such indebtedness of or the termination of any commitment to
lend to Borrower or any such Subsidiary.
8.11 ERISA. (a) The occurrence of a Termination Event with
respect to one or more Plans and/or one or more Multiemployer Plans if
Borrower's maximum liability (as measured, (A) in the case of a Termination
Event described in clauses (i) through (iii) of the definition of "Termination
Event", by the amount by which plan assets are insufficient to satisfy benefit
liabilities upon termination under ERISA with respect to each Plan as to which
such Termination Event has occurred, (B) in the case of a Termination Event
described in clause (iv) of said definition, by the withdrawal liability under
Section 4063 of ERISA with respect to each Plan as to which such Termination
Event has occurred, and (C) in the case of a Termination Event described in
clause (v) of the definition of "Termination Event", by the excess, if any of
(i) the aggregate of annual contributions due or paid during a plan year plus
payments and interest due or paid pursuant to Section 4219 of ERISA during the
same plan year, with respect to each Multiemployer Plan as to which a
Termination Event has occurred, over (ii) the annual contribution amount due or
paid for such Multiemployer Plan for the plan year preceding the plan year in
which such Termination Event occurred) which could arise upon the occurrence of
all such Termination Events that occur within a twelve consecutive month period
exceeds One Million Dollars ($1,000,000); or
(b) The aggregate withdrawal liability which could be incurred
under Section 4201 of ERISA of Borrower and all ERISA Affiliates, collectively,
upon a complete withdrawal, within the meaning of Section 4203 of ERISA, from
each and all Multiemployer Plans to which each is or has contributed within the
past five calendar years, plus the aggregate of the excess of benefit
liabilities, within the meaning of Section 4001(a)(16) of ERISA, of each Plan
upon termination of such Plan over the assets of such Plan, exceeds Five Million
Dollars ($5,000,000).
8.12 SPECIFIC DEFAULTS. (i) Borrower shall fail duly and
promptly to perform or observe any term or provision specified in any of
Sections 6.01, 6.02(e), 6.05, 6.06, 6.12, 6.13 or 6.15 or Article VII hereof or
(ii) Borrower shall fail to perform or observe any term or provision specified
in Section 6.09 and shall not remedy such failure to perform or observe any term
or provision specified in such Section 6.09 within 10 calendar days.
8.13 GUARANTEE AND COLLATERAL AGREEMENT; IMPAIRMENT OF
COLLATERAL DOCUMENTS. (a) Any breach or default shall occur under the Guarantee
and Collateral Agreement or the Guarantee and Collateral Agreement shall be
revoked by, or become ineffective as to, the Borrower or any Guarantor;
provided, however, that any merger, liquidation, consolidation or transfer of
any Guarantor with any
72
66
other Guarantor or Borrower in accordance with Section 7.05(c) or Section
7.05(d) shall not constitute an Event of Default under this Agreement;
(b) (i) any provision of any Collateral Document (other than
the collateral assignments of tenant's rights in leases) necessary for the
practical realization of the substantial benefits thereof shall for any reason
cease to be valid and binding on or enforceable against Borrower or any
Subsidiary or Borrower or any Subsidiary shall so state in writing or bring an
action to limit its obligations or liabilities thereunder; or
(ii) any of the Collateral Documents shall for any reason
(other than pursuant to the terms thereof) cease to create a valid security
interest in the Collateral purported to be covered thereby or such security
interest shall for any reason cease to be a perfected security interest having
the priority purported to be created by such Collateral Document (other than by
or as a result of any action by the Collateral Agent).
8.14 CONDEMNATION. Any governmental authority shall condemn,
seize or appropriate any property of Borrower or any Subsidiary if the fair
market value of the property prior to being condemned, seized or taken is equal
to or greater than Five Million Dollars ($5,000,000) and if such governmental
authority fails to compensate such entity for such taking within one (1) year
after such entity loses quiet enjoyment of such property due to such taking in
an amount at least equal to the fair market value as a going concern of the
property taken.
8.15 PAYOUT EVENT. A "Payout Event" (as defined in the Pooling
& Servicing Agreement or in the 1996-1 Supplement to the Pooling & Servicing
Agreement including the occurrence of a Series 0000-0 Xxx-Xxx-Xxxxx under
Section 7 thereof, or any future supplement to the Pooling and Servicing
Agreement) shall have occurred with respect to the 1996-1 Certificates or any
other Receivables Program Certificates, whether or not the occurrence or
continuance of such Payout Event has been waived.
8.16 ACTUAL OR ASSERTED INVALIDITY. (i) This Agreement, any
Note, any Collateral Document or any instrument or certificate executed or
delivered to Banks, the Agent or the Collateral Agent pursuant to this Agreement
or in connection with any transaction contemplated herewith shall cease, for any
reason (other than solely as a result of any action or inaction on the part of
the Agent or any of the Banks), to be in full force and effect, or the Borrower
or any of its Affiliates shall so assert or (ii) any Lien created thereby or
subordination provision therein shall cease to be enforceable and of the same
effect and priority purported to be created thereby as a result of any action or
inaction on the part of the Borrower or any of its Affiliates.
8.17 OTHER DEFAULTS. Borrower or any Subsidiary shall breach,
or default under, any term, condition, provision, covenant, representation or
warranty contained in this Agreement not specifically referred to in this
Article or in any Collateral Document, if such breach or default shall continue
for thirty (30) days after notice from Agent as required by Majority Banks;
THEN:
(a) In the case of an Event of Default other than one referred
to in Section 8.05 or 8.06 of this Article VIII, upon request of
Majority Banks to Agent, any obligation on the part of Banks to make or
continue the Credit or any obligation on the part of any Issuing Bank
to issue or amend any Letter of Credit shall terminate and, at the
further option of Majority Banks, Agent shall declare all sums of
principal and interest outstanding on the Credit and all other sums
outstanding under or in respect of this Agreement and the Notes
immediately due and
73
67
payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or
demands of any kind or character (other than as stated in any of the
foregoing sections of this Article VIII), all of which are hereby
expressly waived by Borrower; and
(b) in the case of an Event of Default referred to in Section
8.05 or 8.06 of this Article VIII, Banks' obligations to make or
continue the Credit and the Issuing Banks' obligations to issue or
amend any Letter of Credit shall be automatically cancelled and all
sums of principal and interest on the Credit and all other sums
outstanding under or in respect of this Agreement and the Notes shall
automatically become immediately due and payable without notice of
default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, all of which are hereby expressly waived by
Borrower.
Agent shall promptly advise Borrower of any declaration under clause (a), above,
but failure to do so shall not impair the effectiveness of such declaration.
Additionally, upon the occurrence of any Event of Default, Agent, at the request
of the Majority Banks, shall require Borrower to deposit immediately with Agent
cash collateral pursuant to documentation reasonably acceptable to the Agent,
for application against drawings under any Letter of Credit issued for
Borrower's account hereunder, in an amount equal to the undrawn amount of such
Letter of Credit. Any amount so deposited that is not applied to satisfy
drawings under such Letter of Credit will be repaid with interest (at Agent's
applicable certificate of deposit rate in effect on the date of such deposit) to
Borrower, provided that Banks have received all other amounts due to them under
this Agreement and the Notes. Borrower shall not make (or declare) any
Restricted Payments otherwise permitted under Section 7.01 if a Default or an
Event of Default has occurred and is continuing on the date of such payment (or
declaration), or would result from such payment (or declaration).
ARTICLE IX.
MISCELLANEOUS
-------------
9.01 NOTICES. Except as otherwise provided herein, any notice
required hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered (i) four (4) Banking Days following deposit in the
United States mails, with proper postage prepaid, and addressed to the party to
be notified; (ii) upon delivery thereof if delivered by hand to the party to be
notified; (iii) on the Banking Day after delivery to a reputable overnight
courier, with all charges prepaid, and addressed to the party to be notified; or
(iv) upon acknowledgment of receipt thereof if transmitted by telecopy to a
valid telecopier number for the party to be notified; in each case such
notification shall be addressed to Borrower at:
Bally Total Fitness Holding Corporation
0000 Xxxx Xxxx Xxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telecopy: 000-000-0000
Phone: 000-000-0000
74
68
and shall be addressed to Agent at:
The Chase Manhattan Bank
00 X. XxXxxxx Xxxxxx - 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy: 000-000-0000
Phone: 000-000-0000
With a copy to:
Chase Manhattan Bank Agency Services
Xxx Xxxxx Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx
Telecopy: 000-000-0000
Phone: 000-000-0000
and with respect to the other parties hereto, as set forth on Schedule 9.01
hereof, or to such other address as each party may designate for itself by like
notice. Notices to Agent shall not be effective until received by Agent.
9.02 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that Borrower shall not assign this Agreement or any
of the rights of Borrower hereunder without the prior written consent of each
Bank. Any purported assignment in contravention of the foregoing shall be null
and void.
9.03 BANKS' OBLIGATIONS SEVERAL. The obligations of each Bank
under this Agreement are several. Neither Agent, Collateral Agent nor any Bank
shall be liable for the failure of any other Bank to perform its obligations
under this Agreement.
9.04 ASSIGNMENTS; PARTICIPATIONS. (a) Any Bank may, with the
consent of Agent, each Issuing Bank to whom obligations are owed in respect of
Letters of Credit issued by it and (unless a Default or Event of Default has
occurred and is continuing) Borrower, which consent of Agent, such Issuing Bank
and the Borrower shall not be unreasonably withheld or delayed, at any time
assign and delegate to one or more banks or other entities and may, with notice
to Borrower and Agent but without the consent of Borrower or Agent, assign to
any of its Affiliates or any other Bank (each an "ASSIGNEE"), all or any part of
the Advances, the Revolving Credit Commitment, any Letter of Credit
participations, reimbursement obligations in respect of any Letter of Credit or
any other rights or obligations of such Bank hereunder; PROVIDED, HOWEVER, that
such assignment must be in a minimum amount (unless otherwise agreed in writing
by the Borrower and the Agent) of One Million Dollars ($1,000,000) (or, if less,
the full amount of such assigning Bank's Advances, Letter of Credit
Participations, reimbursement obligations in respect of any Letter of Credit or
any other rights and obligations of such Bank hereunder); PROVIDED, further,
that (i) Borrower shall not be required to pay any increased costs or taxes
pursuant to Section 2.12 or 2.13 by reason of any such assignment; (ii) Borrower
and Agent shall be entitled to continue to deal solely and directly with such
Bank in connection with the interests so assigned to the Assignee until written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee shall have been given to
Borrower and Agent by such Bank and the Assignee; and (iii) such Bank shall not
be released from its obligations hereunder with respect to the assigned portion
of any such rights or
75
69
obligations until the Assignee shall have delivered to Borrower and Agent an
agreement to be bound by the terms and conditions of this Agreement (which
agreement shall be substantially in the form of Exhibit M) and the assignor Bank
shall have paid a processing fee to Agent in the amount of Two Thousand Dollars
$2,000, and thereupon shall be released from its obligations with respect to the
assigned portion.
(b) Any Bank may, without the consent of Agent, any other Bank
to whom obligations are owed in respect of Letters of Credit issued by it or
Borrower, at any time sell to one or more banks or other entities (a
"PARTICIPANT") participating interests in any Advances, the Revolving Credit
Commitment, any Letter of Credit participations or any reimbursement obligations
of such Bank in respect of any Letter of Credit hereunder; PROVIDED, HOWEVER,
that such participation shall not increase the amount payable by Borrower in
respect of taxes pursuant to Section 2.11 and, PROVIDED FURTHER that (i) such
Bank's obligations under this Agreement shall remain unchanged; (ii) such Bank
shall remain solely responsible for the performance of its obligations
hereunder; (iii) Borrower and Agent shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and obligations under this
Agreement; (iv) no Bank shall transfer, grant or assign any participation under
which the Participant shall have rights to approve any amendment or waiver of
this Agreement except to the extent such amendment or waiver would (A) extend
the Termination Date beyond November 18, 2000 or the scheduled date for the
payment of any installment of principal or interest of the Advances in which
such Participant is participating, (B) reduce the amount of any scheduled
installment of principal of the Advances hereunder in which such Participant is
participating, (C) reduce the interest rate applicable to Advances hereunder in
which such Participant is participating or (D) reduce any fees or commissions
payable hereunder in which such Participant is participating; and (v) such Bank
shall require its Participants to comply with the provisions of Section
10.03(b). In the case of any such participation, the Participant shall not have
any rights under this Agreement or any of the other documents in connection
herewith and all amounts payable by Borrower hereunder shall be determined as if
such Bank had not sold such participation, except that Borrower agrees that if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement and
the Notes to the same extent as if the amount of its participating interest were
owing directly to it as a lender under this Agreement. The Borrower agrees that
each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and
2.14 with respect to its participation in the Commitments and the Advances and
Letters of Credit outstanding from time to time as if it was a Bank; PROVIDED
that, in the case of Sections 2.12, 2.13 and 2.14, such Participant shall have
complied with the requirements of said Section and PROVIDED, FURTHER, that no
Participant shall be entitled to receive any greater amount pursuant to any such
Section than the transferor Bank would have been entitled to receive in respect
of the amount of the participation transferred by such transferor Bank to such
Participant had no such transfer occurred.
(c) Borrower authorizes each Bank to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee
such financial and other information in such Bank's possession concerning
Borrower or its Subsidiaries which has been delivered to Banks pursuant to this
Agreement or which has been delivered to Banks by Borrower in connection with
Banks' credit evaluation of Borrower prior to entering into this Agreement.
(d) Nothing herein shall prohibit any Bank from pledging or
assigning any Note in accordance with applicable law, including to any Federal
Reserve Bank.
9.05 DELAYS AND WAIVERS. No delay or omission by Agent,
Collateral Agent or Banks to exercise any right under this Agreement, the
Collateral Documents or any instrument or agreement contemplated hereunder or
thereunder shall impair any such right, nor shall it be construed to be a
76
70
waiver thereof. No waiver of any single breach or default under this Agreement
shall be deemed a waiver of any other breach or default. Any waiver, consent or
approval under this Agreement must be in writing to be effective.
9.06 COSTS AND EXPENSES. Borrower agrees:
(a) to pay or reimburse Agent, the Collateral Agent and the
Issuing Banks on demand for all reasonable out-of-pocket costs and
expenses incurred by them in connection with the development,
preparation, delivery, administration and execution of, and any
amendment, supplement or modification to, this Agreement, any
Collateral Document and any other documents or instruments prepared in
connection herewith or therewith, the consummation of the transactions
contemplated hereby and thereby, and the consummation of the
transactions to occur on the Closing Date, including, without
limitation, (i) the reasonable fees and out-of-pocket expenses of
outside and local counsel and special tax counsel to Agent and the
Collateral Agent (and the allocated cost of Agent's staff counsel) with
respect thereto and (ii) the reasonable fees and out-of-pocket expenses
of Agent's outside accounting consultant;
(b) to pay or reimburse each Bank, the Collateral Agent, the
Agent and the Issuing Banks on demand for all reasonable costs and
expenses incurred by any of them in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, any
Collateral Document, and any other documents or instruments prepared in
connection herewith or therewith and in connection with any refinancing
or restructuring of the Credit in the nature of a "work-out",
including, without limitation, reasonable fees and out-of-pocket
expenses of outside and local counsel (and the allocated cost of staff
counsel) to Agent, the Collateral Agent and to each of the several
Banks; and
(c) to pay or reimburse Agent or the Collateral Agent on
demand for all reasonable appraisal, accounting, audit, search,
recordation and filing fees, incurred or sustained by them in
connection with the matters referred to under paragraphs (a) and (b)
above.
9.07 TELEPHONE INDEMNITY. Borrower shall protect Banks and
Agent and hold them harmless from and not liable for any and all loss, damage,
claim or expense (including, without limitation, reasonable attorneys' fees and
the allocated costs of any Bank's in-house legal counsel) incurred by Agent or
Banks in connection with or in relation to any act or any failure to act upon
telephone instructions received by Banks or Agent from Borrower or any Person
who has identified himself as an authorized officer of Borrower, whether or not
the instructions are actually given by an authorized officer of Borrower.
9.08 OTHER INDEMNITY. (a) Borrower agrees to indemnify and
hold harmless Agent, the Collateral Agent, each Bank and each of their
respective officers, directors, agents and employees from and against any and
all claims, damages, liabilities, costs and expenses (including, without
limitation, reasonable fees, expenses and disbursements of counsel) which may be
incurred by or asserted against Agent, the Collateral Agent, any Bank, any
Issuing Bank or any such other indemnified Person in connection with or arising
out of any investigation, litigation or proceeding related to this Agreement,
the Revolving Credit Commitments, the Letters of Credit or the negotiation and
preparation of documentation in connection herewith or therewith, whether or not
Agent, the Collateral Agent, any Issuing Bank or such Bank is a party thereto;
PROVIDED, HOWEVER, that Borrower shall not be required to indemnify any such
indemnified Person from or against any portion of such claims, damages,
liabilities or expenses arising out of gross negligence or willful misconduct of
such indemnified Person. The foregoing indemnification shall be binding on the
Borrower forever, and shall survive repayment of the Obligations and the release
of any liens under the Collateral Documents.
77
71
(b) Borrower hereby agrees to indemnify, defend and hold
harmless Agent, the Collateral Agent, the Issuing Banks and each Bank, and each
of their respective officers, directors, employees and agents, from and against
any and all claims, losses, liabilities, damages and expenses (including,
without limitation, reasonable attorneys' fees), which may be incurred by or
asserted against Agent, the Collateral Agent, the Issuing Banks or any Bank or
any such indemnified Person in connection with or arising out of any
investigation, litigation or proceeding, or any action taken by any Person, with
respect to any Hazardous Materials Claim arising out of or related to any of the
Properties which are subject to a Lien in favor of the Collateral Agent as
contemplated hereunder (including, without limitation, any Hazardous Materials
Claim arising out of or relating to any (i) release of Hazardous Materials on,
upon, under or into any such Properties or (ii) damage to real or personal
property or natural resources and/or harm or injury to Persons alleged to have
resulted from such release of Hazardous Materials on, upon or into any such
Properties); PROVIDED, HOWEVER, that Borrower shall not be required to
indemnify, defend or hold harmless any such indemnified Person from or against
any portion of such loss, liability, damage or expense arising out of the gross
negligence or willful misconduct of such indemnified Person. The foregoing
indemnification is the personal obligation of Borrower, binding on Borrower
forever, and shall survive repayment of the Obligations and release of record of
the mortgages or deeds of trust in favor of Collateral Agent encumbering the
Properties and any transfer of the Properties by foreclosure or by deed in lieu
of foreclosure. The foregoing indemnification shall not be affected or negated
by any exculpatory clause that may be contained in any of the Collateral
Documents. It is expressly understood and agreed that to the extent that
Collateral Agent and/or Banks are strictly liable under any such law,
regulation, ordinance or requirement, Borrower's obligation to Collateral Agent
and Banks under this indemnity shall likewise be without regard to fault on the
part of Borrower or its Subsidiaries with respect to the violation or condition
which results in liability to Collateral Agent and/or Banks; PROVIDED, HOWEVER,
that Borrower shall not be required to indemnify, defend or hold harmless any
such indemnified Person from or against any portion of such loss, liability,
damage or expense arising after the Collateral Agent shall have foreclosed or
otherwise taken possession of such property which is caused by any action or
inaction of the Collateral Agent after such time.
(c) Agent, the Collateral Agent and each Bank agree that in
the event that any such investigation, litigation or proceeding is asserted or
threatened in writing or instituted against it or any of its officers,
directors, agents, and employees, or any remedial, removal or response action is
requested of it or any of its officers, directors, agents and employees, for
which Agent, the Collateral Agent or any Bank may desire indemnity or defense
hereunder, Agent, the Collateral Agent or such Bank shall promptly notify
Borrower in writing.
(d) Borrower at the request of Agent, the Collateral Agent or
any Bank, shall have the obligation to defend against such investigation,
litigation or proceeding or requested remedial, removal or response action, and
Agent, in any event, may participate in the defense thereof with legal counsel
of Agent's choice if Agent asserts defenses that raise potential conflicts of
interest with Borrower. No action taken by legal counsel chosen by Agent or any
Bank in defending against any such investigation, litigation or proceeding or
requested remedial, removal or response action shall vitiate or in any way
impair Borrower's obligation and duty hereunder to indemnify and hold harmless
Agent, the Collateral Agent and each Bank (unless such action is grossly
negligent).
9.09 CHOICE OF LAW. EXCEPT FOR COLLATERAL DOCUMENTS GOVERNED
BY THE LAWS OF ANOTHER STATE OR COUNTRY, AGENT, COLLATERAL AGENT AND BANKS AND
BORROWER AGREE THAT ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, THE NOTES AND ALL OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH,
AND WHETHER ARISING IN CONTRACT, TORT,
78
72
EQUITY, OR OTHERWISE, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.10 PERSONAL JURISDICTION. AGENT, COLLATERAL AGENT AND BANKS
MAY ENFORCE ANY CLAIM ARISING UNDER THIS AGREEMENT, THE NOTES, OR ANY COLLATERAL
DOCUMENT IN ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND
LOCATED IN CHICAGO, ILLINOIS OR NEW YORK, NEW YORK. FOR THE PURPOSE OF ANY
ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH CLAIM, BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS.
9.11 SERVICE OF PROCESS. THE PARTIES HERETO IRREVOCABLY
CONSENT TO THE SERVICE OF PROCESS OF ANY OF THE AFORESAID COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS PROVIDED HEREIN NOT LESS
THAN FIVE (5) DAYS AFTER THE APPLICABLE SUMMONS IS ISSUED AND SHALL BECOME
EFFECTIVE UPON MAILING. NOTHING CONTAINED IN THIS SECTION 9.11 SHALL AFFECT THE
RIGHT OF AGENT, COLLATERAL AGENT, ANY BANK OR ANY HOLDER OF A NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST BORROWER OR ANY GUARANTOR IN ANY OTHER JURISDICTION.
9.12 WAIVER OF JURY TRIAL. EACH OF AGENT, COLLATERAL AGENT,
BANKS AND BORROWER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN AGENT, BANKS
AND BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT.
INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
9.13 SECTION HEADINGS. Section headings are for reference
only, and shall not affect the interpretation or meaning of any provision of
this Agreement.
9.14 SEVERABILITY. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
9.15 COUNTERPARTS. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts (provided that Borrower shall execute
each counterpart), each of which, when so executed, shall be deemed an original,
but all such counterparts shall constitute but one and the same agreement.
9.16 NO RELIANCE BY BANKS. Banks hereby acknowledge that they
have not, in good faith, relied upon any margin stock (as defined in Regulation
U of the Board of Governors of the Federal Reserve System) as collateral in
extending or maintaining the loans under this Agreement.
9.17 ENTIRE AGREEMENT. This Agreement, any writing referred to
in Section 2.11 and any agreement, document or instrument attached hereto or
referred to herein (i) integrate all the terms and conditions mentioned herein
or incidental hereto, (ii) supersede all oral negotiations and prior writings in
respect to the subject matter hereof, and (iii) are intended by the parties as
the final
79
73
expression of the agreement with respect to the terms and conditions set forth
in this Agreement and any such agreement, document or instrument (including such
letter agreement) and as the complete and exclusive statement of the terms
agreed to by the parties.
9.18 CONFIDENTIALITY. Each Bank and Agent agree to keep
information obtained by it pursuant hereto and the other Collateral Documents
confidential in accordance with such Bank's or Agent's, as the case may be,
customary practices and agrees that it will only use such information in
connection with the transactions contemplated by this Agreement and not disclose
any of such information other than (i) to such Bank's or Agent's, as the case
may be, employees, representatives, agents or affiliates who are advised of the
confidential nature of such information, (ii) to the extent such information
presently is or hereafter becomes available to such Bank or Agent, as the case
may be, on a non-confidential basis from a source other than Borrower or such
information that is in the public domain at the time of disclosure, (iii) to the
extent disclosure is required by law, regulation, subpoena or judicial order or
process (which requirement or order shall be promptly notified to Borrower
unless such notice is legally prohibited) or requested or required by bank
regulators or auditors or any administrative body or commission to whose
jurisdiction such Bank or Agent, as the case may be, may be subject, (iv) to
assignees or participants or potential assignees or participants who agree to be
bound by the provisions of this Section 9.18, (v) to the extent required in
connection with any litigation between Borrower and/or any Guarantor and any
Bank or Agent, (vi) following an Event of Default, in connection with the sale
or other realization on any Collateral under any Collateral Document, or (vii)
with Borrower's prior written consent.
9.19 RECEIVABLES PROGRAM SAVINGS CLAUSE. Notwithstanding
anything to the contrary contained herein, in the event that any action taken by
the Borrower, any Guarantor or any Subsidiary (including Funding Corp.), which
is contemplated and permitted under the Receivables Program Documents, would
violate one or more provisions of this Agreement or any Collateral Document,
then such violation shall not constitute or give rise to a Default or Event of
Default hereunder or thereunder, PROVIDED that such action is permitted or
contemplated by one or more other provisions of this Agreement or the Collateral
Documents.
ARTICLE X.
RELATION OF BANKS
-----------------
10.01 AGENT AND COLLATERAL AGENT; ENFORCEMENT OF GUARANTIES.
(a) Each Bank hereby irrevocably appoints, designates and authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other instrument or agreement contemplated hereunder and to exercise such powers
and perform such duties as are expressly delegated to it by the terms of this
Agreement or such other instrument or agreement, together with such powers as
are reasonably incidental thereto. Each Bank agrees that no Bank shall have the
right individually to enforce the Guarantee and Collateral Agreement or the
Mortgages and hereby appoints Agent to act upon the direction of the Majority
Banks to enforce each such Agreement. Chase (as successor to Manufacturers
Hanover Trust Company and Chemical Bank) and the Operating Banks agree that none
of such Banks shall take any action to enforce the Operating Bank Guaranty,
respectively, until Agent has commenced to enforce the Guarantee and Collateral
Agreement upon the direction of the Majority Banks pursuant to the preceding
sentence. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in such other instrument or agreement, Agent shall not have
any duties or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any such other instrument or agreement or
otherwise exist against the Agent. Agent may execute any of its duties under
this Agreement by or through agents,
80
74
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Agent shall not be responsible
for the negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
(b) Each Bank hereby authorizes the Collateral Agent to enter
into the Collateral Documents to which it is a party and to take all action
contemplated by the Collateral Agency Agreement; PROVIDED that the Collateral
Agent shall not enter into or consent to any amendment, modification,
termination or waiver of any provision contained in any Collateral Document or
take any action thereunder without the direction of Agent. Agent shall not
direct the Collateral Agent to enter into or consent to any amendment,
modification, termination or waiver of any provision of any Collateral Document
or direct the Collateral Agent to take any action thereunder without the prior
consent of the Majority Banks. Each Bank agrees that no Bank shall have any
right individually to seek or to enforce or to realize upon the security granted
to the Collateral Agent under the Collateral Documents, it being understood and
agreed that such rights and remedies may be exercised by the Collateral Agent
for the benefit of all of the Secured Creditors upon the terms of the Collateral
Documents and the Collateral Agency Agreement.
10.02 PRO RATA SHARING. All principal, interest and fee
payments on the Credit (other than sums under Sections 2.09(a)(ii), 2.09(a)(iii)
and 2.11) and all sums realized under the Guarantee and Collateral Agreement (or
any guaranty executed and delivered pursuant to Section 3.04) and all proceeds
of Collateral distributed to Banks under the Collateral Agency Agreement shall
be divided PRO RATA among Banks in accordance with their Commitment Percentages,
and any reduction in the maximum limits for borrowing under this Agreement shall
reduce Banks' Revolving Credit Commitments or L/C Commitments on a PRO RATA
basis.
10.03 SET-OFF. (a) Subject to the rights of the Secured
Creditors with respect to any Collateral and in addition to any Liens granted by
Borrower or any of its Subsidiaries to the Collateral Agent and any rights now
or hereafter granted under applicable law and not by way of limitation of any
such Lien or rights, upon the occurrence and during the continuance of an Event
of Default, each Secured Creditor is hereby authorized by Borrower at any time
and from time to time, without notice to Borrower, or to any other Person (any
such notice being hereby expressly waived) to set-off all deposits of Borrower
and any other Debt at any time held or owing by such Secured Creditor to or for
the credit of Borrower against and on account of the Secured Obligations owing
to such Secured Creditor irrespective of whether or not Agent or such Secured
Creditor shall have made demand under this Agreement or any Collateral Document
and although the Secured Obligations may be unmatured. Each of the Banks agrees
that it shall not, without the express consent of Agent, set-off against the
Obligations or any other amounts owing to such Bank any accounts of Borrower now
or hereafter maintained with such Bank. Each Bank further agrees that it shall
not, unless specifically requested to do so by Agent, take or cause to be taken
any action, including, without limitation, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral for the purpose of which is, or
could be, to give such Bank any preference or priority against any other Secured
Creditor with respect to the Collateral.
(b) If at any time or times any Bank shall receive by payment,
foreclosure, set-off or otherwise, any proceeds of any Collateral or any
payments with respect to the Secured Obligations arising under, or relating to,
this Agreement or the Collateral Documents, except for any such proceeds or
payments received by such Bank or any Issuing Bank from Agent pursuant to the
terms of this Agreement or the Collateral Agency Agreement, such Bank shall
promptly purchase, without recourse or warranty, an undivided interest and
participation in the Secured Obligations owed to the other Banks (or, after an
Event of Default, the other Secured Creditors) so that such excess payment
received shall be applied ratably as among Banks in accordance with their
respective Commitment Percentages; (or,
81
75
after an Event of Default, among the Secured Creditors as provided for in the
Collateral Agency Agreement); PROVIDED, HOWEVER, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment. Notwithstanding any contrary provision contained
herein, the proceeds of any drawing under any Letter of Credit issued hereunder
in favor of Chase in its individual capacity (without affecting Chase's
obligation to purchase a participation in any such Letter of Credit in
accordance with Section 2.15(c)(i)) shall be for Chase's sole benefit.
(c) Each Secured Creditor other than in its capacity as a Bank
shall be entitled to any rights conferred upon it under this Agreement or any of
the Collateral Documents only on the condition and understanding that it shall
be bound by the terms of this Section 10.03 to the same extent as Banks.
10.04 LIABILITY OF AGENT. Neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement (except for its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Banks for any recital, statement, representation or warranty made by
Borrower or any Subsidiary or any officer thereof contained in this Agreement or
in any other instrument or agreement contemplated hereunder or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
instrument or agreement contemplated hereunder or for the value of any
Collateral or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other instrument or agreement contemplated
hereunder or for any failure of Borrower or any Subsidiary to perform its
obligations hereunder or thereunder. Agent shall not be under any obligation to
any Bank to ascertain or to inquire as to the observance or performance of any
of agreements contained in, or conditions of, this Agreement or any other
instrument or agreement contemplated hereunder, or to inspect the properties,
books or records of Borrower or any Subsidiary.
10.05 RELIANCE BY AGENT. Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, telecopy, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including counsel to
Borrower or any Guarantor), independent accountants and other experts selected
by Agent. Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other instruction or agreement contemplated
hereunder unless it shall first receive such advice or concurrence of the
Majority Banks as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other instrument or
agreement contemplated hereunder in accordance with a request or consent of the
Majority Banks and such request and any action taken or failure to act pursuant
thereto shall be binding upon all Banks.
10.06 APPROVALS; AMENDMENTS. This Agreement and the Collateral
Documents may be amended only upon the prior express written consent of Borrower
or Guarantors, as the case may be, party thereto and the Majority Banks. Upon
any occasion requiring or permitting an approval, consent, waiver, election or
other action on the part of Majority Banks, action shall be taken by Agent for
and on behalf or for the benefit of all Banks upon the direction of Majority
Banks, and any such action shall be
82
76
binding on all Banks; PROVIDED, HOWEVER, that unless all Banks agree in writing,
no amendment, modification, consent or waiver shall be effective which:
(a) increases the amount of the Credit or the amount of the
Revolving Credit Commitment or L/C Commitment of any Bank,
(b) reduces interest, principal, commissions or fees owing
hereunder,
(c) extends the scheduled date on which any sum is due
hereunder,
(d) releases any Guarantor from its obligations under the
Guarantee and Collateral Agreement or, subject to the proviso in
Section 8.13(a), releases any material portion of the Collateral
(except (i) in connection with dispositions thereof permitted under
this Agreement, (ii) as permitted by subsection 10.13(b), (iii) any
Guarantor may be released from its obligations under the Credit
Documents if all of the Capital Stock of, or substantially all of the
assets of, such Guarantor are disposed of in a transaction permitted by
this Agreement or (iv) as otherwise expressly permitted by this
Agreement),
(e) changes the definition of "Majority Banks", or
(f) amends or waives the provisions of Sections
2.15(a)(ii)(C), 2.15(b)(iii), 7.04(d), 8.08, 8.15 or this Section 10.6.
10.07 NOTICE OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default, except with
respect to defaults in the payment of principal, interest, commissions and fees
payable to Agent hereunder for the account of Banks, unless Agent shall have
received notice from a Bank or Borrower referring to this Agreement, describing
such Event of Default and stating that such notice is a "notice of default". In
the event that Agent receives such a notice, Agent shall give prompt notice
thereof to Banks. Agent shall take such action with respect to such Event of
Default as shall be requested by the Majority Banks in accordance with Article
VIII; PROVIDED, HOWEVER, that unless and until Agent shall have received any
such request, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default as it
shall deem advisable in the best interests of Banks.
10.08 CREDIT DECISION. Each Bank expressly acknowledges that
neither Agent nor any other Bank nor any of their Affiliates nor any officer,
director, employee, agent or attorney-in-fact of any of them has made any
representation or warranty to it and that no act by Agent or any other Bank
hereafter taken, including any review of the affairs of Borrower and its
Subsidiaries and their Affiliates, shall be deemed to constitute any
representation or warranty by Agent or any other Bank to such Bank. Each Bank
represents to Agent and to each other Bank that it has, independently and
without reliance upon Agent or any other Bank and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrower and Guarantors and made its own
decision to enter into this Agreement and extend credit to Borrower hereunder
(without reliance on the Agent or any other Bank). Each Bank also represents
that it will, independently and without reliance upon Agent or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower and Guarantors (without reliance on the Agent or
any other Bank). Except for notices, reports and other documents expressly
required to be furnished to Banks by Agent
83
77
hereunder, Agent shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Borrower or any Guarantor which may come into the possession of Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.09 BANKS' INDEMNITY. Each Bank agrees to indemnify Agent
(to the extent not reimbursed by or on behalf of Borrower and without limiting
the obligation of Borrower to do so), ratably, according to its respective
Commitment Percentage, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever which may at any time (including at any
time following the repayment of the Advances or the Letters of Credit) be
imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by Agent under or in connection with any of the
foregoing; PROVIDED HOWEVER, that no Bank shall be liable for the payment to
Agent of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from Agent's gross negligence or willful misconduct. Without limitation
of the foregoing, each Bank agrees to reimburse Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including reasonable fees and
expenses of counsel and the allocated cost of in-house counsel) incurred by
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any Collateral Document, or any document
contemplated by or referred to herein to the extent that Agent is not reimbursed
for such expenses by or on behalf of Borrower.
10.10 AGENT AS BANK. Chase shall have the same rights and
powers hereunder as any other Bank and may exercise the same as though it were
not Agent; and the term "Banks" shall include Chase in its individual capacity.
Chase and its subsidiaries and affiliates may accept deposits from, lend money
to, act as agent or trustee for other lenders to, and generally engage in any
kind of banking, trust or other business with Borrower or any of its
Subsidiaries or Affiliates as if it were not Agent.
10.11 NOTICE OF TRANSFER. Subject to Section 9.04(a), Agent
may deem and treat a Bank party to this Agreement as the owner of such Bank's
portion of the Credit for all purposes hereof unless and until a written notice
of the assignment or transfer thereof executed by such Bank shall have been
received by Agent.
10.12 RESIGNATION OF AGENT. Agent may resign at any time by
giving written notice to Banks and Borrower. Upon any such resignation, Majority
Banks shall have the right to appoint a successor Agent (which shall be either a
Bank or a commercial bank with capital and surplus in excess of One Hundred
Million Dollars ($100,000,000) and which successor Agent, unless a Default or an
Event of Default has occurred and is continuing, shall be reasonably acceptable
to Borrower). If no successor Agent shall have accepted such appointment within
thirty (30) days after the retiring Agent's giving of notice of resignation, the
retiring Agent may, on behalf of Banks, appoint a successor Agent. Upon the
acceptance by the successor Agent of its appointment hereunder, the successor
Agent shall succeed to and become vested with all the rights and obligations of
the retiring Agent, and the retiring Agent shall be discharged from its
obligations under this Agreement. The provisions of this Article X and Sections
9.06, 9.07 and 9.08 shall inure to the benefit of the retiring Agent as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
84
78
10.13 COLLATERAL MATTERS. (a) Agent may from time to time,
before or after the occurrence of an Event of Default, make such disbursements
and advances to the Collateral Agent ("Agent Advances") which Agent, in its sole
discretion, deems necessary or desirable to preserve or protect the Collateral
or any portion thereof, to enhance the likelihood or maximize the amount of
repayment of the Obligations or to pay any other amount chargeable to Borrower
or any Guarantor pursuant to the terms of this Agreement or any Collateral
Document, including, without limitation, costs, fees and expenses as described
in Section 9.06; PROVIDED, HOWEVER, that the Agent Advances shall not exceed One
Hundred Thousand Dollars ($100,000) without the prior written consent of
Majority Banks. The Agent Advances shall be repayable on demand and be secured
by the Collateral. The Agent Advances shall not constitute Advances but shall
otherwise constitute Obligations hereunder. Agent shall notify each Bank in
writing of each such Agent Advance, which notice shall include a description of
the purpose of such Agent Advance. Without limitation to its obligations
pursuant to Section 10.09, each Bank agrees that it shall make available to
Agent, upon Agent's demand, in immediately available funds, the amount equal to
such Bank's Commitment Percentage of each such Agent Advance. If such funds are
not made available to Agent by such Bank within one (1) Banking Day after
Agent's demand therefor, Agent will be entitled to recover any such amount from
such Bank together with interest thereon at the Federal Funds Rate for each day
during the period commencing the date of such demand and ending on the date such
amount is received.
(b) Banks hereby irrevocably authorize Agent, at its option
and in its discretion, to direct the Collateral Agent to release or subordinate
on terms satisfactory to the Collateral Agent any Lien granted to or held by the
Collateral Agent upon any Collateral (i) upon termination of the Revolving
Credit Commitments and indefeasible payment in full and satisfaction of all of
the Obligations; or (ii) constituting property being sold or disposed of if the
sale or disposition is permitted hereunder; or (iii) constituting property in
which neither Borrower nor any Guarantor owned an interest at the time the Lien
was granted or at any time thereafter; or (iv) constituting property leased to
Borrower or any Guarantor; or (v) if approved, authorized or ratified in writing
by the Majority Banks; or (vi) subject to a Permitted Lien; or (vii) not owned
by the Borrower or any Guarantor. Upon request by Agent at any time, Banks will
confirm in writing Agent's authority to so direct the release of particular
types or items of Collateral pursuant to this Section 10.13(b). The Banks hereby
irrevocably authorize Agent, at its option and discretion (1) to direct the
Collateral Agent to release and subordinate, on terms satisfactory to the
Collateral Agent, Liens on Collateral which is also subject to Permitted Liens,
(2) to execute any release, subordination or acknowledgement documents requested
by the Borrower in order to effect any release or subordination described in
this paragraph (b) and (3) to execute acknowledgements with respect to leases to
the effect that the Property subject to such leases is not subject to the Liens
created by the Credit Documents or Collateral. This paragraph (b) is intended as
an authorization by the Lenders to permit the Agent and the Collateral Agent to
take the actions described herein and neither the Borrower nor any of its
Subsidiaries or any other Person shall be entitled to the benefits hereof.
(c) Without in any manner limiting Agent's authority to act
without any specific or further authorization or consent by the Majority Banks
(as set forth in Section 10.13(b) above), each Bank agrees to confirm in
writing, upon request by Borrower, the authority to direct the release of
Collateral conferred upon the Agent under clauses (i) through (v) of Section
10.13(b) above. So long as no Event of Default is then continuing, upon receipt
by Agent of confirmation from the Majority Banks of its authority to direct the
release of any particular item or types of Collateral, and upon at least five
(5) Banking Days' prior written request by Borrower, Agent shall (and is hereby
irrevocably authorized by Banks to) direct the Collateral Agent to execute such
documents as may be necessary to evidence the release of the Liens granted to
the Collateral Agent for the benefit of the Secured Creditors herein or pursuant
hereto upon such Collateral; PROVIDED, HOWEVER, that (i) Agent shall not be
required to direct the Collateral Agent to execute any such document on terms
which, in Agent's opinion, would expose
85
79
Agent or the Collateral Agent to liability or create any obligation or entail
any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of Borrower in respect
of) all interests retained by Borrower, including (without limitation) the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(d) Neither Agent nor Collateral Agent shall have any
obligation whatsoever to any Bank to assure that the Collateral exists or is
owned by Borrower or is cared for, protected or insured or has been encumbered
or that the Liens granted to the Collateral Agent pursuant to any Collateral
Document have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent or Collateral Agent in this Section 10.13 or in
any of the Collateral Documents, it being understood and agreed that in respect
of the Collateral, or any act, omission or event related thereto, Agent may act
in any manner it may deem appropriate, in its sole discretion, given Agent's own
interest in the Collateral as one of the Banks and that Agent shall have no duty
or liability whatsoever to any Bank (except as specifically provided in this
Agreement and the Collateral Documents).
EACH BANK FURTHER ACKNOWLEDGES AND AGREES THAT AGENT SHALL NOT
BE RESPONSIBLE FOR, AND SHALL HAVE NO LIABILITY OR OBLIGATION WITH RESPECT TO,
THE VALIDITY, EFFECTIVENESS, GENUINENESS, ENFORCEABILITY OR SUFFICIENCY OF THIS
AGREEMENT, THE REVOLVING NOTES, THE COLLATERAL DOCUMENTS, ANY OTHER INSTRUMENT
OR AGREEMENT CONTEMPLATED HEREUNDER OR THEREUNDER, ANY ACTION TAKEN OR NOT TAKEN
OR ANY DECISION MADE BY ANY PERSON (OTHER THAN AGENT) WITH RESPECT TO ANY
THEREOF OR WITH RESPECT TO THE COLLATERAL, THE FAILURE OF THE BORROWER OR ANY
SUBSIDIARY TO PERFORM ITS OBLIGATIONS HEREUNDER OR THEREUNDER, ANY
MISREPRESENTATION BY BORROWER OR ANY SUBSIDIARY HEREUNDER OR THEREUNDER, OR THE
VALUE OF ANY COLLATERAL OR THE CREATION, ATTACHMENT, PERFECTION OR PRIORITY OF
ANY SECURITY INTEREST OR LIEN PURPORTED TO BE CREATED BY THE COLLATERAL
DOCUMENTS, THIS AGREEMENT OR SUCH OTHER INSTRUMENTS OR AGREEMENTS AND THAT
AGENT, AS COLLATERAL AGENT AND AGENT, HAS UNDERTAKEN NO INDEPENDENT REVIEW OR
ANALYSIS WITH RESPECT TO ANY OF THE FOREGOING.
(e) The benefit of the Collateral Documents and of the
provisions of this Agreement relating to the Collateral shall extend to and be
available in respect of the Secured Obligations (as defined in the Collateral
Agency Agreement) solely on the condition and understanding, as among Agent and
Banks, that (i) the Secured Obligations shall be entitled to the benefit of the
Collateral to the extent expressly set forth in the Collateral Documents, and to
such extent the Collateral Agent shall hold, and have the right and power to act
with respect to, the Collateral on behalf of and as agent for the holders of the
Secured Obligations; but Agent in its separate capacity as agent hereunder is
acting solely as agent for the Banks and shall have no separate fiduciary duty,
duty of loyalty, duty of care, duty of disclosure or other obligations
whatsoever to any holder of Secured Obligations; and (ii) all matters, acts and
omissions relating in any manner to the Collateral, or the omission, creation,
perfection, priority, abandonment or release of any Lien, shall be governed
solely by the provisions of this Agreement and the Collateral Documents, and no
separate Lien, right, power or remedy shall arise or exist in favor of any Bank
under any separate instrument or agreement or in respect of any Secured
Obligations; and (iii) each Bank shall be bound by all actions taken or omitted,
in accordance with the provisions of this Agreement or the Collateral Documents,
by the Collateral Agent, at the direction of
86
80
Agent on behalf of the Banks; and (iv) no holder of Secured Obligations shall
exercise any right of setoff, banker's lien or similar right except as expressly
provided in Section 10.03.
(f) Any Collateral proceeds received by Agent from the
Collateral Agent pursuant to Section 3(b) of the Collateral Agency Agreement
shall be applied and paid to the Obligations as follows (unless Agent and
Majority Banks otherwise agree):
FIRST: To Agent and the Collateral Agent in an amount equal to
all costs and expenses incurred in connection with performing their
respective duties hereunder and under the Collateral Documents,
including, without limitation, those related to or in connection with
the administration of this Agreement or the enforcement of their
respective rights under the Collateral Documents;
SECOND: To any accrued and unpaid interest outstanding
hereunder or under the Notes;
THIRD: To the unpaid principal amount of the Advances
outstanding under the Notes;
FOURTH: To Agent for deposit as cash collateral, for
application against drawings under any Letters of Credit, up to an
amount equal to the undrawn amount of such Letters of Credit;
FIFTH: To any accrued and unpaid fees, commissions or other
sums payable pursuant to this Agreement; and
SIXTH: Any surplus then remaining shall be paid to Borrower or
its successors or assigns, or to whomever may be lawfully entitled to
receive the same, or as a court of competent jurisdiction may direct.
10.14 COLLATERAL AGENT. The Collateral Agent shall be entitled
to the standards of care, indemnities and other rights set forth in this Article
Ten as are set forth for the Agent, MUTATIS MUTANDIS, except as may be expressly
provided otherwise hereunder, or in the Collateral Documents.
[Remainder of Page Intentionally Left Blank]
87
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers as of the day and year first above
written.
BALLY TOTAL FITNESS HOLDING CORPORATION
By: /s/ Xxxx x. Xxxxx
----------------------------------
Name: Xxxx x. Xxxxx
Title: Senior Vice President and
Chief Financial Officer
88
THE CHASE MANHATTAN BANK,
as Agent and as Bank
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
89
U.S. BANK NATIONAL ASSOCIATION,
successor by merger to, and
doing business as First Bank
National Association
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Vice President
90
LASALLE NATIONAL BANK
By: /s/ Xxxx X. XXXXXX
---------------------------------
Name: Xxxx X. XXXXXX
Title: Vice President
91
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
92
SOCIETE GENERALE
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
93
THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH
By: /s/ Xxx-Xxxxxx Xxxxxxxxx
---------------------------------
Name: Xxx-Xxxxxx Xxxxxxxxx
Title: Joint General Manager
