Execution Copy
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CREDIT AGREEMENT
Dated as of November 19, 1998
among
MASKA U.S., INC. and SHC HOCKEY INC.
as Borrowers
THE OTHER CREDIT PARTIES SIGNATORY HERETO
as Credit Parties
and
THE LENDERS SIGNATORY HERETO FROM TIME TO TIME
as Lenders
and
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent and Lender
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TABLE OF CONTENTS
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SECTION 1. AMOUNT AND TERMS OF CREDIT......................................2
1.1 Credit Facilities................................................2
1.2 Letters of Credit................................................5
1.3 Prepayments......................................................5
1.4 Use of Proceeds..................................................7
1.5 Interest and Applicable Margins..................................8
1.6 Eligible Accounts...............................................11
1.7 Eligible Inventory..............................................13
1.8 Cash Management Systems.........................................15
1.9 Fees............................................................15
1.10 Receipt of Payments.............................................16
1.11 Application and Allocation of Payments..........................16
1.12 Loan Account and Accounting.....................................17
1.13 Indemnity.......................................................18
1.14 Access..........................................................19
1.15 Taxes...........................................................19
1.16 Capital Adequacy; Increased Costs; Illegality...................21
1.17 Single Loan.....................................................23
1.18 Obligations of Canadian Credit Parties..........................23
SECTION 2. CONDITIONS PRECEDENT...........................................23
2.1 Conditions to the Initial Loans.................................23
2.2 Further Conditions to Each Loan.................................25
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................26
3.1 Corporate Existence; Compliance with Law........................26
3.2 Executive Offices; FEIN.........................................27
3.3 Corporate Power, Authorization, Enforceable
Obligations....................................................27
3.4 Financial Statements and Projections and Other
Reports........................................................28
3.5 Material Adverse Effect.........................................29
3.6 Ownership of Property; Liens....................................29
3.7 Labor Matters...................................................30
3.8 Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness.........................................30
3.9 Government Regulation...........................................31
3.10 Margin Regulations..............................................31
3.11 Taxes...........................................................31
3.12 ERISA...........................................................32
3.13 No Litigation...................................................33
3.14 Brokers.........................................................33
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3.15 Intellectual Property...........................................33
3.16 Full Disclosure.................................................34
3.17 Environmental Matters...........................................34
3.18 Insurance.......................................................35
3.19 Deposit and Disbursement Accounts...............................35
3.20 Government Contracts............................................35
3.21 Customer and Trade Relations....................................35
3.22 Agreements and Other Documents..................................36
3.23 Solvency........................................................36
3.24 Reorganization Agreement........................................36
3.25 Status of Ultimate Parent; SHC; WAP; and CCM....................37
3.26 Senior Debt.....................................................37
3.27 Leased Premises.................................................37
3.28 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices............................................37
SECTION 4. FINANCIAL STATEMENTS AND INFORMATION...........................38
4.1 Reports and Notices.............................................38
4.2 Communication with Accountants..................................38
SECTION 5. AFFIRMATIVE COVENANTS..........................................38
5.1 Maintenance of Existence and Conduct of Business................38
5.2 Payment of Obligations..........................................39
5.3 Books and Records...............................................39
5.4 Insurance; Damage to or Destruction of Collateral...............40
5.5 Compliance with Laws............................................42
5.6 Supplemental Disclosure.........................................42
5.7 Intellectual Property...........................................43
5.8 Environmental Matters...........................................43
5.9 Landlords' Agreements, Mortgagee Agreements and
Bailee Letters.................................................44
5.10 Further Assurances..............................................45
5.11 Year 2000 Problems..............................................45
SECTION 6. NEGATIVE COVENANTS.............................................45
6.1 Mergers, Subsidiaries, Etc......................................45
6.2 Investments; Loans and Advances.................................46
6.3 Indebtedness....................................................47
6.4 Employee Loans and Affiliate Transactions.......................50
6.5 Capital Structure and Business..................................50
6.6 Guaranteed Indebtedness.........................................51
6.7 Liens...........................................................51
6.8 Sale of Stock and Assets........................................52
6.9 ERISA...........................................................52
6.10 Financial Covenants.............................................52
6.11 Hazardous Materials.............................................52
6.12 Sale-Leasebacks.................................................52
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6.13 Cancellation of Indebtedness....................................53
6.14 Restricted Payments.............................................53
6.15 Change of Corporate Name or Location; Change of
Fiscal Year....................................................54
6.16 No Impairment of Intercompany Transfers.........................54
6.17 No Speculative Transactions.....................................54
6.18 Changes Relating to Other Indebtedness..........................54
6.19 Credit Parties Other Than Borrowers; Inactive
Subsidiaries; CCM..............................................55
6.20 Deposit and Disbursement Accounts...............................55
6.21 Intellectual Property Licences; CCM Shareholder's
Agreement......................................................56
6.22 Locations Leased from Designated Quebec Landlords and
Xxxx Corners Associates........................................56
6.23 Inventory at Warehouse and Distribution Facilities..............56
6.24 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices............................................57
SECTION 7. TERM...........................................................57
7.1 Termination.....................................................57
7.2 Survival of Obligations Upon Termination of Financing
Arrangements...................................................57
SECTION 8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES.........................58
8.1 Events of Default...............................................58
8.2 Remedies........................................................60
8.3 Waivers by Credit Parties.......................................61
SECTION 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT............61
9.1 Assignment and Participations...................................61
9.2 Appointment of Agent............................................63
9.3 Agent's Reliance, Etc...........................................64
9.4 GE Capital and Affiliates.......................................65
9.5 Lender Credit Decision..........................................65
9.6 Indemnification.................................................65
9.7 Successor Agent.................................................66
9.8 Setoff and Sharing of Payments..................................66
9.9 Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert.............................................67
SECTION 10. SUCCESSORS AND ASSIGNS.........................................70
10.1 Successors and Assigns..........................................70
SECTION 11. MISCELLANEOUS..................................................70
11.1 Complete Agreement; Modification of Agreement...................70
11.2 Amendments and Waivers..........................................70
11.3 Fees and Expenses...............................................72
11.4 No Waiver.......................................................74
11.5 Remedies........................................................74
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11.6 Severability....................................................74
11.7 Conflict of Terms...............................................75
11.8 Confidentiality.................................................75
11.9 GOVERNING LAW...................................................75
11.10 Notices.........................................................76
11.11 Section Titles..................................................77
11.12 Counterparts....................................................77
11.13 WAIVER OF JURY TRIAL............................................77
11.14 Press Releases..................................................77
11.15 Reinstatement...................................................78
11.16 Advice of Counsel...............................................78
11.17 No Strict Construction..........................................78
SECTION 12. CROSS-GUARANTY.................................................78
12.1 Cross-Guaranty..................................................78
12.2 Waivers by Borrowers............................................79
12.3 Benefit of Guaranty.............................................79
12.4 Subordination of Subrogation, Etc...............................79
12.5 Election of Remedies............................................80
12.6 Limitation......................................................80
12.7 Contribution with Respect to Guaranty Obligations...............81
12.8 Liability Cumulative............................................82
INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b)(ii) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
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Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.22 - Material Agreements
Schedule 5.1 - Trade Names
Schedule 6.3 - Indebtedness
Schedule 6.4(a) - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Schedule of Additional Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections--
Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A - Commitments as of Closing Date
Commitments definition)
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CREDIT AGREEMENT, dated as of November 19, 1998, among MASKA U.S.,
INC., a Vermont corporation ("Maska US"), and SHC HOCKEY INC., a Vermont
corporation ("SHC Hockey") (Maska US and SHC Hockey are sometimes collectively
referred to herein as the "Borrowers" and individually as a "Borrower"), the
other Credit Parties signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation (in its individual capacity, "GE Capital"), for itself, as
Lender, and as Agent for Lenders, and the other Lenders signatory hereto from
time to time.
RECITALS
WHEREAS, Borrowers desire that Lenders extend a revolving credit
facility to Borrowers of up to Thirty-Five Million Dollars ($35,000,000) in the
aggregate (including a Letter of Credit Subfacility of up to $10,000,000) for
the purpose of funding certain transaction costs and expenses in connection with
the Acquisition and refinancing certain indebtedness of SLM International, Inc.,
a Delaware corporation ("Ultimate Parent"), and certain of its Subsidiaries and
to provide (a) working capital financing for Borrowers, and (b) funds for other
general corporate purposes of Borrowers; and for these purposes, Lenders are
willing to make certain loans and other extensions of credit to Borrowers of up
to such amount upon the terms and conditions set forth herein; and
WHEREAS, Ultimate Parent is willing to guarantee all of the
obligations of Borrowers to Agent and Lenders under the Loan Documents (the
"Ultimate Parent Guaranty"); and
WHEREAS, the Guarantors are each willing to guarantee all of the
Obligations of Credit Parties to Agent and Lenders under the Loan Documents to
the extent permitted by applicable law (collectively, the "Subsidiary
Guaranties"); and
WHEREAS, Tropsport Acquisitions Inc., a Canada corporation
("Tropsport"), is willing to guarantee all of the obligations of Ultimate Parent
under the Ultimate Parent Guarantee (the "Tropsport Guaranty"); and
WHEREAS, Credit Parties desire to secure all of their Obligations
under the Loan Documents by granting to Agent, for the benefit of Agent and
Lenders, and to Agent and Lenders, as applicable, a security interest in and
Lien upon all of their existing and after-acquired personal and real property,
subject to the terms of the Intercreditor Agreement; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings given to them in Annex A. All Annexes, Disclosure Schedules, Exhibits
and other attachments (collectively, "Appendices") hereto, or expressly
identified to this Agreement, are incorporated herein by reference, and taken
together, shall constitute a single agreement. These Recitals shall be construed
as part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
SECTION 1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available from time to time until the Commitment
Termination Date its Pro Rata Share of revolving credit advances (each, a
"Revolving Credit Advance"). The Pro Rata Share of the Revolving Loan of any
Revolving Lender shall not at any time exceed its separate Revolving Loan
Commitment. The obligations of each Revolving Lender hereunder shall be several
and not joint. The aggregate amount of Revolving Credit Advances outstanding
shall not exceed at any time the lesser of (A) the Maximum Amount and (B) the
Aggregate Borrowing Base, in each case less the sum of the Letter of Credit
Obligations and the Swing Line Loan outstanding at such time ("Borrowing
Availability"). Moreover, the sum of the Revolving Loan and Swing Line Loan
outstanding to either Borrower shall not exceed at any time that Borrower's
separate Borrowing Base. Until the Commitment Termination Date, Borrowers may
from time to time borrow, repay and reborrow under this Section 1.1(a). Each
Revolving Credit Advance shall be made on notice by Borrower Representative on
behalf of the applicable Borrower to the representative of Agent identified on
Schedule 1.1 at the address specified thereon. Those notices must be given no
later than (1) 11:00 a.m. (New York time) on the Business Day of the proposed
Revolving Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m.
(New York time) on the date which is three (3) Business Days prior to the
proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice
(a "Notice of Revolving Credit Advance") must be given in writing (by telecopy
or overnight courier) substantially in the form of Exhibit 1.1(a)(i), and shall
include the information required in such Exhibit, as such may be amended,
modified, supplemented or restated by Agent from time to time in its sole
discretion, acting reasonably. If either Borrower desires to have a Revolving
Credit Advance bear interest by reference to a LIBOR Rate, Borrower
Representative must comply with Section 1.5(e).
(ii) Each Borrower shall execute and deliver to each Revolving
Lender a promissory note to evidence the Revolving Loan Commitment of that
Revolving Lender. Each note shall be in the principal amount of the Revolving
Loan Commitment of the applicable Revolving Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(a)(ii) (each a "Revolving Note" and,
collectively, the "Revolving Notes"). Each Revolving Note shall represent the
obligation of each Borrower to pay the amount of each Revolving Lender's
Revolving Loan Commitment or, if less, the applicable Revolving Lender's Pro
Rata Share of the aggregate unpaid
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principal amount of all Revolving Credit Advances to such Borrower together with
interest thereon as prescribed in Section 1.5. The entire unpaid balance of the
aggregate Revolving Loan and all other non-contingent Obligations shall be
immediately due and payable in full on the Commitment Termination Date.
(b) Swing Line Facility.
(i) Swing Line Advances. Agent shall notify the Swing Line
Lender upon Agent's receipt of any Notice of Revolving Credit Advance. Subject
to the terms and conditions hereof, the Swing Line Lender may, in its
discretion, make available from time to time until the Commitment Termination
Date advances (each, a "Swing Line Advance") in accordance with any such notice.
The aggregate amount of Swing Line Advances outstanding shall not exceed the
lesser of (A) the Swing Line Commitment and (B) the lesser of the Maximum Amount
and the Aggregate Borrowing Base, in each case, less the outstanding balance of
the Revolving Loan at such time ("Swing Line Availability"). Moreover, the Swing
Line Loan outstanding to any Borrower shall not exceed at any time that
Borrower's separate Borrowing Base less the Revolving Loan outstanding to such
Borrower. Until the Commitment Termination Date, Borrowers may from time to time
borrow, repay and reborrow under this Section 1.1(b). Each Swing Line Advance
shall be made pursuant to a Notice of Revolving Credit Advance delivered to
Agent by Borrower Representative on behalf of the applicable Borrower in
accordance with Section 1.1(a). Those notices must be given no later than 11:00
a.m. (New York time) on the Business Day of the proposed Swing Line Advance.
Notwithstanding any other provision of this Agreement or the other Loan
Documents, the Swing Line Loan shall constitute an Index Rate Loan. Borrowers
shall repay the aggregate outstanding principal amount of the Swing Line Loan
upon demand therefor by Agent.
(ii) Swing Line Notes. Each Borrower shall execute and deliver
to the Swing Line Lender a promissory note to evidence the Swing Line
Commitment. Each note shall be in the principal amount of the Swing Line
Commitment of the Swing Line Lender, dated the Closing Date and substantially in
the form of Exhibit 1.1(b)(ii) (each a "Swing Line Note" and, collectively, the
"Swing Line Notes"). Each Swing Line Note shall represent the joint and several
obligation of each Borrower to pay the amount of the Swing Line Commitment or,
if less, the aggregate unpaid principal amount of all Swing Line Advances made
to such Borrower together with interest thereon as prescribed in Section 1.5.
The entire unpaid balance of the Swing Line Loan and all other non-contingent
Obligations shall be immediately due and payable in full on the Commitment
Termination Date if not sooner paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender, at
any time and from time to time in its sole and absolute discretion, but no less
frequently than once weekly, shall on behalf of either Borrower (and each
Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its
behalf) request each Revolving Lender (including the Swing Line Lender) to make
a Revolving Credit
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Advance to such Borrower (which shall be an Index Rate Loan) in an amount equal
to such Revolving Lender's Pro Rata Share of the principal amount of such
Borrower's Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the
date such notice is given. Unless any of the events described in Sections 8.1(h)
or 8.1(i) shall have occurred (in which event the procedures of Section
1.1(b)(iv) shall apply) and regardless of whether the conditions precedent set
forth in this Agreement to the making of a Revolving Credit Advance are then
satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata
Share of a Revolving Credit Advance on behalf of the Swing Line Lender, prior to
3:00 p.m. (New York time), on the Business Day next succeeding the date such
notice is given. The proceeds of such Revolving Credit Advances shall be
immediately paid to the Swing Line Lender and applied to repay the Refunded
Swing Line Loan of the applicable Borrower.
(iv) Participation in Swing Line Loans. If, prior to refunding
a Swing Line Loan with a Revolving Credit Advance pursuant to Section
1.1(b)(iii), one of the events described in Sections 8.1(h) or 8.1(i) shall have
occurred, then, subject to the provisions of Section 1.1(b)(v) below, each
Revolving Lender will, on the date such Revolving Credit Advance was to have
been made for the benefit of the applicable Borrower, purchase from the Swing
Line Lender an undivided participation interest in the Swing Line Loan to such
Borrower in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon
request, each Revolving Lender will promptly transfer to the Swing Line Lender
the amount of its participation.
(v) Revolving Lenders' Obligations Unconditional. Each
Revolving Lender's obligation to make Revolving Credit Advances in accordance
with Section 1.1(b)(iii) and to purchase participating interests in accordance
with Section 1.1(b)(iv) shall be absolute and unconditional and shall not be
affected by any circumstance, including (A) any right of set-off, counterclaim,
recoupment, defense or other right which such Revolving Lender may have against
the Swing Line Lender, any Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of any Borrower to satisfy the conditions precedent
to borrowing set forth in this Agreement on the date upon which such
participating interest is to be purchased or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
If any Revolving Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Section 1.1(b)(iii) or
1.1(b)(iv), as the case may be, the Swing Line Lender shall be entitled to
recover such amount on demand from such Revolving Lender, together with interest
thereon for each day from the date of non-payment until such amount is paid in
full at the Federal Funds Rate for the first two Business Days and at the Index
Rate thereafter.
(c) Reliance on Notices; Appointment of Borrower Representative.
Agent shall be entitled to rely upon, and shall be fully protected in relying
upon, any Notice of Revolving Credit Advance, Notice of Conversion/Continuation
or similar notice believed by Agent to be genuine. Agent may assume that each
Person executing and delivering
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such a notice was duly authorized, unless the responsible individual acting
thereon for Agent has actual knowledge to the contrary. Each Borrower hereby
designates Borrower Representative as its representative and agent on its behalf
for the purposes of issuing Notices of Revolving Credit Advance and Notices of
Conversion/Continuation, giving instructions with respect to the disbursement of
the proceeds of the Loans, selecting interest rate options, requesting Letters
of Credit, giving and receiving all other notices and consents hereunder or
under any of the other Loan Documents and taking all other actions (including in
respect of compliance with covenants) on behalf of either Borrower or Borrowers
under the Loan Documents. Borrower Representative hereby accepts such
appointment. Agent and each Lender may regard any notice or other communication
pursuant to any Loan Document from Borrower Representative as a notice or
communication from both Borrowers, and may give any notice or communication
required or permitted to be given to either Borrower or Borrowers hereunder to
Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower
agrees that each notice, election, representation and warranty, covenant,
agreement and undertaking made on its behalf by Borrower Representative shall be
deemed for all purposes to have been made by such Borrower and shall be binding
upon and enforceable against such Borrower to the same extent as if the same had
been made directly by such Borrower.
1.2 Letters of Credit.
Subject to and in accordance with the terms and conditions contained
herein and in Annex B, Borrower Representative, on behalf of the applicable
Borrower, shall have the right to request, and Revolving Lenders agree to incur,
or purchase participations in, Letter of Credit Obligations in respect of either
Borrower.
1.3 Prepayments.
(a) Voluntary Prepayments.
Borrowers may at any time on at least five (5) Business Days' prior
written notice by Borrower Representative to Agent terminate the Revolving Loan
Commitment; provided that upon such termination, all Loans and other Obligations
shall be immediately due and payable in full. Any such voluntary prepayment and
any such termination of the Revolving Loan Commitment prior to the first
anniversary of the Closing Date must be accompanied by the payment of the fee
required by Section 1.9(c), if any, plus the payment of any LIBOR funding
breakage costs in accordance with Section 1.13(b). Upon any such prepayment and
termination of the Revolving Loan Commitment, each Borrower's right to request
Revolving Credit Advances, or request that Letter of Credit Obligations be
incurred on its behalf, or request Swing Line Advances, shall simultaneously be
terminated.
(b) Mandatory Prepayments.
(i) If the outstanding balance of the Revolving Loan of either
Borrower exceeds such Borrower's separate Borrowing Base at any time less the
outstanding balance of the Swing Line Loan of such Borrower at such time, the
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Borrowers shall immediately repay its Revolving Credit Advances to the extent
required to eliminate such excess (and, if necessary, shall provide cash
collateral for Letter of Credit Obligations as described in Annex B hereto).
(ii) Immediately upon receipt by any Credit Party of cash
proceeds of any asset disposition (including condemnation proceeds, but
excluding proceeds of asset dispositions permitted by Section 6.8 (a)) or any
sale of Stock of any Subsidiary of any Credit Party, Borrowers shall, subject to
the Intercreditor Agreement, prepay the Loans (in the case of proceeds
pertaining to any Credit Party other than Borrowers, to be applied ratably to
all of the Loans owing by each Borrower) in an amount equal to all such cash
proceeds, net of (A) commissions and other reasonable and customary transaction
costs, fees, discounts and expenses properly attributable to such transaction
and payable by a Credit Party in connection therewith (in each case, paid to
non-Affiliates) including, without limitation, reasonable and customary fees
payable to legal counsel, accountants and other professionals, (B) transfer
taxes, (C) amounts payable to holders of senior Liens with respect to any assets
subject to such disposition (to the extent such Liens constitute Permitted
Encumbrances; except that, with respect to any amount payable to the Caisse
Secured Parties, such amount may only be paid to the Caisse Secured Parties if
the Caisse Secured Parties have given the requisite notice pursuant to the
Intercreditor Agreement), if any, (D) an appropriate reserve for income taxes in
accordance with GAAP in connection therewith, and (E) such other reserves as
Agent may permit from time to time, acting reasonably, including, for
indemnification obligations or amounts held in escrow. If Ultimate Parent shall
receive any such proceeds, Borrower shall prepay the Loans in an amount equal to
the net amount, as calculated above multiplied by a fraction equal to the sum of
the aggregate amount of the Loans plus the revolving loans, swing line loans and
letter of credit obligations divided by the aggregate outstanding amount of the
loan under the Canadian Facility. Any such prepayment shall be applied in
accordance with clause (c) below.
(iii) If Ultimate Parent issues Stock, no later than the
Business Day following the date of receipt of the proceeds thereof, Borrowers
shall prepay the Loans, to be applied ratably to all of the Loans owing by each
Borrower in an amount equal to all such proceeds, net of underwriting discounts
and commissions and other reasonable costs paid to non-Affiliates in connection
therewith, multiplied by a fraction equal to the aggregate outstanding amount of
the Loans divided by the sum of the aggregate outstanding amount of the Loans
plus the revolving loans, swing line loans and letter of credit obligations
under the Canadian Facility. Any such prepayment shall be applied in accordance
with clause (c) below.
(iv) In the case of receipt by any Credit Party (other than
Borrowers and any Credit Party not organized in the United States) of proceeds
as described in clauses (ii) and (iii) above, such Credit Party shall distribute
or contribute such proceeds to Borrowers to fund the prepayment required under
clause (ii) or (iii), as applicable.
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(c) Application of Certain Mandatory Prepayments.
Any prepayments made by either Borrower pursuant to clauses (b)(ii),
(b)(iii), or (b)(iv) above shall be applied as follows: first, to Fees and
reimbursable expenses of Agent then due and payable pursuant to any of the Loan
Documents; second, to interest then due and payable on such Borrower's Swing
Line Loan; third, to the principal balance of such Borrower's Swing Line Loan,
until the same shall have been repaid in full; fourth, to interest then due and
payable on such Borrower's Revolving Credit Advances; fifth, to the principal
balance of the Revolving Credit Advances outstanding to such Borrower until the
same shall have been repaid in full; sixth, to provide cash collateral for any
Letter of Credit Obligations of such Borrower in the manner set forth in Annex
B, until all such Letter of Credit Obligations have been fully cash
collateralized in the manner set forth in Annex B; seventh, to interest then due
and payable on the Swing Line Loan of the other Borrower, pro rata; eighth, to
the principal balance of the Swing Line Loan outstanding to the other Borrower,
pro rata, until the same shall have been repaid in full; ninth, to interest then
due and payable on the Revolving Credit Advances outstanding to the other
Borrower, pro rata; tenth, to the principal balance of the Revolving Credit
Advances made to the other Borrower, pro rata, until the same shall have been
paid in full, and last to provide cash collateral for any Letter of Credit
Obligations of the other Borrower, pro rata, to provide cash collateral therefor
in the manner set forth in Annex B, until all such Letter of Credit Obligations
have been fully cash collateralized. Neither the Revolving Loan Commitment nor
the Swing Line Commitment shall be permanently reduced by the amount of any such
prepayments.
(d) Application of Prepayments from Insurance Proceeds.
Prepayments from insurance proceeds in accordance with Section
5.4(c) shall be applied subject to the terms of the Intercreditor Agreement as
follows: first, to the Swing Line Loans and, second, to the Revolving Credit
Advances of the Borrowers in such order as determined by Agent. Neither the
Revolving Loan Commitment nor the Swing Line Loan Commitment shall be
permanently reduced by the amount of any such prepayments.
(e) No Consent Construed.
Nothing in this Section 1.3 shall be construed to constitute Agent's
or any Lender's consent to any transaction referred to in clauses (b)(ii) and
(b)(iii) above which is not permitted by other provisions of this Agreement or
the other Loan Documents.
1.4 Use of Proceeds.
Borrowers shall utilize the proceeds of the Revolving Loan and the
Swing Line Loan made on the Closing Date solely for certain transaction costs
and expenses in connection with the Acquisition and the Refinancing and Loans
made after the Closing Date will be used for the financing of Borrowers'
ordinary working capital and general corporate needs (but excluding, in any
event, the making of any Restricted Payment not specifically permitted by
Section 6.14). Disclosure Schedule 1.4 contains a description of Borrowers'
sources and uses of funds as of the Closing Date, including Loans and Letter of
Credit Obligations to be made or
7
incurred on that date, and a funds flow memorandum detailing how funds from each
source are to be transferred to particular uses.
1.5 Interest and Applicable Margins.
(a) Borrowers shall pay interest to Agent, for the ratable benefit
of Lenders in accordance with the various Loans being made by each Lender, in
arrears on each applicable Interest Payment Date, at the following rates: (i)
with respect to Revolving Credit Advances, the Index Rate plus the Applicable
Index Margin per annum, or at the election of Borrower Representative, the
applicable LIBOR Rate plus the Applicable LIBOR Margin per annum, based on the
aggregate Revolving Credit Advances outstanding from time to time; and (ii) with
respect to the Swing Line Loan, the Index Rate plus the Applicable Index Margin
per annum.
The Applicable Index Margin and Applicable LIBOR Margin will be
0.50% and 2.00% per annum, respectively, as of the Closing Date. The Applicable
Margins will be adjusted (up or down) prospectively on a quarterly basis as
determined by Ultimate Parent's consolidated financial performance for the four
(4) most recently ended Fiscal Quarters as described below, commencing with the
date specified below upon delivery to Lenders and Agent of Ultimate Parent's
quarterly Financial Statements for the third Fiscal Quarter ending September 30,
1999. Adjustments in Applicable Margins will be determined by reference to the
following grids:
IF OPERATING CASH LEVEL OF
FLOW RATIO IS: APPLICABLE MARGINS:
-------------- -------------------
> 3.25 Level I
> 2.50, but 2.00, but 1.50, but
