EXHIBIT 99.1
AMENDMENT TO SUPPORT AGREEMENT
THIS AMENDMENT TO SUPPORT AGREEMENT (the "Amendment") is made and entered
into as of August 1, 2005, by and among Salton, Inc., a Delaware corporation
(the "Company"), and the undersigned beneficial owners, or investment managers
or advisors for the beneficial owners, of the Old Notes (as defined below) and
each beneficial owner (or investment managers or advisors for the beneficial
owner) of Old Notes that executes a counterpart signature page of the Support
Agreement (as defined below).
WHEREAS, the Company and the other parties hereto have entered into a
Support Agreement, dated as of July 5, 2005 (as it may be amended, modified,
supplemented or amended and restated, the "Support Agreement") (capitalized
terms used and not defined in this Amendment have the meanings ascribed to them
in the Support Agreement);
WHEREAS, pursuant to the Support Agreement, the parties have made certain
agreements relating to the consummation of the Exchange Offer and the Consent
Solicitation on terms described in the Term Sheet attached to the Support
Agreement;
WHEREAS, the parties hereto wish to amend the Support Agreement as
follows;
NOW, THEREFORE, in consideration of the agreements and provisions herein
contained, the parties hereto do hereby agree as follows:
1. Amendments to Section 1.
(a) The definition of "Consent Solicitation" is hereby amended by
deleting it in its entirety and replacing it with the following: "Consent
Solicitation" means a solicitation of consents to the Indenture Amendments,
which Consent Solicitation will occur simultaneously with the Exchange Offer."
(b) The definition of "Indenture Amendments" is hereby amended by
deleting it in its entirety and replacing it with the following: "Indenture
Amendments" means: (A) an amendment to the 2005 Senior Subordinated Notes
Indenture which, among other things, deletes substantially all of the covenants
contained in the 2005 Senior Subordinated Notes Indenture (other than those
covenants that cannot be eliminated without the consent of each holder of 2005
Notes); and (B) an amendment to the 2008 Senior Subordinated Notes Indenture
which, among other things, deletes substantially all of the covenants contained
in the 2008 Senior Subordinated Notes Indenture (other than those covenants that
cannot be eliminated without the consent of each holder of 2008 Notes).
2. Amendment to Term Sheet. The Term Sheet attached to the Support
Agreement is hereby amended by deleting it in its entirety and replacing it with
the Term Sheet attached hereto as Exhibit A.
3. Amendment to Schedule A. Schedule A to the Support Agreement is hereby
amended by deleting it in its entirety and replacing it with Schedule A attached
hereto.
4. Continuing Effect. Except as specifically provided herein, the Support
Agreement shall remain in full force and effect in accordance with their
respective terms and are hereby ratified and confirmed in all respects.
5. No Waiver; Reservation of Rights. This Amendment is limited as
specified and the execution, delivery and effectiveness of this Amendment shall
not operate as a modification, acceptance or waiver of any provision of the
Support Agreement except as specifically set forth herein.
6. References.
(a) From and after the date hereof, (i) the Support Agreement shall
be deemed amended hereby to the extent necessary, if any, to give effect to the
provisions of this Amendment and (ii) all of the terms and provisions of this
Amendment are hereby incorporated by reference into the Support Agreement, as
applicable, as if such terms and provisions were set forth in full therein, as
applicable.
(b) From and after the date hereof, (i) all references in the
Support Agreement to "this Agreement", "hereto", "hereof", "hereunder" or words
of like import referring to the Support Agreement shall mean the Support
Agreement as amended hereby and (ii) all references in the Support Agreement to
"Support Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Support Agreement shall mean the Support Agreement as amended
hereby.
7. Governing Law. THIS AMENDMENT, AND ALL MATTERS ARISING OUT OF OR
RELATING TO THE SUBJECT MATTER HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
8. Severability. The provisions of this Amendment are severable, and if
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision in this Amendment in any jurisdiction.
9. Counterparts. This Amendment may be executed in any number of
counterparts and by facsimile, each of which counterparts when executed and
delivered shall be an original, but all of which shall together constitute one
and the same instrument. Delivery of an executed counterpart of this Amendment
by telefacsimile or electronic mail shall be equally effective as delivery of a
manually executed counterpart.
10. Headings. Section headings in this Amendment are included herein =for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
11. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
12. Integration. This Amendment, together with the Support Agreement,
incorporates all negotiations of the parties hereto with respect to the subject
matter hereof and is the final expression and agreement of the parties hereto
with respect to the subject matter hereof.
[Signature pages follow]
IN WITNESS WHEREOF, each of the parties has signed this Amendment to be
executed and delivered by its duly authorized officers as of the date first
written above.
SALTON, INC.
By: ________________________
Xxxxxxx X. Xxx
President and Chief Operating
Officer
_____________________________
By:__________________________
Its:_________________________
SCHEDULE A
Aggregate Principal Aggregate Principal
Amount Due at Maturity Amount Due at Maturity
of 2005 Notes held by such of 2008 Notes held by
Noteholder as such Noteholder as
beneficial owner (or beneficial owner (or as
as investment manager investment manager
or advisor for or advisor
beneficial owner) for the beneficial
Noteholders owner)
ANNEX A
SALTON, INC.
TERM SHEET
This Term Sheet is a part of and made subject to that certain Support
Agreement, dated as of July 5, 2005 (as amended as of August 1, 2005 and as it
may be further amended, modified, supplemented or amended and restated from time
to time, the "Support Agreement"), by and between Salton, Inc. (the "Company")
and the "Noteholders" (as defined in the Support Agreement). Capitalized terms
used herein but not defined herein shall have the meanings assigned thereto in
the Support Agreement.
ISSUER: Salton, Inc.
ISSUE: New Notes, Series C Preferred and Common Stock
EXCHANGE OFFER:
Holders of 2005 Notes and 2008 Notes that are institutional accredited
investors (each a "Holder") may tender to the Company in the Exchange Offer in
exchange for an aggregate principal amount of New Notes under the New Notes
Credit Agreement:
(i) with respect to tendered 2005 Notes, the exchange ratio will
range from .60 to .675 depending on the aggregate principal
amount of the 2005 Notes tendered in the Exchange Offer. The
exchange ratio will be the sum of (a) .60 and (b) the
Incremental 2005 Note Participation Percentage. The
"Incremental 2005 Note Participation Percentage" will be the
product of (a) .075 multiplied by (b) the ratio of (x) the
amount, if any, by which the aggregate amount of 2005 Notes
validly tendered in the Exchange Offer exceeds $75 million
(including any 2005 Notes that are validly tendered but not
accepted), over (y) $50 million; provided that if the
aggregate principal amount of 2005 Notes validly tendered in
the Exchange Offer does not exceed $75 million, the
Incremental 2005 Note Participation Amount will be zero. Set
forth below is a chart illustrating the exchange ratio for the
2005 Notes assuming the tender of various aggregate principal
amounts of the 2005 Notes:
Aggregate Principal Amount
of 2005 Notes Tendered Exchange Ratio
----------------------------------------------
100% 0.67500
----------------------------------------------
90% 0.65625
----------------------------------------------
80% 0.63750
----------------------------------------------
70% 0.61875
----------------------------------------------
60% 0.60000
----------------------------------------------
(ii) with respect to tendered 2008 Notes, the exchange ratio will be .60.
In addition, for each $1,000 of New Notes issued under the under the New
Notes Credit Agreement to a holder of 2005 Notes and/or 2008 Notes in the
Exchange Offer, such holder would also receive:
(i) 1.3636 shares of Series C Preferred with a liquidation
preference equal to $100.00 (the aggregate number of shares of
the Series C Preferred to be issued if the maximum of $110
million of new notes are issued in the Exchange Offer would be
150,000 with an aggregate liquidation preference of $15
million); provided that fractional shares would be paid in
cash. The Series C Preferred would: (i) rank senior to the
Series A Voting Convertible Preferred Stock and senior to the
Series B Junior Participating Preferred Stock; (ii) be
non-dividend bearing and non-voting (except as required under
Delaware law); (iii) be redeemable by the holders upon a
change of control at the liquidation preference plus a rate of
5% per annum compounded annually on each anniversary of the
issuance date; and (iv) be redeemable by the Company at the
face amount on the fifth anniversary of the issuance date.
(ii) 20.58 shares of Common Stock (the aggregate number of shares of
Common Stock to be issued if the maximum of $110 million of New
Notes are issued in the exchange offer would be 2,263,880); provided
that fractional shares would be paid in cash. The shares of Common
Stock and Series C Preferred would be subject to a registration
rights agreement with the Company.
PRORATION:
The maximum aggregate principal amount of New Notes under the New Notes
Credit Agreement to be issued in the Exchange Offer would not exceed $110
million. To the extent that proration is required, Salton intends to accept
tendered Notes, subject to proration, in the following order of priority:
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(i) 2005 Notes tendered by Holders who executed the Support Agreement;
(ii) 2005 Notes up to a total aggregate principal amount of 2005 Notes
of $100 million accepted for exchange (including 2005 Notes
tendered by Holders who executed the Support Agreement)
(iii) 58% of the 2008 Notes tendered by each Holder who executed the
Support Agreement;
(iv) 2008 Notes tendered by each Holder who executed the Support
Agreement in a pro rata amount based on the percentage of such
Holder's 2005 Notes tendered to the aggregate amount of 2005 Notes
tendered by all such Holders;
(v) 2008 Notes tendered by each Holder who executed the Support
Agreement pro rata based on a one-to-one basis up to the aggregate
principal amount of 2005 Notes tendered by such Holder;
(vi) 2008 Notes tendered by each Holder of 2005 Notes who has not
executed the Support Agreement but who has tendered all of the 2005
Notes held by such Holder in a pro rata amount based on the
percentage of such Holder's 2005 Notes tendered to the aggregate
amount of 2005 Notes tendered by all such Holders;
(vii) 2008 Notes tendered by each Holder of 2005 Notes who has not
executed the Support Agreement but who has tendered all of the 2005
Notes held by such Holder pro rata based on a one to one basis up
to the aggregate principal amount of 2005 Notes tendered by such
Holder;
(viii) Other 2008 Notes pro rata based on the principal amount
of 2008 Notes tendered; and
(ix) Other 2005 Notes pro rata based on the principal amount of 2005
Notes tendered; provided that the amount of 2008 Notes accepted
from a Holder by the Company pursuant to clause (iii) shall be
credited against the amount of 2008 Notes that the Company would
otherwise accept from such Holder pursuant to clause (iv) above
and, if necessary, clause (v) above.
DURATION OF EXCHANGE OFFER:
The Exchange Offer will remain open for an initial term expiring on
midnight, New York City time, on Monday, August 15, 2005. The Company may extend
the expiration date of the Exchange Offer to any date not later than September
1, 2005.
CONDITIONS TO CLOSING OF EXCHANGE OFFER:
As set forth in Section 4 of the Support Agreement.
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DIRECTOR:
Upon the closing of the Exchange Offer, a new independent board member
designated in writing by the Required Noteholders and reasonably acceptable to
the existing board of directors of the Company shall be added to the board of
directors of the Company.
CONSENT SOLICITATION:
The Consent Solicitation will solicit consents to amend the 2005 Senior
Subordinated Notes Indenture pursuant to the Indenture Amendments, a copy of
which is attached hereto as Exhibit 1. The Company will also solicit consents to
amend the 2008 Senior Subordinated Notes Indenture pursuant to an amendment to
the 2008 Senior Subordinated Notes Indenture in the form attached hereto as
Exhibit 7 which, among other things, eliminates substantially all of the
restrictive covenants and certain events of default contained in the 2008 Senior
Subordinated Notes Indenture.
THIRD AMENDMENT TO SENIOR CREDIT AGREEMENT:
On or prior to the closing of the Exchange Offer, the Third Amendment to
Senior Credit Agreement in the form attached hereto as Exhibit 2 shall have
become effective.
SERIES C PREFERRED CERTIFICATE OF DESIGNATION:
On or prior to the closing of the Exchange Offer, the Series C Preferred
Certificate of Designation in the form attached hereto as Exhibit 3 shall have
been filed with the Delaware Secretary of State.
DOCUMENTATION:
On or prior to the closing of the Exchange Offer, the Company shall have
entered into the following documents, which are incorporated by reference
herein:
(i) New Notes Credit Agreement, substantially in the form attached
hereto as Exhibit 4;
(ii) New Notes Security Documents;
(iii) the Intercreditor Agreement, substantially in the form
attached hereto as Exhibit 5; and
(iv) the Registration Rights Agreement, substantially in the form
attached hereto as Exhibit 6, with respect to the Common Stock and
Series C Preferred issued to the Noteholders.
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EXHIBIT 1
--------------------------------------------------------------------------------
10 3/4% SENIOR SUBORDINATED NOTES DUE 2005
----------
FIRST SUPPLEMENT TO INDENTURE
DATED AS OF ________ , 2005
----------
SALTON, INC.,
AS ISSUER,
HOME CREATIONS DIRECT LTD.
AND
EACH NEWLY ACQUIRED OR
CREATED DOMESTIC SUBSIDIARY
OF ISSUER, AS GUARANTORS
AND
SUNTRUST BANK,
AS TRUSTEE
--------------------------------------------------------------------------------
FIRST SUPPLEMENT TO INDENTURE
The First Supplement to Indenture is dated as of __________, 2005 by
and between Salton, Inc., a Delaware corporation (the "Company"), and SunTrust
Bank, a national banking association duly organized and existing under the laws
of the United States of America and having its principal corporate office at 000
Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxxxx, Xxxxxxx 00000 (the "Trustee"), as successor to
Xxxxx Fargo Bank, National Association, with respect to the Company's 10 3/4%
Senior Subordinated Notes due 2005 (this "First Supplement"). Capitalized terms
used but not otherwise defined in this First Supplement shall have the meanings
ascribed to such terms in the Indenture (hereinafter defined).
WHEREAS, the Company and the Trustee entered into that certain
Indenture, dated as December 16, 1998 (as may be amended and supplemented from
time to time in accordance with its terms, the "Indenture");
WHEREAS, Section 9.2 of the Indenture provides that, when authorized by
resolutions of its Board of Directors, the Company and the Trustee may, with the
consent of the Holders of not less than a majority in principal amount of the
outstanding Notes, enter into one or more indentures supplemental to the
Indenture for the purpose of, among other things, changing in any manner or
eliminating any of the provisions of the Indenture or of modifying in any manner
the rights of the Holders, subject to certain exceptions set forth therein;
WHEREAS, Holders of a majority in principal amount of the Notes
outstanding have consented to this First Supplement;
WHEREAS, pursuant to Section 9.2 of the Indenture, the Trustee is
authorized to execute and deliver this First Supplement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree, for the equal and proportionate benefit
of all Holders of the Securities, as follows:
Article 1
INDENTURE AMENDMENTS
Section 1.01 Amendment to Article 4. Sections 4.2 through 4.9 of the
Indenture, inclusive, Sections 4.11 through 4.14 of the Indenture, inclusive,
and Sections 4.16 through 4.19 of the Indenture, inclusive, are hereby deleted
in their entirety and each Section is replaced with the following: "Reserved."
Section 1.02 Amendment to Article 5. Article 5 of the Indenture is
hereby deleted in its entirety and replaced with the following: "Reserved."
Section 1.03 Amendment to Article 6. Clauses (c) through (j) of Section
6.1 of the Indenture, inclusive, are hereby deleted in their entirety and each
clause is replaced with the following: "Reserved."
Section 1.04 Amendment to Article 7. The second to last paragraph of
Section 7.7 is hereby deleted in its entirety and replaced with the following:
"When the Trustee incurs expenses or renders services (a) after
an Event of Default specified in Section 6.1(b) hereof occurs,
or (b) after the Company or any of its Restricted Subsidiaries
pursuant to or within the meaning of Bankruptcy Law (i) commence
a voluntary case, (ii) consent to the entry of an order for
relief against them in an involuntary case, (iii) consent to the
appointment of a Custodian of them or for all or substantially
all of their property, (iv) make a general assignment for the
benefit of their creditors, or (v) generally are not paying
their debts as they become due, the expenses and the
compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses
of administration under any Bankruptcy Law."
Article 2
MISCELLANEOUS PROVISIONS
Section 2.01 Instruments to be Read Together. This First Supplement is
an indenture supplement to and an implementation of the Indenture, and said
Indenture and this Supplement shall henceforth be read together.
Section 2.02 Confirmation. The Indenture, as amended and supplemented by
this First Supplement, is in all respects confirmed and preserved.
Section 2.03 Counterparts. This First Supplement may be executed in any
number of counterparts, each of which, when so executed, shall be deemed to be
an original, but all of which shall together constitute one and the same
instrument.
Section 2.04 Effectiveness. This First Supplement shall become effective
immediately upon its execution in accordance with the provisions of Article 9 of
the Indenture.
Section 2.05 GOVERNING LAW. THIS FIRST SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
THE COMPANY AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, COUNTY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS FIRST SUPPLEMENT.
Section 2.06 Disclaimer of Trustee's Responsibility. In executing this
First Supplement, the Trustee shall be entitled to all the privileged and
immunities afforded to the Trustee under the terms and conditions of the
Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplement to Indenture to be duly executed as of the date first above written.
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SALTON, INC.
By:
------------------------------------
Name:
----------------------------------
Its:
--------------------------------
SUNTRUST BANK
By:
------------------------------------
Name:
----------------------------------
Its:
--------------------------------
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EXECUTION COPY
THIRD AMENDMENT
TO, AND WAIVER UNDER,
AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO, AND WAIVER UNDER, AMENDED AND RESTATED CREDIT
AGREEMENT (this "Third Amendment") is made and entered into as of July 8, 2005,
by and among the financial institutions identified on the signature pages hereof
(such financial institutions, together with their respective successors and
assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), XXXXX FARGO FOOTHILL, INC., a California
corporation, as administrative agent and collateral agent for the Lenders (in
such capacities, together with any successor administrative agent and collateral
agent, the "Agent"), SILVER POINT FINANCE, LLC, as the co-agent, syndication
agent, documentation agent (in such capacities, together with any successor
co-agent, syndication agent, and documentation agent, the "Co-Agent"), arranger
and book runner, SALTON, INC., a Delaware corporation (the "Parent"), each of
the Parent's Subsidiaries identified on the signature pages hereof as Borrowers
(collectively with the Parent, the "Borrowers") and each of the Parent's
Subsidiaries identified on the signature pages hereof as Guarantors
(collectively, the "Guarantors" and, together with the Borrowers, the "Borrower
Parties").
WITNESSETH:
WHEREAS, the Lenders, the Agent, the Co-Agent, and the Borrower Parties
are parties to that certain Amended and Restated Credit Agreement, dated as of
May 9, 2003 and amended and restated as of June 15, 2004 (as amended as of
August 30, 2004 and as of May 11, 2005, and as it may be further amended,
modified, supplemented or amended and restated from time to time, the "Credit
Agreement");
WHEREAS, subsequent to the issuance of Parent's consolidated financial
statements for the fiscal quarter ended April 2, 2005, Parent determined that
its Series A Convertible Preferred Stock should be classified outside of
permanent equity in accordance with the guidance of Emerging Issues Task Force
Topic No. D-98 "Classification and Measurement of Redeemable Securities",
because the redemption of the Series A Convertible Preferred Stock in shares of
common stock is outside of Parent's control (the "Non-GAAP Preferred Stock
Classification") ; and, based upon such determination, on June 28, 2005,
Parent's management and the Audit Committee of the Board of Directors, in
consultation with Parent's independent registered public accounting firm,
Deloitte & Touche LLP, concluded that Parent's financial statements for the
fiscal quarters ended October 2, 2004, January 1, 2005 and April 2, 2005 and for
the fiscal years ended July 3, 2004, June 28, 2003 and June 29, 2002
(collectively, the "Applicable Financial Statements") needed to be restated to
reclassify the Series A Convertible Preferred Stock as temporary equity (the
"Financial Statement Restatements");
WHEREAS, as a result of the Non-GAAP Preferred Stock Classification,
the Borrower Parties have failed to comply with the requirements set forth in
Section 5.1 of the Credit Agreement to prepare its books, records and accounts
in accordance with GAAP with respect to the Applicable Financial Statements (the
"Section 5.1 Default"); and
WHEREAS, the Borrower Parties, the Lenders, the Agent and the Co-Agent
wish to amend the Credit Agreement as herein provided;
NOW, THEREFORE, in consideration of the agreements and provisions
herein contained, the parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS. Any capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Credit Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby
amended, effective as of the date this Third Amendment becomes effective in
accordance with Section 7 hereof, as follows:
2.01 AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of
the Credit Agreement is hereby amended by deleting "$275,000,000" therein and
inserting "$287,000,000 minus the original principal amount of the Second Lien
Term Loan as of the Second Lien Closing Date" in lieu thereof.
2.02 AMENDMENT TO SECTION 3.1(B) OF THE CREDIT AGREEMENT. Section 3.1(b)
of the Credit Agreement is hereby amended by adding the words "other than
pursuant to Section 3.1(c)" after the words "The Term Loan may not be prepaid".
2.03 AMENDMENT TO SECTION 3.1(C) OF THE CREDIT AGREEMENT. Section 3.1(c)
of the Credit Agreement is hereby amended by deleting it in its entirety and
inserting the following in lieu thereof:
"(c) Mandatory Prepayments. Notwithstanding anything to the
contrary contained herein, upon (i) any issuance of Debt or shares of
Stock by any Subsidiary (other than Debt permitted to be issued pursuant
to Section 7.13), (ii) any issuance of Debt in the form of additional
Second Lien Term Loans after the Second Lien Closing Date or (iii) any
sale or other disposition of assets by any Subsidiary (other than any
sale or disposition permitted pursuant to Section 7.9) (the occurrence
of any such event in clause (i), (ii) or (iii) above, a "Prepayment
Triggering Event"), Borrowers shall prepay the outstanding principal
amount of the Loans in an amount equal to 100% of the Net Cash Proceeds
received in connection therewith up to an aggregate amount with respect
to all of the Prepayment Triggering Events equal to $11,000,000 and, to
the extent that the aggregate amount of any such Net Cash Proceeds
exceeds $11,000,000, Borrowers shall prepay the outstanding principal
amount of the Loans in an amount equal to 50% of such Net Cash Proceeds
received in connection therewith in excess of $11,000,000 and, subject
to the immediately succeeding sentence of this Section 3.1(c), Borrowers
may use all or a portion of the 50% of such Net Cash Proceeds not
required to prepay the Loans to purchase, prepay or redeem all or a
portion of the outstanding principal amount of the 2005 Senior Notes
and, after the payment in full and retirement of all outstanding 2005
Senior Notes, the 2008 Senior Notes (and the Second Lien Term Loan to
the extent required by the Second Lien Credit Agreement to purchase 2008
Senior Notes); provided, that (x) concurrently with each such
application to the outstanding Loans, Agent and
2
Co-Agent shall establish and maintain a corresponding reserve against
the Maximum Amount and the Borrowing Base in an amount equal to the
amount of such prepayment (but in no event to exceed an aggregate amount
of $45,410,000 (minus the amount, if any, of the Make-Whole Payment (as
defined in Section 4 of the Third Amendment) that the Co-Agent and the
Lenders with Revolver Commitments are required to refund in accordance
with Section 4 of the Third Amendment)), and (y) such reserve against
the Maximum Amount and the Borrowing Base shall be released only at the
sole discretion of the Agent and the Co-Agent; provided, however, that,
notwithstanding the foregoing, if at the time of any such Prepayment
Triggering Event the aggregate outstanding principal amount of the Loans
does not exceed the result of the sum of clauses (a)(A), (a)(B) and
(a)(C) of the definition of Borrowing Base, then Borrowers may, subject
to the immediately succeeding sentence of this Section 3.1(c), in lieu
of prepaying the principal amount of the Loans, use all or a portion of
such Net Cash Proceeds to purchase, prepay or redeem all or a portion of
the outstanding principal amount of the 2005 Senior Notes and, after the
payment in full and retirement of all outstanding 2005 Senior Notes, the
2008 Senior Notes (and the Second Lien Term Loan to the extent required
by the Second Lien Credit Agreement to purchase 2008 Senior Notes); and
provided, further, however, that the Maximum Amount and the applicable
Commitments shall be permanently reduced, on a dollar for dollar basis,
to the extent that the Loans are prepaid in accordance with this Section
3.1(c) solely as a result of the issuance of Debt in the form of
additional Second Lien Term Loans after the Second Lien Closing Date in
accordance with the terms of the Second Lien Credit Agreement (as in
effect on the date hereof without any modification or amendment
thereof). Borrowers' right to use Net Cash Proceeds to purchase, prepay
or redeem all or a portion of the outstanding principal amount of the
2005 Senior Notes and, after the payment in full and retirement of all
outstanding 2005 Senior Notes, 2008 Senior Notes (and the Second Lien
Term Loan to the extent required by the Second Lien Credit Agreement to
purchase 2008 Senior Notes) pursuant to this Section 3.1(c) is subject
to (a) no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (b) in the case of the purchase,
prepayment or redemption of the 2005 Senior Notes, Availability is
greater than $5,000,000 both immediately before and immediately after
giving effect to any such purchase, prepayment or redemption made prior
to September 15, 2005 and (c) in the case of the purchase, prepayment or
redemption of the 2008 Senior Notes (and the Second Lien Term Loan to
the extent required by the Second Lien Credit Agreement to purchase 2008
Senior Notes), Availability is greater than $4,000,000 both immediately
before and immediately after giving effect to any such purchase,
prepayment or redemption. Each prepayment of the Loans made pursuant to
this Section 3.1(c) shall be applied: first, to the extent that the
Required Lenders have not waived all or any portion of such prepayment,
to the outstanding principal amount of the Term Loan, and second,
ratably to the outstanding principal amount of the Revolving Loans. The
provisions of this Section 3.1(c) shall not be deemed to be implied
consent to any issuance, incurrence, sale or other disposition otherwise
prohibited by the terms and conditions of this Agreement."
2.04 AMENDMENT TO SECTION 3.6 OF THE CREDIT AGREEMENT. Section 3.6 of
the Credit Agreement is hereby amended by adding the words "subject to the
Intercreditor Agreement," immediately after "tenth," in the second sentence
thereof.
3
2.05 AMENDMENT TO SECTION 5.2 OF THE CREDIT AGREEMENT. Section 5.2 of
the Credit Agreement is hereby amended by inserting the following subsections at
the end thereof:
"(v) Monthly, in any event no later than the tenth (10th) day of
each month, a 13-week rolling cash flow report, which report shall show, among
other things, the actual versus the budgeted cash flow for the prior month.
(w) Promptly, true and complete copies of any and all documents,
notices, reports and other information delivered by or to any Loan Party
pursuant to the terms of the Second Lien Loan Documents except any such
documents, notices, reports or information otherwise required to be delivered
hereunder."
2.06 AMENDMENT TO SECTION 6.25 OF THE CREDIT AGREEMENT. Section 6.25 of
the Credit Agreement is hereby amended by adding the words ", the Second Lien
Loan Documents" after the words "the Loan Documents" in each of the second line
and the fifth line thereof.
2.07 AMENDMENT TO SECTION 7.9 OF THE CREDIT AGREEMENT. Section 7.9 of
the Credit Agreement is hereby amended by deleting clause (a) in its entirety
and inserting the following in lieu thereof: "(a)(i) sales of Inventory in the
ordinary course of business and (ii) sales of excess Inventory not in the
ordinary course of business in an aggregate amount not to exceed $15,000,000
(such amount to be based on the lower of book value and fair market value of the
subject Inventory) so long as (x) no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (y) Borrowers deliver to
Agent and Co-Agent a written notice at the time of each such sale that describes
the Inventory sold and the book value and fair market value of the subject
Inventory, and (z) such sale is not part of, does not result from and does not
arise in connection with a sale, disposition or transfer by a Loan Party of one
or more business divisions, lines of business or Subsidiaries of any Loan Party
except to the extent that such sale is comprised of excess Inventory that was in
existence immediately prior to the date of such sale, disposition or transfer by
such Loan Party of such business division, line of business or Subsidiary;".
2.08 AMENDMENT TO SECTION 7.10 OF THE CREDIT AGREEMENT. Section 7.10 of
the Credit Agreement is hereby amended by deleting the words "one hundred eighty
(180) days" in the third and fourth lines thereof and inserting "ninety one (91)
days" in lieu thereof.
2.09 AMENDMENT TO SECTION 7.12 OF THE CREDIT AGREEMENT. Section 7.12 of
the Credit Agreement is hereby amended by adding the words "or Section 7.13(k)"
at the end thereof.
2.10 AMENDMENT TO SECTION 7.13 OF THE CREDIT AGREEMENT. Section 7.13 of
the Credit Agreement is hereby amended by deleting the words "and (j) Seller
Subordinated Debt. The Parent shall not enter into any amendment or modification
of the documents evidencing the Debt permitted under clauses (e), (f) or (g)
above that is in any manner adverse to the Parent, any Subsidiary, the Agent or
any Lender" therein and inserting the following in lieu thereof: "(j) Seller
Subordinated Debt; and (k) the Second Lien Obligations incurred pursuant to the
Second Lien Credit Agreement. Notwithstanding anything to the contrary contained
herein, the Parent shall not, directly or indirectly, enter into any amendment
or modification of the documents
4
evidencing the Debt permitted under clauses (e), (f) or (g) above that is in any
manner adverse to the Parent, any Subsidiary, the Agent, the Co-Agent or any
Lender. Notwithstanding anything to the contrary contained herein, no Borrower
Party shall, directly or indirectly, enter into any amendment or modification of
the Second Lien Credit Agreement, any other documents evidencing the Debt
permitted under clause (k) above or any other Second Lien Loan Document."
2.11 AMENDMENT TO SECTION 7.14 OF THE CREDIT AGREEMENT. Section 7.14 of
the Credit Agreement is hereby amended by deleting it in its entirety and
inserting the following in lieu thereof:
"7.14 Prepayment. Notwithstanding anything to the contrary contained
herein, no Borrower Party shall prepay any Debt, except (a) the Obligations in
accordance with the terms of this Agreement, (b) in connection with a
refinancing permitted under Section 7.13(e) above including the application of
any proceeds received as a result of an equity infusion to prepay the Debt
described in Section 7.13(e), (c) the principal amount of the 2005 Senior Notes,
2008 Senior Notes (and the Second Lien Term Loan to the extent required to
repurchase 2008 Senior Notes) solely to the extent permitted pursuant to Section
3.1(c) or (d) the principal amount of the 2005 Senior Notes solely to the extent
permitted pursuant to Section 5 of the Third Amendment."
2.12 AMENDMENTS TO SECTION 7.31 OF THE CREDIT AGREEMENT. Section 7.31 of
the Credit Agreement is hereby amended by replacing each reference to "Foreign
Subsidiary" with "Subsidiary".
2.13 AMENDMENTS TO SECTION 9.1 OF THE CREDIT AGREEMENT. Section 9.1 of
the Credit Agreement is hereby amended as follows: (a) the word "or" is hereby
deleted at the end of clause (q) thereof; (b) the following clause (r) is hereby
added: "(r) there occurs any Default or Event of Default under, and as such
terms are defined in, the Second Lien Loan Documents; and"; and (c) the current
"clause (r)" is hereby renumbered "clause (s)".
2.14 AMENDMENT TO SECTION 9.2 OF THE CREDIT AGREEMENT. Section 9.2(a) of
the Credit Agreement is hereby amended by adding the words "and/or the
applicable Commitments" immediately after the words "reduce the Maximum Amount"
in clause (i) thereof.
2.15 AMENDMENTS TO SECTION 10.1 OF THE CREDIT AGREEMENT. Section 10.1 of
the Credit Agreement is hereby amended as follows: (a) the words "any early
termination or prepayment fees or penalties" in the third sentence thereof is
hereby deleted and the words "the Make-Whole Amount" is inserted in lieu
thereof; and (b) the following sentence is hereby added immediately after the
end of the third sentence thereof: "Without limiting the foregoing, in the event
of the termination of this Agreement and repayment of the Obligations at any
time prior to the Stated Termination Date, for any other reason, including (a)
termination upon the election of the Required Lenders to terminate after the
occurrence and during the continuation of an Event of Default, (b) foreclosure
and sale of Collateral, (c) sale of the Collateral in any Insolvency Proceeding,
or (d) restructure, reorganization, or compromise of the Obligations by the
confirmation of a plan of reorganization or any other plan of compromise,
restructure, or arrangement in any Insolvency Proceeding, then, in view of the
impracticability and extreme difficulty of ascertaining the actual amount of
damages to the Agent, the Co-Agent and the
5
Lenders or profits lost by the Agent, the Co-Agent and the Lenders as a result
of such early termination, and by mutual agreement of the parties as to a
reasonable estimation and calculation of the lost profits or damages of Agent,
the Co-Agent and the Lenders, Borrowers shall pay to Agent (for the benefit of
the Lenders in accordance with their Pro Rata Shares), in cash, the Make-Whole
Amount, measured as of the date of such termination.".
2.16 AMENDMENTS TO SECTION 11.2 OF THE CREDIT AGREEMENT. Section 11.2 of
the Credit Agreement is hereby amended as follows:
(a) Clause (b) thereof is hereby amended by (i) adding the words
"and the Intercreditor Agreement" immediately after the words "the Loan
Documents" in the seventh line thereof; and (ii) adding the words "and the
Intercreditor Agreement" immediately after the words "the other Loan Documents"
in the eighth line thereof.
(b) Clause (c) thereof is hereby amended by (i) deleting the
words "or any other Loan Document" in clause (i) thereof and inserting ", any
other Loan Document or the Intercreditor Agreement" in lieu thereof; and (ii)
deleting the words "or any other Loan Document" in clause (ii) thereof and
inserting ", any other Loan Document or the Intercreditor Agreement" in lieu
thereof.
(c) Clause (e) thereof is hereby amended by (i) deleting the
words "and the other Loan Documents" in clause (iii) thereof and inserting ",
the other Loan Documents and the Intercreditor Agreement" in lieu thereof; and
(ii) deleting the words "or any other Loan Document" in clause (iv) thereof and
inserting ", any other Loan Document or the Intercreditor Agreement" in lieu
thereof.
2.17 AMENDMENT TO SECTION 12.5 OF THE CREDIT AGREEMENT. Section 12.5 of
the Credit Agreement is hereby amended by deleting the words "Section 9" and
inserting "Section 9.2" in lieu thereof.
2.18 AMENDMENTS TO SECTION 12.17 OF THE CREDIT AGREEMENT. Section 12.17
of the Credit Agreement is hereby amended by (a) adding the words "and the
Intercreditor Agreement" immediately after the words "the other Loan Documents"
in the second and third lines thereof and (b) deleting the words "or the other
Loan Documents" in the sixth line thereof and inserting ", the other Loan
Documents or the Intercreditor Agreement" in lieu thereof.
2.19 AMENDMENTS TO SECTION 13.7 OF THE CREDIT AGREEMENT. Section 13.7 of
the Credit Agreement is hereby amended by (a) adding the words ", the
Intercreditor Agreement" immediately after the words "this Agreement" in the
fifth line thereof, (b) adding the words ", the Intercreditor Agreement"
immediately after the words "the Loan Documents" in the eighth line thereof and
(c) adding the words ", the Intercreditor Agreement" immediately after the words
"the Loan Documents" in the second and third sentence thereof.
2.20 AMENDMENT TO SECTION 13.17(C) OF THE CREDIT AGREEMENT. Section
13.17(c) of the Credit Agreement is hereby amended by deleting the words
"Confidential Information" and inserting "confidential information" in lieu
thereof.
2.21 AMENDMENTS TO ANNEX A: CREDIT AGREEMENT DEFINITIONS.
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(a) The definition of "Availability" is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"Availability" means, at any time, the lesser of (a) the Maximum
Amount, minus the Aggregate Outstandings, minus Reserves other than Reserves
deducted in the calculation of the Borrowing Base, plus sixty-five percent (65%)
of the aggregate undrawn face amount of all outstanding commercial Letters of
Credit issued for the purpose of purchasing Eligible In-Transit Inventory not
included in the calculation of the Borrowing Base and (b) the Borrowing Base,
minus the Aggregate Outstandings, minus Reserves other than Reserves deducted in
the calculation of the Borrowing Base, plus sixty-five percent (65%) of the
aggregate undrawn face amount of all outstanding commercial Letters of Credit
issued for the purpose of purchasing Eligible In-Transit Inventory not included
in the calculation of the Borrowing Base.
(b) Clause (a)(D)(II) of the definition of "Borrowing Base" is
hereby amended by deleting "$11,000,000" and inserting "an amount equal to
$15,410,000 minus the amount, if any, of the Make-Whole Payment (as defined in
Section 4 of the Third Amendment) that the Co-Agent and the Lenders with
Revolver Commitments are required to refund in accordance with Section 4 of the
Third Amendment" in lieu thereof.
(c) The definition of "Collateral" is hereby amended by adding
the following words, ", except as otherwise agreed to by any Loan Party
(including pursuant to the Second Amendment to the Credit Agreement dated as of
May 11, 2005)" immediately after the word "but" and immediately prior to the
words ", excluding up to 35% of the equity interests of any Borrower Party in
any Foreign Subsidiary".
(d) The following definition of "Exchange Offer" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Exchange Offer" has the meaning specified in Section 4 of the
Third Amendment."
(e) The following definition of "Excluded Taxes" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Excluded Taxes" has the meaning specified in Section 4.1(a)."
(f) The following definition of "Indemnified Liabilities" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Indemnified Liabilities" has the meaning specified in Section
13.11."
(g) The following definition of "Indemnified Person" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Indemnified Person" has the meaning specified in Section
13.11."
(h) The following definition of "Intercreditor Agreement" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
7
""Intercreditor Agreement" means that certain Intercreditor
Agreement, dated as of the date that the Exchange Offer is consummated, among
the Co-Agent and the Agent, on the one hand, and the Second Lien Agent, on the
other hand, as amended, modified, supplemented or restated from time to time."
(i) The definition of "Make-Whole Amount" is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"Make-Whole Amount" means, as of any date of determination, an
amount equal to (a) during the period of time from and after the date of the
execution and delivery of this Agreement up to June 15, 2006, 4.50% times the
Maximum Amount; and (b) during the period of time from and including June 15,
2006 up to the Stated Termination Date, 3.50% times the Maximum Amount; provided
that, in the event of a prepayment of less than the entire outstanding amount of
the Term Loans and the Revolving Loans after the commencement of the Exercise of
Secured Creditor Remedies (as defined in the Intercreditor Agreement) that
results in a permanent reduction of the Maximum Amount and the Commitments
pursuant to Section 9(b) of the Intercreditor Agreement, the Make-Whole Amount
shall be equal to (x) the Make-Whole Amount, determined as set forth above,
times the result of (y) the amount of such prepayment divided by the Maximum
Amount (less any prior permanent reductions thereof)."
(j) The definition of "Maximum Amount" is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
""Maximum Amount" means $287,000,000 minus the original
principal amount of the Second Lien Term Loan as of the Second Lien Closing
Date, as such Maximum Amount may be reduced from time to time in accordance with
the terms hereof and upon a permanent reduction of the Commitments pursuant to
Section 9(b) of the Intercreditor Agreement.".
(k) The following definition of "Non-Consenting Lender" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Non-Consenting Lender" has the meaning specified in Section
11.1(c)."
(l) The following definition of "originating Lender" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""originating Lender" has the meaning set forth in Section
11.2(e)."
(m) The definition of "Permitted Liens" is hereby amended by (i)
deleting "and" at the end of clause (h) thereof; (ii) deleting the period and
inserting "; and" at the end of clause (i) thereof; and (iii) inserting the
following at the end thereof: "(j) Liens held by the Second Lien Agent, as agent
for the lenders party to the Second Lien Credit Agreement, to secure the Second
Lien Obligations, subject to the terms of the Intercreditor Agreement."
(n) The definition of "Permitted Transactions" is hereby amended
by adding the words "(1) the redemption or other acquisition by Parent of all or
a portion of the Senior Notes solely in connection with the exchange offer
pursuant to which holders of the Senior Notes tender all or a portion of their
Senior Notes in exchange for a ratable portion of the Second Lien
8
Term Loan, Common Stock and Series C Preferred Stock on terms acceptable to the
Co-Agent and Agent, (2) acquisition by Parent of 2005 Senior Notes solely to the
extent permitted by Section 5 of the Third Amendment, (3) the purchase,
prepayment or redemption of the 2005 Senior Notes and/or 2008 Senior Notes (and
the Second Lien Term Loan to the extent required by the Second Lien Credit
Agreement to purchase 2008 Senior Notes) solely to the extent permitted pursuant
to Section 3.1(c) and (4)" immediately after the word "means" in the first line
thereof.
(o) The following definition of "Prepayment Triggering Event" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Prepayment Triggering Event" has the meaning set forth in
Section 3.1(c)."
(p) The following definition of "Proposed Change" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Proposed Change" has the meaning specified in Section
11.1(c)."
(q) The following definition of "Report" is hereby inserted in
Annex A of the Credit Agreement in proper alphabetical order:
""Report" has the meaning set forth in Section 12.18(a)."
(r) The following definition of "Required Amount" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Required Amount" has the meaning set forth in Section 7.31."
(s) The definition of "Revolver Commitment" is hereby amended by
adding the words ", as such Revolver Commitment may be reduced from time to time
in accordance with the terms hereof and Section 9(b) of the Intercreditor
Agreement" at the end thereof.
(t) The following definition of "Second Lien Agent" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Second Lien Agent" means the "Second Lien Agent" as defined
under the Intercreditor Agreement."
(u) The following definition of "Second Lien Closing Date" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Second Lien Closing Date" means the "Closing Date" as defined
under the Second Lien Credit Agreement."
(v) The following definition of "Second Lien Credit Agreement"
is hereby inserted in Annex A of the Credit Agreement in proper alphabetical
order:
9
""Second Lien Credit Agreement" means that certain Credit
Agreement, dated as of the date that the Exchange Offer is consummated, by and
among Parent, Borrowers, Guarantors, the Second Lien Agent, as agent, and the
lenders from time to time party thereto, as such is amended, modified,
supplemented or restated from time to time in accordance with the terms thereof
and hereof."
(w) The following definition of "Second Lien Loan Documents" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Second Lien Loan Documents" means the Loan Documents as such
term is defined in the Second Lien Credit Agreement, as such is amended,
modified, supplemented or restated from time to time in accordance with the
terms thereof and hereof."
(x) The following definition of "Second Lien Obligations" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Second Lien Obligations" means the Obligations as such term is
defined in the Second Lien Credit Agreement, as such is amended, modified,
supplemented or restated from time to time in accordance with the terms thereof
and hereof."
(y) The following definition of "Second Lien Term Loan" is
hereby inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Second Lien Term Loan" means the Term Loan as such term is
defined in the Second Lien Credit Agreement, as such is amended, modified,
supplemented or restated from time to time in accordance with the terms thereof
and hereof."
(z) The definition of "Senior Notes" is hereby amended by adding
the words "(the "2005 Senior Notes")" after the words "10 3/4% Senior
Subordinated Notes Due 2005" therein and by adding the words "(the "2008 Senior
Notes")" after the words "12-1/4% Senior Subordinated Notes Due 2008" therein.
(aa) The definition of "Stated Termination Date" is hereby
amended by deleting "June 15, 2007" therein and inserting "December 31, 2007" in
lieu thereof.
(bb) The definition of "Term Loan Commitment" is hereby amended
by adding the words ", as such Term Loan Commitment may be reduced from time to
time in accordance with the terms hereof and Section 9(b) of the Intercreditor
Agreement" at the end thereof.
(cc) The following definition of "Third Amendment" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""Third Amendment" means that certain Third Amendment to the
Credit Agreement, dated as of July 8, 2005."
(dd) The definition of "Total Commitment" is hereby amended by
adding the words ", as such Total Commitment may be reduced from time to time in
accordance with the terms hereof and Section 9(b) of the Intercreditor
Agreement" at the end thereof.
10
(ee) The following definition of "2005 Senior Notes" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""2005 Senior Notes" has the meaning set forth in the definition
of Senior Notes."
(ff) The following definition of "2008 Senior Notes" is hereby
inserted in Annex A of the Credit Agreement in proper alphabetical order:
""2008 Senior Notes" has the meaning set forth in the definition
of Senior Notes."
SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent, the
Co-Agent and the Lenders to enter into this Third Amendment, the Borrower
Parties hereby represent and warrant that:
3.01 NO DEFAULT. At and as of the date of this Third Amendment and after
giving effect to this Third Amendment, no Default or Event of Default exists.
3.02 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. At and as of the
date of this Third Amendment and both prior to and after giving effect to this
Third Amendment, each of the representations and warranties contained in the
Credit Agreement and other Loan Documents is true and correct in all material
respects.
3.03 CORPORATE POWER, ETC. The Borrower Parties (a) have all requisite
corporate power and authority to execute and deliver this Third Amendment and to
consummate the transactions contemplated hereby and (b) have taken all action,
corporate or otherwise, necessary to authorize the execution and delivery of
this Third Amendment and the consummation of the transactions contemplated
hereby.
3.04 NO CONFLICT. Neither the execution and delivery of this Third
Amendment nor consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach or violation of any provision of the
certificate of incorporation, certificate of formation or by-laws of the
Borrower Parties, (b) result in any breach or violation of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of a Lien upon any of the
properties or assets of the Borrower Parties under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease agreement or other instrument or obligation to which the Borrower Parties
are parties or to which any of their properties or assets are subject, (c)
require any consent, approval, authorization or permit of, or filing with or
notification to, any third party or any Governmental Authority, or (d) violate
any order, writ, injunction, decree, judgment, ruling, law, statute, rule or
regulation of any Governmental Authority.
3.05 BINDING EFFECT. This Third Amendment has been duly executed and
delivered by the Borrower Parties and constitutes the legal, valid and binding
obligation of the Borrower Parties, enforceable against the Borrower Parties in
accordance with its terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, relating to or affecting the
11
enforcement of creditors' rights generally, and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.06 FINANCIAL STATEMENT RESTATEMENTS. The Financial Statement
Restatements will have no effect on the previously reported net income, earnings
per share or cash flows of Parent and its Subsidiaries.
SECTION 4. PAYMENT OF MAKE-WHOLE AMOUNT; REDUCTION OF REVOLVER COMMITMENTS. As a
condition precedent to the Agent, the Co-Agent and the Lenders entering into
this Third Amendment, on the date hereof, Borrower Parties shall have paid to
the Co-Agent, for the ratable benefit of the Lenders with Revolver Commitments,
a make-whole payment (the "Make-Whole Payment"), in immediately available funds,
in an amount equal to $4,410,000, which represents a make-whole percentage of
4.50% multiplied by $98,000,000 (the amount by which the Revolver Commitments
would be reduced if a $110,000,000 second lien facility were created in
connection with the Exchange Offer contemplated by this Third Amendment (the
"Exchange Offer")); provided that, if upon consummation of the Exchange Offer
the amount of reductions in the Revolver Commitments is less than $98,000,000,
Co-Agent and the Lenders with Revolver Commitments shall, on a ratable basis,
refund to the Borrower Parties a portion of such payment equal to the lesser of
(a) an amount equal to (i) 4.50% multiplied by (ii) (A) $98,000,000 minus (B)
the actual amount of reductions in the Revolver Commitments as a result of the
consummation of the Exchange Offer and (b) $2,400,000; provided, further, that,
in the event that the Exchange Offer is not consummated on or prior to September
15, 2005, Co-Agent and the Lenders with Revolver Commitments shall, on a ratable
basis, refund to the Borrower Parties the full amount of the Make-Whole Payment.
Upon consummation of the Exchange Offer and satisfaction of the conditions
precedent set forth in Section 7 of this Third Amendment, the Revolver
Commitments shall be reduced by an amount equal to (a) $175,000,000 minus (b)
$287,000,000 minus the original principal amount of the Second Lien Term Loan as
of the Second Lien Closing Date minus $100,000,000.
SECTION 5. AGREEMENT REGARDING SHORT-TERM OBLIGATIONS RESERVE. Notwithstanding
anything in the Credit Agreement to the contrary, in the event that Parent shall
have duly accepted tendered Senior Notes in accordance with the terms of the
Exchange Offer and all of the conditions to effectiveness of the Third Amendment
shall have been satisfied, then Parent shall be entitled to make Borrowings that
would otherwise be available if not for the Short-Term Obligation Reserve
resulting from the 2005 Senior Notes that remain outstanding after such Exchange
Offer; provided that the funds from such Borrowings must be used solely to
purchase such 2005 Senior Notes.
SECTION 6. WAIVER. Subject to the satisfaction of the terms and conditions set
forth herein, the Agent, the Co-Agent and the Required Lenders hereby agree to
waive the Section 5.1 Default solely with respect to the Non-GAAP Preferred
Stock Classification with respect to the Applicable Financial Statements.
12
SECTION 7. CONDITIONS. This Third Amendment shall be effective upon the
fulfillment by the Borrower Parties, in a manner satisfactory to the Co-Agent,
the Agent and the Lenders, of all of the following conditions precedent set
forth in this Section 7 (such date, the "Effective Date"); provided, that,
notwithstanding the foregoing, Section 4 of this Third Amendment shall be
effective as of the date hereof:
7.01 EXECUTION OF THE THIRD AMENDMENT. Each of the parties hereto shall
have executed an original counterpart of this Third Amendment and shall have
delivered (including by way of telefacsimile or electronic mail) the same to the
Co-Agent.
7.02 REPRESENTATIONS AND WARRANTIES. As of the Effective Date, the
representations and warranties set forth in Section 3 hereof shall be true and
correct.
7.03 MAKE-WHOLE PAYMENT. Borrower Parties shall have made the Make-Whole
Payment to the Co-Agent, for the ratable benefit of the Lenders with Revolver
Commitments, required to be paid pursuant to Section 4 hereof.
7.04 REQUISITE AMOUNT OF 2005 SENIOR NOTES TENDERED. Borrower Parties
shall have delivered to the Co-Agent and the Agent an officer's certificate,
certifying that at least $75,000,000 of the outstanding principal amount of the
2005 Senior Notes shall have been validly tendered and not withdrawn by the
holders of the 2005 Senior Notes on or prior to the expiration time of the
Exchange Offer, and the Parent shall have duly accepted such tendered 2005
Senior Notes in accordance with the terms of the Exchange Offer.
7.05 AMENDMENT TO DECEMBER 16, 1998 INDENTURE. An amendment to the
December 16, 1998 Indenture relating to the 2005 Senior Notes, in form and
substance satisfactory to the Co-Agent and the Agent, shall have been duly
authorized and approved by the requisite holders of the 2005 Senior Notes and
shall have been duly executed by Parent and the Trustee under the December 16,
1998 Indenture, and Borrower Parties shall have delivered a certified copy of
the same to the Co-Agent and the Agent.
7.06 PROJECTIONS. Borrower Parties shall have delivered to the Co-Agent
and the Agent the final updated projections (giving pro forma effect to the
exchange and contemplated asset sales), in form and substance acceptable to the
Co-Agent and the Agent.
7.07 13-WEEK CASH FLOW REPORT. Borrower Parties shall have delivered to
the Co-Agent and the Agent a revised 13-week cash flow report, in form and
substance acceptable to the Co-Agent and the Agent.
7.08 SECOND LIEN LOAN DOCUMENTS. Borrower Parties shall have delivered
to the Co-Agent and the Agent certified copies of the Second Lien Loan
Documents, which shall each be in form and substance satisfactory to the
Co-Agent and the Agent and which shall each be effective in accordance with
their terms.
7.09 INTERCREDITOR AGREEMENT. The Intercreditor Agreement among the
Co-Agent and the Agent, on the one hand, and the Second Lien Agent, on the other
hand, shall have been executed and delivered, in form and substance satisfactory
to the Co-Agent and the Agent, and shall be effective in accordance with its
terms.
13
7.10 OPINION OF COUNSEL. Agent shall have received an opinion of counsel
for the Borrower Parties, in form and substance satisfactory to the Co-Agent and
the Agent.
7.11 DELIVERY OF OTHER DOCUMENTS. The Co-Agent shall have received all
such other instruments, documents and agreements as the Co-Agent may reasonably
request, in form and substance reasonably satisfactory to the Co-Agent and the
Agent.
SECTION 8. MISCELLANEOUS.
8.01 CONTINUING EFFECT. Except as specifically provided herein, the
Credit Agreement and the other Loan Documents shall remain in full force and
effect in accordance with their respective terms and are hereby ratified and
confirmed in all respects.
8.02 NO WAIVER; RESERVATION OF RIGHTS. This Third Amendment is limited
as specified and the execution, delivery and effectiveness of this Third
Amendment shall not operate as a modification, acceptance or waiver of any
provision of the Credit Agreement, or any other Loan Document, except as
specifically set forth herein. Notwithstanding anything contained in this Third
Amendment to the contrary, the Agent, the Co-Agent and the Lenders expressly
reserve the right to exercise any and all of their rights and remedies under the
Credit Agreement, any other Loan Document and applicable law in respect of any
Default or Event of Default.
8.03 REFERENCES.
(a) From and after the Effective Date, (i) the Credit Agreement,
the other Loan Documents and all agreements, instruments and documents executed
and delivered in connection with any of the foregoing shall each be deemed
amended hereby to the extent necessary, if any, to give effect to the provisions
of this Third Amendment and (ii) all of the terms and provisions of this Third
Amendment are hereby incorporated by reference into the Credit Agreement, as
applicable, as if such terms and provisions were set forth in full therein, as
applicable.
(b) From and after the Effective Date, (i) all references in the
Credit Agreement to "this Agreement", "hereto", "hereof", "hereunder" or words
of like import referring to the Credit Agreement shall mean the Credit Agreement
as amended hereby and (ii) all references in the Credit Agreement, the other
Loan Documents or any other agreement, instrument or document executed and
delivered in connection therewith to "Credit Agreement", "thereto", "thereof",
"thereunder" or words of like import referring to the Credit Agreement shall
mean the Credit Agreement as amended hereby.
8.04 GOVERNING LAW. THIS THIRD AMENDMENT, AND ALL MATTERS ARISING OUT OF
OR RELATING TO THE SUBJECT MATTER HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
8.05 SEVERABILITY. The provisions of this Third Amendment are severable,
and if any clause or provision shall be held invalid or unenforceable in whole
or in part in any jurisdiction,
14
then such invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction and shall not in any manner
affect such clause or provision in any other jurisdiction, or any other clause
or provision in this Third Amendment in any jurisdiction.
8.06 COUNTERPARTS. This Third Amendment may be executed in any number of
counterparts and by facsimile, each of which counterparts when executed and
delivered shall be an original, but all of which shall together constitute one
and the same instrument. Delivery of an executed counterpart of this Third
Amendment by telefacsimile or electronic mail shall be equally effective as
delivery of a manually executed counterpart. A complete set of counterparts
shall be lodged with the Borrower Parties, the Agent, the Co-Agent and each
Lender.
8.07 HEADINGS. Section headings in this Third Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Third Amendment for any other purpose.
8.08 BINDING EFFECT; ASSIGNMENT. This Third Amendment shall be binding
upon and inure to the benefit of the Borrower Parties, the Agent, the Co-Agent
and the Lenders and their respective successors and assigns; provided, however,
that the rights and obligations of the Borrower Parties under this Third
Amendment shall not be assigned or delegated without the prior written consent
of the Agent, the Co-Agent and the Lenders.
8.09 EXPENSES. The Borrowers agree to pay the Agent and Co-Agent upon
demand, for all reasonable expenses, including reasonable fees of attorneys and
paralegals for the Agent, the Co-Agent and the Lenders (who may be employees of
the Agent, Co-Agent or the Lenders), incurred by the Agent, the Co-Agent and the
Lenders in connection with the preparation, negotiation and execution of this
Third Amendment and any document required to be furnished herewith.
8.10 INTEGRATION. This Third Amendment, together with the other Loan
Documents, incorporates all negotiations of the parties hereto with respect to
the subject matter hereof and is the final expression and agreement of the
parties hereto with respect to the subject matter hereof.
[Signature pages follow]
15
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWERS:
SALTON, INC., a Delaware corporation
By:
Title:
TOASTMASTER INC., a Missouri
corporation
By:
Title:
SALTON TOASTMASTER LOGISTICS
LLC, a Delaware limited liability company
By:
Title:
GUARANTORS:
HOME CREATIONS DIRECT, LTD.,
a Delaware corporation
By:
Title:
SONEX INTERNATIONAL
CORPORATION, a Delaware corporation
By:
Title:
[SIGNATURE PAGE OF THIRD AMENDMENT]
ICEBOX, LLC, an Illinois limited
liability company
By:
Title:
FAMILY PRODUCTS INC., a Delaware
corporation
By:
Title:
SALTON HOLDINGS, INC., a Delaware
corporation
By:
Title:
AGENT, CO-AGENT AND LENDERS:
XXXXX FARGO FOOTHILL, INC.
as the Administrative Agent, the
Collateral Agent and as a Lender
By:
Its:
SILVER POINT FINANCE, LLC, as the
Co-Agent, the Documentation Agent, and
the Syndication Agent
By:
Its:
[SIGNATURE PAGE OF THIRD AMENDMENT]
TRS THEBE LLC, as a Lender
By:
Its:
SEA PINES FUNDING LLC, as a Lender
By:
Its:
SPIRET IV LOAN TRUST 2003-A, as a Lender
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as trustee
By:
Its:
SPCP GROUP LLC, as a Lender
By:
Its:
FIELD POINT I, LTD., as a Lender
By:
Its:
FIELD POINT II, LTD., as a Lender
By:
Its:
[SIGNATURE PAGE OF THIRD AMENDMENT]
EXHIBIT 3
SALTON, INC.
CERTIFICATE OF DESIGNATION OF SERIES C PREFERRED STOCK SETTING
FORTH THE POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK
Salton, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, as amended (the "Delaware
Code"), does HEREBY CERTIFY:
That, pursuant to authority conferred by Article IV of the Second
Amended and Restated Certificate of Incorporation of the Corporation, the Board
of Directors of the Corporation has adopted a resolution providing for the
issuance of a series of Preferred Stock consisting of 150,000 shares designated
"Series C Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors (the "Board") of Salton, Inc., a Delaware corporation (the
"Corporation"), by Article IV of the Second Amended and Restated
Certificate of Incorporation of the Corporation (the "Second Restated
Certificate"), the Board does hereby create, provide for and approve a
series of Preferred Stock, par value $.01 per share (herein called
"Preferred Stock"), of the Corporation to be designated "Series C
Preferred Stock" (such series being herein called the "Series C Preferred
Stock"), consisting of 150,000 shares of the presently authorized but
unissued shares of Preferred Stock, and does hereby fix and herein state
and express the designations, powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions of the Series C Preferred Stock as follows
(all terms used herein which are defined in the Second Restated
Certificate shall have the meaning provided in said Second Restated
Certificate).
Section 1. Rank.
All shares of Series C Preferred Stock shall rank, as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, (a) notwithstanding anything in
the Second Restated Certificate to the contrary, senior, in
preference of, and prior to, all shares of Series A Voting Convertible Preferred
Stock, par value $.01 per share, of the Corporation (the "Series A Preferred
Stock") from time to time outstanding, (b) senior, in preference of, and prior
to, all other classes and series of the Corporation's Preferred Stock, par value
$.01 per share, including without limitation, the Series B Junior Participating
Preferred Stock, par value $.01 per share, of the Corporation, and (c) senior,
in preference of, and prior to, all of the Corporation's now or hereafter issued
Common Stock or other capital stock of the Corporation. The term "Common Stock"
shall mean the Common Stock, $.01 par value per share, of the Corporation as the
same exists at the date hereof or as such stock may be constituted from time to
time.
Section 2. Voting Rights.
Except as otherwise required by law or Section 6 hereof, the holders
of shares of Series C Preferred Stock, by virtue of their ownership thereof,
shall have no voting rights.
Section 3. Liquidation Preference.
In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Series C Preferred
Stock shall be entitled to receive and be paid out of the assets of the
Corporation, whether such assets are stated capital or surplus of any nature, an
amount in cash equal to $100.00 per share. Such payments shall be made before
any payment shall be made or any assets distributed to the holders of Common
Stock or any other class or series of the Corporation's capital stock ranking
junior as to liquidation rights to the Series C Preferred Stock. If, upon the
occurrence of a liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the assets and funds of the Corporation
legally available for distribution to the holders of Series C Preferred Stock
shall be insufficient to make payment in full to all such holders of the
preferential amount
- 2 -
such holders are entitled to, then the entire assets and funds of the
Corporation legally available for distribution to such holders shall be
distributed ratably among such holders based upon the total preferential amount
each holder would be entitled to receive if sufficient funds were distributed to
pay the full preferential amounts. Neither a consolidation, merger or other
business combination of the Corporation's assets for cash, securities or other
property shall be considered a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 3 (unless in connection therewith the
liquidation, dissolution or winding up of the Corporation is specifically
approved).
Section 4. Change of Control.
(a) (i) In the event that any Change of Control (as hereinafter
defined) shall occur at any time and from time to time while any shares of
Series C Preferred Stock are outstanding, each holder of Series C Preferred
Stock shall have the right to give notice that it is exercising a Change of
Control election (a "Change of Control Election"), with respect to all or any
number of such holder's shares of Series C Preferred Stock, during the period
(the "Exercise Period") beginning on the 30th day and ending on the 90th day
after the date of such Change of Control. Upon any such election, the
Corporation shall redeem each such holder's shares for which such an election is
made, to the extent the Corporation shall have capital and surplus lawfully
available therefor, at a redemption price per share payable on the Change of
Control Payment Date (as hereinafter defined) equal to the liquidation
preference per share plus an amount equivalent to interest accrued thereon at a
rate of 5% per annum compounded annually on each anniversary date of the
original issuance of the Series C Preferred Stock for the period from the date
of such original issuance through the date of the Change of Control Payment
Date.
- 3 -
(b) As used herein, "Change of Control" shall mean:
(i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934) (the "Acquiring Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under such
Act) of 50% or more of the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote
generally in the election of directors, but excluding, for this
purpose, any such action by (x) the Corporation or any of its
subsidiaries, (y) any of the Centre Partner Entities (as defined
below) or any Acquiring Person of which any of the Centre Partners
Entities own, either individually or in the aggregate, 50% or more
of the outstanding voting securities, including, without limitation,
the receipt by such an Acquiring Person of shares of Common Stock of
the Company upon conversion or redemption by the Company of the
Series A Preferred Stock, or (z) any corporation or other entity
with respect to which, following such acquisition, more than 50% of
the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors (or if another entity, more than 50% of the equivalent
controlling interests) is then beneficially owned, directly or
indirectly, by individuals and entities who were the beneficial
owners of voting securities of the Corporation immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
(For purposes of this Section 4(b)(i), the "Centre Partners
- 4 -
Entities" shall mean Centre Partners Capital Investors II, L.P.,
Centre Capital Tax-Exempt Investors II, L.P., Centre Capital
Offshore Investors II, L.P., the State Board of Administration of
Florida, Centre Partners Management Partners, L.P., Centre Partners
Coinvestment L.P. or any Affiliate (as defined in the Securities
Exchange Act of 1934, as amended); or
(ii) consummation of a reorganization, merger or consolidation
involving the Corporation, in each case, with respect to which the
individuals and entities who were the respective beneficial owners
of at least 80% of the voting securities of the Corporation
immediately prior to such reorganization, merger or consolidation do
not or will not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than
50% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors
of the corporation resulting from such reorganization, merger or
consolidation; or
(iii) the sale or other disposition of all or substantially
all the assets of the Corporation in one transaction or series of
related transactions; or
(iv) individuals who would constitute a majority of the
members of the Board of Directors elected at any meeting of
stockholders or by written consent (without regard to any members of
the Board of Directors elected pursuant to the terms of any series
of Preferred Stock) shall be elected to the Board of Directors and
the election or the nomination for election by the Corporation's
stockholders
- 5 -
of such directors was not approved by a vote of at least a majority
of the directors in office immediately prior to such election or
nomination.
(c) As used herein, "Change of Control Payment Date" shall mean the
date after a Change Control that is 91 days after the earlier of (i) the date on
which all of the Specified Debt matures and (ii) the date on which all of the
Specified Debt is repaid in full by the Company.
(d) As used herein, "Specified Debt" shall mean collectively:
(i) the Amended and Restated Credit Agreement dated as of May
9, 2003 and Amended and Restated as of June 15, 2004 among the
financial institutions named therein as the Lenders and Wachovia
Bank, National Association as the Agent and Silver Point Finance,
LLC as the Co-Agent, Syndication Agent, Documentation Agent,
Arranger and Book Runner, and Salton, Inc. as the Parent and each of
its Subsidiaries that are signatories thereto as the Borrowers and
each of its other Subsidiaries that are signatories thereto as
Guarantors;
(ii) the Credit Agreement dated as of August ___, 2005 among
the financial institutions named therein as the Lenders and The Bank
of New York as the Agent, and Salton, Inc. as the Parent and each of
its Subsidiaries that are signatories thereto as the Borrowers and
each of its other Subsidiaries that are signatories thereto as
Guarantors;
- 6 -
(iii) the Indenture dated as of December 16, 1998 by and among
Salton, Inc., as issuer, Home Creations Direct, Ltd. and each newly
acquired or created domestic restricted subsidiary of the issuer, as
guarantors, and Xxxxx Fargo Bank Minnesota, N.A. (as successor to
Norwest Bank Minnesota National Association), as the trustee; and
(iv) the Indenture dated as of April 23, 2001 by and among
Salton, Inc., as issuer, Home Creations Direct Ltd., Toastmaster,
Inc., Sonex International Corporation, Sasaki Products Company and
each newly acquired or created domestic restricted subsidiary of the
issuer, as guarantors, and Xxxxx Fargo Bank Minnesota, N.A., as
trustee;
(v) in the case of each of the foregoing clauses (i) through
(iv), as amended, restated or modified (provided that such
amendment, restatement or modification does not extend the
respective maturity date or result in such Specified Debt not
becoming due upon a Change of Control) from time to time (whether
with the original agents and lenders or other agents and lenders).
(e) On or before the fourteenth (14th) day after a Change of
Control, the Corporation shall mail to all holders of record of the Series C
Preferred Stock at their respective addresses as the same shall appear on the
books of the Corporation as of such date, a notice disclosing (i) the Change of
Control, (ii) the redemption price per share of the Series C Preferred Stock
applicable hereunder and (iii) the procedure which the holder must follow to
exercise the redemption right provided above. To exercise such redemption right,
if applicable, a holder of the Series C Preferred Stock must deliver during the
Exercise Period written notice to the
- 7 -
Corporation (or an agent designated by the Corporation for such purpose) of the
holder's exercise of such redemption right, and, to be valid, any such notice of
exercise must be accompanied by each certificate evidencing shares of the Series
C Preferred Stock with respect to which the redemption right is being exercised,
duly endorsed for transfer. On or prior to the fifth (5th) business day after
receipt of such written notice, the Corporation shall accept for payment all
shares of Series C Preferred Stock properly surrendered to the Corporation (or
an agent designated by the Corporation for such purpose) during the Exercise
Period for redemption in connection with the valid exercise of such redemption
right and shall cause payment to be made in cash for such shares of Series C
Preferred Stock on the Change of Control Payment Date. If at the time of any
Change of Control, the Corporation does not have sufficient capital and surplus
legally available to purchase all of the outstanding shares of Series C
Preferred Stock with respect to which the redemption right has been validly
exercised, the Corporation shall take all measures permitted under the Delaware
Code to increase the amount of its capital and surplus legally available, and
the Corporation shall purchase as many shares of Series C Preferred Stock with
respect to which the redemption right has been validly exercised as it has
capital and surplus legally available therefor, ratably from the holders thereof
in proportion to the total amount which holders are entitled to in connection
with the Change of Control, and shall thereafter, whenever it shall have capital
and surplus legally available therefor, offer to purchase ratably as many shares
of Series C Preferred Stock with respect to which the redemption right has been
validly exercised as it has capital and surplus available therefor until it has
offered to purchase all of the outstanding shares of Series C Preferred Stock
with respect to which the redemption right has been validly exercised.
Notwithstanding anything in this Second Restated Certificate to the contrary, in
the event of a Change of Control, the Company shall purchase all of the
outstanding
- 8 -
shares of Series C Preferred Stock with respect to which the redemption right
has been validly exercised before any payment shall be made with respect to the
redemption of shares of Series A Preferred Stock upon such Change of Control.
(f) In the event of any Change of Control, proper provision shall be
made to ensure that the holders of shares of Series C Preferred Stock will be
entitled to receive the benefits afforded by this Section 4; provided, however,
that in the event of any Change of Control effected with the Corporation's
consent, such provision to ensure the benefits of this Section 4 shall be made
prior to such Change of Control.
Section 5. Optional and Mandatory Redemption.
(a) The Corporation, at its option, may at any time redeem the
Series C Preferred Stock in whole or in part, at a cash redemption price per
share equal to 100% of the liquidation preference.
(b) On August ___, 2010, the Corporation shall redeem all
outstanding shares of Series C Preferred Stock at a redemption price equal to
the liquidation preference per share. The redemption price shall be paid in
cash.
(c) Not more than sixty (60) nor less than thirty (30) days prior to
the redemption date, notice by first class mail, postage prepaid, shall be given
to each holder of record of the Series C Preferred Stock to be redeemed, at such
holder's address as it shall appear upon the stock transfer books of the
Corporation. Each such notice of redemption shall be irrevocable and shall
specify the date fixed for redemption, the redemption price, the identification
of the shares to be redeemed (if fewer than all the outstanding shares are to be
- 9 -
redeemed), the place or places of payment and that payment will be made upon
presentation and surrender of the certificate(s) evidencing the shares of Series
C Preferred Stock to be redeemed.
(d) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Series C Preferred Stock receives such notice; and failure to give such notice
by mail, or any defect in such notice, to the holders of any shares designated
for redemption shall not affect the validity of the proceedings for the
redemption of any other shares of Series C Preferred Stock. On or after the date
fixed for redemption as stated in such notice, each holder of the shares called
for redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the redemption price in the manner set forth in
the notice. If fewer than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If, on the date fixed for redemption, funds necessary for the
redemption shall be available therefor and shall have been irrevocably deposited
or set aside, then, notwithstanding that the certificates evidencing any shares
so called for redemption shall not have been surrendered, the shares shall no
longer be deemed outstanding, the holders thereof shall cease to be
stockholders, and all rights whatsoever with respect to the shares so called for
redemption (except the right of the holders to receive the redemption price
without interest upon surrender of their certificates therefor) shall terminate.
(e) If fewer than all the shares outstanding are to be redeemed, the
Corporation shall select the shares to be redeemed pro rata.
- 10 -
Section 6. Protective Provisions.
So long as any shares of the Series C Preferred Stock shall be
outstanding, the Corporation shall not, without the prior approval by
affirmative vote or prior written consent of the holders of at least a majority
of the then outstanding shares of Series C Preferred Stock:
(a) amend, waive or repeal any provisions of, or add any provisions
to, this Certificate of Designation;
(b) take any action that authorizes, creates or issues, or obligates
the Corporation to issue, any shares of any capital stock or security or right
convertible or exchangeable for shares of capital stock of the Corporation that
are senior to or on parity with the Series C Preferred Stock;
(c) declare or pay a dividend or distribution on the Common Stock;
(d) increase the authorized number of shares of Series C Preferred
Stock;
(e) enter any agreement, contract or understanding or otherwise
incur any obligation which by its terms would violate or be in conflict with the
rights, privileges and preferences of the holders of Series C Preferred Stock
hereunder or conflict with the terms of the Second Restated Certificate; or
(f) amend the Second Restated Certificate or By-laws of the
Corporation, if such amendment would adversely affect the rights, privileges or
preferences of the holders of the Series C Preferred Stock in any material
respect.
- 11 -
Section 7. Dividends. The holders of shares of Series C Preferred
shall not be entitled to receive dividends.
Section 8. Notice.
All notices hereunder shall be in writing.
Section 9. Reacquired Shares.
Any shares of Series C Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares of Series C
Preferred Stock shall, upon their cancellation, and upon the filing of an
appropriate certificate with the Secretary of the State of Delaware, become
authorized but unissued shares of Preferred Stock, par value $.01 per share, of
the Corporation, undesignated as to series, and may be reissued as part of
another series of Preferred Stock, par value $.01 per share, of the Corporation
subject to the conditions of restrictions on issuance set forth therein.
Signed on _______________, 2005
________________________________________
(Name, Title of authorized officer)
- 12 -
EXHIBIT 4
CREDIT AGREEMENT
DATED AS OF AUGUST __, 2005
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
AS THE LENDERS
AND
THE BANK OF NEW YORK
AS THE AGENT,
AND
SALTON, INC.
AS THE PARENT
AND
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
AS THE BORROWERS
And
EACH OF ITS OTHER SUBSIDIARIES THAT ARE SIGNATORIES HERETO
AS GUARANTORS
TABLE OF CONTENTS
PAGE
ARTICLE I LOANS......................................................................................... 2
1.1. Total Facility.............................................................................. 2
1.2. Stated Maturity Date........................................................................ 2
1.3. Term Loan................................................................................... 2
1.4. Registered Notes............................................................................ 2
ARTICLE II INTEREST AND FEES............................................................................ 2
2.1. Interest.................................................................................... 2
2.2. Intentionally Omitted....................................................................... 3
2.3. Maximum Interest Rate....................................................................... 3
ARTICLE III PAYMENTS AND PREPAYMENTS.................................................................... 4
3.1. Repayment of Term Loan...................................................................... 4
3.2. Termination of Facility..................................................................... 5
3.3. Intentionally Omitted....................................................................... 5
3.4. Payments by the Borrowers................................................................... 5
3.5. Intentionally Deleted....................................................................... 6
3.6. Apportionment, Application and Reversal of Payments......................................... 6
3.7. Indemnity for Returned Payments............................................................. 6
3.8. Agent's and Lenders' Books and Records; Monthly Statements.................................. 7
ARTICLE IV TAXES........................................................................................ 7
4.1. Taxes....................................................................................... 7
ARTICLE V BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES............................................. 8
5.1. Books and Records........................................................................... 8
5.2. Financial Information....................................................................... 9
5.3. Additional Financial Information............................................................ 12
5.4. Notices to the Lenders...................................................................... 13
5.5. Collateral Reporting........................................................................ 15
ARTICLE VI GENERAL WARRANTIES AND REPRESENTATIONS....................................................... 16
6.1. Authorization, Validity, and Enforceability of this Agreement and the Loan Documents........ 16
6.2. Validity and Priority of Security Interest.................................................. 16
6.3. Organization and Qualification.............................................................. 17
6.4. Corporate Name; Prior Transactions.......................................................... 17
6.5. Subsidiaries and Affiliates................................................................. 17
6.6. Financial Statements and Projections........................................................ 17
6.7. Capitalization.............................................................................. 18
6.8. Solvency.................................................................................... 18
6.9. Debt........................................................................................ 18
6.10. Distributions............................................................................ 18
6.11. Real Estate; Leases...................................................................... 18
6.12. Proprietary Rights....................................................................... 18
6.13. Trade Names.............................................................................. 19
6.14. Litigation............................................................................... 19
6.15. Labor Disputes........................................................................... 19
-i-
TABLE OF CONTENTS
(continued)
PAGE
6.16. Environmental Laws....................................................................... 19
6.17. No Violation of Law...................................................................... 21
6.18. No Default............................................................................... 21
6.19. ERISA Compliance......................................................................... 21
6.20. Taxes.................................................................................... 22
6.21. Regulated Entities....................................................................... 22
6.22. Use of Proceeds; Margin Regulations...................................................... 22
6.23. Copyrights, Patents, Trademarks and Licenses, etc........................................ 22
6.24. No Material Adverse Change............................................................... 22
6.25. Full Disclosure.......................................................................... 22
6.26. Material Agreements...................................................................... 23
6.27. Intentionally Omitted.................................................................... 23
6.28. Governmental Authorization............................................................... 23
6.29. Tax Shelter Regulations.................................................................. 23
ARTICLE VII AFFIRMATIVE AND NEGATIVE COVENANTS.......................................................... 23
7.1. Taxes and Other Obligations................................................................. 23
7.2. Legal Existence and Good Standing; Name Changes............................................. 24
7.3. Compliance with Law and Agreements; Maintenance of Licenses................................. 24
7.4. Maintenance of Property; Inspection of Property............................................. 24
7.5. Insurance................................................................................... 24
7.6. Insurance and Condemnation Proceeds......................................................... 25
7.7. Environmental Laws.......................................................................... 26
7.8. Compliance with ERISA....................................................................... 26
7.9. Mergers, Consolidations or Sales............................................................ 26
7.10. Distributions; Capital Change; Restricted Investments.................................... 28
7.11. Intentionally Omitted.................................................................... 28
7.12. Guaranties............................................................................... 28
7.13. Debt..................................................................................... 28
7.14. Prepayment............................................................................... 29
7.15. Transactions with Affiliates............................................................. 29
7.16. Investment Banking and Finder's Fees..................................................... 30
7.17. Business Conducted....................................................................... 30
7.18. Liens.................................................................................... 30
7.19. Sale and Leaseback Transactions.......................................................... 30
7.20. No New Subsidiaries...................................................................... 30
7.21. Fiscal Year.............................................................................. 30
7.22. Use of Proceeds.......................................................................... 30
7.23. Financial Covenants...................................................................... 30
7.24. Intentionally Omitted.................................................................... 31
7.25. Further Assurances....................................................................... 31
7.26. Intentionally Omitted.................................................................... 31
7.27. Subsidiary Distributions................................................................. 31
7.28. Modification of Covenants................................................................ 31
ARTICLE VIII CONDITIONS OF CLOSING...................................................................... 32
8.1. Required Deliveries on or before the Closing Date........................................... 32
-ii-
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE IX DEFAULT; REMEDIES............................................................................ 33
9.1. Events of Default........................................................................... 33
9.2. Remedies.................................................................................... 36
9.3. Waiver of Default or Event of Default under First Lien Credit Agreement..................... 37
ARTICLE X BINDING OBLIGATIONS........................................................................... 38
ARTICLE XI AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS................................. 38
11.1. Amendments and Waivers................................................................... 38
11.2. Assignments; Participations.............................................................. 39
ARTICLE XII THE AGENT................................................................................... 42
12.1. Appointment and Authorization............................................................ 42
12.2. Delegation of Duties..................................................................... 43
12.3. Liability of Agent....................................................................... 43
12.4. Reliance by Agent........................................................................ 44
12.5. Notice of Default........................................................................ 44
12.6. Credit Decision.......................................................................... 44
12.7. Indemnification.......................................................................... 45
12.8. Agent in Individual Capacity............................................................. 45
12.9. Successor Agent.......................................................................... 46
12.10. Withholding Tax.......................................................................... 46
12.11. Collateral Matters....................................................................... 47
12.12. Restrictions on Actions by Lenders; Sharing of Payments.................................. 49
12.13. Agency for Perfection.................................................................... 50
12.14. Payments by Agent to Lenders............................................................. 50
12.15. Intentionally Omitted.................................................................... 50
12.16. Intentionally Omitted.................................................................... 50
12.17. Concerning the Collateral and the Related Loan Documents................................. 50
12.18. Intentionally Omitted.................................................................... 50
12.19. Relation Among Lenders................................................................... 51
12.20. Additional Agents........................................................................ 51
ARTICLE XIII MISCELLANEOUS.............................................................................. 51
13.1. No Waivers; Cumulative Remedies.......................................................... 51
13.2. Severability............................................................................. 51
13.3. Governing Law; Choice of Forum; Service of Process....................................... 51
13.4. Waiver of Jury Trial..................................................................... 52
13.5. Survival of Representations and Warranties............................................... 53
13.6. Other Security and Guaranties............................................................ 53
13.7. Fees and Expenses........................................................................ 53
13.8. Notices.................................................................................. 54
13.9. Waiver of Notices........................................................................ 55
13.10. Binding Effect........................................................................... 55
13.11. Indemnity of the Agent and the Lenders by the Borrowers.................................. 55
13.12. Limitation of Liability.................................................................. 56
13.13. Final Agreement.......................................................................... 57
13.14. Counterparts............................................................................. 57
-iii-
TABLE OF CONTENTS
(continued)
PAGE
13.15. Captions................................................................................. 57
13.16. Right of Setoff.......................................................................... 57
13.17. Confidentiality.......................................................................... 58
13.18. Conflicts with Other Loan Documents...................................................... 59
13.19. The Administrative Borrower.............................................................. 59
ARTICLE XIV JOINT AND SEVERAL OBLIGATIONS............................................................... 59
14.1. All Obligations to Constitute Joint and Several Obligations.............................. 59
-iv-
ANNEXES, EXHIBITS AND SCHEDULES
ANNEX A DEFINED TERMS
EXHIBIT A FORM OF GUARANTOR JOINDER AGREEMENT
EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
EXHIBIT C FORM OF NOTE
SCHEDULE 1.1 - LENDERS' COMMITMENTS
SCHEDULE 6.3 - ORGANIZATION AND QUALIFICATIONS
SCHEDULE 6.4 - CORPORATE NAME; PRIOR TRANSACTIONS
SCHEDULE 6.5 - SUBSIDIARIES AND AFFILIATES
SCHEDULE 6.7 - CAPITALIZATION
SCHEDULE 6.9 - DEBT
SCHEDULE 6.11 - REAL ESTATE; LEASES
SCHEDULE 6.12 - PROPRIETARY RIGHTS
SCHEDULE 6.13 - TRADE NAMES
SCHEDULE 6.14 - LITIGATION
SCHEDULE 6.15 - LABOR DISPUTES
SCHEDULE 6.16(a) - ENVIRONMENTAL LAWS AND COMPLIANCE
SCHEDULE 6.16(f) - ENVIRONMENTAL DISCLOSURE
SCHEDULE 6.26 - MATERIAL AGREEMENTS
SCHEDULE 6.28 - AUTHORIZATIONS
SCHEDULE 7.9 - DISPOSITION OF TOASTMASTER FACILITIES
SCHEDULE 7.16 - FEES/COMMISSIONS
SCHEDULE 9.1(k) - JUDGMENTS
SCHEDULE E-1 - LOCATIONS OF ELIGIBLE LANDED INVENTORY
SCHEDULE E-2 - PERMITTED LIENS
SCHEDULE E-3 - RESTRUCTURING CHARGES
SCHEDULE E-4 - IMPAIRMENT LOSSES
-v-
CREDIT AGREEMENT
This Credit Agreement, dated as of August __, 2005 (this "Agreement"),
among the financial institutions from time to time parties hereto (such
financial institutions, together with their respective successors and assigns,
are referred to hereinafter each individually as a "Lender" and collectively as
the "Lenders"), THE BANK OF NEW YORK, a national banking association, with
offices at [ ], as administrative agent and collateral agent for the Lenders
(the "Agent"), SALTON, INC., a Delaware corporation, with offices at 0000 Xxxxx
Xxxxx, Xxxx Xxxxxx, Xxxxxxxx 00000 (the "Parent"), each of the Parent's
Subsidiaries identified on the signature pages hereof as Borrowers and each of
the Parent's other Subsidiaries identified on the signature pages hereof as
Guarantors.
WITNESSETH:
WHEREAS, Parent issued those 10 3/4% Senior Subordinated Notes Due 2005
(the "2005 Senior Notes"), pursuant to that certain Indenture dated as of
December 16, 1998 in favor of Sun Trust Bank (as successor to Xxxxx Fargo Bank
Minnesota, N.A.), as Trustee, as amended, restated, supplemented or otherwise
modified from time to time;
WHEREAS, Parent issued those 12 1/4% Senior Subordinated Notes Due 2008
(the "2008 Senior Notes") pursuant to that certain Indenture, dated as of April
23, 2001 in favor of Sun Trust Bank (as successor to Xxxxx Fargo Bank Minnesota,
N.A.), as Trustee, as amended, restated, supplemented or otherwise modified from
time to time;
WHEREAS, Parent has offered (the "Exchange Offer") holders of the 2005
Senior Notes and of the 2008 Senior Notes to exchange such Senior Notes for a
portion of the Term Loans issued or to be issued pursuant to this Agreement,
shares of Common Stock of the Parent and shares of Series C Preferred Stock of
the Parent;
WHEREAS, simultaneous with the execution of this Agreement, the Parent has
closed the Exchange Offer (the "Exchange Offer Closing") and accepted the 2005
Senior Notes and the 2008 Senior Notes tendered by each of the Lenders as set
forth beside each Lenders name under the applicable heading on Schedule 1.1 in
exchange for a ratable portion of the Term Loan issued pursuant to this
Agreement; and
WHEREAS, capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings ascribed thereto in Annex A which is
attached hereto and incorporated herein; the rules of construction contained
therein shall govern the interpretation of this Agreement, and all Annexes,
Exhibits and Schedules attached hereto are incorporated herein by reference;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Lenders, the Agent, the Borrowers,
and the Guarantors hereby agree as follows.
ARTICLE I
LOANS
1.1. Total Facility. In connection with the Exchange Offer Closing, each
Lender in exchange for their 2005 Senior Notes and 2008 Senior Notes agree to
accept the Term Loans in the amount as set forth on Schedule 1.1 opposite such
Lender's name, constituting a total credit facility of up to $110 million (the
"Total Facility"). The Total Facility shall be composed of the Term Loans to the
Borrowers. Notwithstanding anything to the contrary contained in this Agreement,
the aggregate principal amount of Term Loans under this Agreement shall not
exceed $110 million.
1.2. Stated Maturity Date. Each of the Term Loans will mature on the Stated
Maturity Date.
1.3. Term Loan. Subject to the terms and conditions hereof and in reliance
upon the representations and warranties set forth herein, at the Closing Date,
each Lender agrees (severally, not jointly or jointly and severally) to make
term loans (collectively, the "Term Loans") to Borrowers in an amount as set
forth on Schedule 1.1 opposite such Lender's name, which Term Loan shall be
funded pursuant to the tender and exchange of the Senior Notes. In the event
that the aggregate principal amount of the Term Loans hereunder upon the
Exchange Offer Closing is less than $110 million, then the Borrowers may add
additional Lender parties hereto through the issuance of additional Term Loans
so long as the aggregate principal amount of Term Loans under this Agreement
does not exceed $110 million.
1.4. Registered Notes. Administrative Borrower agrees to record each Term
Loan on the Register referred to in Section 11.2(g). Each Term Loan recorded on
the Register may not be evidenced by promissory notes other than Registered
Notes (as defined below). Upon the registration of each Term Loan,
Administrative Borrower agrees to execute and deliver to such Lender a
promissory note, in conformity with the terms of this Agreement, in registered
form to evidence such Registered Loan, substantially in the form attached hereto
as Exhibit C, and registered as provided in Section 11.2(g) (a "Registered
Note"), payable to the order of such Lender and otherwise duly completed. Once
recorded on the Register, each Term Loan may not be removed from the Register so
long as it or they remain outstanding, and a Registered Note may not be
exchanged for a promissory note that is not a Registered Note.
ARTICLE II
INTEREST AND FEES
2.1. Interest.
(a) Interest Rates. All outstanding Obligations shall bear interest on
the unpaid principal amount thereof (including, to the extent permitted by law,
on interest thereon not paid when due) from the date made until paid in full in
cash at a rate
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determined by reference to the LIBOR Rate plus the Applicable Margin, but not to
exceed the Maximum Rate. All interest charges shall be computed on the basis of
a year of three hundred sixty (360) days and actual days elapsed (which results
in more interest being paid than if computed on the basis of a three hundred and
sixty-five (365) day year). The Borrowers shall pay to the Agent, for the
ratable benefit of Lenders, interest semiannually on all Term Loans in arrears
on each January 15 and July 15, commencing on January 15, 2006, through the
Termination Date.
(b) Default Rate. If any Default or Event of Default occurs and is
continuing and the Agent or the Required Lenders in their discretion so elect,
then, while any such Default or Event of Default is continuing, all of the
Obligations shall bear interest at the Default Rate applicable thereto;
provided, however, that the Obligations shall bear interest at the Default Rate
applicable thereto without notice or action by the Agent or the Required Lenders
upon a Default or Event of Default arising under Section 9.1(e) or Section
9.1(f).
2.2. Intentionally Omitted.
2.3. Maximum Interest Rate. In no event shall any interest rate provided
for hereunder exceed the maximum rate legally chargeable by any Lender under
applicable law for such Lender with respect to loans of the type provided for
hereunder (the "Maximum Rate"). If, in any month, any interest rate, absent such
limitation, would have exceeded the Maximum Rate, then the interest rate for
that month shall be the Maximum Rate, and, if in future months, that interest
rate would otherwise be less than the Maximum Rate, then that interest rate
shall remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event that, upon payment in
full of the Obligations, the total amount of interest paid or accrued under the
terms of this Agreement is less than the total amount of interest which would,
but for this Section 2.3, have been paid or accrued if the interest rate
otherwise set forth in this Agreement had at all times been in effect, then the
Borrowers shall, to the extent permitted by applicable law, pay the Agent, for
the account of the Lenders, an amount equal to the excess of (a) the lesser of
(i) the amount of interest which would have been charged if the Maximum Rate
had, at all times, been in effect or (ii) the amount of interest which would
have accrued had the interest rate otherwise set forth in this Agreement, at all
times, been in effect over (b) the amount of interest actually paid or accrued
under this Agreement. If a court of competent jurisdiction determines that the
Agent and/or any Lender has received interest and other charges hereunder in
excess of the Maximum Rate, such excess shall be deemed received on account of,
and shall automatically be applied to reduce, the Obligations other than
interest, in the inverse order of maturity, and if there are no Obligations
outstanding, the Agent and/or such Lender shall refund to the Borrowers such
excess.
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ARTICLE III
PAYMENTS AND PREPAYMENTS
3.1. Repayment of Term Loan.
(a) Intentionally Omitted.
(b) Term Loans. The Term Loans shall be due and payable in full,
together with all accrued and unpaid interest thereon, on the Stated Maturity
Date. The Term Loans may not be prepaid, except to the extent set forth in
clauses (c) and (d) below.
(c) Optional Prepayments. Solely to the extent permitted by the First
Lien Credit Agreement, Borrowers may prepay or optionally redeem all or any part
of the Term Loans on a ratable basis at any time prior to the Stated Maturity
Date at the respective redemption prices set forth below, plus accrued interest
thereon to the redemption date:
Redemption Dates Redemption
Prices
On or after August ___, 2005 but prior to August ___, 2006 102%
On or after August ___, 2006 but prior to August ___, 2007 101%
On or after August ___, 2007 100%
(d) Purchase of 2008 Senior Notes. Solely to the extent permitted by
the First Lien Credit Agreement, after the Exchange Offer Closing, Parent may
purchase 2008 Senior Notes not exchanged in the Exchange Offer through open
market purchases or otherwise, provided that (i) Borrowers have a minimum level
of Availability as defined and set forth under the First Lien Credit Agreement
of not less than $4,000,000 after giving effect to any such purchases and (ii)
the amount spent by the Borrowers to purchase the 2008 Senior Notes does not
exceed $11,000,000. Notwithstanding the foregoing, the Borrowers may spend more
than $11,000,000 in the aggregate in accordance with the following schedule to
purchase 2008 Senior Notes if the condition in Section 3.1(d)(i) above is met
and provided that concurrently or prior to such purchases, and solely to the
extent permitted by the First Lien Credit Agreement, Borrowers shall have
optionally prepaid or redeemed on a ratable basis a cumulative portion of the
Term Loans as follows:
4
Permitted Additional
Amounts that Borrowers May
Cumulative Percentage of Spend To Purchase 2008
Initial Term Loans Redeemed Senior Notes
9% $2 million
18% $5 million
27% $9 million
36% $14 million
45% $20 million
54% $27 million
63% $35 million
72% $44 million
81% $54 million
90% $66 million
100% $78 million
In the event that as of the Closing Date the principal amount of the Term
Loans is less than $110 million, then the Cumulative Percentages and permitted
paydowns set forth above shall each be proportionately reduced to the percentage
or paydown amount determined by multiplying such percentages and paydowns by a
fraction (expressed as a percentage) the numerator of which is the principal
amount of the Term Loans as of the Closing Date and the denominator of which is
$110 million.
(e) Mandatory Prepayment. Upon a Change of Control, the Borrowers
shall be required to prepay the Term Loans in full. The principal amount to be
paid on such required prepayment shall be based on the Redemption Price schedule
set forth in Section 3.1(c) applicable to Optional Prepayments.
3.2. Termination of Facility. The Borrowers may terminate this Agreement
upon at least ten (10) Business Days' notice to the Agent and the Lenders, upon
(a) the payment in full of the outstanding Term Loans, together with accrued
interest thereon, and (b) the payment in full in cash of all reimbursable
expenses and other Obligations.
3.3. Intentionally Omitted.
3.4. Payments by the Borrowers.
(a) All payments to be made by the Borrowers shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Borrowers shall be made to the Agent for the account
of the Lenders, at the account designated by the Agent and shall be made in
Dollars and in immediately available funds, no later than 2:00 p.m. (New York,
New York time) on the date specified herein. Any payment received by the Agent
after such time shall be deemed (for purposes of calculating interest only) to
have been received on the following Business Day and any applicable interest
shall continue to accrue.
5
(b) Subject to the provisions set forth in the definition of "Interest
Period", whenever any payment is due on a day other than a Business Day, such
payment shall be due on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.
3.5. Intentionally Deleted.
3.6. Apportionment, Application and Reversal of Payments. Principal and
interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Loans held by each Lender and to which such
payments relate) and payments of the fees shall, as applicable, be apportioned
ratably among the Lenders, except for fees payable solely to the Agent and
except as provided in Section 11.1(b). All payments shall be remitted to the
Agent and all such payments not relating to principal or interest of specific
Loans, or not constituting payment of specific fees, and all proceeds of
Accounts or other Collateral received by the Agent, shall be applied, ratably,
subject to the provisions of this Agreement and the Intercreditor Agreement,
first, to pay any fees, indemnities or expense reimbursements then due to the
Agent from the Borrowers; second, to pay any fees or expense reimbursements then
due to the Lenders from the Borrowers; third, to pay interest then due on the
Term Loans; fourth, to pay or prepay principal of the Term Loans; fifth, to the
payment of any other Obligation due to the Agent or any Lender by the Borrowers;
and sixth, subject to the Intercreditor Agreement, upon request by the
Borrowers, to the Borrowers. The Agent and the Lenders shall have the continuing
and exclusive right to apply and reverse and reapply any and all such proceeds
and payments to any portion of the Obligations in accordance with this
Agreement.
3.7. Indemnity for Returned Payments. If after receipt of any payment which
is applied to the payment of all or any part of the Obligations, the Agent or
any Lender is for any reason compelled to surrender such payment or proceeds to
any Person because such payment or application of proceeds is invalidated,
declared fraudulent, set aside, determined to be void or voidable as a
preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Agent or such Lender
and the Borrowers shall be liable to pay to the Agent and the Lenders, and each
Borrower hereby does indemnify the Agent and the Lenders and hold the Agent and
the Lenders harmless for, the amount of such payment or proceeds surrendered.
The provisions of this Section 3.7 shall be and remain effective notwithstanding
any contrary action which may have been taken by the Agent or any Lender in
reliance upon such payment or application of proceeds, and any such contrary
action so taken shall be without prejudice to the Agent's and the Lenders'
rights under this Agreement and shall be deemed to have been conditioned upon
such payment or application of proceeds having become final and irrevocable. The
provisions of this Section 3.7 shall survive the termination of this Agreement.
6
3.8. Agent's and Lenders' Books and Records; Monthly Statements. The Agent
shall record the principal amount of the Loans owing to each Lender from time to
time on its books. In addition, each Lender may note the date and amount of each
payment or prepayment of principal of such Lender's Loans in its books and
records. Failure by the Agent or any Lender to make such notation shall not
affect the obligations of the Borrowers with respect to the Loans. The Borrowers
agree that the Agent's and each Lender's books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom, and
shall constitute rebuttably presumptive proof thereof, irrespective of whether
any Obligation is also evidenced by a promissory note or other instrument. The
Agent will provide to the Administrative Borrower a monthly statement of Loans,
payments, and other transactions pursuant to this Agreement. Such statement
shall be deemed correct, accurate, and binding on the Borrowers and an account
stated (except for reversals and reapplications of payments made as provided in
Section 3.6 and corrections of errors discovered by or acknowledged and agreed
to by the Agent), unless the Administrative Borrower, on behalf of the
Borrowers, notifies the Agent in writing to the contrary within thirty (30) days
after such statement is rendered in accordance with Section 13.8. In the event a
timely written notice of objections is given by the Administrative Borrower,
only the items to which exception is expressly made will be considered to be
disputed by the Borrowers.
ARTICLE IV
TAXES
4.1. Taxes.
(a) Any and all payments by the Borrowers to each Lender or the Agent
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for, any Taxes excluding net income
taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the
Agent or any Lender as a result of a present or former connection between the
Agent or such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Agent's or such Lender's
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document) ("Excluded
Taxes"). In addition, the Borrowers shall pay all Other Taxes.
(b) Each Borrower agrees to indemnify and hold harmless each Lender
and the Agent for the full amount of Taxes or Other Taxes (including any Taxes
or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by any Lender or the Agent and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be
7
made within thirty (30) days after the date such Lender or the Agent makes
written demand therefor.
(c) If the Borrowers shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender or the Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions or withholdings been made;
(ii) the Borrowers shall make such deductions and withholdings;
(iii) the Borrowers shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance with
applicable law or, if being contested in good faith, set up reserves determined
by the Agent in its commercially reasonable discretion to be adequate for such
Taxes or Other Taxes; and
(iv) the Borrowers shall also pay to each Lender or the Agent for
the account of such Lender, at the time interest is paid, all additional amounts
which the respective Lender specifies as necessary to preserve the after-tax
yield such Lender would have received if such Taxes or Other Taxes had not been
imposed.
(d) At the Agent's request, within thirty (30) days after the date of
any payment by any Borrower of Taxes or Other Taxes, such Borrower shall furnish
the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Agent.
(e) If the Borrowers are required to pay additional amounts to any
Lender or the Agent pursuant to subsection (c) of this Section, then such Lender
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its lending office so as to eliminate any such
additional payment by the Borrowers which may thereafter accrue, if such change
in the judgment of such Lender is not otherwise disadvantageous to such Lender.
ARTICLE V
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
5.1. Books and Records. The Borrower Parties shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions and such books, records and accounts
on a consolidated basis shall be prepared in accordance with GAAP applied
consistently with
8
the audited Financial Statements required to be delivered pursuant to Section
5.2(a). The Parent on a consolidated basis shall, by means of appropriate
entries, reflect in such accounts and in all Financial Statements proper
liabilities and reserves for all taxes and proper provision for depreciation and
amortization of property and bad debts, all in accordance with GAAP. Each
Borrower Party shall maintain at all times books and records pertaining to the
Collateral in such detail, form and scope as the Agent or any Lender shall
reasonably require, including, but not limited to, records of (a) all payments
received and all credits and extensions granted with respect to the Accounts;
(b) the return, rejection, repossession, stoppage in transit, loss, damage, or
destruction of any Inventory; and (c) all other dealings affecting the
Collateral.
5.2. Financial Information. The Borrower Parties shall promptly furnish to
each Lender the financial information set forth below. Such documents and
financial information may be delivered by electronic posting on a digital
workspace provided by IntraLinks, Inc. or another digital workspace provider
reasonably acceptable to the Agent and to which the Lenders have access;
provided, however, if the Borrower Parties determine such digital posting is or
has become impractical, then the Borrower Parties may deliver such information
via any means described in Section 13.8, including via electronic mail at the
e-mail address set forth therein. The Agent shall have no duty to maintain
copies of any such documents or notices. The Administrative Borrower will
furnish to each Lender, in such detail as the Agent shall reasonably request,
the following:
(a) Annual Financial Statements. As soon as available, but in any
event not later than ninety (90) days after the close of each Fiscal Year,
consolidated audited balance sheets as of the date thereof and for the Fiscal
Year then ended, and consolidated audited statements of earnings, cash flows and
stockholders' equity for the Parent for such Fiscal Year, including a footnote
containing supplemental consolidating financial information for (a) the Borrower
Parties on a consolidated basis and (b) for the Subsidiaries of Parent other
than domestic Subsidiaries (collectively, the "Foreign Subsidiaries") on a
consolidated basis. Such supplemental consolidating financial information will
include balance sheets, statements of earnings and statements of cash flows.
(b) General. The audited statements set forth above in Section 5.2(a)
shall be examined in accordance with generally accepted auditing standards by
and, in the case of such statements performed on a consolidated basis,
accompanied by a report thereon unqualified with respect to going concerns by
independent certified public accountants selected by the audit committee of the
board of directors of the Parent and reasonably satisfactory to the Agent. The
Borrower Parties hereby authorize the Agent (as directed by the Lenders) to
communicate directly with their certified public accountants and, by this
provision, authorizes those accountants to disclose to the Agent any and all
financial statements and other supporting financial documents and schedules
relating to the Borrower Parties and to discuss directly with the Agent the
finances and
9
affairs of the Borrower Parties; provided, that together with each of the
audited Financial Statements delivered pursuant to Section 5.2(a), the
Administrative Borrower shall furnish a certificate of the independent certified
public accountants that examined such statements to the effect that they have
reviewed and are familiar with this Agreement and that, in examining such
Financial Statements, they did not become aware of any fact or condition which
then constituted a Default or Event of Default with respect to the financial
covenants set forth in Section 7.23 hereof, except for those Defaults or Event
of Defaults, if any, described in reasonable detail in such certificate.
(c) Quarterly Financial Statements. As soon as available, but in any
event not later than forty-five (45) days after the close of first, second and
third Fiscal Quarters of each Fiscal Year, consolidated unaudited balance sheets
as of the date thereof, and consolidated unaudited statements of earnings, cash
flows and stockholders' equity for the Parent for such Fiscal Quarter, including
a footnote containing supplemental consolidating financial information for (a)
the Borrower Parties on a consolidated basis and (b) for Foreign Subsidiaries on
a consolidated basis. Such supplemental consolidating financial information will
include balance sheets, statements of earnings and statements of cash flows. The
consolidated unaudited statements referred to in the first sentence of this
Section 5.2(c), shall fully present in all material respects the consolidated
financial position and consolidated results of operations of the Parent as at
the date thereof and for the Fiscal Quarter then ended, and, in each case, in
comparable form, figures for the corresponding period in the prior Fiscal Year
and prepared in accordance with GAAP applied consistently with the audited
Financial Statements required to be delivered pursuant to Section 5.2(a) (except
as disclosed therein). The Parent shall certify by a certificate signed by its
senior financial officer thereof that all such consolidated unaudited statements
referred to in the first sentence of this Section 5.2(c) have been prepared in
accordance with GAAP and present fairly in all material respects the Parent's
consolidated financial position as at the dates thereof and its consolidated
results of operations for the periods then ended, subject to recurring year-end
adjustments and required quarterly footnotes.
(d) With each of the annual audited Financial Statements delivered
pursuant to Section 5.2, a certificate of the senior financial officer of the
Parent setting forth in reasonable detail the calculations required to establish
that the Borrower Parties were in compliance with the covenants set forth in
Section 7.23 during the period covered in such Financial Statements and as at
the end thereof. Within forty-five (45) days after the end of each Fiscal
Quarter (after making all quarter end adjustments), a certificate of the senior
financial officer of the Parent setting forth in reasonable detail (i) the
amount of all Capital Expenditures incurred by the Borrower Parties for the
Fiscal Year to date and (ii) the calculations required to establish that the
Borrower Parties were in compliance with the covenants set forth in Section 7.23
during the period covered in such Financial Statements and as at the end
thereof. Within forty-five (45) days after the end of each Fiscal Quarter, a
certificate of the chief financial officer of the Parent stating that, except as
explained in reasonable detail in such certificate, to the knowledge of such
10
senior financial officer, (A) all of the representations and warranties of the
Borrower Parties contained in this Agreement and the other Loan Documents are
correct and complete in all material respects as at the date of such certificate
as if made at such time, except for those that speak as of a particular date,
(B) the Borrower Parties are, at the date of such certificate, in compliance
with all of their respective covenants and agreements in this Agreement and the
other Loan Documents, (C) no Default or Event of Default then exists or existed
during the period covered by the Financial Statements for such month, and (D)
the Management's Discussion and Analysis contained in the Form 10-Q for such
Fiscal Quarter filed with the SEC complies in all material respects with the
requirements of the SEC for that disclosure and does not contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not misleading in any material respect. If such certificate discloses
that a representation or warranty is not correct or complete in all material
respects, or that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set forth what action
the Borrower Parties have taken or propose to take with respect thereto.
(e) Promptly, and in any event within five (5) Business Days after
filing with the PBGC and the IRS, a copy of each annual report or other filing
filed with respect to each Plan of any Borrower Party.
(f) Promptly, and in any event within five (5) Business Days after the
filing thereof, copies of all periodic reports, if any, or other documents filed
by the Parent or any of its Subsidiaries with the SEC under the Exchange Act,
and all reports, notices, or statements sent or received by the Parent or any of
its Subsidiaries to or from the holders of any equity interests of the Parent
(other than routine non-material correspondence sent by shareholders of the
Parent to the Parent and filings with the SEC by any shareholder of the Parent
pursuant to Section 13(d) or 16(a) of the Exchange Act) or any such Subsidiary
or of any Debt of the Parent or any of its Subsidiaries registered under the
Securities Act of 1933, as in effect from time to time, or to or from the
trustee under any indenture under which the same is issued.
(g) As soon as available, but in any event not later than fifteen (15)
days after any Borrower Party's receipt thereof, a copy of all management
reports and management letters prepared for such Borrower Party by any
independent certified public accountants of the Borrower Parties; provided, that
the Borrower Parties shall have no liability hereunder for any failure to
deliver such management reports and management letters to the extent such
failure results solely from the refusal of such accountants to authorize the
Borrower Parties to comply with such obligation.
(h) Promptly, and in any event within two (2) Business Days after
filing with the SEC, copies of any and all proxy statements, financial
statements, and reports which the Parent makes available to its shareholders.
11
(i) Such additional information as the Agent and/or any Lender may
from time to time reasonably request regarding the financial and business
affairs of the Parent or any Subsidiary (including, without limitation, a copy
of each tax return filed by any Borrower Party), subject to confidentiality
obligations in favor of any Borrower Party, including but not limited to any new
confidentiality agreement that may be reached with respect to such information.
(j) As soon as available, but in any event not later than forty-five
(45) days after the close of each Fiscal Quarter, a report, in form and
substance satisfactory to the Agent, setting forth the reasonably estimated
amount of cash in the Foreign Subsidiaries that is available to be repatriated
to a Borrower Party without the incurrence of tax liability or other penalties
by such Borrower Party as of the close of such Fiscal Quarter, but only to the
extent not otherwise prohibited by any applicable financing arrangement.
5.3. Additional Financial Information. In addition to the financial
information provided pursuant to Section 5.2 above, the Administrative Borrower
will furnish to the Agent the additional information referenced in this Section,
which may be delivered in the same manner as the financial information delivered
pursuant to Section 5.2, but only to the Agent and not to any of the Lenders,
except as described herein. The Agent will not provide copies of the information
delivered pursuant to this Section 5.3 to any Lender unless and until (a) such
Lender submits a written request for such information to the Agent, and (b) such
Lender executes and delivers a confidentiality agreement with the Company and
the Agent, in form and substance acceptable to the Company. The additional
information includes:
(a) Consolidated Monthly Financial Statements. As soon as available,
but in any event not later than thirty (30) days after the end of each month
occurring during each Fiscal Year (other than the first, third, sixth, ninth and
twelfth such month and as to such months, as soon as available) unaudited
consolidated balance sheets of the Parent as at the end of such month, and
unaudited consolidated income statements and statements of cash flows for the
Parent for such month and for the period from the beginning of the Fiscal Year
to the end of such month, fairly presenting in all material respects the
consolidated financial position and consolidated results of operations of the
Parent as at the date thereof and for such periods, and prepared in accordance
with GAAP applied consistently with the audited Financial Statements required to
be delivered pursuant to Section 5.2(a) (except as disclosed therein). The
Parent shall certify by a certificate signed by its senior financial officer
thereof that all such statements have been prepared in accordance with GAAP and
present fairly in all material respects the Parent's consolidated financial
position as at the dates thereof and its consolidated results of operations for
the periods then ended, subject to normal year-end adjustments and the absence
of footnotes; and
12
(b) Financial Projections. As soon as available, but in any event not
later than forty-five (45) days after the end of each Fiscal Year, annual
forecasts (to include forecasted consolidated and consolidating balance sheets,
income statements and cash flow statements) for the Parent as at the end of and
for each fiscal month of such Fiscal Year.
5.4. Notices to the Lenders. The Administrative Borrower shall notify the
Agent and the Lenders in writing of the following matters at the following
times:
(a) Immediately after becoming aware of any Default or Event of
Default;
(b) Immediately after becoming aware of the assertion by the holder of
any capital stock of any Borrower Party or the holder of any Debt of the Parent
or any Subsidiary in an amount outstanding in excess of $1,000,000 or with
respect to any licensing agreement that a default exists with respect thereto or
that the Parent or such Subsidiary is not in compliance with the terms thereof,
or the commencement by such holder of any enforcement action because of such
asserted default or non-compliance;
(c) Immediately after becoming aware of any event or circumstance
which would have a Material Adverse Effect;
(d) Immediately after any settlement offer is made by the Parent or
any Subsidiary in an amount that would, if consummated, result in an Event of
Default hereunder;
(e) Immediately after becoming aware of any pending action, suit, or
proceeding, by any Person, or any pending or threatened investigation by a
Governmental Authority, which could reasonably be expected to have a Material
Adverse Effect or which involves the same matters that are the subject of class
action litigation or matters related thereto;
(f) Immediately after becoming aware of any pending strike, work
stoppage, unfair labor practice claim, or other labor dispute affecting the
Parent or any of its Subsidiaries in a manner which could reasonably be expected
to have a Material Adverse Effect;
(g) Immediately after becoming aware of any violation of any law,
statute, regulation, or ordinance of a Governmental Authority affecting the
Parent or any Subsidiary which could reasonably be expected to have a Material
Adverse Effect;
(h) Immediately after receipt of any notice of any violation by the
Parent or any of its Subsidiaries of any Environmental Law which could
reasonably be expected to have a Material Adverse Effect or that any
Governmental Authority has asserted in writing that the Parent or any Subsidiary
is not in compliance with any
13
Environmental Law or is investigating the Parent's or such Subsidiary's
compliance therewith;
(i) Immediately after receipt of any written notice that the Parent or
any of its Subsidiaries is or may be liable to any Person as a result of the
Release or threatened Release of any Contaminant or that the Parent or any
Subsidiary is subject to investigation by any Governmental Authority evaluating
whether any remedial action is needed to respond to the Release or threatened
Release of any Contaminant which, in either case, is reasonably likely to give
rise to liability that is not covered by insurance in excess of $1,000,000;
(j) Immediately after receipt of any written notice of the imposition
of any Environmental Lien against any property to the extent the liability with
respect thereto that is not covered by insurance and is in excess of $1,000,000;
(k) Any change in the Parent's or any Subsidiary's name as it appears
in the state of its incorporation or other organization, state of incorporation
or organization, type of entity, organizational identification number, or, with
respect to any Borrower Party, locations of Collateral, or form of organization,
trade names under which such Person will sell Inventory or create Accounts, or
to which instruments in payment of Accounts may be made payable, in each case at
least thirty (30) days prior thereto;
(l) Within ten (10) Business Days after any Borrower Party or any
ERISA Affiliate knows, that an ERISA Event or a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) has occurred, and, when
known, any action taken or threatened by the IRS, the DOL or the PBGC with
respect thereto;
(m) Upon request, or, in the event that such filing reflects a
significant change with respect to the matters covered thereby, within three (3)
Business Days after the filing thereof with the PBGC, the DOL or the IRS, as
applicable, copies of the following: (i) each annual report (form 5500 series),
including Schedule B thereto, filed with the PBGC, the DOL or the IRS with
respect to each Plan, (ii) a copy of each funding waiver request filed with the
PBGC, the DOL or the IRS with respect to any Plan and all communications
received by any Borrower Party or any ERISA Affiliate from the PBGC, the DOL or
the IRS with respect to such request, and (iii) a copy of each other filing or
notice filed with the PBGC, the DOL or the IRS, with respect to each Plan by
either a Borrower Party or any ERISA Affiliate;
(n) Within three (3) Business Days after receipt thereof by any
Borrower Party or any ERISA Affiliate, copies of the following: (i) any notices
of the PBGC's intention to terminate a Plan or to have a trustee appointed to
administer such Plan; (ii) any favorable or unfavorable determination letter
from the IRS regarding the qualification of a Plan under Section 401(a) of the
Code; or (iii) any notice from a Multi-employer Plan regarding the imposition of
withdrawal liability;
14
(o) Within three (3) Business Days after the occurrence thereof: (i)
any changes in the benefits of any existing Plan which increase any Borrower
Party's annual costs with respect thereto by an amount in excess of $1,000,000,
or the establishment of any new Plan or the commencement of contributions to any
Plan to which any Borrower Party or any ERISA Affiliate was not previously
contributing; or (ii) any failure by any Borrower Party or any ERISA Affiliate
to make a required installment or any other required payment under Section 412
of the Code on or before the due date for such installment or payment; or
(p) Within three (3) Business Days after any Borrower Party or any
ERISA Affiliate knows or has reason to know that any of the following events has
or will occur: (i) a Multi-employer Plan has been or will be terminated; (ii)
the administrator or plan sponsor of a Multi-employer Plan intends to terminate
a Multi-employer Plan; or (iii) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.
(q) Within forty-five (45) days of the end of each Fiscal Quarter,
updated or supplemented as of the last day of such Fiscal Quarter, Schedule 6.7,
Schedule 6.9, Schedule 6.11, Schedule 6.12, Schedule 6.13, Schedule 6.14,
Schedule 6.15, Schedule 6.16(a), Schedule 6.16(f), or Schedule 6.26, or any of
the foregoing in each case as may be required to render correct the
representations and warranties contained in the applicable sections to which
such schedules relate as of the last day of such Fiscal Quarter without giving
effect to any references therein to the "Closing Date" in each case,
appropriately marked to show the changes made therein; provided that no such
supplement to any such Schedule or representation shall be deemed a waiver of
any Default or Event of Default resulting from the matters disclosed therein,
except as consented to by the Required Lenders in writing.
(r) Promptly after any Borrower Party has notified the Agent of any
intention by such Borrower Party to treat the Loans and related transactions as
being a "reportable transaction" (within the meaning of Treasury Regulation
Section 1.6011-4), a duly completed copy of IRS Form 8886 or any successor form.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the Parent,
any Subsidiary or any ERISA Affiliate, as applicable, has taken or proposes to
take with respect thereto.
5.5. Collateral Reporting. The Parent shall provide the Agent with the
following documents at the following times in form satisfactory to the Agent:
(i) upon reasonable request, a statement of the balance of each intercompany
account (including the Intercompany Account); (ii) such other reports as to the
Collateral of each Borrower Party as the Agent shall reasonably request from
time to time; and (iii) with the delivery of each of the foregoing, upon the
request of the Agent, a certificate of the Parent executed by an officer thereof
certifying as to the accuracy and completeness of the foregoing. If any of the
Borrower Parties' records or reports of the Collateral are
15
prepared by an accounting service or other agent, each Borrower Party hereby
authorizes such service or agent to deliver such records, reports, and related
documents to the Agent, for distribution to the Lenders.
ARTICLE VI
GENERAL WARRANTIES AND REPRESENTATIONS
In order to induce the Agent and the Lenders to enter into this Agreement,
each Borrower Party makes the following representations and warranties to the
Agent and the Lenders which shall be true, correct, and complete, in all
material respects, as of the date hereof, and shall be true, correct, and
complete, in all material respects, as of the Closing Date and such
representations and warranties shall survive the execution and delivery of this
Agreement:
6.1. Authorization, Validity, and Enforceability of this Agreement and the
Loan Documents. Each Borrower Party has the power and authority to execute,
deliver and perform this Agreement and the other Loan Documents to which it is a
party and to grant to the Agent Liens upon and security interests in the
Collateral with respect to which it has rights, title or ownership and each
Borrower has the authority to incur the Obligations. Each Borrower Party has
taken all necessary action (including obtaining approval of its stockholders if
necessary) to authorize its execution, delivery, and performance of this
Agreement and the other Loan Documents to which it is a party. This Agreement
and the other Loan Documents to which it is a party have been duly executed and
delivered by each Borrower Party, and constitute the legal, valid and binding
obligations of such Borrower Party, enforceable against it in accordance with
their respective terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law). Each
Borrower Party's execution, delivery, and performance of this Agreement and the
other Loan Documents to which it is a party do not and will not conflict with,
or constitute a violation or breach of, or result in the imposition of any Lien
(other than the Liens created by this Agreement and the other Loan Documents)
upon the property of the Parent or any of its Subsidiaries, by reason of the
terms of (a) any contract, mortgage, lease, agreement, indenture, or instrument
to which the Parent or such Subsidiary is a party or which is binding upon it,
(b) any Requirement of Law applicable to the Parent or any of its Subsidiaries,
or (c) the certificate or articles of incorporation or by-laws or the limited
liability company operating agreement or limited partnership agreement of such
Borrower Party.
6.2. Validity and Priority of Security Interest. The provisions of this
Agreement and the other Loan Documents create legal and valid Liens on all the
Collateral in favor of the Agent, for the ratable benefit of the Agent and the
Lenders, and such Liens constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral, except for
those Liens identified in clauses (c), (d),
16
(e), (f), (h), (i) and (j) of the definition of Permitted Liens securing all the
Obligations, and enforceable against the Borrower Parties and all third parties.
6.3. Organization and Qualification. Each Borrower Party (a) is duly
organized or incorporated and validly existing in good standing under the laws
of the state of its organization or incorporation, (b) is qualified to do
business and is in good standing in the jurisdictions set forth on Schedule 6.3,
which are the only jurisdictions in which qualification is necessary in order
for it to own or lease its property and conduct its business, except where the
failure to so qualify would have a Material Adverse Effect and (c) has all
requisite power and authority to conduct its business and to own its property.
6.4. Corporate Name; Prior Transactions. Except as set forth on Schedule
6.4, to the Parent's Knowledge, none of the Borrower Parties has, during the
past five (5) years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
outside of the ordinary course of business.
6.5. Subsidiaries and Affiliates. Schedule 6.5 is a correct and complete
list of the name and relationship to the Parent of each and all of the
Subsidiaries and other Affiliates. Each Subsidiary is (a) duly incorporated or
organized and validly existing in good standing under the laws of its state of
incorporation or organization set forth on Schedule 6.5, and (b) qualified to do
business and in good standing in each jurisdiction, in which the failure to so
qualify or be in good standing could reasonably be expected to have a Material
Adverse Effect and (c) has all requisite power and authority to conduct its
business and own its property. The aggregate value of the assets or net worth of
Toastmaster V.I., Inc., a Virgin Islands corporation, does not exceed
$10,000.00.
6.6. Financial Statements and Projections.
(a) The Administrative Borrower has delivered to the Agent and the
Lenders the audited consolidated balance sheet and related consolidated
statements of income, retained earnings, cash flows, and changes in stockholders
equity for the Parent and its Subsidiaries as of July 3, 2004, and for the
Fiscal Year then ended, accompanied by the report thereon of the Parent's
independent certified public accountants, Deloitte & Touche. The Administrative
Borrower has also delivered to the Agent and the Lenders the unaudited
consolidated balance sheet and related unaudited consolidated statements of
income and cash flows for the Parent and its Subsidiaries as of April 2, 2005.
All such financial statements have been prepared in accordance with GAAP and
present accurately and fairly in all material respects the financial position of
the Parent and its consolidated Subsidiaries as at the dates thereof and their
results of operations for the periods then ended.
(b) The Latest Projections when submitted to the Agent as required
herein represent the Borrower Parties' good faith estimate of the future
consolidated financial performance of the Parent and its Subsidiaries, as
applicable, for the periods set
17
forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Borrower Parties believe are fair and
reasonable in light of current and reasonably foreseeable business conditions at
the time submitted to the Agent.
(c) The Fiscal Year of the Parent ends each year on the Saturday
closest to June 30.
6.7. Capitalization. Schedule 6.7 sets forth, as of the Closing Date, a
complete and accurate description of the authorized capital stock of each
Borrower Party and each of its directly-owned Subsidiaries, by class, and a
description of the number of shares of each class that are issued and
outstanding and the par value thereof. All such shares of capital stock are
validly issued, fully-paid and non-assessable.
6.8. Solvency. The Parent and the Subsidiaries are Solvent on a
consolidated basis prior to and after giving effect to the Borrowings to be made
on the Closing Date.
6.9. Debt. After giving effect to the making of the Term Loan to be made on
the Closing Date, the Borrower Parties have no Debt, except (a) Debt permitted
under Section 7.13, and (b) Debt as of the Closing Date described on Schedule
6.9.
6.10. Distributions. Except as permitted by Section 7.10, since June 28,
2003, no Distribution has been declared, paid, or made upon or in respect of any
capital stock or other securities of the Parent or any Subsidiary.
6.11. Real Estate; Leases. Schedule 6.11 sets forth, as of the Closing
Date, a correct and complete list of all Real Estate owned by any Borrower
Party, all leases and subleases of real property held by any Borrower Party as
lessee or sublessee, including all locations where any Borrower Party conduct
any manufacturing operations or distribution business, and all leases and
subleases of real property held by any of any Borrower Party as lessor, or
sublessor in excess of $200,000. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect, no
default by any of any Borrower Party under any such lease or sublease exists
and, to the Parent's Knowledge, no default by any other party under any such
lease or sublease exists. Each Borrower Party has good and marketable title in
fee simple to the Real Estate identified on Schedule 6.11 as owned by the
Borrower Party, or valid leasehold interests in all Real Estate designated
therein as "leased" by any of any Borrower Party and each Borrower Party has
good, indefeasible, and merchantable title to all of its other property
reflected on the Financial Statements delivered to the Agent and the Lenders
referenced in Section 6.6 above, except as disposed of in the ordinary course of
business since the date thereof, free of all Liens except Permitted Liens.
6.12. Proprietary Rights. Schedule 6.12 sets forth a correct and complete
list as of the Closing Date of all of any Borrower Party's Proprietary Rights;
provided that with respect to Proprietary Rights such Schedule sets forth a
correct and complete list of all of
18
any Borrower Party's trademarks then in use by such Borrower Party. None of such
Proprietary Rights is subject to any licensing agreement or similar arrangement
except as set forth on Schedule 6.12. To the Parent's Knowledge (including, at
the time of any launch of any new product, after review of a patent search with
respect to the Proprietary Rights related to such product or an opinion of
counsel with respect thereto and determination by any Borrower Party that there
is no infringement or conflict), none of the Proprietary Rights infringes on or
conflicts with any other Person's property, and, to the Parent's Knowledge and
except as otherwise disclosed in writing to the Agent, no other Person's
property infringes on or conflicts with the Proprietary Rights, in each case, to
the extent any such infringement, individually or in the aggregate, could
reasonably be expected to result in any loss or damage to any Borrower Party in
excess of $1,000,000. The Proprietary Rights described on Schedule 6.12
constitute all of the property of such type necessary to the current and
anticipated future conduct of each of the Borrower Parties' business. No claim
or litigation regarding any of the foregoing is pending or, to the Parent's
Knowledge, threatened, and no patent, invention, device or application for the
same is pending or, to the Parent's Knowledge, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
6.13. Trade Names. All trade names or styles as of the Closing Date under
which the Borrower Parties sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule
6.13.
6.14. Litigation. Except as set forth on Schedule 6.14 as of the Closing
Date, there is no pending, or to the Parent's Knowledge threatened, action,
suit, proceeding, or counterclaim by any Person, or to the Parent's Knowledge,
investigation by any Governmental Authority, or any basis for any of the
foregoing, which could reasonably be expected to have a Material Adverse Effect.
6.15. Labor Disputes. Except as set forth on Schedule 6.15, as of the
Closing Date (a) there is no collective bargaining agreement or other labor
contract covering employees of any of the Borrower Parties, (b) no such
collective bargaining agreement or other labor contract is scheduled to expire
during the term of this Agreement, (c) to the Parent's Knowledge no union or
other labor organization is seeking to organize, or to be recognized as, a
collective bargaining unit of employees of any of the Borrower Parties or for
any similar purpose, and (d) there is no pending or (to the Parent's Knowledge)
threatened, strike, work stoppage, material unfair labor practice claim, or
other material labor dispute against or affecting the Parent or its Subsidiaries
or their employees.
6.16. Environmental Laws. Except as otherwise disclosed in writing to the
Agent or except to the extent the failure of any of the following, individually
or in the aggregate, to be correct could reasonably be expected to result in any
uninsured claim, loss or damage to any Borrower Party in excess of $1,000,000:
(a) Except as disclosed on Schedule 6.16(a), each of the Parent and
each Subsidiary is and has been in compliance with, in all material respects,
all
19
Environmental Laws and neither the Parent nor any Subsidiary, nor any of its
presently owned real property or presently conducted operations, nor its
previously owned real property or prior operations, is subject to any
Environmental Claim from any Governmental Authority or private Person respecting
(i) compliance with any Environmental Law or (ii) any potential liabilities and
costs or actions arising from a Release or threatened Release of a Contaminant.
(b) Each of the Parent and each Subsidiary has obtained all permits
necessary for its current operations under Environmental Laws, and all such
permits are in good standing and each of the Parent and each Subsidiary is in
compliance with all material terms and conditions of such permits.
(c) Neither the Parent nor any Subsidiary, nor, to the Parent's
Knowledge (after appropriate due diligence), any of its predecessors in
interest, has in violation of applicable law stored, treated or disposed of any
Contaminants on any property owned by the Parent or any Subsidiary.
(d) Neither the Parent nor any Subsidiary has received any summons,
complaint, order or similar written notice or an Environmental Claim indicating
that it is not currently in compliance with or that any Governmental Authority
is investigating its compliance with, any Environmental Laws or that it is or
may be liable to any other Person as a result of a Release or threatened Release
of a Contaminant.
(e) To the Parent's Knowledge, none of the present or past operations
of the Parent and its Subsidiaries is the subject of any investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to a Release or threatened Release of a Contaminant.
(f) Except as described on Schedule 6.16(f), there is not now, nor to
the Parent's Knowledge has there ever been, on or in the Real Estate:
(1) any underground storage tanks or surface impoundments,
(2) any asbestos-containing material, or
(3) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment.
(g) Neither the Parent nor any Subsidiary has filed, or has had the
duty to file, any notice under any requirement of Environmental Law reporting a
spill or accidental and unpermitted Release or discharge of a Contaminant into
the environment.
(h) Neither the Parent nor any Subsidiary has for the past five (5)
years entered into any negotiations or settlement agreements with any Person
(including any prior owner of its Real Property) imposing obligations or
liabilities on the Parent or any
20
Subsidiary with respect to any Environmental Claim in response to a Release of a
Contaminant.
(i) None of the products manufactured, distributed or sold by the
Parent or any Subsidiary contain asbestos containing material.
(j) No Environmental Lien has attached to the Real Estate.
6.17. No Violation of Law. Neither the Parent nor any Subsidiary is in
violation in any material respect of any material law, statute, regulation,
ordinance, judgment, order, or decree applicable to it which could reasonably be
expected to result in a Material Adverse Effect.
6.18. No Default. Neither the Parent nor any Subsidiary is in default in
any material respect with respect to any material note, indenture, loan
agreement, mortgage, lease, deed, or other agreement to which the Parent or such
Subsidiary is a party or by which it is bound.
6.19. ERISA Compliance.
(a) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other applicable
federal or state law. Each Plan which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter from the IRS
and to the Parent's Knowledge, nothing has occurred which would cause the loss
of such qualification. Each of the Parent, each Subsidiary and each ERISA
Affiliate has made all required contributions to any Plan subject to Section 412
of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or, to the Parent's Knowledge, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan which has resulted or could reasonably be expected to result
in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) none of
the Parent, any Subsidiary or any ERISA Affiliate has incurred, or reasonably
expects to incur, any material liability under Title IV of ERISA with respect to
any Pension Plan (other than premiums due and not delinquent under Section 4007
of ERISA); (iv) none of the Parent, any Subsidiary or any ERISA Affiliate has
incurred, or reasonably expects to incur, any material liability (and no event
has occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of
21
ERISA with respect to a Multi-employer Plan; and (v) none of the Parent, any
Subsidiary or any ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
6.20. Taxes. The Parent and the Subsidiaries have filed all federal and
other tax returns and reports required to be filed, and have paid all federal
and other taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable unless (i) such unpaid taxes and assessments would constitute a
Permitted Lien, or (ii) such taxes are being contested in good faith and
reserves adequate in the commercially reasonable determination of the Agent have
been provided by such Person.
6.21. Regulated Entities. No Borrower Party, any Person controlling a
Borrower Party, or any other Subsidiary, is an "Investment Company" within the
meaning of the Investment Company Act of 1940. No Borrower Party or any other
Subsidiary is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code or law, or any other federal or state statute or regulation
limiting its ability to incur indebtedness.
6.22. Use of Proceeds; Margin Regulations. The proceeds of the Loans are to
be used solely for working capital and other lawful corporate purposes. None of
the Parent or any Subsidiary is engaged in the business of purchasing or selling
Margin Stock or extending credit for the purpose of purchasing or carrying
Margin Stock.
6.23. Copyrights, Patents, Trademarks and Licenses, etc. Each Borrower owns
or is licensed or otherwise has the right to use all of the patents, trademarks,
service marks, trade names, copyrights, contractual franchises, licenses, rights
of way, authorizations and other rights that are reasonably necessary for the
operation of its businesses, without conflict with the rights of any other
Person. To the Parent's Knowledge, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Borrower Parties infringes upon any rights
held by any other Person. No claim or litigation regarding any of the foregoing
is pending or (to the Parent's Knowledge) threatened, and no patent, invention,
device, application, principle or any statute, law, rule, regulation, standard
or code is pending or, to the Parent's Knowledge, proposed, which, in either
case, could reasonably be expected to have a Material Adverse Effect.
6.24. No Material Adverse Change. No Material Adverse Effect has occurred
since the latest date of the Financial Statements delivered to the Lenders,
except as otherwise disclosed in the Parent's filings with the Securities and
Exchange Commission under the Exchange Act.
6.25. Full Disclosure. None of the representations or warranties made by
any Borrower Party in the Loan Documents as of the date such representations and
warranties
22
are made or deemed made, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of any Borrower Party
in connection with the Loan Documents contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
6.26. Material Agreements. Schedule 6.26 hereto sets forth as of the
Closing Date all agreements and contracts material to the Borrower Parties which
would be deemed a material contract as provided in Regulation S-K promulgated by
the SEC under the Securities Act of 1933.
6.27. Intentionally Omitted.
6.28. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other Person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, any
Borrower Party of any Loan Document, except approvals, consents, exemptions,
authorizations, other actions, notices or filings described in Schedule 6.28,
which approvals, consents, exemptions, authorizations, other actions, notices or
filings have been made or obtained and are in full force and effect.
6.29. Tax Shelter Regulations. The Borrowers do not intend to treat the
Loans as being a "reportable transaction" (within the meaning of Treasury
Regulation Section 1.6011-4). In the event the Borrowers determine to take any
action inconsistent with such intention, each will promptly notify the Agent
thereof. If the Borrowers so notify the Agent, the Borrowers acknowledge that
one or more of the Lenders may treat its Loans as part of a transaction that is
subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders,
as applicable, will maintain the lists and other records required by such
Treasury Regulation.
ARTICLE VII
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower Party covenants to the Agent and each Lender that so long as
any of the Obligations remain outstanding or this Agreement is in effect:
7.1. Taxes and Other Obligations. Each Borrower Party shall cause each of
its Subsidiaries to (a) file when due (after taking into account any applicable
exemptions) all tax returns and other reports which it is required to file; (b)
pay, or provide for the payment, when due, of all taxes, fees, assessments and
other governmental charges against it or upon its property, income and
franchises, make all required withholding and other tax deposits, and establish
adequate reserves for the payment of all such items, and provide to the Agent
and the Lenders, upon request, satisfactory evidence of its timely compliance
with the foregoing; and (c) pay when due all Debt owed by it and all claims
23
of materialmen, mechanics, carriers, warehousemen, landlords, processors and
other like Persons, and all other indebtedness owed by it and perform and
discharge in a timely manner all other obligations undertaken by it; provided,
however, so long as the Administrative Borrower has notified the Agent in
writing, no Borrower Party or Subsidiary need pay any tax, fee, assessment, or
governmental charge (i) it is contesting in good faith by appropriate
proceedings diligently pursued, (ii) as to which such Borrower Party has
established proper reserves as required under GAAP, and (iii) the nonpayment of
which does not result in the imposition of a Lien (other than a Permitted Lien).
7.2. Legal Existence and Good Standing; Name Changes.
(a) Each of the Parent and each Subsidiary shall (i) maintain its
legal existence, except as permitted by Section 7.9, and (ii) maintain its
qualification and good standing in all jurisdictions in which the failure to
maintain such existence and qualification or good standing could reasonably be
expected to have a Material Adverse Effect.
(b) No Borrower Party shall change its name, Federal Employment
Identification Number, organizational identification number, corporate structure
or identity, or add any new fictitious name or reincorporate or reorganize
itself under the laws of any jurisdiction other than the jurisdiction in which
it is incorporated or organized as of the date hereof.
7.3. Compliance with Law and Agreements; Maintenance of Licenses. The
Parent shall and shall cause each Subsidiary to comply in all material respects
with all material Requirements of Law of any Governmental Authority having
jurisdiction over it or its business (including the Federal Fair Labor Standards
Act and all Environmental Laws). The Parent shall and shall cause each of its
Subsidiaries to obtain and maintain all material licenses, permits, franchises,
and governmental authorizations necessary to own its property and to conduct its
business as conducted on the Closing Date. No Borrower Party shall modify, amend
or alter (a) its certificate or articles of incorporation, or its limited
liability company operating agreement or limited partnership agreement, as
applicable, other than in a manner which does not adversely affect the rights of
the Lenders or the Agent, or (b) licensing agreements, other than in a manner
which does not adversely affect the rights of the Lenders or the Agent with
respect to the Inventory or (c) the Kmart Receivable Purchasing Agreement.
7.4. Maintenance of Property; Inspection of Property. Each Borrower Party
shall maintain all of its property necessary and useful in the conduct of its
business, in good operating condition and repair, ordinary wear and tear
excepted.
7.5. Insurance.
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(a) Each Borrower Party shall maintain, with financially sound and
reputable insurers having a rating of at least A- or better by Best Rating
Guide, insurance against loss or damage by fire with extended coverage; theft,
burglary, pilferage and loss in transit; products liability and third party
property damage; larceny, embezzlement or other criminal liability; business
interruption; public liability and third party property damage; and such other
hazards or of such other types as is customary for Persons engaged in the same
or similar business, as the Agent, in its reasonable discretion, or acting at
the direction of the Required Lenders, shall specify, in amounts, and under
policies reasonably acceptable to the Agent and the Required Lenders.
(b) The Borrower Parties shall cause the Agent, for the ratable
benefit of the Agent and the Lenders, to be named as secured party or mortgagee
and sole loss payee or additional insured, in a manner acceptable to the Agent.
Each policy of insurance shall contain a clause or endorsement requiring the
insurer to give not less than thirty (30) days' prior written notice to the
Agent in the event of cancellation of the policy for any reason whatsoever and a
clause or endorsement stating that the interest of the Agent shall not be
impaired or invalidated by any act or neglect of the Parent or any of its
Subsidiaries or the owner of any Real Estate for purposes more hazardous than
are permitted by such policy. All premiums for such insurance shall be paid by
the Borrower Parties when due, and certificates of insurance and, if requested
by the Agent or any Lender, photocopies of the policies, shall be delivered to
the Agent, in each case in sufficient quantity for distribution by the Agent to
each of the Lenders. If the Borrower Parties fail to procure such insurance or
to pay the premiums therefor when due, the Agent may, and at the direction of
the Majority Lenders shall, obtain such insurance and Borrower shall promptly
reimburse the Agent for any charges incurred in connection therewith.
7.6. Insurance and Condemnation Proceeds. The Borrower Parties shall
promptly notify the Agent and the Lenders of any loss, damage, or destruction to
the Collateral whether or not covered by insurance. The Agent is hereby
authorized to collect all insurance and condemnation proceeds in respect of
Collateral directly and to apply or remit them as follows:
(i) With respect to insurance and condemnation proceeds relating
to Collateral other than Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 3.6.
(ii) With respect to insurance and condemnation proceeds relating
to Collateral consisting of Fixed Assets, the Agent shall permit or require the
Borrowers to use such proceeds, or any part thereof, to replace, repair, restore
or rebuild the relevant Fixed Assets in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the loss, damage or
25
destruction so long as (1) no Default or Event of Default has occurred and is
continuing, (2) the aggregate proceeds do not exceed $1,000,000 and (3) the
Borrower first (i) provides the Agent and the Required Lenders with plans and
specifications for any such repair or restoration which shall be reasonably
satisfactory to the Agent and the Required Lenders and (ii) demonstrates to the
reasonable satisfaction of the Agent and the Required Lenders that the funds
available to it will be sufficient to complete such project in the manner
provided therein. In all other circumstances, the Agent shall apply such
insurance and condemnation proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 3.6.
7.7. Environmental Laws.
(a) The Parent shall, and shall cause each of its Subsidiaries to,
conduct its business in compliance in all material respects with all material
Environmental Laws applicable to it, including those relating to the generation,
handling, use, storage, and disposal of any Contaminant. The Parent shall, and
shall cause each of its Subsidiaries to, take prompt and appropriate action to
respond to any material non-compliance with Environmental Laws and shall
regularly report to the Agent on such response.
(b) Without limiting the generality of the foregoing, the Borrower
Parties shall submit to the Agent and the Lenders annually, commencing on the
first anniversary Date and on each Anniversary Date thereafter, an update of the
status of each environmental compliance or liability issue. The Agent or any
Lender may obtain copies of technical reports prepared by the Parent and its
Subsidiaries and their communications with any Governmental Authority to
determine whether the appropriate Borrower Parties are proceeding reasonably to
correct, cure or contest in good faith any alleged non-compliance or
environmental liability.
7.8. Compliance with ERISA. Each Borrower Party shall, and shall cause each
of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) make all required contributions to any
Plan subject to Section 412 of the Code; (d) not engage in a prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan; and (e) not engage in a transaction that could be subject to Section
4069 or 4212(c) of ERISA.
7.9. Mergers, Consolidations or Sales. No Loan Party shall enter into any
transaction of merger, reorganization, or consolidation, or transfer, sell,
assign, lease, or otherwise dispose of all or any part of its property, or wind
up, liquidate or dissolve, or agree to do any of the foregoing, except:
26
(a) (i) sales of Inventory in the ordinary course of its business, and
(ii) sales of excess Inventory not in the ordinary course of its business as
permitted by the First Lien Credit Agreement;
(b) (i) sales or other dispositions of Equipment of the Parent or the
Subsidiaries in the ordinary course of business that are obsolete or no longer
useable on a commercially reasonable basis by any such Person in its business,
and (ii) so long as no Default or Event of Default has occurred and is
continuing, the sale of Equipment by a Borrower to another Borrower and the sale
of Equipment by a Guarantor to another Borrower Party. All proceeds of a sale or
disposition under clause (i) or (ii) above, after payment of reasonable selling
costs, shall be deposited in a Payment Account. All Equipment purchased with
such proceeds shall be free and clear of all Liens, except the Agent's Liens;
(c) the merger of a Borrower into another Borrower so long as (i) no
Default or Event of Default has occurred and is continuing or would be caused
thereby, (ii) the Borrower Parties provide the Agent with ten (10) days prior
written notice of such merger, (iii) in the event of a merger involving the
Parent, the Parent shall be the surviving Person, and (iv) contemporaneously
with such merger, the Borrower Parties deliver to the Agent all documents
reasonably requested by the Agent to continue the Agent's Liens on the
Collateral, in each case, in form and substance satisfactory to the Agent,
including, without limitation, such pledge agreements, new stock certificates
and stock powers, financing statements or other documents as shall be reasonably
requested by the Agent;
(d) the merger of a Guarantor into another Guarantor so long as (i) no
Default or Event of Default has occurred and is continuing or would be caused
thereby, (ii) the Borrower Parties provide the Agent with ten (10) days prior
written notice of such merger, and (iii) contemporaneously with such merger, the
Borrower Parties deliver to the Agent all documents reasonably requested by the
Agent to continue the Agent's Liens on the Collateral, in each case, in form and
substance satisfactory to the Agent, including, without limitation, such pledge
agreements, new stock certificates and stock powers, financing statements or
other documents as shall be reasonably requested by the Agent; and
(e) the merger of a Guarantor into a Borrower so long as (i) no
Default or Event of Default has occurred and is continuing or would be caused
thereby, (ii) the applicable Borrower shall be the surviving Person, (iii) the
Borrower Parties provide the Agent with ten (10) days prior written notice of
such merger, and (iv) contemporaneously with such merger, the Borrower Parties
deliver to the Agent all documents reasonably requested by the Agent to continue
the Agent's Liens on the Collateral, in each case, in form and substance
satisfactory to the Agent, including, without limitation, such pledge
agreements, new stock certificates and stock powers, financing statements or
other documents as shall be reasonably requested by the Agent;
27
(f) Permitted Acquisitions;
(g) disposition of other assets having a fair market value not to
exceed $2,000,000 during any Fiscal Year or $7,000,000 in the aggregate during
the term of this Agreement;
(h) disposition of Real Estate acquired in connection with the
acquisition of Toastmaster Inc. set forth on Schedule 7.9 and any of the
personal property (except Inventory) located thereon; and
(i) disposition of Proprietary Rights to a Subsidiary of any Borrower
Party; provided, that prior to the consummation of any such disposition, the
Agent shall be satisfied in its sole discretion of the continued second lien
priority and validity of the Agent's Lien in all such Proprietary Rights.
7.10. Distributions; Capital Change; Restricted Investments. Except for (1)
Permitted Transactions, (2) Permitted Acquisitions and (3) so long as the
holders of any such preferred Stock do not have any redemption rights on or
prior to the date ninety one (91) days following the Termination Date, the
issuance of preferred Stock, no Borrower Party shall (a) directly or indirectly
declare or make, or incur any liability to make, any Distribution, except
Distributions to a Borrower by its Subsidiaries, (b) make any change in its
capital structure which could have a Material Adverse Effect or (c) make any
Restricted Investment.
7.11. Intentionally Omitted.
7.12. Guaranties. No Loan Party shall make, issue, or become liable on any
Guaranty, except (a) Guaranties of the Obligations in favor of the Agent or the
First Lien Agent, (b) Guaranties by the Parent of Debt permitted by Section
7.13, trade payables and real estate operating leases and (c) Guaranties of Debt
by Guarantors permitted by Section 7.13(e) or Section 7.13(k).
7.13. Debt. No Loan Party shall incur or maintain any Debt, other than: (a)
the Obligations; (b) Debt described on Schedule 6.9; (c) Capital Leases of
Equipment and purchase money secured Debt incurred to purchase Equipment (or any
renewals or refinancing of such Debt on terms not materially less favorable to
the Loan Parties) provided that (i) Liens securing the same attach only to the
applicable Equipment acquired by the incurrence of such Debt, and (ii) the
aggregate amount of such Debt (including Capital Leases) outstanding does not
exceed $3,000,000 at any time; (d) Debt evidencing a refunding, renewal or
extension of the Debt described on Schedule 6.9 (other than the First Lien
Obligations); provided that (i) the principal amount thereof is not increased,
(ii) the Liens, if any, securing such refunded, renewed or extended Debt do not
attach to any assets in addition to those assets, if any, securing the Debt to
be refunded, renewed or extended, (iii) no Person that is not an obligor or
guarantor of such Debt as of the Closing Date shall become an obligor or
guarantor thereof, and (iv) the
28
terms of such refunding, renewal or extension are not materially less favorable
to the Loan Parties, the Agent or the Lenders than the original Debt; (e) the
Senior Notes and any refinancings, refundings, renewals or extensions thereof;
provided that any such refinancing, refundings, renewals or extensions do not
increase the aggregate principal amount outstanding thereunder by more than
$25,000,000 and do not shorten the maturity of any principal amount thereof, (f)
the Intercompany Account so long as such Debt is subject to the Subordination
Agreement and provided that (i) no Borrower Party shall make any Investment in a
Foreign Subsidiary and (ii) no Foreign Subsidiary shall make any Investment in
another Foreign Subsidiary, (g) Debt in respect of swap agreements entered into
for non-speculative purposes related to hedging interest rates, currency values
and commodities; (h) Debt arising by reason of Guaranties by the Loan Parties
permitted by Section 7.12(b); (i) Debt assumed or acquired in connection with
any Permitted Acquisition which Debt is outstanding on the date of such
Permitted Acquisition and does not, individually or in the aggregate with
respect to one or more Permitted Acquisitions, exceed $1,000,000; (j) Seller
Subordinated Debt; and (k) the First Lien Obligations. Notwithstanding anything
to the contrary contained herein, the Parent shall not, directly or indirectly,
enter into any amendment or modification of the documents evidencing the Debt
permitted under clauses (f), (g) or (h) above that is in any manner adverse to
the Parent, any Subsidiary, the Agent or any Lender.
7.14. Prepayment. Notwithstanding anything to the contrary contained
herein, no Borrower Party shall prepay any Debt, except (a) the First Lien
Obligations in accordance with the First Lien Loan Documents, (b) in connection
with a refinancing permitted under Section 7.13(e) above including the
application of any proceeds received as a result of an equity infusion to prepay
the Debt described in Section 7.13(e), (c) the principal amount of the 2005
Senior Notes, or (d) the 2008 Senior Notes solely to the extent permitted
pursuant to Section 3.1(d); provided however, the prepayments permitted under
subsections (c) and (d) may be made only to the extent such prepayments would
not cause a default under the First Lien Credit Agreement.
7.15. Transactions with Affiliates. Except as set forth below and except
for mergers permitted under Section 7.9 and the Intercompany Account permitted
pursuant to Section 7.13, no Loan Party shall sell, transfer, distribute, or pay
any money or property, including, but not limited to, any fees or expenses of
any nature (including, but not limited to, any fees or expenses for management
services), to any Affiliate, or lend or advance money or property to any
Affiliate, or invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or indebtedness, or any property, of any Affiliate, or
become liable on any Guaranty of the indebtedness, dividends, or other
obligations of any Affiliate. Notwithstanding the foregoing, while no Event of
Default has occurred and is continuing, the Borrower Parties may engage in
transactions with Affiliates in the ordinary course of business consistent with
past practices, in amounts and upon terms fully disclosed to the Agent and the
Lenders, and no less favorable to the Borrower Parties than would be obtained in
a comparable arm's-length transaction with a
29
third party who is not an Affiliate; provided, that in any event all such
transactions shall be reflected and itemized on the Intercompany Account.
7.16. Investment Banking and Finder's Fees. Except as set forth on Schedule
7.16, no Borrower Party shall pay or agree to pay, or reimburse any other party
with respect to, any investment banking or similar or related fee, underwriter's
fee, finder's fee, or broker's fee to any Person in connection with this
Agreement. Each Borrower Party shall defend and indemnify the Agent and the
Lenders against and hold them harmless from all claims of any Person that the
Parent or any Subsidiary is obligated to pay for any such fees, and all costs
and expenses (including attorneys' fees) incurred by the Agent and/or any Lender
in connection therewith.
7.17. Business Conducted. No Borrower shall or shall permit any of its
Subsidiaries to engage, directly or indirectly, in any line of business other
than the businesses in which such Person is engaged on the Closing Date or which
are reasonably related thereto, including without limitation the design,
marketing and distribution of any products covered by the International
Housewares Association.
7.18. Liens. No Loan Party shall create, incur, assume, or permit to exist
any Lien on any property, including without limitation to the Real Estate, now
owned or hereafter acquired by any of them, except Permitted Liens.
7.19. Sale and Leaseback Transactions. No Loan Party shall, directly or
indirectly, enter into any arrangement or arrangements, with any Person
providing for the Parent or such Subsidiary to lease or rent property that the
Parent or such Subsidiary has sold or will sell or otherwise transfer to such
Person.
7.20. No New Subsidiaries. No Loan Party shall, directly or indirectly,
organize, create, acquire or permit to exist any Subsidiary.
7.21. Fiscal Year. No Borrower Party shall change its Fiscal Year without
the prior written consent of the Agent.
7.22. Use of Proceeds. No Borrower shall, nor shall it suffer or permit any
Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (a)
for any purpose inconsistent with the purposes, terms and conditions hereof or
other than for lawful and permitted purposes, (b) to purchase or carry Margin
Stock, (c) to repay or otherwise refinance indebtedness of the Borrowers or
others incurred to purchase or carry Margin Stock, (d) to extend credit for the
purpose of purchasing or carrying any Margin Stock, or (e) to acquire any
security in any transaction that is subject to Section 13 or 14 of the Exchange
Act.
7.23. Financial Covenants. The financial covenants entitled "Minimum
EBITDA", "Capital Expenditures", "Fixed Charge Coverage Ratio" and "Foreign
Leverage Ratio" as set forth in Sections 7.22, 7.23, 7.24 and 7.25,
respectively, of the
30
First Lien Credit Agreement, are hereby incorporated in their entirety into this
Agreement.
7.24. Intentionally Omitted.
7.25. Further Assurances. The Borrower Parties shall execute and deliver,
or cause to be executed and delivered, to the Agent and/or the Lenders such
documents and agreements, and shall take or cause to be taken such actions, as
the Agent or any Lender may, from time to time, reasonably request to carry out
the terms and conditions of this Agreement and the other Loan Documents.
7.26. Intentionally Omitted.
7.27. Subsidiary Distributions. Upon (a) any issuance of Debt or shares of
Stock by any Subsidiary or (b) any sale or other disposition of assets by any
Subsidiary which would, in either case, require a prepayment pursuant to Section
3.1(c) of the First Lien Credit Agreement, such Subsidiary shall cause an amount
equal to the amount that is required to be used to make the prepayments required
pursuant to Section 3.1(c) of the First Lien Credit Agreement (such amount, the
"Required Amount") to be distributed to its immediate parent entity and such
immediate parent entity shall cause such Required Amount to be distributed to
its immediate parent entity and such distributions shall continue until such
Required Amount is ultimately distributed to Parent for use by Parent to make
the prepayments required pursuant to Section 3.1(c) of the First Lien Credit
Agreement.
7.28. Modification of Covenants. The Lenders and the Agent acknowledge and
agree that the covenants set forth in this Article 7 substantially duplicate the
covenants set forth in the First Lien Credit Agreement, and to the extent the
First Lien Lenders amend or modify the covenants under the First Lien Agreement,
the parallel covenants hereunder shall be deemed amended or modified to the
extent so amended or modified, without further consent or agreement of the Agent
or the Lenders; provided, however, this Section 7.28 shall not apply to a
violation of Section 7.14 or any increase in the First Lien Maximum Amount.
Notice of any such amendment or modification shall be provided to the Agent by
the Company and shall be confirmed in writing by the First Lien Agent and First
Lien Co-Agent. Upon the request of the Company, the First Lien Agent or the
First Lien Co-Agent, the Agent shall execute a written acknowledgement of such
notice and, if requested, an amendment or modification to this Agreement
prepared by or on behalf of the Company approved by the First Lien Agent and
First Lien Co-Agent to give effect herein to the parallel covenant provisions in
the First Lien Credit Agreement.
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ARTICLE VIII
CONDITIONS OF CLOSING
8.1. Required Deliveries on or before the Closing Date. On or before the
Closing Date which shall occur on or before September 1, 2005, the Agent shall
receive the following:
(a) the Intercreditor Agreement, in form and substance satisfactory
to the Agent, duly executed, and in full force and effect;
(b) a certificate from the Secretary of each Borrower Party (i)
attesting to the resolutions of such Borrower Party's board of directors
authorizing its execution, delivery, and performance of all Loan Documents
required to be executed and delivered by such Borrower Party on the Closing
Date, and authorizing specific officers of such Borrower Party to execute the
same and (ii) certifying the names and true signatures of the officers of such
Borrower Party authorized to sign such Loan Documents;
(c) copies of each Borrower Party's governing documents, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary of
each Borrower Party;
(d) a certificate of status with respect to each Borrower Party,
dated within ten (10) days of the Closing Date, such certificate to be issued by
the appropriate officer of the jurisdiction of organization of the Borrower
Party, which certificate shall indicate that such Borrower Party is in good
standing in such jurisdiction;
(e) certificates of status with respect to each Borrower Party, each
dated within thirty (30) days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such Borrower Party) in which its failure to be
duly qualified or licensed would constitute a Material Adverse Effect, which
certificates shall indicate that such Borrower Party is in good standing in such
jurisdictions;
(f) an opinion of counsel for the Borrower Parties in form and
substance satisfactory to the Agent;
(g) copies of all existing Blocked Account Agreements, and Agent
shall be satisfied that all such agreements are in full force and effect;
(h) the Agent shall be satisfied that financing statements filed
against all Borrower Parties naming Agent, for the benefit of Lenders, as the
secured creditor are sufficient to create a second priority security interest in
all Collateral, except as otherwise permitted herein, and Agent shall have
received searches reflecting the filing of all such financing statements;
32
(i) the Third Amendment to the First Lien Credit Agreement shall have
been executed;
(j) Each Borrower Party shall have received all licenses, approvals
or evidence of other actions required by any Governmental Authority in
connection with the execution and delivery by such Borrower Party of this
Agreement or any other Loan Document or with the consummation of the
transactions contemplated hereby and thereby; and
(k) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to the Agent.
ARTICLE IX
DEFAULT; REMEDIES
9.1. Events of Default. It shall constitute an event of default ("Event of
Default") if any one or more of the following shall occur for any reason:
(a) any failure by the Borrowers to pay the principal of or interest
or premium on any of the Obligations or any fee or other amount owing hereunder
when due, whether upon demand or otherwise;
(b) any representation or warranty made or deemed made by any
Borrower Party in this Agreement or in any of the other Loan Documents, any
Financial Statement, or any certificate furnished by any Borrower Party at any
time to the Agent or any Lender shall prove to be untrue in any material respect
as of the date on which made, deemed made, or furnished;
(c) (i) any default shall occur in the observance or performance of
any of the covenants and agreements contained in Sections 7.2(a), 7.5, 7.8
through 7.22, (ii) any default shall occur in the observance or performance of
any of the covenants and agreements contained in Sections 5.2, 5.3 or 5.4 and
such default shall continue for five (5) days or more; or (iii) any default
shall occur in the observance or performance of any of the other covenants or
agreements contained in any other Section of this Agreement or any other Loan
Document, or any other agreement entered into at any time to which any Borrower
Party and the Agent or any Lender are party and such default shall continue for
fifteen (15) days or more;
(d) any default shall occur with respect to any Debt (other than the
Obligations) of any Borrower Party in an outstanding principal amount which
exceeds $1,000,000, or under any agreement or instrument under or pursuant to
which any such Debt may have been issued, created, assumed, or guaranteed by any
Borrower Party and such default shall continue for more than the period of
grace, if any, therein specified, if the effect thereof (with or without the
giving of notice or further lapse of time or both) is
33
to accelerate, or to permit the holders of any such Debt to accelerate, the
maturity of any such Debt; or any such Debt shall be declared due and payable or
be required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof;
(e) the Parent or any of its Subsidiaries shall (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing, or consent to, approve of, or acquiesce in,
any such petition, action or proceeding; (ii) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator, sequestrator, custodian,
monitor, trustee or similar officer for it or for all or any part of its
property; (iii) make an assignment for the benefit of creditors; or (iv) be
unable generally to pay its debts as they become due;
(f) an involuntary petition shall be filed or an action or proceeding
otherwise commenced seeking reorganization, arrangement, consolidation or
readjustment of the debts of the Parent or any of its Subsidiaries or for any
other relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter existing
and such petition or proceeding shall not be dismissed within thirty (30) days
after the filing or commencement thereof or an order of relief shall be entered
with respect thereto;
(g) a receiver, assignee, liquidator, sequestrator, custodian,
monitor, trustee or similar officer for the Parent or any of its Subsidiaries or
for all or any part of its property shall be appointed or a warrant of
attachment, execution or similar process shall be issued against any part of the
property of the Parent or any of its Subsidiaries;
(h) any Borrower Party shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up or shall
commence, or the Parent or any of its Subsidiaries shall have commenced against
it, any action or proceeding for dissolution, winding-up or liquidation, and
such action or proceeding shall not be dismissed within thirty (30) days after
the filing or commencement thereof or an order of relief shall be entered with
respect thereto;
(i) all or any material part of the property (including Inventory) of
the Parent or any of its Subsidiaries shall be nationalized, expropriated or
condemned, recalled, seized or otherwise appropriated, or custody or control of
such property or of the Parent or such Subsidiary shall be assumed by any
Governmental Authority or any court of competent jurisdiction at the instance of
any Governmental Authority, except where contested in good faith by proper
proceedings diligently pursued where a stay of enforcement is in effect;
34
(j) any Loan Document shall be terminated, revoked or declared void
or invalid or unenforceable or challenged by any Borrower Party or any other
obligor;
(k) Except as set forth on Schedule 9.1(k), one or more judgments,
orders, decrees (including, without limitation, out of court settlements) or
arbitration or mediation awards is entered against or paid by any Borrower Party
involving in the aggregate liability (to the extent not covered by independent
third-party insurance as to which the insurer does not dispute coverage) as to
any single or related or unrelated series of transactions, incidents or
conditions, of $1,000,000 or more the same shall remain unsatisfied, unvacated
and unstayed pending appeal for a period of thirty (30) days after the entry
thereof;
(l) any loss, theft, damage or destruction of any item or items of
Collateral or other property of any Borrower Party occurs which could reasonably
be expected to cause a Material Adverse Effect and is not adequately covered by
insurance;
(m) there is filed against the Parent or any of its Subsidiaries any
action, suit or proceeding under any federal or state racketeering statute
(including the Racketeer Influenced and Corrupt Organization Act of 1970), which
action, suit or proceeding (i) is not dismissed within one hundred twenty (120)
days, or (ii) could reasonably be expected to result in the confiscation or
forfeiture of any material portion of the Collateral;
(n) any Loan Document ceases to be in full force and effect or any
Lien with respect to any material portion of the Collateral intended to be
secured thereby ceases to be, or is not, valid, perfected and prior to all other
Liens (other than Permitted Liens) or is terminated, revoked or declared void;
(o) (i) an ERISA Event shall occur with respect to a Pension Plan or
Multi-employer Plan which has resulted or could reasonably be expected to result
in liability of any Borrower Party under Title IV of ERISA to the Pension Plan,
Multi-employer Plan or the PBGC in an aggregate amount, together with the amount
of any liability under clauses (ii) and (iii) of this Section 9.1(o), in excess
of $1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time, together with the amount of any liability under
clauses (i) and (iii) of this Section 9.1(o) exceeds $1,000,000; or (iii) any
Borrower Party or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multi-employer
Plan in an aggregate amount, together with the amount of any liability under
clauses (i) and (ii) of this Section 9.1(o), in excess of $1,000,000;
(p) there occurs any default or event of default under the Senior
Notes, or the Kmart Receivable Purchasing Agreement;
(q) there occurs a Change of Control; or
35
(r) there occurs an event having a Material Adverse Effect.
9.2. Remedies.
(a) Subject to the Intercreditor Agreement, if an Event of Default
exists, the Agent shall, at the direction of the Required Lenders, at any time
or times without notice to or demand on the Borrower Parties, declare any or all
Obligations to be immediately due and payable; provided, however, that upon the
occurrence of any Event of Default described in Sections 9.1(e), 9.1(f), 9.1(g),
or 9.1(h), all Obligations shall automatically become immediately due and
payable without notice or demand of any kind; and (C) pursue its other rights
and remedies under the Loan Documents and applicable law.
(b) If an Event of Default has occurred and is continuing: (i) the
Agent shall have for the benefit of the Lenders, in addition to all other rights
of the Agent and the Lenders, the rights and remedies of a secured party under
the Loan Documents and the UCC; (ii) the Agent may, at any time, take possession
of the Collateral and keep it on the Borrower Parties' premises, at no cost to
the Agent or any Lender, or remove any part of it to such other place or places
as the Agent may desire, or the Borrower Parties shall, upon the Agent's demand,
at the Borrowers' cost, assemble the Collateral and make it available to the
Agent at a place reasonably convenient to the Agent; and (iii) the Agent may
sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as the Agent deems
advisable, in its sole discretion, and may, if the Agent deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Without in any way requiring notice to be given in the following
manner, the Borrower Parties agree (on their behalf and on behalf of their
Subsidiaries) that any notice by the Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the UCC
or otherwise, shall constitute reasonable notice to the Parent and the
Subsidiaries if such notice is mailed by registered or certified mail, return
receipt requested, postage prepaid, or is delivered personally against receipt,
at least ten (10) calendar days prior to such action to the Administrative
Borrower's address specified in or pursuant to Section 13.8. If any Collateral
is sold on terms other than payment in full at the time of sale, no credit shall
be given against the Obligations until the Agent or the Lenders receive cash
payment, and if the buyer defaults in payment, the Agent may resell the
Collateral without further notice to the Parent and the Subsidiaries. In the
event the Agent seeks to take possession of all or any portion of the Collateral
by judicial process, the Borrower Parties (on their behalf and on behalf of
their Subsidiaries) irrevocably waive: (A) the posting of any bond, surety or
security with respect thereto which might otherwise be required; (B) any demand
for possession prior to the commencement of any suit or action to recover the
Collateral; and (C) any requirement that the Agent retain possession and not
dispose of any Collateral until after trial or final judgment. The Borrower
Parties agree (on their behalf and on behalf of their Subsidiaries) that the
Agent
36
has no obligation to preserve rights to the Collateral or marshal any Collateral
for the benefit of any Person. The Agent is hereby granted a license or other
right to use, without charge, the Parent's and the Subsidiaries' labels,
patents, copyrights, names, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and the Parent's and the Subsidiaries'
rights under all licenses and all franchise agreements shall inure to the
Agent's benefit for such purpose. The proceeds of sale shall be applied first to
all expenses of sale, including attorneys' fees, and then to the Obligations.
The Agent will return any excess to the Parent and the Subsidiaries and the
Parent and the Subsidiaries shall remain liable for any deficiency.
(c) If an Event of Default has occurred and is continuing, the
Borrower Parties hereby waive to the extent permitted by law (on their behalf
and on behalf of the Subsidiaries) all rights to notice and hearing prior to the
exercise by the Agent of the Agent's rights to repossess the Collateral without
judicial process or to replevy, attach or levy upon the Collateral without
notice or hearing.
9.3. Waiver of Default or Event of Default under First Lien Credit
Agreement. The Lenders and the Agent acknowledge and agree that to the extent a
default or event of a default has occurred under the First Lien Credit Agreement
and such default or event of default is waived by the First Lien Lenders, such
waiver will be concurrently deemed a waiver of any corresponding default or
Event of Default under this Agreement, without any further consent or agreement
of the Agent or the Lenders; provided, however, that no such waiver shall be
effective with respect to any payment default hereunder, with respect to a
waiver of Section 7.14 hereof or with respect to a waiver which would result in
an increase in the First Lien Maximum Amount. Notice of any such waiver shall be
provided to the Agent by the Company confirmed in writing by the First Lien
Agent and First Lien Co-Agent and upon the request of the Company, the First
Lien Agent or the First Lien Co-Agent, the Agent shall execute a written
acknowledgement of such waiver. In the event that the Agent declares a default
hereunder and declares any or all Obligations to be immediately due and payable
or otherwise pursues any remedies under Section 9.2, and the corresponding
default or event of default under the First Lien Credit Agreement is
subsequently waived by the First Lien Lenders, the default previously declared
hereunder shall be deemed waived and the Obligations that were declared to be
immediately due and payable hereunder shall be de-accelerated and shall no
longer be immediately due and payable; provided, however, that no such waiver
shall be effective with respect to any payment default hereunder, with respect
to a waiver of Section 7.14 hereof or with respect to a waiver which would
result in an increase in the First Lien Maximum Amount.
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ARTICLE X
BINDING OBLIGATIONS
All Obligations (including all unpaid principal, accrued and unpaid
interest and any early termination or prepayment fees or penalties) shall be
immediately due and payable in full on the Stated Maturity Date. Until all
Obligations are indefeasibly paid and performed in full in cash, the Borrower
Parties shall remain bound by the terms of this Agreement and shall not be
relieved of any of their respective Obligations hereunder or under any other
Loan Document and the Agent and the Lenders shall retain all their rights and
remedies hereunder (including the Agent's Liens in and all rights and remedies
with respect to all then existing and after-acquired or after-arising
Collateral).
ARTICLE XI
AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
11.1. Amendments and Waivers.
(a) No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent with respect to any departure by the
Borrower Parties therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by the Agent at the written
request of the Required Lenders) and the Borrower Parties party thereto and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by all the
Lenders and the Borrower Parties party thereto and acknowledged by the Agent, do
any of the following:
(i) increase or extend the Commitment of any Lender (it being
understood and agreed that a waiver of any Default or Event of Default or a
modification of any of the defined terms contained herein (other than those
defined terms specifically addressed in this Section 11.1) shall not constitute
a change in the terms of any Commitment of any Lender);
(ii) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(iii) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
(iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Lenders or any of
them to take any action hereunder;
38
(v) amend this Section or any provision of this Agreement
providing for consent or other action by all Lenders;
(vi) release any Guaranties of the Obligations or release
Collateral other than as permitted by Section 12.11;
(vii) change the definitions of "Agent", "Majority Lenders" or
"Required Lenders"; or
(viii) increase the Term Loan Amount;
provided, however, that no amendment, waiver or consent shall, unless in writing
and signed by the Agent, affect the rights or duties of the Agent under this
Agreement or any other Loan Document and, provided further, that Schedule 1.1
hereto (Lenders' Commitments) may be amended from time to time by Agent alone to
reflect assignments of Commitments in accordance herewith.
(b) If any fees are paid to the Lenders as consideration for
amendments, waivers or consents with respect to this Agreement, at Agent's
election, such fees may be paid only to those Lenders that agree to such
amendments, waivers or consents within the time specified for submission
thereof.
(c) If, in connection with any proposed amendment, waiver or consent
(a "Proposed Change"):
(i) requiring the consent of all Lenders, the consent of Required
Lenders is obtained, but the consent of other Lenders is not obtained (any such
Lender whose consent is not obtained as described in this clause (i) and in
clause (ii) below being referred to as a "Non-Consenting Lender"), or
(ii) requiring the consent of Required Lenders, the consent of
Majority Lenders is obtained,
then, so long as the Agent is not a Non-Consenting Lender, at the Borrowers'
request, the Agent or an Eligible Assignee shall have the right (but not the
obligation) with the Agent's approval, to purchase from the Non-Consenting
Lenders, and the Non-Consenting Lenders agree that they shall sell, all the
Non-Consenting Lenders' Commitments for an amount equal to the principal
balances thereof and all accrued interest and fees with respect thereto through
the date of sale pursuant to an Assignment and Acceptance, without premium or
discount.
11.2. Assignments; Participations.
(a) Any Lender may assign and delegate to one or more Eligible
Assignees (each an "Assignee") all, or any ratable part of all, of the Loans,
the
39
Commitments and the other rights and obligations of such Lender hereunder
(provided that, in all cases, the Loans assigned by the assignor Lender shall be
composed of pro-rata portions of the assignor Lender's Commitment), in a minimum
amount of $5,000,000; provided, however, that the Borrower Parties and the Agent
may continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee, shall have been given to the Administrative Borrower
and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee
shall have delivered to the Administrative Borrower and the Agent an Assignment
and Acceptance in the form of Exhibit B ("Assignment and Acceptance"); (iii) the
Assignee executes and delivers to the First Lien Agent and First Lien Co-Agent a
written acknowledgment in which the Assignee acknowledges its agreement to be
bound by the terms of the Intercreditor Agreement; and (iv) the assignor Lender
or Assignee has paid to the Agent a processing fee in the amount of $3,500;
provided, however, that no such processing fee shall be due in connection with
any assignment by a Lender to an Affiliate of such Lender or a Related Fund.
(b) From and after the date that the Agent notifies the assignor
Lender that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations have been assigned
to it pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents and the Intercreditor
Agreement, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents and the Intercreditor
Agreement have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document or the
Intercreditor Agreement furnished pursuant hereto or the attachment, perfection,
or priority of any Lien granted by the Parent and any Subsidiary to the Agent or
any Lender in the Collateral; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Parent and the Subsidiaries or the performance or observance by
the Parent and the Subsidiaries, as applicable, of any of their obligations
under this Agreement, any other Loan Document or the Intercreditor Agreement
furnished pursuant
40
hereto; (iii) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such Assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers,
including the discretionary rights and incidental power, as are reasonably
incidental thereto; and (vi) such Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Immediately upon satisfaction of the requirements of Section
11.2(a), this Agreement shall be deemed to be amended to the extent, but only to
the extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of any Borrower Party (a
"Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Borrower Parties and the Agent shall continue to
deal solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement, the other Loan
Documents and the Intercreditor Agreement, and (iv) no Lender shall transfer or
grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement, any other Loan Document or the Intercreditor Agreement except the
matters set forth in Section 11.1(a) (i), (ii) and (iii), and all amounts
payable by the Borrowers hereunder shall be determined as if such Lender had not
sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent and subject to the same limitation as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement.
(f) Notwithstanding any other provision in this Agreement, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in
41
accordance with Regulation A of the Federal Reserve Board or United States
Treasury Regulation 31 C.F.R. Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
(g) Administrative Borrower shall maintain, or cause to be
maintained, a register (the "Register") on which it enters the name of a Lender
as the registered owner of each Term Loan held by such Lender. Other than in
connection with an assignment by a Lender of all or any portion of its Term Loan
to an Affiliate of such Lender or a Related Fund of such Lender (i) a Registered
Loan (and the Registered Note, if any, evidencing the same) may be assigned or
sold in whole or in part only by registration of such assignment or sale on the
Register (and each Registered Note shall expressly so provide) and (ii) any
assignment or sale of all or part of such Registered Loan (and the Registered
Note, if any, evidencing the same) may be effected only by registration of such
assignment or sale on the Register, together with the surrender of the
Registered Note, if any, evidencing the same duly endorsed by (or accompanied by
a written instrument of assignment or sale duly executed by) the holder of such
Registered Note, whereupon, at the request of the designated assignee(s) or
transferee(s), one or more new Registered Notes in the same aggregate principal
amount shall be issued to the designated assignee(s) or transferee(s). Prior to
the registration of assignment or sale of any Registered Loan (and the
Registered Note, if any evidencing the same), Administrative Borrower shall
treat the Person in whose name such Loan (and the Registered Note, if any,
evidencing the same) is registered as the owner thereof for the purpose of
receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary. In the case of any assignment by a Lender of all or any
portion of its Term Loan to an Affiliate of such Lender or a Related Fund of
such Lender, and which assignment is not recorded in the Register, the assigning
Lender, on behalf of Administrative Borrower, shall maintain a comparable
register.
(h) In the event that a Lender sells participations in the Registered
Loan, such Lender, on behalf of Administrative Borrower, shall maintain a
register on which it enters the name of all participants in the Registered Loans
held by it (the "Participant Register"). A Registered Loan (and the Registered
Note, if any, evidencing the same) may be participated in whole or in part only
by registration of such participation on the Participant Register (and each
Registered Note shall expressly so provide). Any participation of such
Registered Loan (and the Registered Note, if any, evidencing the same) may be
effected only by the registration of such participation on the Participant
Register.
ARTICLE XII
THE AGENT
12.1. Appointment and Authorization. Each Lender hereby designates and
appoints the Agent as its agent under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes the Agent to take such
action on its behalf
42
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to them
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. The Agent agrees to act as such on
the express conditions contained in this Article 12. The provisions of this
Article 12 are solely for the benefit of the Agent and the Lenders and, no
Borrower Party shall have any rights as a third party beneficiary of any of the
provisions contained herein, nor shall anything contained in this Article 12
limit any rights set forth elsewhere in this Agreement the Borrower Parties have
or may have against the Agent, any Lender or any other Agent-Related Person.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties. Except as expressly otherwise provided in this Agreement,
the Agent shall have and may use its sole discretion with respect to exercising
or refraining from exercising any discretionary rights or taking or refraining
from taking any actions which the Agent is expressly entitled to take or assert
under this Agreement and the other Loan Documents, including the exercise of
remedies pursuant to Section 9.2, and any action so taken or not taken shall be
deemed consented to by the Lenders.
12.2. Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys in fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
12.3. Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Borrower Party, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any
43
failure of any Borrower Party or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Agent-Related Person shall be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Parent or any of the Parent's Subsidiaries or Affiliates.
12.4. Reliance by Agent. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be 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 the
Borrower Parties), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders (or all Lenders if so required by
Section 11.1) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
12.5. Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, unless the Agent
shall have received written notice from a Lender or the Borrowers referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." The Agent will notify the Lenders of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Required Lenders in
accordance with Section 9.2.
12.6. Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of
Borrower Parties and their Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower Parties and their Affiliates, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to the
Borrowers. Each Lender also represents that it will, independently and without
reliance upon any Agent-Related
44
Person and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of Borrower Parties. Except for notices, reports
and other documents expressly herein required to be furnished to the Lenders by
the Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Borrower Parties which may come into the possession of any of the Agent-Related
Persons.
12.7. Indemnification. Whether or not the transactions contemplated hereby
are consummated, the Lenders shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrowers and
without limiting the obligation of the Borrowers to do so), in accordance with
their Pro Rata Shares, from and against any and all Indemnified Liabilities as
such term is defined in Section 13.11; provided, however, that no Lender shall
be liable for the payment to the Agent-Related Persons of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse the Agent upon demand for its Pro Rata Share of any costs or out of
pocket expenses (including Attorney Costs) incurred by the Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that the Agent is not reimbursed for such
expenses by or on behalf of the Borrowers. The undertaking in this Section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of the Agent.
12.8. Agent in Individual Capacity. The Agent and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Parent and its
Subsidiaries and Affiliates as though the Agent were not the Agent hereunder and
without notice to or consent of the Lenders. The Agent or its respective
Affiliates may receive information regarding the Borrowers, their Affiliates and
Account Debtors (including information that may be subject to confidentiality
obligations in favor of the Borrowers or such Affiliates) and acknowledge that
the Agent shall be under no obligation to provide such information to them. With
respect to its Loans, if any, the Agent shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though it
were not the Agent and the terms "Lender" and "Lenders" include the Agent in its
individual capacity.
45
12.9. Successor Agent. The Agent may resign as Agent upon at least thirty
(30) days' prior notice to the Lenders and the Borrowers, such resignation to be
effective upon the acceptance of a successor agent to its appointment as Agent.
In the event the Agent sells all of its Commitment and/or the Term Loan as part
of a sale, transfer or other disposition by the Agent of substantially all of
its loan portfolio, the Agent shall resign as Agent and Collateral Agent and
such purchaser or transferee shall become the successor Agent hereunder. Subject
to the foregoing, if the Agent resigns under this Agreement, the Required
Lenders shall appoint from among the Lenders a successor agent for the Lenders.
If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the
Lenders and the Borrowers, a successor agent from among the Lenders. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article 12 shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement.
12.10. Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Lender claims exemption from, or a
reduction of, U. S. withholding tax under Sections 1441 or 1442 of the Code,
such Lender agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States of America tax treaty, properly completed
IRS Forms W-8BEN and W-8ECI before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States of America withholding tax because it is
effectively connected with a United States of America trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI before the
payment of any interest is due in the first taxable year of such Lender and in
each succeeding taxable year of such Lender during which interest may be paid
under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States of America as a condition to exemption from,
or reduction of, United States of America withholding tax. Such Lender agrees to
promptly notify the Agent of any change in circumstances which would modify or
render invalid any claimed exemption or reduction.
46
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States of America tax treaty by providing IRS
Form FW-8BEN and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations owing to such Lender, such
Lender agrees to notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Borrowers to such Lender. To
the extent of such percentage amount, the Agent will treat such Lender's IRS
Form W-8BEN as no longer valid.
(c) If any Lender claiming exemption from United States of America
withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns, grants
a participation in, or otherwise transfers all or part of the Obligations owing
to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States of America or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Lenders under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
12.11. Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent, at its
option and in its sole discretion, to release any Agent's Liens upon any
Collateral, (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowers of all Loans; (ii) constituting property being
sold or disposed of if the Borrowers certify to the Agent that the sale or
disposition is made in compliance with Section 7.9 (and the Agent may rely
conclusively on any such certificate, without further inquiry); (iii)
constituting property in which the Borrower Parties owned no interest at the
time the Lien was granted or at any time thereafter; or (iv) constituting
property leased to the Borrower
47
Parties under a lease which has expired or been terminated in a transaction
permitted under this Agreement. Except as provided above, the Agent will not
release any of the Agent's Liens without the prior written authorization of all
Lenders; provided that the Agent may, in its discretion, release the Agent's
Liens on Collateral valued in the aggregate not in excess of $500,000 during
each Fiscal Year without the prior written authorization of the Lenders and the
Agent may release the Agent's Liens on Collateral valued in the aggregate not in
excess of $1,000,000 during each Fiscal Year with the prior written
authorization of Required Lenders. Upon request by the Agent or the Borrowers at
any time, the Lenders will confirm in writing the Agent's authority to release
any Agent's Liens upon particular types or items of Collateral pursuant to this
Section 12.11.
(b) Upon receipt by the Agent of any authorization required
pursuant to Section 12.11(a) from the Lenders of the Agent's authority to
release any Agent's Liens upon particular types or items of Collateral, and upon
at least five (5) Business Days' prior written request by the Borrowers, the
Agent shall (and is hereby irrevocably authorized by the Lenders to) execute
such documents as may be necessary to evidence the release of the Agent's Liens
upon such Collateral; provided, however, that (i) the Agent shall not be
required to execute any such document on terms which, in the Agent's opinion,
would expose the Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of the Borrower Parties in respect of) all interests retained by any
Borrower Party, including the proceeds of any sale, all of which shall continue
to constitute part of the Collateral.
(c) The Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by the Borrower Parties
or is cared for, protected or insured or has been encumbered, or that the
Agent's Liens have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to the Agent pursuant to any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate in its sole discretion given the Agent's own interest in the
Collateral in its capacity as one of the Lenders and that the Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.
(d) The Agent agrees that the face of each promissory note
evidencing the Obligations or any portion thereof and any agreement purporting
to grant any security interest therefor shall be inscribed with a legend
conspicuously indicating such promissory note or such security agreement is
subject to the terms and provisions of the Intercreditor Agreement. Any
promissory note evidencing any of the Obligations or any
48
portion thereof, and any agreement granting any security interest therefor,
which is hereafter executed will, on the date thereof, be inscribed with a
similar legend. Upon the acceptance of any promissory note under the Exchange
Offer, the Lender accepting such note shall be deemed to have accepted the terms
and provisions of this Agreement, the Intercreditor Agreement or any other
agreement executed in connection herewith or therewith.
(e) The Agent, the Lenders and the Company acknowledge and agree
that this Agreement is subject to the terms and provisions of the Intercreditor
Agreement and to the extent there is a conflict between the terms of this
Agreement and the terms of the Intercreditor Agreement, the terms of the
Intercreditor Agreement shall govern and control.
12.12. Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the
express consent of Required Lenders, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of all Lenders, set-off against the
Obligations, any amounts owing by such Lender to the Borrowers or any accounts
of the Borrower Parties now or hereafter maintained with such Lender. Each of
the Lenders further agrees that it shall not, unless specifically requested to
do so by the Agent, take or cause to be taken any other action to enforce its
rights under this Agreement or against the Borrower Parties, including the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.
(b) If at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations of the Borrowers to such Lender arising
under, or relating to, this Agreement or the other Loan Documents, except for
any such proceeds or payments received by such Lender from the Agent pursuant to
the terms of this Agreement, or (ii) payments from the Agent in excess of such
Lender's ratable portion of all such distributions by the Agent, such Lender
shall promptly (A) turn the same over to the Agent, in kind, and with such
endorsements as may be required to negotiate the same to the Agent, or in same
day funds, as applicable, for the account of all of the Lenders and for
application to the Obligations in accordance with the applicable provisions of
this Agreement, or (B) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
49
12.13. Agency for Perfection. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession as of the Closing Date. Should any Lender (other than the Agent)
obtain possession of any such Collateral, such Lender shall notify the Agent
thereof, and, promptly upon the Agent's request therefor shall deliver such
Collateral to the Agent or in accordance with the Agent's instructions.
12.14. Payments by Agent to Lenders. All payments to be made by the Agent
to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds to each Lender pursuant to wire transfer
instructions delivered in writing to the Agent on or prior to the Closing Date
(or if such Lender is an Assignee, on the applicable Assignment and Acceptance),
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to the Agent. Concurrently with each such payment,
the Agent shall identify whether such payment (or any portion thereof)
represents principal, premium or interest on the Term Loan or otherwise. Unless
the Agent receives notice from the Borrowers prior to the date on which any
payment is due to the Lenders that the Borrowers will not make such payment in
full as and when required, the Agent may assume that the Borrowers have made
such payment in full to the Agent on such date in immediately available funds
and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrowers have not made
such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
12.15. Intentionally Omitted.
12.16. Intentionally Omitted.
12.17. Concerning the Collateral and the Related Loan Documents. Each
Lender authorizes and directs the Agent to enter into the other Loan Documents
and the Intercreditor Agreement, for the ratable benefit and obligation of the
Agent and the Lenders. Each Lender agrees that any action taken by the Agent,
the Majority Lenders or Required Lenders, as applicable, in accordance with the
terms of this Agreement, the other Loan Documents or the Intercreditor
Agreement, and the exercise by the Agent, the Majority Lenders, or the Required
Lenders, as applicable, of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders. The Lenders acknowledge that the Term Loan and
all interest, fees and expenses hereunder constitute one Debt, secured pari
passu by all of the Collateral.
12.18. Intentionally Omitted.
50
12.19. Relation Among Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.
12.20. Additional Agents. None of the Lenders or other entities identified
on the facing page of or elsewhere in this Agreement as a "Book Manager",
"Arranger", "Syndication Agent" or "Documentation Agent" shall, in such
capacities, have any right, power, obligation, liability, responsibility or duty
under this Agreement or any other Loan Document other than those applicable to
all Lenders as such. Without limiting the foregoing, none of the Lenders so
identified shall have or be deemed to have any fiduciary relationship with any
other Lender. Each Lender acknowledges that it has not relied, and will not
rely, on any of the Lenders or other Persons so identified in deciding to enter
into this Agreement or any other Loan Document or in taking or not taking action
hereunder or thereunder.
ARTICLE XIII
MISCELLANEOUS
13.1. No Waivers; Cumulative Remedies. No failure by the Agent or any
Lender to exercise any right, remedy, or option under this Agreement or any
present or future supplement thereto, or in any other agreement between or among
the Borrower Parties and the Agent and/or any Lender, or delay by the Agent or
any Lender in exercising the same, will operate as a waiver thereof. No waiver
by the Agent or any Lender will be effective unless it is in writing, and then
only to the extent specifically stated. No waiver by the Agent or the Lenders on
any occasion shall affect or diminish the Agent's and each Lender's rights
thereafter to require strict performance by the Borrower Parties of any
provision of this Agreement. The Agent and the Lenders may proceed directly to
collect the Obligations without any prior recourse to the Collateral. The
Agent's and each Lender's rights under this Agreement will be cumulative and not
exclusive of any other right or remedy which the Agent or any Lender may have.
13.2. Severability. The illegality or unenforceability of any provision of
this Agreement or any Loan Document 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.
13.3. Governing Law; Choice of Forum; Service of Process.
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION
ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE
OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE
00
XXX) XX XXX XXXXX XX XXX XXXX; PROVIDED THAT THE AGENT AND THE LENDERS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES LOCATED IN NEW YORK CITY, NEW YORK; AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF EACH BORROWER PARTY, THE AGENT AND EACH
LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF EACH BORROWER PARTY, THE AGENT EACH LENDER
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING:
(1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST THE BORROWER PARTIES OR THEIR PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2)
EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS
DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) EACH BORROWER PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE ADMINISTRATIVE
BORROWER AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED
IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE
RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER
PERMITTED BY LAW.
13.4. Waiver of Jury Trial. THE BORROWER PARTIES, THE LENDERS AND THE
AGENT EACH IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
52
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER PARTIES, THE LENDERS
AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
13.5. Survival of Representations and Warranties. All of the Borrower
Parties' representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Agent or the Lenders or their
respective agents.
13.6. Other Security and Guaranties. The Agent, may, without notice or
demand and without affecting the Borrower Parties' obligations hereunder, from
time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
13.7. Fees and Expenses. The Borrowers agree to pay to the Agent, for its
benefit, on demand, all costs and expenses that the Agent pays or incurs in
connection with the negotiation, preparation, syndication, consummation,
administration, enforcement, and termination of this Agreement or any of the
other Loan Documents, including: (a) Attorney Costs; (b) costs and expenses
(including attorneys' and paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby; (c) costs and expenses of
lien and title searches and title insurance; (d) taxes, fees and other charges
for recording any mortgages, filing financing statements and continuations, and
other actions to perfect, protect, and continue the Agent's Liens (including
costs and expenses paid or incurred by the Agent in connection with the
consummation of Agreement); (e) sums paid or incurred to pay any amount or take
any action required of the Borrower Parties under the Loan Documents that the
Borrower Parties fail to pay or take; and (f) costs and expenses of forwarding
loan proceeds, collecting checks and other items of payment, and establishing
and maintaining Payment
53
Accounts and lock boxes, and costs and expenses of preserving and protecting the
Collateral. In addition, the Borrowers agree to pay costs and expenses incurred
by the Agent (including Attorneys' Costs) to the Agent, for their respective
benefit, on demand, and to the other Lenders for their benefit, on demand, and
all reasonable fees, expenses and disbursements incurred by such other Lenders,
in each case, paid or incurred to obtain payment of the Obligations, enforce the
Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise
enforce the provisions of the Loan Documents, or to defend any claims made or
threatened against the Agent or any Lender arising out of the transactions
contemplated hereby (including preparations for and consultations concerning any
such matters). The foregoing shall not be construed to limit any other
provisions of the Loan Documents regarding costs and expenses to be paid by the
Borrowers. All of the foregoing costs and expenses shall be charged to, and
promptly reimbursed by, the Borrowers.
13.8. Notices. Except as otherwise provided herein, all notices, demands
and requests that any party is required or elects to give to any other shall be
in writing, or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service, (b) four (4) days after it shall have been mailed by United States
mail, first class, certified or registered, with postage prepaid, or (c) in the
case of notice by such a telecommunications device, when properly transmitted
and confirmed, in each case addressed to the party to be notified as follows:
If to the Agent:
with copies to:
If to the Borrower Parties, or any of them:
Salton, Inc.
0000 Xxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
Email: xxxxxxx@xxxxxxxxx.xxx
54
with copies to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Email: xxxxxxxxxxx@xxxxxxxxxxxx.xxx
If to a Lender, to such Lender at such address as shall be set forth on
its signature page hereof,
in each case above, or to such other address as each party may designate for
itself by like notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall not adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
13.9. Waiver of Notices. Unless otherwise expressly provided herein, the
Borrower Parties waive presentment, and notice of demand or dishonor and protest
as to any instrument, notice of intent to accelerate the Obligations and notice
of acceleration of the Obligations, as well as any and all other notices to
which it might otherwise be entitled. No notice to or demand on the Borrower
Parties which the Agent or any Lender may elect to give shall entitle the
Borrower Parties, or any of them, to any or further notice or demand in the
same, similar or other circumstances.
13.10. Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; provided, however, that no interest herein may be
assigned by the Borrower Parties without prior written consent of the Agent and
each Lender. The rights and benefits of the Agent and the Lenders hereunder
shall, if such Persons so agree, inure to any party acquiring any interest in
the Obligations or any part thereof.
13.11. Indemnity of the Agent and the Lenders by the Borrowers.
(a) Each Borrower agrees to defend, indemnify and hold the
Agent-Related Persons, and each Lender and each of its respective officers,
directors, employees, counsel, representatives, agents and attorneys in fact
(each, an "Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated
55
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement, any other Loan Document
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrowers shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified Liabilities resulting from
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
(b) Each Borrower agrees to indemnify, defend and hold harmless the
Agent and the Lenders from any loss or liability directly or indirectly arising
out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of a hazardous substance
relating to the Borrowers' operations, business or property. This indemnity will
apply whether the hazardous substance is on, under or about the Borrower's
property or operations or property leased to the Borrowers. The indemnity
includes but is not limited to Attorneys Costs. The indemnity extends to the
Agent and the Lenders, their parents, affiliates, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns.
"Hazardous substances" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant"
or a similar designation or regulation under any federal, state or local law
(whether under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including petroleum or natural gas. This
indemnity will survive repayment of all other Obligations.
(c) It is understood that the handling of the Collateral of the
Borrowers in a combined fashion, as more fully set forth herein, is done solely
as an accommodation to the Borrowers in order to utilize the collective
borrowing powers of the Borrowers in the most efficient and economical manner
and at their request, and that neither the Agent nor any Lender shall incur
liability to any Borrower as a result hereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Collateral in a
combined fashion since the successful operation of each Borrower is dependent on
the continued successful performance of the integrated group. To induce the
Agent and the Lenders to do so, and in consideration thereof, each Borrower
hereby jointly and severally agrees to indemnify and hold harmless the Agent and
the Lenders against any and all liability, expense, loss or claim of damage or
injury, made against the Agent or the Lenders by any Borrower or by any third
party whosoever, arising from or incurred by reason of (i) the handling of the
Collateral of the Borrowers as herein provided, (ii) the Agent's or any Lender's
relying on any instructions of the Administrative Borrower, or (iii) any other
action taken by the Agent or any Lender hereunder or under the other Loan
Documents.
13.12. Limitation of Liability. NO CLAIM MAY BE MADE BY EACH OF ANY
BORROWER PARTY, ANY LENDER OR OTHER PERSON AGAINST THE
56
AGENT, ANY LENDER, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL,
REPRESENTATIVES, AGENTS OR ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH
OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH BORROWER
PARTY AND EACH LENDER HEREBY WAIVES, RELEASES AND AGREES NOT TO XXX UPON ANY
CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR
SUSPECTED TO EXIST IN ITS FAVOR.
13.13. Final Agreement. This Agreement and the other Loan Documents are
intended by the Borrower Parties, the Agent and the Lenders to be the final,
complete, and exclusive expression of the agreement between them. This Agreement
supersedes any and all prior oral or written agreements relating to the subject
matter hereof. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement or any other Loan Document shall be made, except by
a written agreement signed by the Borrower Parties party thereto and a duly
authorized officer of each of the Agent and the requisite Lenders.
13.14. Counterparts. This Agreement may be executed in any number of
counterparts, and by the Agent, each Lender, and each Borrower Party in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement; signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same document.
13.15. Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
13.16. Right of Setoff. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Borrowers, any such notice being waived by the
Borrowers to the fullest extent permitted by law, to set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender or any
Affiliate of such Lender to or for the credit or the account of the Borrowers
against any and all Obligations owing to such Lender, now or hereafter existing,
irrespective of whether or not the Agent or such Lender shall have made demand
under this Agreement or any Loan Document and although such Obligations may be
contingent or unmatured. Each Lender agrees promptly to notify the Borrowers and
the Agent after any such set-off and application made by such Lender; provided,
57
however, that the failure to give such notice shall not affect the validity of
such set-off and application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL
EXERCISE ANY RIGHT OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT
ACCOUNT OR PROPERTY OF ANY BORROWER HELD OR MAINTAINED BY SUCH LENDER WITHOUT
THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.
13.17. Confidentiality.
(a) The Borrower Parties hereby consent that the Agent and each
Lender may issue and disseminate to the public general information describing
the credit accommodation entered into pursuant to this Agreement, including the
name and address of the Borrower Parties and a general description of the
Borrower Parties' businesses and may use the Borrower Parties' name in
advertising and other promotional material.
(b) Each Lender severally agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the Borrowers Parties
and provided to the Agent or such Lender by or on behalf of the Borrower
Parties, under this Agreement or any other Loan Document, except to the extent
that such information (i) was or becomes generally available to the public other
than as a result of disclosure by the Agent or such Lender, or (ii) was or
becomes available on a nonconfidential basis from a source other than the
Borrower Parties, provided that such source is not bound by a confidentiality
agreement with the Borrower Parties known to the Agent or such Lender; provided,
however, that the Agent and any Lender may disclose such information (1) at the
request or pursuant to any requirement of any Governmental Authority to which
the Agent or such Lender is subject or in connection with an examination of the
Agent or such Lender by any such Governmental Authority; (2) pursuant to
subpoena or other court process; (3) when required to do so in accordance with
the provisions of any applicable Requirement of Law; (4) to the extent
reasonably required in connection with any litigation or proceeding (including,
but not limited to, any bankruptcy proceeding) to which the Agent, any Lender or
their respective Affiliates may be party; (5) to the extent reasonably required
in connection with the exercise of any remedy hereunder or under any other Loan
Document; (6) to the Agent's or such Lender's independent auditors, accountants,
attorneys and other professional advisors; (7) to any prospective Participant or
Assignee under any Assignment and Acceptance, actual or potential, provided that
such prospective Participant or Assignee agrees to keep such information
confidential to the same extent required of the Agent and the Lenders hereunder;
(8) as expressly permitted under the terms of any other document or agreement
regarding confidentiality to which the Borrower Parties are party or is deemed
party with the Agent or such Lender; (9) to its Affiliates; and (10) for the
purpose of defending itself, reducing its liability, or protecting or exercising
any of its claims, rights, remedies or interests under or in connection with any
Loan Document.
58
(c) Each Lender acknowledges that, under certain circumstances the
United States securities laws may prohibit a Person who has received material,
non-public information from an issuer from purchasing or selling securities of
such issuer or from communicating such information to any other Person under
circumstances in which it is reasonably foreseeable that such other Person is
likely to purchase or sell such securities. Each Lender further acknowledges
that certain confidential information could be considered material non-public
information and agrees that it will not, and it will use reasonable efforts to
ensure that its employees will not, trade in the securities of the Parent on the
basis of such information or communicate such information to any other Person
under circumstances in which it is reasonably foreseeable that such other Person
is likely to purchase or sell such securities.
(d) This Section 13.17 shall survive the termination of this
Agreement.
13.18. Conflicts with Other Loan Documents. Unless otherwise expressly
provided in this Agreement (or in another Loan Document by specific reference to
the applicable provision contained in this Agreement), if any provision
contained in this Agreement conflicts with any provision of any other Loan
Document, the provision contained in this Agreement shall govern and control.
13.19. The Administrative Borrower. Each Borrower hereby irrevocably
appoints Salton, Inc. as the borrowing agent and attorney-in-fact for all
Borrowers (the "Administrative Borrower"), which appointment shall remain in
full force and effect unless and until the Agent shall have received prior
written notice signed by each Borrower that such appointment has been revoked
and that another Borrower has been appointed the Administrative Borrower. Each
Borrower hereby irrevocably appoints and authorizes the Administrative Borrower
(i) to provide the Agent with all notices and instructions under this Agreement
and (ii) to take such action as the Administrative Borrower deems appropriate on
its behalf to exercise such other powers as are reasonably incidental thereto to
carry out the purposes of this Agreement.
ARTICLE XIV
JOINT AND SEVERAL OBLIGATIONS
14.1. All Obligations to Constitute Joint and Several Obligations.
(a) All Obligations shall constitute joint and several obligations
of the Borrowers and shall be secured by the Agent's Lien upon all of the
Collateral, and by all other security interests and Liens heretofore, now or at
any time hereafter granted by each Borrower to the Agent and the Lenders, to the
extent provided in the Loan Documents under which such Lien arises. Each
Borrower expressly represents and acknowledges that it is part of a common
enterprise with the other Borrowers and that any financial accommodations by the
Agent and the Lenders to any other Borrower hereunder and under the other Loan
Documents are and will be of direct and indirect interest, benefit and advantage
to all Borrowers. Each Borrower acknowledges that any notice or request
59
given by the Administrative Borrower (including the Administrative Borrower) to
the Agent or any Lender shall bind all Borrowers, and that any notice given by
the Agent, or any Lender to any Borrower shall be effective with respect to all
Borrowers. Each Borrower acknowledges and agrees that each Borrower shall be
liable, on a joint and several basis, for all of the Loans and other
Obligations, regardless of which Borrower actually may have received the
proceeds of any of the Loans or other extensions of credit or the amount of such
Loans received or the manner in which the Agent or any of the Lenders accounts
among the Borrowers for such Loans or other extensions of credit on its books
and records, and further acknowledges and agrees that Loans to any Borrower
inure to the mutual benefit of all of the Borrowers and that the Agent and the
Lenders are relying on the joint and several liability of the Borrowers in
extending the Loans and other financial accommodations hereunder. Each Borrower
shall be entitled to subrogation and contribution rights from and against the
other Borrowers to the extent any Borrower is required to pay to the Lenders any
amount in excess of the Loans advanced directly to, or other Obligations
incurred directly by, such Borrower or as otherwise available under Applicable
Law; provided, however, that such subrogation and contribution rights are and
shall be subject to the terms and conditions of this Section 14.1.
(b) It is the intent of the Borrowers, the Agent and the Lenders and
any other Person holding any of the Obligations that each Borrower's maximum
obligations hereunder (such Borrower's "Maximum Borrower Liability") in any case
or proceeding referred to below (but only in such a case or proceeding) shall
not be in excess of:
(i) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code on or within one (1) year from the date on
which any of the Obligations of such Borrower are incurred, the maximum amount
that would not otherwise cause the Obligations of such Borrower hereunder (or
any other Obligations of such Borrower to the Agent, the Lenders and any other
Person holding any of the Obligations) to be avoidable or unenforceable against
such Borrower under (A) Section 548 of the Bankruptcy Code or (B) any state
fraudulent transfer or fraudulent conveyance act or statute applied in such case
or proceeding by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code subsequent to one (1) year from the date on
which any of the Obligations of such Borrower are incurred, the maximum amount
that would not otherwise cause the Obligations of such Borrower hereunder (or
any other Obligations of such Borrower to the Agent, the Lenders and any other
Person holding any of the Obligations) to be avoidable or unenforceable against
such Borrower under any state fraudulent transfer or fraudulent conveyance act
or statute applied in any such case or proceeding by virtue of Section 544 of
the Bankruptcy Code; or
60
(iii) in a case or proceeding commenced by or against such
Borrower under any law, statute or regulation other than the Bankruptcy Code
relating to dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief from time to time in effect affecting
the rights of creditors generally (collectively, "Other Debtor Relief Law"), the
maximum amount that would not otherwise cause the Obligations of such Borrower
hereunder (or any other Obligations of such Borrower to the Agent and the
Lenders and any other Person holding any of the Obligations) to be avoidable or
unenforceable against such Borrower under such Other Debtor Relief Law,
including, without limitation, any state fraudulent transfer or fraudulent
conveyance act or statute applied in any such case or proceeding. (The
substantive state or federal laws under which the possible avoidance or
unenforceability of the Obligations of any Borrower hereunder (or any other
Obligations of such Borrower to the Agent, the Lenders and any other Person
holding any of the Obligations) shall be determined in any such case or
proceeding shall hereinafter be referred to as the "Avoidance Provisions").
Notwithstanding the foregoing, no provision of this Section 14.1(b) shall
limit any Borrower's liability for loans advanced directly or indirectly to it
under this Agreement.
(c) To the extent set forth in Section 14.1(b) hereof, but only to
the extent that the Obligations of any Borrower hereunder, or the transfers made
by such Borrower under any Loan Document, would otherwise be subject to
avoidance under any Avoidance Provisions if such Borrower is not deemed to have
received valuable consideration, fair value, fair consideration or reasonably
equivalent value for such transfers or obligations, or if such transfers or
obligations of any Borrower hereunder would render such Borrower insolvent, or
leave such Borrower with an unreasonably small capital or unreasonably small
assets to conduct its business, or cause such Borrower to have incurred debts
(or to have intended to have incurred debts) beyond its ability to pay such
debts as they mature, in each case as of the time any of the obligations of such
Borrower are deemed to have been incurred and transfers made under such
Avoidance Provisions, then the obligations of such Borrower hereunder shall be
reduced to that amount which, after giving effect thereto, would not cause the
Obligations of such Borrower hereunder (or any other Obligations of such
Borrower to the Agent, the Lenders or any other Person holding any of the
Obligations), as so reduced, to be subject to avoidance under such Avoidance
Provisions. This Section 14.1(c) is intended solely to preserve the rights
hereunder of the Agent, the Lenders and any other Person holding any of the
Obligations to the maximum extent that would not cause the obligations of the
Borrowers hereunder to be subject to avoidance under any Avoidance Provisions,
and none of the Borrowers nor any other Person shall have any right, defense,
offset, or claim under this Section 14.1(c) as against the Agent, the Lenders or
any other Person holding any of the Obligations that would not otherwise be
available to such Person under the Avoidance Provisions.
61
(d) Each Borrower agrees that the Obligations may at any time and
from time to time exceed the Maximum Borrower Liability of such Borrower, and
may exceed the aggregate Maximum Borrower Liability of all Borrowers hereunder,
without impairing this Agreement or any provision contained herein or affecting
the rights and remedies of the Lenders or the Agent hereunder.
(e) In the event any Borrower (a "Funding Borrower") shall make any
payment or payments under this Agreement or shall suffer any loss as a result of
any realization upon any collateral granted by it to secure its obligations
hereunder, each other Borrower (each, a "Contributing Borrower") shall
contribute to such Funding Borrower an amount equal to such payment or payments
made, or losses suffered, by such Funding Borrower determined as of the date on
which such payment or loss was made multiplied by the ratio of (i) the Maximum
Borrower Liability of such Contributing Borrower (without giving effect to any
right to receive any contribution or other obligation to make any contribution
hereunder), to (ii) the aggregate Maximum Borrower Liability of all Borrowers
(including the Funding Borrowers) hereunder (without giving effect to any right
to receive, or obligation to make, any contribution hereunder). Nothing in this
Section 14.1(e) shall affect any Borrower's joint and several liability to the
Agent and the Lenders for the entire amount of its Obligations. Each Borrower
covenants and agrees that its right to receive any contribution hereunder from a
Contributing Borrower shall be subordinate and junior in right of payment to all
obligations of the Borrowers to the Agent and the Lenders hereunder.
(f) No Borrower will exercise any rights that it may acquire by way
of subrogation hereunder or under any other Loan Document or at law by any
payment made hereunder or otherwise, nor shall any Borrower seek or be entitled
to seek any contribution or reimbursement from any other Borrower in respect of
payments made by such Borrower hereunder or under any other Loan Document, until
all amounts owing to the Agent and the Lenders on account of the Obligations are
paid in full in cash and the Commitments are terminated. If any amounts shall be
paid to any Borrower on account of such subrogation or contribution rights at
any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Borrower in trust for the Agent and the Lenders,
segregated from other funds of such Borrower, and shall, forthwith upon receipt
by such Borrower, be turned over to the Agent in the exact form received by such
Borrower (duly endorsed by such Borrower to the Agent, if required), to be
applied against the Obligations, whether matured or unmatured, as provided for
herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
62
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
BORROWERS:
SALTON, INC., a Delaware corporation
By:
----------------------------------------
Title:
-------------------------------------
TOASTMASTER INC., a Missouri
corporation
By:
----------------------------------------
Title:
-------------------------------------
SALTON TOASTMASTER LOGISTICS
LLC, a Delaware limited liability company
By:
----------------------------------------
Title:
-------------------------------------
GUARANTORS:
HOME CREATIONS DIRECT, LTD.,
a Delaware corporation
By:
----------------------------------------
Title:
-------------------------------------
SONEX INTERNATIONAL
CORPORATION, a Delaware corporation
By:
----------------------------------------
Title:
-------------------------------------
ICEBOX, LLC, an Illinois limited liability
company
By:
----------------------------------------
Title:
-------------------------------------
FAMILY PRODUCTS INC., a Delaware
corporation
By:
----------------------------------------
Title:
-------------------------------------
SALTON HOLDINGS, INC., a Delaware
corporation
By:
----------------------------------------
Title:
-------------------------------------
AGENT :
THE BANK OF NEW YORK,
as Agent
By:
----------------------------------------
Title:
-------------------------------------
ANNEX A
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have the following
respective meanings (unless otherwise defined therein), and all section
references in the following definitions shall refer to sections of the
Agreement:
"Account Debtor" means each Person obligated in any way on or in
connection with an Account, Chattel Paper or General Intangibles (including a
payment intangible).
"Accounts" means all of each Borrower's now owned or hereafter acquired or
arising accounts, as defined in the UCC, including any rights to payment for the
sale or lease of goods or rendition of services, whether or not they have been
earned by performance and all health care receivables.
"Administrative Borrower" has the meaning specified in Section 13.19.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person or which owns, directly or indirectly, five percent (5%) or more of
the outstanding equity interest of such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agent" means The Bank of New York, solely in its capacity as agent for
the Lenders, and any successor agent.
"Agent's Liens" means the Liens in the Collateral granted to the Agent,
for the benefit of the Lenders and the Agent pursuant to this Agreement and the
other Loan Documents.
"Agent-Related Persons" means the Agent, together with its Affiliates, and
the officers, directors, employees, counsel, representatives, agents and
attorneys-in-fact of the Agent and such Affiliates.
"Agreement" means the Credit Agreement to which this Annex A is attached,
as from time to time amended, restated, supplemented or otherwise modified.
"Anniversary Date" means each anniversary of the Closing Date.
"Applicable Margin" means seven percent (7.00%).
A-1
"Assignee" has the meaning specified in Section 11.2(a).
"Assignment and Acceptance" has the meaning specified in Section 11.2(a).
"Attorney Costs" means and includes all reasonable fees, expenses and
disbursements of any law firm or other counsel engaged by the Agent, and the
reasonably allocated costs and expenses of internal legal services of the Agent.
"Availability" means Availability as such term is defined in the First
Lien Credit Agreement, as such is amended, modified, supplemented or restated
from time to time in accordance with the terms thereof and hereof.
"Avoidance Provisions" has the meaning specified in Section 14.1(b)(iii).
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as in effect from time to time.
"Blocked Account Agreement" means any agreement among a Borrower, the
First Lien Agent and a Clearing Bank, concerning the collection of payments
which represent the proceeds of Accounts or of any other Collateral.
"Borrower Parties" means the Parent, the Borrowers and the Guarantors, and
"Borrower Party" shall mean any one of the foregoing Borrower Parties.
"Borrowers" means the Parent, Toastmaster, Inc. and Salton Toastmaster
Logistics LLC and "Borrower" shall mean any one of the foregoing Borrowers.
"Borrowing" means a borrowing hereunder consisting of the Term Loan made
on the Closing Date by the Lenders to the Borrowers.
"Business Day" means (a) any day that is not a Saturday, Sunday, or a day
on which banks in New York, New York are required or permitted to be closed, and
(b) with respect to all notices, determinations, fundings and payments in
connection with the Term Loans, any day that is a Business Day pursuant to
clause (a) above and that is also a day on which trading in Dollars is carried
on by and between banks in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all payments due (whether or not paid during
any fiscal period) in respect of the cost of any Fixed Asset or improvement, or
replacement, substitution, or addition thereto, which has a useful life of more
than one year, including,
A-2
without limitation, those costs arising in connection with the direct or
indirect acquisition of such asset by way of increased product or service
charges or in connection with a Capital Lease.
"Capital Lease" means any lease of property by the Parent or a Subsidiary
which, in accordance with GAAP, should be reflected as a capital lease on the
consolidated balance sheet of the Parent.
"Change of Control" shall mean (i) directly or indirectly a sale,
transfer, or other conveyance of all or substantially all of the assets of the
Parent in one transaction or a series of transactions, (ii) any "person" or
"group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable), other than the shareholders of the
Parent as of the Original Closing Date (as such term is defined in the First
Lien Credit Agreement) (or any Person or group of Persons that, as of the
Agreement Date, are Affiliates of such shareholders), is or becomes the
"beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a Person shall be deemed to
have "beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than thirty-five percent (35%) of the
aggregate number of votes of all classes of capital stock of the Parent that
ordinarily have voting power for the election of directors of the Parent, (iii)
during any period of twenty-four (24) consecutive months, individuals who at the
beginning of such period constituted the board of directors of the Parent,
together with any new directors whose election by such board or whose nomination
for election by the shareholders of the Parent was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
board of directors of the Parent then in office or (iv) the Parent shall cease
to own, directly or indirectly, 100% of the Stock of any Subsidiary, except as
otherwise permitted by Section 7.9.
"Chattel Paper" means all of the Parent's and each Subsidiary's now owned
or hereafter acquired chattel paper, as defined in the UCC, including electronic
chattel paper and tangible chattel paper.
"Clearing Bank" means any banking institution with whom a Payment Account
has been established pursuant to a Blocked Account Agreement.
"Closing Date" means the date of this Agreement.
"Closing Fees" has the meaning specified in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as in effect from time to
time.
A-3
"Collateral" means all of each Borrower Party's Accounts, Inventory,
Chattel Paper, Documents, Investment Property, Deposit Accounts, Equipment and
General Intangibles, and all other assets of any Person from time to time
subject to the Agent's Liens securing payment or performance of the Obligations,
but excluding up to thirty-five percent (35%) of the equity interests of any
Borrower Party in any Foreign Subsidiary.
"Collections" means all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Commitment" means, with respect to each Lender, the principal amount of
the Term Loan held by such Lender, and, with respect to all Lenders, the
aggregate principal amount of the Term Loan, in each case as such Dollar amounts
are set forth beside such Lender's name under the applicable heading on Schedule
1.1 or on the signature page of the Assignment and Acceptance pursuant to which
such Lender became a Lender hereunder in accordance with the provisions of
Section 11.2, as such Commitment may be adjusted from time to time in accordance
with the provisions of Section 11.2, and "Commitments" means, collectively, the
aggregate amount of the Commitments of all of the Lenders, as such obligations
may be reduced from time to time pursuant to the terms hereof.
"Consolidated Adjusted Net Earnings from Operations" means, with respect
to any fiscal period of the Parent, the Parent's net income on a consolidated
basis after provision for income taxes for such fiscal period, as determined in
accordance with GAAP and reported on the Financial Statements for such period,
excluding any and all of the following included in such net income: (a) gain or
loss arising from the sale of any capital assets; (b) gain arising from any
write up in the book value of any asset or loss arising from any write down in
the book value of any asset other than an asset the value of which is included
in the calculation of the Borrowing Base (as such term is defined in the First
Lien Credit Agreement), (c) earnings or losses of any Person, substantially all
the assets or Stock of which have been acquired by the Parent or any of its
Subsidiaries in any manner, to the extent realized by such other Person prior to
the date of acquisition; (d) earnings or losses of any Person in which the
Parent or any of its Subsidiaries has a minority ownership interest unless (and
only to the extent) such earnings or losses shall actually have been received by
the Parent or any of its Subsidiaries in the form of cash distributions; (e)
earnings or losses of any Person to which assets of the Parent or any of its
Subsidiaries shall have been sold, transferred or disposed of, or into which the
Parent or any of its Subsidiaries shall have been merged, or which has been a
party with the Parent or any of its Subsidiaries to any consolidation or other
form of reorganization, prior to the date of such transaction; (f) gain arising
from the acquisition of debt or equity securities of the Parent or any of its
Subsidiaries or from cancellation or forgiveness of Consolidated Debt; (g) gain
and non-cash loss arising from extraordinary items or from any other
non-recurring transaction, as determined in accordance with GAAP; and (h) all
restructuring charges incurred through October 31, 2004 as described on Schedule
E-3.
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"Consolidated Debt" means, without duplication, all indebtedness for
borrowed money or the deferred purchase price of property, to any Person, of any
kind or nature, now or hereafter owing, arising, due or payable, howsoever
evidenced, created, incurred, acquired or owing, whether primary, secondary,
direct, contingent, fixed or otherwise, excluding trade payables, but including
(a) all Obligations; (b) all obligations or liabilities created or arising under
any Capital Lease or conditional sale or other title retention agreement with
respect to property used or acquired by any Borrower Party, even if the rights
and remedies of the lessor, seller or lender thereunder are limited to
repossession of such property; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such property as would be shown on
a balance sheet of the Borrower Parties prepared in accordance with GAAP; (c)
all obligations and liabilities under Guaranties, (d) the present value
(discounted at the Base Rate) of lease payments due under synthetic leases, and
(e) earn-outs or other contingent payments incurred in connection with any
acquisition to the extent such earn-outs or payments are not reflected as
expenses on the income statements of such Person; provided, further, however,
that in no event shall the term Consolidated Debt include the capital stock
surplus, retained earnings, minority interests in the common stock of
Subsidiaries, lease obligations (other than pursuant to (b) or (d) above),
reserves for deferred income taxes and investment credits, or other deferred
credits or reserves.
"Consolidated EBITDA" means, with respect to any fiscal period of the
Parent, Consolidated Adjusted Net Earnings from Operations, plus, to the extent
deducted in the determination of Consolidated Adjusted Net Earnings from
Operations for that fiscal period, interest expenses, Federal, state, local and
foreign income taxes, depreciation and amortization (including, without
limitation, amortization of restricted stock, stock appreciation rights and
similar equity instruments), and impairment losses incurred in connection with a
restructuring of the U.S. operations in an aggregate amount not to exceed the
applicable amount set forth in Schedule E-4 for each applicable period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, with respect to any fiscal period of the Parent, on a
consolidated basis, the ratio of (a) the sum of (i) Consolidated EBITDA minus
(ii) Capital Expenditures (excluding Capital Expenditures funded with
Consolidated Debt other than Revolving Loans (as such term is defined in the
First Lien Credit Agreement), but including, without duplication, principal
payments with respect to such Consolidated Debt) to (b) Consolidated Fixed
Charges.
"Consolidated Fixed Charges" means, with respect to any fiscal period of
the Parent on a consolidated basis, without duplication, cash interest expense,
principal payments of Consolidated Debt (excluding any historical or future cash
payments made with respect to the refinancing of principal of Consolidated
Debt), all Distributions paid, all cash Investments, all Specified Transactions,
and Federal, state, local and foreign income taxes paid in cash.
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"Contaminant" means any material defined as waste, pollutant, hazardous
substance, toxic substance, hazardous waste or special waste under Environmental
Laws, including without limitation, petroleum or petroleum-derived substance or
waste, asbestos in any form or condition, polychlorinated biphenyls ("PCBs"), or
any constituent of any such substance or waste.
"Contributing Borrower" has the meaning specified in Section 14.1(e).
"Copyright Security Agreement" means Copyright Security Agreement,
executed and delivered by the Borrowers to the Agent, for the benefit of the
Agent and the Lenders, to evidence and perfect the Agent's security interest in
the Borrowers' present and future copyrights and related licenses and rights.
"Debt" means, without duplication, all indebtedness for borrowed money or
the deferred purchase price of property, to any Person, of any kind or nature,
now or hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise, excluding trade payables, but including (a) all Obligations;
(b) all obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement with respect to property
used or acquired by any Borrower Party, even if the rights and remedies of the
lessor, seller or lender thereunder are limited to repossession of such
property; provided, however, that all such obligations and liabilities which are
limited in recourse to such property shall be included in Debt only to the
extent of the book value of such property as would be shown on a balance sheet
of the Borrower Parties prepared in accordance with GAAP; (c) all obligations
and liabilities under Guaranties;(d) the present value (discounted at the Base
Rate) of lease payments due under synthetic leases, and (e) earn-outs or other
contingent payments incurred in connection with any acquisition to the extent
such earn-outs or payments are not reflected as expenses on the income
statements of such Person; provided, further, however, that in no event shall
the term Debt include the capital stock surplus, retained earnings, minority
interests in the common stock of Subsidiaries, lease obligations (other than
pursuant to (b) or (d) above), reserves for deferred income taxes and investment
credits, or other deferred credits or reserves.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at all times
equal to the sum of (a) the LIBOR Rate plus (b) ten percent (10%) per annum.
Each Default Rate shall be adjusted simultaneously with any change in the
applicable Interest Rate.
"Deposit Accounts" means all "deposit accounts" as such term is defined in
the UCC, now or hereafter held in the name of any Borrower Party, including,
without
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limitation, any checking or other demand deposit account, time, savings,
passbook or similar account maintained with a bank.
"Distribution" means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of property in respect of capital
stock (excluding any options or warrants for, or other rights with respect to,
such stock) of such corporation, other than distributions in capital stock (or
any options or warrants for such stock) of the same class; or (b) the redemption
or other acquisition by such corporation of any capital stock (or any options or
warrants for such stock) of such corporation.
"Documents" means all "documents" as such term is defined in the UCC,
including bills of lading, warehouse receipts or other documents of title, now
owned or hereafter acquired by any Borrower Party.
"DOL" means the United States Department of Labor or any successor
department or agency.
"Dollar" and "$" means dollars in the lawful currency of the United
States. Unless otherwise specified, all payments under this Agreement shall be
made in Dollars.
"EBITDA" means, with respect to any fiscal period of the Borrowers, US
Adjusted Net Earnings from Operations, plus, to the extent deducted in the
determination of US Adjusted Net Earnings from Operations for that fiscal
period, interest expenses, Federal, state, local and foreign income taxes,
depreciation and amortization (including, without limitation, amortization of
restricted stock, stock appreciation rights and similar equity instruments), and
impairment losses incurred in connection with a restructuring of the U.S.
operations in an aggregate amount not to exceed the applicable amount set forth
in Schedule E-4 for each applicable period.
"Eligible Assignee" means (a) a qualified institutional buyer (as defined
by Rule 144A promulgated under the Securities Act of 1933, as amended); (b) any
Lender listed on the signature page of this Agreement; (c) any Affiliate of any
Lender; and (d) a Related Fund.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for a Release.
"Environmental Laws" means all federal, state or local, or foreign
Governmental Authority, laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative orders, directed duties,
licenses, authorizations and permits of, and agreements with, any Governmental
Authority, in each case relating to environmental, health, safety and land use
matters.
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"Environmental Lien" means a Lien in favor of any Governmental Authority
for (a) any liability under Environmental Laws, or (b) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"Equipment" means all of any Borrower Party's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (other than consumer goods, farm products or
Inventory), including embedded software, motor vehicles with respect to which a
certificate of title has been issued, aircraft, dies, tools, jigs, molds and
office equipment, as well as all of such types of property leased by any
Borrower Party and all of any Borrower Party's rights and interests with respect
thereto under such leases (including, without limitation, options to purchase);
together with all present and future additions and accessions thereto,
replacements therefor, component and auxiliary parts and supplies used or to be
used in connection therewith, and all substitutes for any of the foregoing, and
all manuals, drawings, instructions, warranties and rights with respect thereto;
wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder, as in effect from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with any Borrower Party within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan,
(b) a withdrawal by any Borrower Party or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA, (c) a complete or partial withdrawal by the any Borrower Party or any
ERISA Affiliate from a Multi-employer Plan or notification that a Multi-employer
Plan is in reorganization, (d) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multi-employer Plan, (e) the occurrence of an event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multi-employer Plan, or (f) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon any Borrower Party or any ERISA Affiliate.
"Event of Default" has the meaning specified in Section 9.1.
A-8
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
promulgated thereunder, as in effect from time to time.
"Exchange Offer" has the meaning specified in the Recitals to this
Agreement.
"Exchange Offer Closing" has the meaning specified in the Recitals to this
Agreement
"Excluded Taxes" has the meaning specified in Section 4.1(a).
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to the Bank on such
day on such transactions as determined by the Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Financial Statements" means, according to the context in which it is
used, the financial statements referred to in Sections 5.2 and 6.6 or any other
financial statements required to be given to the Lenders pursuant to this
Agreement.
"First Lien Agent" means WFF, in its capacity as administrative agent and
collateral agent for the agents and lenders party to the First Lien Credit
Agreement, together with its successors and assigns thereto in such capacities.
"First Lien Co-Agent" means Silver Point, in its capacity as the co-agent,
syndication agent, and documentation agent for the lenders party to the First
Lien Credit Agreement, together with its successors and assigns thereto in such
capacities.
"First Lien Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of May 9, 2003 and amended and restated as of June
15, 2004, as amended by that certain Resignation and Appointment Agreement dated
August 30, 2004, and as further amended by that certain First Amendment to
Amended and Restated Credit Agreement dated August 30, 2004, as further amended
by that certain Second Amendment to Amended and Restated Credit Agreement dated
May 11, 2005, as further amended by that certain Third Amendment to Amended and
Restated Credit Agreement dated July 5, 2005, and as further amended, by and
among the Parent, Borrowers, the First Lien Agent, the First Lien Co-Agent, and
the lenders from time to time party
A-9
thereto, as such is amended, modified, supplemented or restated from time to
time in accordance with the terms thereof and hereof.
"First Lien Lenders" means the Lenders from time to time that are parties
to the First Lien Credit Agreement as Lender.
"First Lien Loan Documents" means the Loan Documents as such term is
defined in the First Lien Credit Agreement, as such is amended, modified,
supplemented or restated from time to time in accordance with the terms thereof
and hereof.
"First Lien Loans" means the Loans as such term is defined in the First
Lien Credit Agreement, as such is amended, modified, supplemented or restated
from time to time in accordance with the terms thereof and hereof.
"First Lien Maximum Amount" means the Maximum Amount as such term is
defined in the First Lien Credit Agreement, as such is amended, modified,
supplemented or restated from time to time in accordance with the terms thereof
and hereof.
"First Lien Obligations" means the Obligations as such term is defined in
the First Lien Credit Agreement, as such is amended, modified, supplemented or
restated from time to time in accordance with the terms thereof and hereof.
"First Lien Required Lenders" means the Required Lenders as such term is
defined in the First Lien Credit Agreement, as such is amended, modified,
supplemented or restated from time to time in accordance with the terms thereof
and hereof.
"First Lien Term Loan" means the Term Loan as such term is defined in the
First Lien Credit Agreement, as such is amended, modified, supplemented or
restated from time to time in accordance with the terms thereof and hereof.
"Fiscal Month" means any fiscal month of any Fiscal Year.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the Parent's fiscal year for financial accounting
purposes which ends each year on the Saturday closest to June 30. The current
Fiscal Year of the Parent will end on July 2, 2005.
"Fixed Assets" means the Equipment and Real Estate of the Borrowers.
"Foreign Adjusted Net Earnings from Operations" means, with respect to any
fiscal period of the Foreign Subsidiaries, the Foreign Subsidiaries' net income
on a consolidated basis after provision for income taxes for such fiscal period,
as determined in accordance with GAAP and reported on the Financial Statements
for such period, excluding any and all of the following included in such net
income: (a) gain or loss
A-10
arising from the sale of any capital assets; (b) gain arising from any write up
in the book value of any asset or loss arising from any write down in the book
value of any asset other than an asset the value of which is included in the
calculation of the Borrowing Base (as such term is defined in the First Lien
Credit Agreement); (c) earnings or losses of any Person, substantially all the
assets or Stock of which have been acquired by the Foreign Subsidiaries in any
manner, to the extent realized by such other Person prior to the date of
acquisition; (d) earnings or losses of any Person in which any Foreign
Subsidiary has a minority ownership interest unless (and only to the extent)
such earnings or losses shall actually have been received by such Foreign
Subsidiary in the form of cash distributions; (e) earnings or losses of any
Person to which assets of any Foreign Subsidiary shall have been sold,
transferred or disposed of, or into which any Foreign Subsidiary shall have been
merged, or which has been a party with any Foreign Subsidiary to any
consolidation or other form of reorganization, prior to the date of such
transaction; (f) gain arising from the acquisition of debt or equity securities
of any Foreign Subsidiary or from cancellation or forgiveness of Debt; (g) gain
and non-cash losses arising from extraordinary items or from any other
non-recurring transaction, as determined in accordance with GAAP; and (h) all
restructuring charges incurred by the Foreign Subsidiaries through October 31,
2004 as described on Schedule E-3.
"Foreign EBITDA" means, with respect to any fiscal period of the Foreign
Subsidiaries, Foreign Adjusted Net Earnings from Operations, plus, to the extent
deducted in the determination of Foreign Adjusted Net Earnings from Operations
for that fiscal period, interest expenses, Federal, state, local and foreign
income taxes, depreciation and amortization (including, without limitation,
amortization of restricted stock, stock appreciation rights and similar equity
instruments).
"Foreign Leverage Ratio" means a ratio determined as of the relevant
calculation date by dividing Foreign Net Debt as of the last day of the
applicable period by Foreign EBITDA for such period.
"Foreign Net Debt" means, with respect to the Foreign Subsidiaries,
without duplication, (I) all indebtedness for borrowed money or the deferred
purchase price of property, to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise, excluding trade payables, but including (a) all Obligations
of the Foreign Subsidiaries; (b) all obligations or liabilities created or
arising under any Capital Lease or conditional sale or other title retention
agreement with respect to property used or acquired by any Foreign Subsidiary,
even if the rights and remedies of the lessor, seller or lender thereunder are
limited to repossession of such property; provided, however, that all such
obligations and liabilities which are limited in recourse to such property shall
be included in Foreign Net Debt only to the extent of the book value of such
property as would be shown on a balance sheet of the Foreign Subsidiaries
prepared in accordance with GAAP; (c) all obligations and liabilities of the
Foreign Subsidiaries under Guaranties; (d) the present value (discounted at the
Base
A-11
Rate) of lease payments of the Foreign Subsidiaries due under synthetic leases,
and (e) earn-outs or other contingent payments incurred by the Foreign
Subsidiaries in connection with any acquisition to the extent such earn-outs or
payments are not reflected as expenses on the income statements of such Person;
provided, further, however, that in no event shall the term Foreign Net Debt
include the capital stock surplus, retained earnings, minority interests in the
common stock of Subsidiaries, lease obligations (other than pursuant to (b) or
(d) above), reserves for deferred income taxes and investment credits, or other
deferred credits or reserves, minus (II) cash held by the Foreign Subsidiaries.
"Foreign Pledge Agreements" means, collectively those certain pledge
agreements among the Borrower Parties, or any of them, and the Agent for the
benefit of the Agent and the other Lenders pursuant to which one or more
Borrower Parties may pledge up to and including sixty-five percent (65%) of the
equity interests of directly-owned Foreign Subsidiaries.
"Foreign Subsidiaries" has the meaning specified in Section 5.2(a).
"Funded Debt" shall mean, for any date, total outstanding Obligations of
Borrowers as of the date of determination.
"Funding Borrower" has the meaning specified in Section 14.1(e).
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles and practices set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
United States accounting profession), which are applicable to the circumstances
as of the Closing Date.
"General Intangibles" means all of the Parent's and each Subsidiary's now
owned or hereafter acquired general intangibles, choses in action and causes of
action and all other intangible personal property of the Parent and each
Subsidiary of every kind and nature (other than Accounts), including, without
limitation, all contract rights, payment intangibles, Proprietary Rights,
corporate or other business records, inventions, designs, blueprints, plans,
specifications, patents, patent applications, trademarks, service marks, trade
names, trade secrets, goodwill, copyrights, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, any funds which may
become due to the Parent or any Subsidiary in connection with the termination of
any Plan or other employee benefit plan or any rights thereto and any other
amounts payable to the Parent or any Subsidiary from any Plan or other employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds
A-12
thereof, proceeds of insurance covering the lives of key employees on which the
Parent or any Subsidiary is beneficiary, rights to receive dividends,
distributions, cash, Instruments and other property in respect of or in exchange
for pledged equity interests or Investment Property and any letter of credit,
guarantee, claim, security interest or other security held by or granted to the
Parent or any Subsidiary.
"Good-Faith Protest" means the right of a Borrower Party to protest any
Lien described in clause (d) of the definition of Permitted Liens, provided that
(a) a reserve acceptable to the Agent in its commercially reasonable discretion
with respect to such obligation is established, (b) any such protest is
instituted promptly and prosecuted diligently by such Borrower Party in good
faith, and (c) the Agent is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the Agent's Liens.
"Goods" means all "goods" as defined in the UCC, now owned or hereafter
acquired by any Borrower Party, wherever located, including embedded Software to
the extent included in "goods" as defined in the UCC.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantors" means the Parent and those Subsidiaries signatory to the
Subsidiary Guaranty from time to time.
"Guaranty" means, with respect to any Person, all obligations of such
Person which in any manner directly or indirectly guarantee or assure, or in
effect guarantee or assure, the payment or performance of any indebtedness,
dividend or other obligations of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including any such obligations
incurred through an agreement, contingent or otherwise: (a) to purchase the
guaranteed obligations or any property constituting security therefor; (b) to
advance or supply funds for the purchase or payment of the guaranteed
obligations or to maintain a working capital or other balance sheet condition;
or (c) to lease property or to purchase any debt or equity securities or other
property or services.
"Indemnified Liabilities" has the meaning specified in Section 13.11.
"Indemnified Person" has the meaning specified in Section 13.11.
"Indentures" has the meaning specified in the definition of Senior Notes.
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"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law, assignment for the benefit of creditors,
formal or informal moratoria, composition, extension generally with creditors or
proceedings seeking reorganization, arrangement or other similar relief.
"Instruments" means all "instruments" as such term is defined in the UCC,
now owned or hereafter acquired by any Borrower Party.
"Intercompany Account" means the net aggregate month-end sum of the
following accounts: (a) "Notes Receivable-Salton CV"; plus (b) "Interest
Receivable-Salton CV" minus (c) "Interco Payable-Salton Hong Kong"; minus (d)
Other Payables-Salton UK; plus (e) Interco receivable-Toastmaster de Mexico
plus (f) all other accounts receivable maintained by Borrowers with Foreign
Subsidiaries minus (g) all other accounts payable maintained by Borrowers with
Foreign Subsidiaries.
"Intercreditor Agreement" means that certain Intercreditor Agreement dated
as of August ___, 2005, among the First Lien Co-Agent, the First Lien Agent and
the Agent, as amended, modified, supplemented or restated from time to time.
"Interest Period" means, as to the Term Loans, (a) the period commencing
on the Funding Date, and ending on January 14, 2006, and (b) thereafter,
successive six month periods through the Stated Maturity Date, each beginning on
January 15 and July 15, respectively. The last Interest Period shall begin on
January 15, 2008 and end on the Stated Maturity Date.
"Interest Rate" means each or any of the interest rates, including the
Default Rate, set forth in Section 2.1.
"Inventory" means all of any Borrower Party's right, title and interest
with respect to "inventory," as such term is defined in the UCC, wherever
located, and in any event including now owned and hereafter acquired inventory,
goods and merchandise, wherever located, to be furnished under any contract of
service or held for sale or lease, all returned goods, raw materials,
work-in-process, finished goods (including embedded Software), other materials
and supplies of any kind, nature or description which are used or consumed in
any Borrower Party's business or used in connection with the packing, shipping,
advertising, selling or finishing of such goods, merchandise, and all documents
of title or other Documents representing them.
"Investment" means, as to any Borrower Party, any acquisition of property
by such Borrower Party in exchange for cash or other property, whether in the
form of an acquisition of stock, debt, or other indebtedness or obligation, or
the purchase or acquisition of any other property, or a loan, advance, capital
contribution, or subscription.
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"Investment Property" means all of any Borrower Party's right, title and
interest in and to any and all: (a) securities, whether certificated or
uncertificated; (b) securities entitlements; (c) securities accounts; (d)
commodity contracts; or (e) commodity accounts.
"IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Kmart Receivable Purchasing Agreement" means that certain Amended and
Restated Single Customer Credit-Approved Receivables Purchasing Agreement, dated
as of May 8, 2003 between Salton Toastmaster Logistics LLC and The CIT
Group/Commercial Services, Inc., as amended.
"Knowledge" means, with respect to the Parent or the Administrative
Borrower, as applicable, the best knowledge of the senior executive officers of
the Parent or the Administrative Borrower, as applicable.
"Latest Projections" means the projections most recently received by the
Agent pursuant to Section 5.3(b).
"Lender" and "Lenders" have the meanings specified in the introductory
paragraph hereof and shall include the Agent to the extent of any Term Loan
outstanding.
"LIBOR Rate" means, the six month London Interbank Offered Rate, as
published in the Wall Street Journal on the first day of each Interest Period;
provided, however, if the first day of any Interest Period is not a Business
Day, then it shall be based on such rate published on the Business Day
immediately preceding such date.
"Lien" means: (a) any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (b) to the extent not included
under the preceding clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting property; and (c) any contingent or other
agreement to provide any of the foregoing.
"Loan Documents" means this Agreement, the Patent and Trademark Security
Agreement, the Copyright Security Agreement, Security Agreement, the Subsidiary
Guaranty, the Pledge Agreement, the Foreign Pledge Agreements, the Subordination
Agreement, and any other agreements, instruments, and documents heretofore, now
or hereafter evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the
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Collateral, or any other aspect of the transactions contemplated by this
Agreement, in each case as amended, restated, supplemented or otherwise modified
from time to time.
"Loan Parties" means, collectively, the Borrower Parties and the Foreign
Subsidiaries (other than Amalgamated Appliance Holding Limited).
"Loans" means, collectively, all loans and advances provided for in
Article 1.
"Majority Lenders" means at any date of determination Lenders whose Pro
Rata Shares aggregate more than fifty percent (50%).
"Margin Stock" means "margin stock" as such term is defined in Regulation
T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower Parties on a consolidated
basis or of the Collateral (b) a material impairment of the ability of the
Borrower Parties, taken as a whole, to perform under any Loan Document or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability against any Borrower Party of any Loan Document to which it is a
party.
"Maximum Borrower Liability" has the meaning specified in Section 14.1(b).
"Maximum Rate" has the meaning specified in Section 2.3.
"Multi-employer Plan" means a "multi-employer plan" as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding six (6) years contributed to by any Borrower Party or any
ERISA Affiliate.
"Net Cash Proceeds" means (a) with respect to the sale or issuance by any
Person or any of its Subsidiaries of any shares of its Stock, the aggregate
amount of cash received (directly or indirectly) from time to time (whether as
initial consideration or through the payment or disposition of deferred
consideration) by or on behalf of such Person or such Subsidiary in connection
therewith, after deducting therefrom only (i) reasonable costs and expenses
related thereto incurred by such Person or such Subsidiary in connection
therewith (including, without limitation, legal, accounting and investment
banking fees, and underwriting discounts and commissions), (ii) transfer taxes
paid by such Person or such Subsidiary in connection therewith and (iii) net
income taxes to be paid in connection therewith (after taking into account any
tax credits or deductions and any tax sharing arrangements), and (b) with
respect to any sale or disposition by any Person or any Subsidiary thereof of
property or assets, the amount of Collections received (directly or indirectly)
from time to time (whether as initial consideration or through the payment of
deferred consideration) by or on behalf of such Person or such Subsidiary, in
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connection therewith after deducting therefrom only (i) the amount of any Debt
secured by any Permitted Lien on any asset (other than (A) Debt owing to Agent
or any Lender under this Agreement or the other Loan Documents and (B) Debt
assumed by the purchaser of such asset) which is required to be, and is, repaid
in connection with such disposition, (ii) reasonable expenses related thereto
incurred by such Person or such Subsidiary in connection therewith, and (iii)
taxes paid or payable to any taxing authorities by such Person or such
Subsidiary in connection therewith, in each case to the extent, but only to the
extent, that the amounts so deducted are, at the time of receipt of such cash,
actually paid or payable to a Person that is not an Affiliate and are properly
attributable to such transaction; in the case of each of clauses (a) and (b), to
the extent, but only to the extent, that the amounts so deducted are (x)
actually paid to a Person that, except in the case of reasonable out-of-pocket
expenses, is not an Affiliate of such Person or any of its Subsidiaries and (y)
properly attributable to such transaction or to the asset that is the subject
thereof, as the case may be.
"Non-Consenting Lender" has the meaning specified in Section 11.1(c).
"Obligations" means all present and future loans, advances, liabilities,
obligations, covenants, duties, and debts owing by the Borrowers to the Agent
and/or any Lender, arising under or pursuant to this Agreement or any of the
other Loan Documents, whether or not evidenced by any note, or other instrument
or document, whether arising from an extension of credit, acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, as principal or
guarantor, and including all principal, interest, charges, expenses, fees,
attorneys' fees, filing fees and any other sums chargeable to any Borrower
hereunder or under any of the other Loan Documents.
"originating Lender" has the meaning specified in Section 11.2(e).
"Other Debtor Relief Law" has the meaning specified in Section
14.1(b)(iii).
"Other Taxes" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from
any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Documents.
"Parent" has the meaning specified in the preamble of this Agreement.
"Participant" means any Person who shall have been granted the right by
any Lender to participate in the financing provided by such Lender under this
Agreement, and who shall have entered into a participation agreement in form and
substance satisfactory to such Lender.
"Participant Register" has the meaning specified in Section 11.2(h).
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"Patent and Trademark Security Agreement" means any Patent Security
Agreement and the Trademark Security Agreement executed and delivered by certain
of the Borrower Parties to the Agent to evidence and perfect the Agent's
security interest in such Borrower Parties' present and future patents,
trademarks, and related licenses and rights, for the benefit of the Agent and
the Lenders.
"Payment Account" means each bank account, including, without limitation,
each lockbox account to which the proceeds of Accounts and other Collateral are
deposited or credited, and which is maintained in the name of a Borrower Party
or, at any time after Agent has taken full dominion over the Payment Accounts,
on terms acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any Governmental
Authority succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Parent or any Subsidiary sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multi-employer Plan has made contributions at
any time during the immediately preceding five (5) plan years.
"Permitted Acquisition" means any acquisition by any Borrower Party of all
or substantially all of the assets or Stock of a Person so long as (a) no
Default or Event of Default exists or would be caused thereby and (b) the
Administrative Borrower delivers evidence to the Agent that Availability (x) for
each of the thirty (30) days most recently ending was not (and after giving
effect to such transaction would not have been) and (y) for each of the thirty
(30) days immediately succeeding such transaction on a pro forma basis (after
giving effect to such transaction) would not be (i) less than (1) $40,000,000
for any day from and after January 1 though June 30 of any year and (2)
$30,000,000 for any day from and after July 1 through December 31 of any year,
Permitted Acquisitions which do not exceed $5,000,000 with respect to any
individual acquisition and (ii) less than (1) $55,000,000 for any day from and
after January 1 though June 30 of any year and (2) $40,000,000 for any day from
and after July 1 through December 31 of any year, Permitted Acquisitions which
exceed $5,000,000 with respect to any individual acquisition; and "Permitted
Acquisitions" means each Permitted Acquisition.
"Permitted Liens" means:
(a) (i) Liens for Taxes not delinquent or (ii) statutory Liens for
Taxes in an amount not to exceed $500,000 (or such greater amount as shall be
covered by a bond) provided that the payment of such taxes which are due and
payable is being contested in good faith and by appropriate proceedings
diligently pursued and as to which adequate financial reserves have been
established on the Parent's and the Subsidiaries' books and records and a stay
of enforcement of any such Lien is in effect;
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(b) the Agent's Liens;
(c) Liens held by the First Lien Agent or the First Lien Co-Agent,
as agents for the lenders party to the First Lien Credit Agreement, to secure
the First Lien Obligations;
(d) Liens incurred or deposits made in the ordinary course of
business in connection with, or to secure payment of, obligations under worker's
compensation, unemployment insurance, social security and other similar laws, or
to secure the performance of bids, tenders or contracts (other than for the
repayment of Debt) or to secure indemnity, performance or other similar bonds
for the performance of bids, tenders or contracts (other than for the repayment
of Debt) or to secure statutory obligations (other than liens arising under
ERISA or Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds;
(e) Liens securing the claims or demands of materialmen, mechanics,
carriers, repairmen, warehousemen, landlords and other like Persons, so long as
(i) such Liens are subject to a Good-Faith Protest or (ii) with respect to such
Liens arising from the nonpayment of such claims or demand when due, such claims
or demands do not exceed $200,000 in the aggregate (or such greater amount as
shall be covered by a bond);
(f) Liens constituting encumbrances in the nature of reservations,
exceptions, encroachments, easements, rights of way, covenants running with the
land, and other similar title exceptions or encumbrances affecting any Real
Estate; provided that they do not in the aggregate materially detract from the
value of the Real Estate or materially interfere with its use in the ordinary
conduct of any Borrower Party's business;
(g) Liens arising from judgments and attachments in connection with
court proceedings provided that the attachment or enforcement of such Liens
would not result in an Event of Default hereunder and such Liens are being
contested in good faith by appropriate proceedings, adequate reserves have been
set aside and no material Property is subject to a material risk of loss or
forfeiture and the claims in respect of such Liens are fully covered by
insurance (subject to ordinary and customary deductibles) and a stay of
execution pending appeal or proceeding for review is in effect;
(h) Liens securing Capital Leases and purchase money Debt permitted
in Section 7.13;
(i) any Liens on Property of a Person acquired in any Permitted
Acquisition otherwise permitted hereunder; provided that such Liens (i) attach
to assets valued individually or in the aggregate not in excess of $1,000,000
and (b) are existing on the date of such Permitted Acquisition and do not relate
to any other then-existing or after-acquired assets of a Borrower Party
following such Permitted Acquisition; and
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(j) Liens, if any, in effect as of the Closing Date and described in
Schedule E-2.
"Permitted Transaction" means (1) the redemption or other acquisition by
Parent of all or a portion of the Senior Notes, solely in connection with the
Exchange Offer, (2) acquisition by Parent of 2005 Senior Notes solely to the
extent permitted by the First Lien Credit Agreement, (3) the purchase,
prepayment or redemption of the 2005 Senior Notes and/or the 2008 Senior Notes
(and the Term Loan to the extent required by the Credit Agreement to purchase
2008 Senior Notes) solely to the extent permitted by the First Lien Credit
Agreement, and (4) any one or more of the following transactions of a Borrower
Party, on the condition that the Administrative Borrower delivers evidence to
the Agent that no Default or Event of Default then exists and that the
Availability (x) for each of the thirty (30) days most recently ending was not
(and after giving effect to such transaction would not have been) and (y) for
each of the thirty (30) days immediately succeeding such transaction on a pro
forma basis (after giving effect to such transaction) would not be less than (a)
$55,000,000 for any day from and after January 1 through June 30 of any year and
(b) $40,000,000 for any day from and after July 1 through December 31 of any
year,
(i) dividends on capital stock of Parent not to exceed
$3,000,000 in the aggregate during any Fiscal Year;
(ii) the redemption or other acquisitions by Parent of any of
its bonds or capital stock (or any options or warrants for such stock);
and "Permitted Transactions" means each Permitted Transaction.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, Governmental Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which a Borrower Party sponsors or maintains or to which a Borrower Party
makes, is making, or is obligated to make contributions and includes any Pension
Plan.
"Pledge Agreement" means the Pledge Agreement of even date herewith among
certain of the Borrower Parties party thereto and the Agent for the benefit of
the Agent and the other Lenders.
"Prepayment Triggering Event" has the meaning specified in Section 3.1(c).
"Proprietary Rights" means all of any Borrower Party's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents, patent
rights, copyrights, works which are the subject matter of copyrights,
trademarks, service marks, trade names, trade styles, patent applications,
copyright applications, trademark and service xxxx
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applications, and all licenses and rights related to any of the foregoing,
including those patents, trademarks, service marks, trade names and copyrights
set forth on Schedule 6.12 hereto, and all other rights under any of the
foregoing, all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to xxx for past,
present and future infringement of any of the foregoing.
"Pro Rata Share" means, with respect to a Lender, a fraction (expressed as
a percentage), the numerator of which is the amount of such Lender's Commitment
and the denominator of which is the sum of the amounts of all of the Lenders'
Commitments, or if no Commitments are outstanding, a fraction (expressed as a
percentage), the numerator of which is the amount of Obligations owed to such
Lender and the denominator of which is the aggregate amount of the Obligations
owed to the Lenders.
"Proposed Change" has the meaning specified in Section 11.1(c).
"Real Estate" means all of any Borrower Party's now or hereafter owned or
leased estates in real property, including, without limitation, all fees,
leaseholds and future interests, together with all of such Borrower Party's now
or hereafter owned or leased interests in the improvements thereon, the fixtures
attached thereto and the easements appurtenant thereto.
"Register" has the meaning specified in Section 11.2(g).
"Registered Loan" means any loan recorded on the Register pursuant to
Section 11.2(g).
"Registered Note" has the meaning specified in Section 1.4.
"Related Fund" means any fund or account managed by any Lender or an
Affiliate of any Lender or by the investment manager of any such fund or
account.
"Release" means a release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant
into the indoor or outdoor environment or into or out of any Real Estate or
other property, including the movement of Contaminants through or in the air,
soil, surface water, groundwater or Real Estate or other property.
"Report" has the meaning specified in Section 12.18(a).
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, other than any such event for which the
thirty (30) day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Required Amount" has the meaning specified in Section 7.31.
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"Required Lenders" means, at any time, (a) the Agent and (b) Lenders whose
Pro Rata Shares aggregate more than sixty-six and two-thirds percent (66-2/3%).
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the corporate comptroller, vice president of
finance, chief financial officer or the president of the Administrative
Borrower, any other officer having substantially the same authority and
responsibility.
"Restricted Investment" means, as to any Borrower Party, any Investment,
except the following: (a) acquisitions of Equipment and intellectual property to
be used in the business of such Borrower Party so long as the acquisition costs
thereof constitute, or are deemed to constitute, Capital Expenditures permitted
hereunder; (b) acquisitions of Inventory in the ordinary course of business of
such Borrower Party; (c) acquisitions of current assets acquired in the ordinary
course of business of the Parent; (d) direct obligations of the United States of
America, or any agency thereof, or obligations guaranteed by the United States
of America, provided that such obligations mature within one year from the date
of acquisition thereof; (e) acquisitions of certificates of deposit maturing
within one year from the date of acquisition, bankers' acceptances, Eurodollar
bank deposits, or overnight bank deposits, in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States of
America or any state thereof having capital and surplus aggregating at least
$1,000,000,000; (f) acquisitions of commercial paper given a rating of "A2" or
better by Standard & Poor's Corporation or "P2" or better by Xxxxx'x Investors
Service, Inc. and maturing not more than ninety (90) days from the date of
creation thereof; and (g) Permitted Acquisitions.
"SEC" means the United States Securities and Exchange Commission and any
successor thereto.
"Security Agreement" means the Security Agreement of even date herewith
among the Borrower Parties and the Agent for the benefit of the Agent and other
Lenders.
"Seller Subordinated Debt" means Debt of the Borrower Parties incurred in
connection with any Permitted Acquisition and initially owing to the seller in
such Permitted Acquisition; provided, that (a) such Debt shall be subordinated,
pursuant to subordination provisions acceptable to the Agent in its sole
discretion and such provisions shall be no less favorable to the Lenders than
the subordination provisions of any existing subordinated debt, to the
obligations of the Borrowers under this Agreement and the other Loan Documents,
(b) such Debt shall mature no less than one hundred eighty (180) days after the
Termination Date and shall have covenants no more restrictive than those set
forth herein and (c) after giving effect to the incurrence of such Debt, no
Default or Event of Default shall be in existence.
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"Senior Notes" means, collectively, those (a) 10 3/4% Senior Subordinated
Notes Due 2005, issued by the Parent, pursuant to that certain Indenture, dated
as of December 16, 1998 in favor of Xxxxx Fargo Bank Minnesota, N.A., as Trustee
(the "December 16, 1998 Indenture") and (b) 12 1/4% Senior Subordinated Notes
Due 2008, issued by the Parent, pursuant to that certain Indenture, dated as of
April 23, 2001 in favor of Xxxxx Fargo Bank Minnesota, N.A., as Trustee (the
"April 23, 2001 Indenture" and together with the December 16, 1998 Indenture,
the "Indentures"), as amended, restated, supplemented or otherwise modified from
time to time.
"Silver Point" means Silver Point Finance, LLC, a Delaware limited
liability company.
"Software" means all "software" as such term is defined in the UCC, now
owned or hereafter acquired by any Borrower Party, other than software embedded
in any category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.
"Solvent" means, when used with respect to any Person, that at the time of
determination:
(a) the assets of such Person, at a fair valuation, are in excess of
the total amount of its debts (including contingent liabilities); and
(b) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become absolute and
matured; and
(c) it is then able and expects to be able to pay its debts
(including contingent debts and other commitments) as they mature; and
(d) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Specified Transaction" means any one or more of the following
transactions of a Borrower Party, (a) dividends on capital stock of Parent and
(b) the redemption or other acquisitions by Parent of any of its bonds or
capital stock (or any options or warrants for such stock); and "Specified
Transactions" means each Specified Transaction.
"Stated Maturity Date" means March 31, 2008.
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"Stock" means all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Exchange Act).
"Subordination Agreement" means that certain Subordination Agreement in
favor of the Agent pursuant to which the Parent or any of the Parent's
Subsidiaries subordinate any Debt owing in favor of such Person by the Parent or
such Subsidiary.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which more
than fifty percent (50%) of the voting stock or other equity interests (in the
case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Parent, including, without
limitation, each Borrower.
"Subsidiary Guaranty" means the Subsidiary Guaranty dated as of the date
hereof, executed and delivered by the Guarantors for the benefit of the Agent
and the Lenders to guarantee the Obligations of the Borrowers under this
Agreement.
"Supporting Obligations" means all "supporting obligations" as such term
is defined in the UCC, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by the Agent's or
each Lender's net income in any the jurisdiction (whether federal, state or
local and including any political subdivision thereof) under the laws of which
such Lender or the Agent, as the case may be, is organized or maintains a
lending office.
"Term Loan" has the meaning specified in Section 1.3.
"Term Loan Amount" means the aggregate amount of the Term Loans set forth
on Schedule 1.1 from time to time, but in no event to exceed $110,000,000.
"Termination Date" means the earliest to occur of (i) the Stated Maturity
Date, (ii) the date the Total Facility is terminated by the Borrowers pursuant
to Section 3.2 and (iii) the date this Agreement is otherwise terminated for any
reason whatsoever pursuant to the terms of this Agreement.
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"Total Facility" has the meaning specified in Section 1.1.
"2005 Senior Notes" has the meaning set forth in the Recitals to this
Agreement.
"2008 Senior Notes" has the meaning set forth in the Recitals to this
Agreement.
"UCC" means the Uniform Commercial Code, as in effect from time to time,
of the State of New York or of any other state the laws of which are required as
a result thereof to be applied in connection with the issue of perfection of
security interests; provided, that to the extent that the UCC is used to define
any term herein or in any other documents and such term is defined differently
in different Articles or Divisions of the UCC, the definition of such term
contained in Article or Division 9 shall govern.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"US Adjusted Net Earnings from Operations" means, with respect to any
fiscal period of the Borrowers, the Borrowers' net income on a consolidated
basis after provision for income taxes for such fiscal period, as determined in
accordance with GAAP and reported on the Financial Statements for such period,
excluding any and all of the following included in such net income: (a) gain or
loss arising from the sale of any capital assets; (b) gain arising from any
write up in the book value of any asset or loss arising from any write down in
the book value of any asset other than an asset the value of which is included
in the calculation of the Borrowing Base (as such term is defined in the First
Lien Credit Agreement); (c) earnings or losses of any Person, substantially all
the assets or Stock of which have been acquired by the Borrowers in any manner,
to the extent realized by such other Person prior to the date of acquisition;
(d) earnings or losses of any Person in which any Borrower has a minority
ownership interest unless (and only to the extent) such earnings or losses shall
actually have been received by such Borrower in the form of cash distributions;
(e) earnings or losses of any Person to which assets of any Borrower shall have
been sold, transferred or disposed of, or into which any Borrower shall have
been merged, or which has been a party with any Borrower to any consolidation or
other form of reorganization, prior to the date of such transaction; (f) gain
arising from the acquisition of debt or equity securities of any Borrower or
from cancellation or forgiveness of Debt; (g) gain and non-cash losses arising
from extraordinary items or from any other non-recurring transaction, as
determined in accordance with GAAP; and (h) all restructuring charges incurred
by the Borrowers through October 31, 2004 as described on Schedule E-3.
"WFF" means Xxxxx Fargo Foothill, Inc., a California corporation.
Accounting Terms. Any accounting term used in the Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
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accordance with GAAP, and all financial computations in the Agreement shall be
computed, unless otherwise specifically provided therein, in accordance with
GAAP as consistently applied and using the same method for inventory valuation
as used in the preparation of the Financial Statements.
Interpretive Provisions. (a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words
refer to the Agreement as a whole and not to any particular provision of the
Agreement; and Subsection, Section, Schedule and Exhibit references are to the
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(i) The term "including" is not limiting and means "including
without limitation."
(ii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including," the
words "to" and "until" each mean "to but excluding" and the word "through" means
"to and including."
(iii) The word "or" is not exclusive.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including the Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of the Agreement and other Loan
Documents are for convenience of reference only and shall not affect the
interpretation of the Agreement.
(f) The Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
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(g) For purposes of Section 9.1, a breach of the financial covenants
referenced in Section 7.23 shall be deemed to have occurred as of any date of
determination thereof by the Agent or as of the last day of any specified
measuring period, regardless of when the Financial Statements reflecting such
breach are delivered to the Agent.
(h) The Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Borrower
Parties and the other parties, and are the products of all parties. Accordingly,
they shall not be construed against the Lenders or the Agent merely because of
the Agent's or Lenders' involvement in their preparation.
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EXHIBIT 5
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT (this "Agreement"), dated as of August
[ ], 2005, is made by and between SILVER POINT FINANCE, LLC, a Delaware limited
liability company, as the co-agent, syndication agent, and documentation agent
under and pursuant to the First Lien Credit Agreement (as hereinafter defined)
(in such capacity, together with its successors and assigns, the "Original First
Lien Co-Agent"), and XXXXX FARGO FOOTHILL, INC., a California corporation, as
administrative agent and collateral agent under and pursuant to the First Lien
Credit Agreement (in such capacity, together with its successors and assigns,
the "Original First Lien Agent"), on the one hand, and THE BANK OF NEW YORK, a
national banking association, as agent under and pursuant to the Second Lien
Credit Agreement (as hereinafter defined) (in such capacity, together with its
successors and assigns, the "Original Second Lien Agent"), on the other hand,
and is acknowledged by Salton, Inc., a Delaware corporation ("Parent"), each of
Parent's Subsidiaries identified on the signature pages of the First Lien Credit
Agreement or otherwise made a party thereto, as Borrowers (collectively with
Parent, the "Borrowers") and each of Parent's Subsidiaries identified on the
signature pages of the First Lien Credit Agreement, or otherwise made a party
thereto, as Guarantors (collectively, the "Guarantors"):
WHEREAS, Parent, the Borrowers, the Guarantors, the Original First
Lien Co-Agent, the Original First Lien Agent, and the lenders party thereto have
entered into that certain Credit Agreement dated as of May 9, 2003 and amended
and restated as of June 15, 2004 (as amended as of August 30, 2004, May 11,
2005, and July 5, 2005 and as it may be further amended, modified, supplemented
or amended and restated from time to time, the "Original First Lien Credit
Agreement") pursuant to which such lenders have agreed, upon the terms and
conditions stated therein, to make loans and advances to and to issue letters of
credit (or guarantees or other undertakings in respect thereof) for the account
of the Borrowers up to a principal amount (such amount, the "First Lien Amount")
equal to $287,000,000 minus the original principal amount of the Second Lien
Term Loan (as defined in the First Lien Credit Agreement) as of the Second Lien
Closing Date (as defined in the First Lien Credit Agreement) at any time
outstanding. The repayment of the Obligations (as that term is defined in the
Original First Lien Credit Agreement) is secured by security interests in and
liens on substantially all of the assets of the Borrowers and the Guarantors
pursuant to certain collateral documents in favor of the Original First Lien
Agent, which documents, together with the other collateral and loan documents
executed and delivered in connection with the Original First Lien Credit
Agreement, each as in effect on the date hereof, are referred to herein as the
"Original First Lien Loan Documents";
WHEREAS, Parent, the Borrowers, the Guarantors, the Original Second
Lien Agent, and the lenders party thereto have entered into a Credit Agreement
dated as of the date hereof (such agreement as in effect on the date hereof, the
"Original Second Lien Credit Agreement") pursuant to which such lenders have
agreed, upon the terms and conditions stated therein, to make loans and advances
to the Borrowers up to the principal amount of $110,000,000 at any time
outstanding. The repayment of the Obligations (as that term is defined in the
Original Second Lien Credit Agreement) is secured by security interests in and
liens on substantially all of the assets of the Borrowers and the Guarantors
pursuant to certain collateral
documents in favor of the Original Second Lien Agent, which documents, together
with the other collateral and loan documents executed and delivered in
connection with the Original Second Lien Credit Agreement, each as in effect on
the date hereof, are referred to herein as the "Original Second Lien Loan
Documents"; and
WHEREAS, each of the Original First Lien Agent and the Original
First Lien Co-Agent, for and on behalf of itself and the First Lien Lenders, and
the Original Second Lien Agent, for and on behalf of itself and the Second Lien
Lenders, wish to enter into this Agreement to establish their respective rights
and priorities in the Collateral.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the Original First Lien Agent and the Original
Second Lien Agent hereby agree as follows:
1. Definitions; Rules of Construction.
a. Terms Defined Above and in the Recitals. As used in this
Agreement, the following terms shall have the respective meanings indicated in
the opening paragraph hereof and in the above Recitals:
"Agreement"
"Borrowers"
"First Lien Amount"
"Guarantors"
"Original First Lien Agent"
"Original First Lien Co-Agent"
"Original First Lien Credit Agreement"
"Original First Lien Loan Documents"
"Original Second Lien Agent"
"Original Second Lien Credit Agreement"
"Original Second Lien Loan Documents"
"Parent"
b. Other Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Adequate Protection Lien" has the meaning set forth in Section 5.d.
"Agent" means First Lien Agent, First Lien Co-Agent and/or Second
Lien Agent, as the context may require.
"Application of Proceeds Blockage Event" has the meaning set forth
in Section 4.a.
"Application of Proceeds Blockage Period" has the meaning set forth
in Section 4.a.
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"Bank Product Obligations" has the meaning set forth in the Original
First Lien Credit Agreement.
"Bankruptcy Code" shall mean title 11 of the United States Code, as
in effect from time to time.
"Capital Stock" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of property of, the issuing
Person.
"Cash Collateral" means any Collateral consisting of money or cash
equivalents, any security entitlement (as defined in the UCC) and any financial
assets (as defined in the UCC).
"Collateral" means all assets and properties upon which either First
Lien Agent or First Lien Co-Agent, on the one hand, or Second Lien Agent, on the
other hand, now has or hereafter acquires a Lien, whether now owned or hereafter
acquired by the Borrowers, any Guarantor or any other Person, together with all
rents, issues, profits, products, and Proceeds thereof.
"Control Collateral" means any Collateral consisting of a
certificated security (as defined in the UCC), investment property (as defined
in the UCC), a deposit account (as defined in the UCC) and any other Collateral
as to which a Lien may be perfected through physical possession or control by
the secured party or any agent therefor.
"DIP Financing" has the meaning set forth in Section 5.d.
"Discharge of First Lien Indebtedness" means payment in full in cash
(or in the case of letters of credit or Bank Product Obligations, the cash
collateralization as required by the Original First Lien Loan Documents) of the
First Lien Indebtedness (other than First Lien Indebtedness consisting solely of
contingent indemnification obligations under the First Lien Loan Documents for
which no claim has been asserted in writing) after or concurrently with
termination of all commitments to extend credit under any First Lien Credit
Agreement.
"Discharge of Second Lien Indebtedness" means payment in full in
cash of the Second Lien Indebtedness (other than Second Lien Indebtedness
consisting solely of contingent indemnification obligations under the Second
Lien Loan Documents for which no claim has been asserted in writing) after or
concurrently with termination of all commitments to extend credit under any
Second Lien Credit Agreement.
"Equity Interests" means Capital Stock and all warrants, options, or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
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"Event of Default" means "Event of Default" as defined in the First
Lien Credit Agreement and/or "Event of Default" as defined in the Second Lien
Credit Agreement.
"Exercise Any Secured Creditor Remedies" or "Exercise of Secured
Creditor Remedies" means (a) the taking of any action to enforce or realize upon
any Lien, including the institution of any foreclosure proceedings or the
noticing of any public or private sale or other disposition pursuant to Article
9 of the UCC, (b) the exercise of any right or remedy provided to a secured
creditor or otherwise on account of a Lien under the First Lien Loan Documents,
the Second Lien Loan Documents, applicable law, in an Insolvency Proceeding or
otherwise, including the election to retain Collateral in satisfaction of a
Lien, (c) the taking of any action or the exercise of any right or remedy in
respect of the collection on, set off against, marshaling of, or foreclosure on
the Collateral or the Proceeds of Collateral, (d) the sale, lease, license, or
other disposition of all or any portion of the Collateral, by private or public
sale, other disposition or any other means permissible under applicable law, (e)
the solicitation of bids from third parties to conduct the liquidation of all or
a material portion of Collateral to the extent undertaken and being diligently
pursued in good faith to consummate the sale of such Collateral within a
commercially reasonable time, (f) the engagement or retention of sales brokers,
marketing agents, investment bankers, accountants, appraisers, auctioneers or
other third parties for the purposes of valuing, marketing, promoting and
selling the Collateral to the extent undertaken and being diligently pursued in
good faith to consummate the sale of such Collateral within a commercially
reasonable time, and (g) the exercise of any other enforcement right relating to
the Collateral (including the exercise of any voting rights relating to any
Capital Stock and including any right of recoupment or set-off) whether under
the First Lien Loan Documents, the Second Lien Loan Documents, applicable law,
in an Insolvency Proceeding or otherwise.
"First Lien Agent" means the Original First Lien Agent, together
with its successors, assigns and transferees under any First Lien Credit
Agreement.
"First Lien Co-Agent" means the Original First Lien Co-Agent,
together with its successors, assigns and transferees under any First Lien
Credit Agreement.
"First Lien Credit Agreement" means the Original First Lien Credit
Agreement as amended, restated, modified, renewed, refunded, replaced, or
refinanced in whole or in part from time to time, and any other agreement
extending the maturity of, consolidating, otherwise restructuring (including
adding Subsidiaries or affiliates of any Obligor or any other Persons as parties
thereto), renewing, replacing or refinancing all or any portion of the
Obligations or Commitments as those terms are defined in the Original First Lien
Credit Agreement or all or any portion of the amounts owed under any other
agreement that itself is a First Lien Credit Agreement hereunder and whether by
the same or any other agent, lender, or group of lenders and whether or not
increasing the amount of First Lien Indebtedness that may be incurred
thereunder, in each case, to the extent that any such amendment, restatement,
modification, renewal, refunding, replacement, or refinancing is permitted under
this Agreement.
"First Lien Default" means any Event of Default under the First Lien
Credit Agreement.
4
"First Lien Indebtedness" means all obligations and all other
amounts owing, due or secured under the terms of the First Lien Credit Agreement
or any other First Lien Loan Document, including any and all amounts payable to
any First Lien Lender, all principal, premium, interest, fees, attorneys fees,
costs, charges, expenses, reimbursement obligations, any obligation to post cash
collateral in respect of letters of credit or indemnities in respect thereof,
indemnities, guarantees, the Make-Whole Amount, Bank Product Obligations, Ledger
Product Obligations and all other amounts payable under any First Lien Loan
Document or in respect thereof (including, in each case, all amounts accruing on
or after the commencement of any Insolvency Proceeding relating to any Obligor,
or that would have accrued or become due under the terms of the First Lien Loan
Documents but for the effect of the Insolvency Proceeding or other applicable
law, and irrespective of whether a claim for all or any portion of such amounts
is allowable or allowed in such Insolvency Proceeding).
"First Lien Lender Sale" has the meaning set forth in Section
2.c(1).
"First Lien Lenders" means the Original First Lien Lenders, together
with the lenders under any First Lien Credit Agreement or First Lien Loan
Documents.
"First Lien Loan Documents" means the First Lien Credit Agreement
and the other Loan Documents (as such term is defined in the Original First Lien
Credit Agreement), or any other security, collateral, ancillary or other
document entered into in connection with or related to any agreement that is a
First Lien Credit Agreement, as such documents may be amended, restated,
modified, renewed, refunded, replaced, or refinanced in whole or in part from
time to time, in accordance with this Agreement.
"First Lien Modification" has the meaning set forth in Section 6.a.
"Forced Obligor Sale" has the meaning set forth in Section 2.c(2).
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state,
federal or foreign bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Ledger Product Obligations" has the meaning set forth in the
Original First Lien Credit Agreement.
"Lender" means a First Lien Lender and/or a Second Lien Lender, as
the context may require.
"Lien" means any interest in an asset securing an obligation owed
to, or a claim by, any Person other than the owner of the asset, irrespective of
whether (a) such interest is based on the common law, statute, or contract, (b)
such interest is recorded or perfected, and (c) such interest is contingent upon
the occurrence of some future event or events or the existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term "Lien" includes the lien or security interest arising from a mortgage,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement,
5
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also includes reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting real property.
"Notice of Intent to Exercise" means a written notice from or on
behalf of Second Lien Agent to First Lien Agent and First Lien Co-Agent (a)
stating that Second Lien Agent intends to Exercise Secured Creditor Remedies,
(b) stating that it is a "Notice of Intent to Exercise Secured Creditor
Remedies" and (c) describing the Event(s) of Default under the Second Lien
Credit Agreement that is(are) the basis for delivering such notice.
"Obligor" means the Borrowers, each Guarantor and any other Person
that now or hereafter is, or whose assets now or hereafter are, liable for all
or any portion of the First Lien Indebtedness or the Second Lien Indebtedness,
as applicable.
"Payment Collateral" means all accounts, instruments, chattel paper,
letters of credit, deposit accounts, securities accounts, and payment
intangibles, together with all supporting obligations (as those terms are
defined in the UCC), in each case composing a portion of the Collateral.
"Permitted Application of Proceeds of Collateral" has the meaning
set forth in Section 3.
"Permitted Replacement Lien" has the meaning set forth in Section
5.i.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, limited liability
partnership, joint venture, trust, land trust, business trust, or other
organization, irrespective of whether such organization is a legal entity, and
shall include a government and any agency or political subdivision thereof.
"Proceeds" means (a) all "proceeds" as defined in Article 9 of the
UCC with respect to the Collateral, and (b) whatever is recoverable or recovered
when Collateral is sold, exchanged, collected, or disposed of, whether
voluntarily or involuntarily.
"Purchase Notice" has the meaning set forth in Section 10.a.
"Recovery" has the meaning set forth in Section 5.c.
"Reorganization Debt Securities" has the meaning set forth in
Section 5.a.
"Second Lien Agent" means the Original Second Lien Agent, together
with its successors, assigns and transferees under any Second Lien Credit
Agreement.
"Second Lien Credit Agreement" means the Original Second Lien Credit
Agreement as amended, restated, modified, renewed, refunded, replaced, or
refinanced in whole or in part from time to time, and any other agreement
extending the maturity of, consolidating, otherwise restructuring (including
adding Subsidiaries or affiliates of any Obligor or any other Persons as parties
thereto), renewing, replacing or refinancing all or any portion of the
6
Obligations or Commitments as those terms are defined in the Original Second
Lien Credit Agreement or all or any portion of the amounts owed under any other
agreement that itself is a Second Lien Credit Agreement hereunder and whether by
the same or any other agent, lender, or group of lenders and whether or not
increasing the amount of Second Lien Indebtedness that may be incurred
thereunder, in each case, to the extent that any such amendment, restatement,
modification, renewal, refunding, replacement, or refinancing is permitted under
this Agreement.
"Second Lien Indebtedness" means all obligations and all other
amounts owing, due or secured under the terms of the Second Lien Credit
Agreement or any other Second Lien Loan Document, including any and all amounts
payable to any Second Lien Lender, all principal, premium, interest, fees,
attorneys fees, costs, charges, expenses, reimbursement obligations, any
obligation to post cash collateral in respect of letters of credit or
indemnities in respect thereof, indemnities, guarantees, any prepayment or early
termination premium, and all other amounts payable under any Second Lien Loan
Document or in respect thereof (including, in each case, all amounts accruing on
or after the commencement of any Insolvency Proceeding relating to any Obligor,
or that would have accrued or become due under the terms of the Second Lien Loan
Documents but for the effect of the Insolvency Proceeding or other applicable
law, and irrespective of whether a claim for all or any portion of such amounts
is allowable or allowed in such Insolvency Proceeding).
"Second Lien Lenders" means the Original Second Lien Lenders,
together with the lenders under any Second Lien Credit Agreement or Second Lien
Loan Documents.
"Second Lien Loan Documents" means the Second Lien Credit Agreement
and the other Loan Documents (as such term is defined in the Original Second
Lien Credit Agreement), or any other security, collateral, ancillary or other
document entered into in connection with or related to any agreement that is a
Second Lien Credit Agreement, as such documents may be amended, restated,
modified, renewed, refunded, replaced, or refinanced in whole or in part from
time to time in accordance with this Agreement.
"Standstill Notice" means a written notice from First Lien Agent or
First Lien Co-Agent to Second Lien Agent stating that a First Lien Default has
occurred and is continuing and stating that it is a "Standstill Notice".
"Standstill Period" means the period beginning on the date that a
Standstill Notice is received by Second Lien Agent through and including the
first to occur of (a) the date upon which the Discharge of First Lien
Indebtedness shall have occurred, (b) the date upon which First Lien Agent or
First Lien Co-Agent shall have waived or acknowledged in writing the termination
of the First Lien Default that gave rise to such Standstill Period, or (c) the
date that is 270 days after the receipt of such Standstill Notice by Second Lien
Agent.
"Trigger Event" has the meaning set forth in Section 10.a.
"Trigger Notice" has the meaning set forth in Section 10.a.
"UCC" means the Uniform Commercial Code as enacted and in effect
from time to time in the State of New York; provided, however, that in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection, priority, or remedies with
7
respect to Agent's Lien on any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a jurisdiction other than the State of New
York, the term "UCC" shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies.
c. Terms Defined in the Original First Lien Credit Agreement. Unless
otherwise defined in this Agreement, any and all initially capitalized terms set
forth in this Agreement shall have the meaning ascribed thereto in the Original
First Lien Credit Agreement.
d. Rules of Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Article, section, subsection, clause, schedule, and exhibit references herein
are to this Agreement unless otherwise specified. Any reference herein to any
Person shall be construed to include such Person's successors and assigns.
2. Subordination and Standstill.
a. Lien Subordination. Notwithstanding (i) the date, time, method,
manner or order of grant, attachment, or perfection of any Liens granted to
First Lien Agent (or First Lien Co-Agent or any First Lien Lender) or Second
Lien Agent (or any Second Lien Lender) in respect of all or any portion of the
Collateral, (ii) the order or time of filing or recordation of any document or
instrument for perfecting the Liens in favor of First Lien Agent (or First Lien
Co-Agent or any First Lien Lender) or Second Lien Agent (or any Second Lien
Lender) in any Collateral, (iii) any provision of the UCC, any other applicable
law, any of the First Lien Loan Documents or the Second Lien Loan Documents,
(iv) irrespective of whether the Liens securing the First Lien Loan Documents
are valid, perfected, enforceable, void, avoidable, subordinated, disputed or
allowed, or (v) any other circumstance whatsoever, each of First Lien Agent and
First Lien Co-Agent, on behalf of itself and the First Lien Lenders, and Second
Lien Agent, on behalf of itself and the Second Lien Lenders, hereby agree that:
(1) any Lien in respect of all or any portion of the Collateral now
or hereafter held by or on behalf of Second Lien Agent or any Second Lien Lender
that secures all or any portion of the Second Lien Indebtedness, shall in all
respects be junior and subordinate to all Liens granted to First Lien Agent,
First Lien Co-Agent and the First Lien Lenders in the Collateral to secure all
or any portion of the First Lien Indebtedness, and
(2) any Lien in respect of all or any portion of the Collateral now
or hereafter held by or on behalf of First Lien Agent, First Lien Co-Agent or
any First Lien Lender that secures all or any portion of the First Lien
Indebtedness shall in all respects be senior and prior to all Liens granted to
Second Lien Agent and the Second Lien Lenders in the Collateral to secure all or
any portion of the Second Lien Indebtedness.
8
b. Remedies Standstill. At any time that a Standstill Period is in
effect, Second Lien Agent and Second Lien Lenders shall not, without the prior
written consent of First Lien Co-Agent (acting upon the direction of the
requisite First Lien Lenders),
(1) commence, prosecute, or participate in any lawsuit, action, or
proceeding, whether private, judicial, equitable, administrative or otherwise
(including any bankruptcy case against any Obligor or any Obligor's assets) to
the extent that any such action could reasonably be expected, in any material
respect, to restrain, hinder, limit, delay for any material period or otherwise
interfere with the Exercise of Secured Creditor Remedies by First Lien Co-Agent,
First Lien Agent or First Lien Lenders; provided that (A) to the extent that
commencing, prosecuting, or participating in any such lawsuit, action, or
proceeding could not reasonably be expected, in any material respect, to
restrain, hinder, limit, delay for any material period or otherwise interfere
with the Exercise of Secured Creditor Remedies by First Lien Co-Agent, First
Lien Agent or First Lien Lenders and Second Lien Agent does, in fact, commence,
prosecute, or participate in any such lawsuit, action, or proceeding, then
Second Lien Agent shall give First Lien Co-Agent and First Lien Agent prompt
written notice of any such action, and (B) as more fully set forth in Section 5,
Second Lien Agent and the Second Lien Lenders may file a proof of claim (such
proof of claim to indicate the subordination set forth herein) in any Insolvency
Proceeding involving any Obligor,
(2) Exercise Any Secured Creditor Remedies,
(3) send any notice to or otherwise seek to obtain payment directly
from any account debtor of any Obligor, xxx for an attachment, an injunction to
enjoin any Exercise of Secured Creditor Remedies by First Lien Co-Agent, First
Lien Agent or First Lien Lenders, a keeper, a receiver or any other similar
legal or equitable remedy, exercise any rights of set off or recoupment as
against any Obligor, or
(4) commence or cause to be commenced or join with any creditor in
commencing any Insolvency Proceeding against any Obligor or any Obligor's
assets.
Notwithstanding any other provision hereof, (i) Second Lien Agent
and Second Lien Lenders may not Exercise Any Secured Creditor Remedies with
respect to any Payment Collateral at any time unless and until the Discharge of
First Lien Indebtedness shall have occurred; (ii) Second Lien Agent may not
exercise any of the remedies described in clauses (1) through (4) above so long
as (A) First Lien Co-Agent or First Lien Agent at such time has commenced and
diligently is pursuing in good faith any Exercise of Secured Creditor Remedies
with respect to all or a material portion of the Collateral or (B) First Lien
Co-Agent, First Lien Agent and Second Lien Agent are enjoined from the Exercise
of Secured Creditor Remedies, in each case, unless and until the Discharge of
First Lien Indebtedness shall have occurred; and (iii) Second Lien Agent may not
exercise any of the remedies described in clauses (1) through (4) above without
first providing First Lien Co-Agent and First Lien Agent at least 10 days prior
written notice in the form of a Notice of Intent to Exercise (it being
understood that (x) notwithstanding anything to the contrary contained herein,
such Notice of Intent to Exercise may only be delivered by Second Lien Agent if
there is an Event of Default under Section 9.1(a), Section 9.1(c) (solely with
respect to a default under Section 7.23 of the Second Lien Credit Agreement), or
Section 9.1(d) (solely with respect to a default in the payment when due of
9
interest or principal on the Senior Notes under the Indentures) of the Second
Lien Credit Agreement; and (y) if First Lien Co-Agent or First Lien Agent does
not deliver a Standstill Notice to Second Lien Agent by the end of such 10 day
period, Second Lien Agent may proceed with the exercise of such remedies, and if
Second Lien Agent elects to exercise such remedies, neither First Lien Agent nor
First Lien Co-Agent may exercise any of the remedies of the type described in
clauses (1) through (4) above so long as Second Lien Agent at such time has
commenced and diligently is pursuing in good faith any Exercise of Secured
Creditor Remedies with respect to all or a material portion of the Collateral,
unless and until the Discharge of Second Lien Indebtedness shall have occurred);
provided, that Second Lien Agent shall not be required to provide a Notice of
Intent to Exercise to First Lien Agent and First Lien Co-Agent in connection
with a permitted Exercise of Secured Creditor Remedies upon the termination of
any Standstill Period.
c. Limitation on Standstill Periods. Subject to clause (ii) in the
last paragraph of Section 2.b, in no event shall a Standstill Period extend
beyond 270 days from the date of receipt by Second Lien Agent from First Lien
Agent or First Lien Co-Agent of a Standstill Notice initiating such Standstill
Period. Any number of notices of a First Lien Default may be given during a
Standstill Period, but no such notice shall extend such Standstill Period. Only
2 Standstill Periods may be commenced within any 360 day period, and no
subsequent Standstill Period may be commenced within 60 days after the
termination of the immediately preceding Standstill Period. No First Lien
Default that existed or was continuing on the date of the commencement of any
Standstill Period and that was known to First Lien Agent, First Lien Co-Agent or
any First Lien Lender will be, or can be, made the basis for the commencement of
a second Standstill Period, whether or not within a period of 360 consecutive
days, unless such First Lien Default has been cured or waived for a period of
not less than 60 consecutive days.
d. Release of Liens.
(1) In the event of any private or public sale or other disposition
of all or any portion of the Collateral by First Lien Agent or First Lien
Co-Agent after the occurrence and during the continuance of a First Lien Default
(and prior to the date upon which the Discharge of First Lien Indebtedness shall
have occurred) in connection with the liquidation by First Lien Agent or First
Lien Co-Agent of all or any material portion of the Collateral and the
collection by First Lien Agent or First Lien Co-Agent of the First Lien
Indebtedness through the sale or other disposition of such Collateral (whether
prior to or after the occurrence of an Insolvency Proceeding) (any such sale or
other disposition, a "First Lien Lender Sale"), then Second Lien Agent, on
behalf of itself and the Second Lien Lenders, agrees that such First Lien Lender
Sale will be free and clear of the Liens securing the Second Lien Indebtedness
(and, if the First Lien Lender Sale includes Equity Interests in any Obligor,
Second Lien Agent, on behalf of itself and the Second Lien Lenders, further
agrees to release the entities whose Equity Interests are sold from all Second
Lien Indebtedness); provided that (x) First Lien Agent, First Lien Co-Agent and
the First Lien Lenders also release their Liens on such Collateral (and, if the
First Lien Lender Sale includes Equity Interests in any Obligor, the entities
whose Equity Interests are sold from all First Lien Indebtedness), (y) the
Proceeds of any such First Lien Lender Sale are applied in accordance with
Section 9, and (z) First Lien Agent or First Lien Co-Agent shall have conducted
such First Lien Lender Sale in a commercially reasonable manner and in
accordance with the UCC.
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(2) In the event of any private or public sale or other disposition
of all or substantially all of the Collateral by any Obligor with the consent of
First Lien Co-Agent and/or First Lien Agent after the occurrence and during the
continuance of a First Lien Default (and prior to the date upon which the
Discharge of First Lien Indebtedness shall have occurred), which sale or other
disposition is conducted by such Obligor with the consent of First Lien Co-Agent
and/or First Lien Agent (any such sale or other disposition, a "Forced Obligor
Sale"), then Second Lien Agent, on behalf of itself and the Second Lien Lenders,
agrees that such Forced Obligor Sale will be free and clear of the Liens
securing the Second Lien Indebtedness (and, if the Forced Obligor Sale includes
Equity Interests in any Obligor, Second Lien Agent, on behalf of itself and the
Second Lien Lenders, further agrees to release the entities whose Equity
Interests are sold from all Second Lien Indebtedness); provided that (x) First
Lien Agent, First Lien Co-Agent and the First Lien Lenders also release their
Liens on such Collateral (and, if the Forced Obligor Sale includes Equity
Interests in any Obligor, the entities whose Equity Interests are sold from all
First Lien Indebtedness), (y) the Proceeds of any such Forced Obligor Sale are
applied in accordance with Section 9 (as if it were Proceeds received in
connection with any Exercise of Secured Creditor Remedies), and (z) the Obligor
conducting such Forced Obligor Sale shall have conducted such Forced Obligor
Sale in a commercially reasonable manner as if such Forced Obligor Sale were
being conducted by a secured creditor in accordance with the UCC.
(3) Second Lien Agent agrees that, in connection with any First Lien
Lender Sale or Forced Obligor Sale, upon the prior written request of First Lien
Co-Agent or First Lien Agent (which request shall specify the proposed terms of
the sale and the type and amount of consideration to be received in connection
therewith), it will execute and/or file any and all Lien releases or other
documents reasonably requested by First Lien Co-Agent or First Lien Agent in
connection therewith (copies of which are provided to Second Lien Agent) without
recourse, representation or warranty and at the sole expense of the Obligors;
provided, that (w) in the case of a First Lien Lender Sale, no such release
documents shall be delivered to any Obligor, (x) in the case of a Forced Obligor
Sale, no such release documents shall be delivered to any Obligor unless First
Lien Co-Agent or First Lien Agent has delivered its release documents to such
Obligor, (y) no such release documents shall be delivered to Second Lien Agent
for execution more than 5 days prior to the anticipated closing date of such
sale or disposition, and (z) the effectiveness of any such release or
termination by Second Lien Agent shall be subject to the sale or other
disposition of the Collateral described in such request and on the terms
described in such request or on substantially similar terms and shall lapse in
the event such sale or other disposition does not occur within 10 days of the
anticipated closing date (at which time First Lien Co-Agent, First Lien Agent or
the Obligors, as the case may be, shall promptly return all release documents to
Second Lien Agent). Subject to the proviso in the immediately preceding
sentence, in the event that Second Lien Agent fails to so execute or file any
such Lien releases or other documents within 5 Business Days after receipt of
written request from First Lien Agent or First Lien Co-Agent, each of First Lien
Co-Agent and First Lien Agent is hereby irrevocably authorized to execute and/or
file such Lien releases and other documents (provided that such Lien releases
and other documents shall not be filed or recorded except substantially
contemporaneous with such sale or disposition or until such sale or disposition
has been consummated).
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e. Waiver of Right to Contest First Lien Indebtedness. Second Lien
Agent agrees that it and the Second Lien Lenders shall not, and hereby waives
any right to, take any action to contest or challenge (or assist or support any
other Person in contesting or challenging), directly or indirectly, whether or
not in any proceeding (including in any Insolvency Proceeding), the validity,
priority, enforceability, or perfection of the Liens of First Lien Agent (on
behalf of itself, the First Lien Co-Agent and the First Lien Lenders) in any
Collateral, the validity, priority, enforceability or allowance of any of the
claims of First Lien Agent or any holder of First Lien Indebtedness against any
Obligor or the validity or enforceability of this Agreement or any of the
provisions hereof. Second Lien Agent agrees that neither it nor the Second Lien
Lenders will take any action that would interfere with any Exercise of Secured
Creditor Remedies undertaken by First Lien Co-Agent or First Lien Agent under
the First Lien Loan Documents, including any public or private sale, lease,
exchange, transfer, or other disposition of any Collateral, whether by
foreclosure or otherwise, in any case so long as First Lien Co-Agent or First
Lien Agent does not act in contravention of this Agreement or applicable law.
Second Lien Agent hereby waives any and all rights it and the Second Lien
Lenders may have as a junior lien creditor or otherwise to contest, protest,
object to, interfere with the manner in which First Lien Co-Agent or First Lien
Agent seeks to enforce the Liens in any Collateral so long as First Lien
Co-Agent or First Lien Agent does not act in contravention of this Agreement or
applicable law.
f. Waiver of Right to Contest Second Lien Indebtedness. Each of
First Lien Agent and First Lien Co-Agent agrees that it and the First Lien
Lenders shall not, and hereby waives any right to, take any action to contest or
challenge (or assist or support any other Person in contesting or challenging),
directly or indirectly, whether or not in any proceeding (including in any
Insolvency Proceeding), the validity, priority (except to the extent expressly
provided by this Agreement), enforceability, or perfection of the Liens of
Second Lien Agent (on behalf of itself and the Second Lien Lenders) in any
Collateral, the validity, priority (except to the extent expressly provided by
this Agreement), enforceability or allowance of any of the claims of Second Lien
Agent or any holder of Second Lien Indebtedness against any Obligor or the
validity or enforceability of this Agreement or any of the provisions hereof.
Solely to the extent that Second Lien Agent is permitted to Exercise Secured
Creditor Remedies under this Agreement, each of First Lien Agent and First Lien
Co-Agent agrees that neither it nor the First Lien Lenders will take any action
that would interfere with any Exercise of Secured Creditor Remedies undertaken
by Second Lien Agent under the Second Lien Loan Documents, including any public
or private sale, lease, exchange, transfer, or other disposition of any
Collateral, whether by foreclosure or otherwise, in any case so long as Second
Lien Agent does not act in contravention of this Agreement or applicable law.
g. Acknowledgement of Liens. The Second Lien Agent acknowledges and
agrees that the First Lien Agent, for the benefit of itself, the First Lien
Co-Agent and the First Lien Lenders, has been and may be granted Liens upon all
of the Collateral in which the Second Lien Agent has been granted Liens and the
Second Lien Agent hereby consents thereto. Each of First Lien Agent and First
Lien Co-Agent acknowledges and agrees that Second Lien Agent, for the benefit of
itself and the Second Lien Lenders, has been or, subject to the terms of this
Agreement, may be granted Liens upon all of the Collateral in which the First
Lien Agent and First Lien Co-Agent has been granted Liens and each of the First
Lien Agent and First Lien Co-Agent hereby consents thereto. The Second Lien
Agent agrees that neither it nor any Second
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Lien Lender shall obtain a Lien on any asset or Collateral to secure all or any
portion of the Second Lien Indebtedness unless concurrently therewith, the First
Lien Agent (on behalf of itself, the First Lien Co-Agent and the First Lien
Lenders) obtains a Lien on such asset or Collateral and the parties hereby agree
that all such Liens are and will be subject to this Agreement. The subordination
of Liens by the Second Lien Agent in favor of the First Lien Agent, the First
Lien Co-Agent and the First Lien Lenders shall not be deemed to subordinate the
Second Lien Agent's Liens to the Liens of any other Person that is not a holder
of First Lien Indebtedness.
h. Agent for Perfection. First Lien Agent and First Lien Co-Agent,
on the one hand, and Second Lien Agent, on the other hand, each agree to hold
all Control Collateral and Cash Collateral, as applicable, in their respective
possession, custody, or control (or in the possession, custody, or control of
agents or bailees for either) as a non-fiduciary agent for the other solely for
the purpose of perfecting the security interest granted to each in such Control
Collateral or Cash Collateral subject to the terms and conditions of this
Section 2.h. None of First Lien Agent, First Lien Co-Agent or the First Lien
Lenders, on the one hand, or Second Lien Agent or the Second Lien Lenders, on
the other hand, as applicable, shall have any obligation whatsoever to the
others to assure that the Control Collateral is genuine or owned by any Obligor
or any other Person or to preserve their respective rights or benefits or those
of any Person. The duties or responsibilities of First Lien Agent, First Lien
Co-Agent and Second Lien Agent under this Section 2.h are and shall be limited
solely to holding or maintaining control of the Control Collateral and the Cash
Collateral as a non-fiduciary agent for the other for purposes of perfecting the
Lien held by Second Lien Agent, on the one hand, or First Lien Agent or First
Lien Co-Agent, on the other hand, as applicable. Neither First Lien Agent nor
First Lien Co-Agent is and shall not be deemed to be a fiduciary of any kind for
Second Lien Agent or any other Person. Second Lien Agent is not and shall not be
deemed to be a fiduciary of any kind for First Lien Agent, First Lien Co-Agent
or any other Person.
3. Permitted Applications of Proceeds of Collateral. So long as an
Application of Proceeds Blockage Period is not then in effect, the Borrowers may
pay or apply, and Second Lien Agent and the Second Lien Lenders may accept and
receive on account of the Second Lien Indebtedness, any Proceeds of Collateral
whatsoever on account of the Second Lien Indebtedness in accordance with the
terms of the Second Lien Loan Documents (any such application being referred to
as a "Permitted Application of Proceeds of Collateral").
4. Application of Proceeds after Exercise of Remedies.
a. In the event that (i) a First Lien Default shall have occurred
and be continuing and (ii) First Lien Agent or First Lien Co-Agent shall have
commenced and shall be diligently pursuing any Exercise of Secured Creditor
Remedies against all or a material portion of the Collateral and shall be
applying all Proceeds of Collateral (to the extent received) in accordance with
Section 9 (the occurrence and continuance of items (i) and (ii), collectively,
an "Application of Proceeds Blockage Event"), then from and after the
commencement of such Application of Proceeds Blockage Event, no Proceeds of
Collateral shall be paid or applied by any Obligor, and neither Second Lien
Agent nor any Second Lien Lender shall accept, take or receive, any Proceeds of
Collateral, on account of the Second Lien Indebtedness until the earlier to
occur of (a) the date of the Discharge of First Lien Indebtedness and (b) the
date of
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termination (including, without limitation, as a result of the failure of any of
items (i) or (ii) above to be continuing) or written waiver by First Lien Agent
or First Lien Co-Agent of such Application of Proceeds Blockage Event (such
period of time being an "Application of Proceeds Blockage Period").
b. In the event that, notwithstanding the terms of the foregoing
Section 4a, the Obligors shall pay or apply or Second Lien Agent or the Second
Lien Lenders shall receive any Proceeds of Collateral on account of the Second
Lien Indebtedness during an Application of Proceeds Blockage Period, then and in
such event the turn-over and other obligations of Second Lien Agent set forth in
Section 8 shall apply.
c. In the case of any Permitted Application of Proceeds of
Collateral on or in respect of any Second Lien Indebtedness that would (in the
absence of any Application of Proceeds Blockage Period) have been made during
any Application of Proceeds Blockage Period, the provisions of this Section 4
shall not prevent the application of (and the Obligor may pay or apply and
Second Lien Agent and the Second Lien Lenders may accept, take and receive) such
Permitted Application of Proceeds of Collateral on or after the date immediately
following the termination of such Application of Proceeds Blockage Period.
5. Insolvency Proceeding.
a. Continuing Priority. This Agreement shall be applicable both
before and after the filing of any Insolvency Proceeding against any Obligor and
all converted or succeeding cases in respect thereof. The relative rights of the
Agents and the Lenders in or to any distributions from or in respect of any
Collateral or Proceeds of Collateral, shall continue after the filing thereof on
the same basis as prior to the date of the petition, subject to any court order
approving the financing of, or use of cash collateral by, the Borrowers or any
other Obligor as debtor-in-possession. Second Lien Agent acknowledges and agrees
that, in the event of a distribution of any notes or other debt securities under
a plan of reorganization under any such Insolvency Proceeding (such notes or
other debt securities, "Reorganization Debt Securities") to each of (i) First
Lien Agent, First Lien Co-Agent and the First Lien Lenders and (ii) Second Lien
Agent and the Second Lien Lenders, such Reorganization Debt Securities received
by Second Lien Agent and the Second Lien Lenders shall be subordinated to the
Reorganization Debt Securities received by First Lien Agent, First Lien Co-Agent
and the First Lien Lenders on terms acceptable to First Lien Agent, First Lien
Co-Agent and the First Lien Lenders.
b. Proof of Claim. Subject to the restrictions set forth in this
Agreement, in the event of any Insolvency Proceeding involving any Obligor or
any property of any Obligor, Second Lien Agent shall retain the right to vote
with respect to the Second Lien Indebtedness. If Second Lien Agent or any Second
Lien Lender does not file a proper claim or proof of debt or other document or
amendment thereof in the form required in any Insolvency Proceeding prior to 5
days before the expiration of time to file such claim or other document or
amendment thereof, then First Lien Agent or First Lien Co-Agent shall have the
right (but not the obligation) in any such Insolvency Proceeding, and Second
Lien Agent, on behalf of itself and each Second Lien Lender, hereby irrevocably
appoints each of First Lien Agent and First Lien Co-Agent as Second Lien Agent's
and Second Lien Lenders' lawful attorney in fact, to file and prove all claims
therefor.
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c. Reinstatement. If First Lien Agent, First Lien Co-Agent, any
First Lien Lender or any other holder of any First Lien Indebtedness is required
in any Insolvency Proceeding or otherwise to turn over or otherwise pay any
amount (a "Recovery") to the estate or to any creditor or representative of an
Obligor or any other Person, then the First Lien Indebtedness shall be
reinstated to the extent of such Recovery. If this Agreement shall have been
terminated prior to such Recovery, this Agreement shall be reinstated in full
force and effect, and such prior termination shall not diminish, release,
discharge, impair, or otherwise affect the obligations of the parties hereto
from such date of reinstatement. All rights, interests, agreements, and
obligations of First Lien Agent, First Lien Co-Agent, the First Lien Lenders and
Second Lien Agent and the Second Lien Lenders under this Agreement shall remain
in full force and effect and shall continue irrespective of the commencement of,
or any discharge, confirmation, conversion, or dismissal of any Insolvency
Proceeding by or against any Obligor or any other Person and irrespective of any
other circumstance which otherwise might constitute a defense available to, or a
discharge of any Obligor or any other Person in respect of the First Lien
Indebtedness. No priority or right of First Lien Agent, First Lien Co-Agent, the
First Lien Lenders or any other holder of First Lien Indebtedness shall at any
time be prejudiced or impaired in any way by any act or failure to act on the
part of any Obligor or any other Person or by the noncompliance by any Person
with the terms, provisions, or covenants of the First Lien Loan Documents or the
Second Lien Loan Documents, regardless of any knowledge thereof which First Lien
Agent, First Lien Co-Agent, the First Lien Lenders or any holder of First Lien
Indebtedness may have.
d. DIP Financing. If any Borrower or any other Obligor shall be
subject to any Insolvency Proceeding and First Lien Co-Agent and/or First Lien
Agent shall desire, prior to the Discharge of First Lien Indebtedness, to permit
the use of cash collateral or to provide any such Obligor financing (or to
permit any such Obligor to obtain financing) (collectively, "DIP Financing")
under Section 363 or Section 364 of the Bankruptcy Code (or any similar
provision under the law applicable to any Insolvency Proceeding) to be secured
by all or any portion of the Collateral, then Second Lien Agent, on behalf of
itself and the Second Lien Lenders, agrees that, so long as (i) the aggregate
principal amount of Indebtedness incurred pursuant to such DIP Financing,
together with the aggregate principal amount of all other outstanding First Lien
Indebtedness, does not exceed the sum of $85,000,000, plus the First Lien
Amount, (ii) Second Lien Agent retains a Lien on the Collateral (including
Proceeds thereof arising after the commencement of such proceeding) with the
same priority as existed prior to the commencement of the case under applicable
law (an "Adequate Protection Lien"), and (iii) such use of cash collateral or
DIP Financing is subject to the terms of this Agreement, it will raise no
objection to such DIP Financing. Second Lien Agent, on behalf of itself and the
Second Lien Lenders, hereby agrees that its Liens in the Collateral shall be
subordinated to such DIP Financing (and all obligations relating thereto) to the
same extent and upon the same terms and conditions specified in this Agreement.
e. Alternative DIP Financings. Nothing in this Agreement shall limit
the rights of any Lender to object to post-petition financing or the use of cash
collateral that is provided on terms in contravention of Section 5.d.
f. Priming DIP Financing. Second Lien Agent, on behalf of itself and
the Second Lien Lenders, agrees that it shall not, directly or indirectly,
provide, offer to provide or
15
support any DIP Financing secured by a Lien senior to or pari passu with the
Liens securing the First Lien Indebtedness. Each of First Lien Agent and First
Lien Co-Agent, on behalf of itself and the First Lien Lenders, agrees that it
shall not, directly or indirectly, provide, offer to provide or support any DIP
Financing on terms in contravention of Section 5.d.
g. Other Waivers by Second Lien Agent. Second Lien Agent, on behalf
of itself and the Second Lien Lenders, agrees that it shall not (without the
First Lien Agent's and First Lien Co-Agent's prior written consent), in any
capacity, in connection with an Insolvency Proceeding of any Obligor: (i) seek
relief from the automatic stay of Section 362 of the Bankruptcy Code or any
other stay in any Insolvency Proceeding in respect of any portion of the
Collateral on which First Lien Agent or First Lien Co-Agent then has or purports
to have a Lien; (ii) seek or request any adequate protection, other than
Adequate Protection Liens, Permitted Replacement Liens and Permitted Interest
Payments, as expressly provided herein; (iii) object to any sale of all or any
portion of the Collateral in accordance with Sections 363 or 365 of the
Bankruptcy Code other than (A) any objection that an unsecured creditor could
assert or (B) if First Lien Agent, First Lien Co-Agent or any First Lien Lender
objects to any such sale to the same extent as such objection; (iv) seek, or
support any request, to dismiss any Insolvency Proceeding or to convert any
chapter 11 case of any such party from chapter 11 to chapter 7 of the Bankruptcy
Code; (v) seek, or support any request for, the appointment of a trustee
pursuant to section 1104(a)(1) of the Bankruptcy Code; (vi) seek, or support any
request for, the appointment of any examiner or such other disinterested person
with expanded powers pursuant to section 1104(c) of the Bankruptcy Code; (vii)
seek, or support any request for, the entry of any order modifying, reversing,
revoking, staying, rescinding, vacating or amending any DIP Financing order
pursuant to which the First Lien Agent, First Lien Co-Agent and/or the First
Lien Lenders have provided such financing; (viii) propose, vote in favor of or
otherwise approve or support any plan of reorganization, arrangement or
liquidation, or file any motion or pleading in support of any plan of
reorganization, arrangement or liquidation, unless it provides for the Discharge
of First Lien Debt; (ix) object to the treatment under a plan of reorganization
or arrangement of the First Lien Lenders' claims with respect to the First Lien
Debt; (x) take any action or vote in any way so as to directly or indirectly
challenge or contest (A) the validity or the enforceability of the First Lien
Credit Agreement, the other First Lien Loan Documents or the liens and security
interests granted to First Lien Agent, First Lien Co-Agent and the First Lien
Lenders with respect to the First Lien Indebtedness, (B) the rights and duties
of First Lien Agent, First Lien Co-Agent and the First Lien Lenders established
in the First Lien Credit Agreement or any other First Lien Loan Document, or (C)
the validity or enforceability of this Agreement; or (xi) take any other action
which would reasonably be expected to have a material adverse effect on the
validity of, or the value of, the First Lien Agent's or First Lien Co-Agent's
security interest in the Collateral or the claims of the First Lien Lenders.
Without in any way limiting the foregoing, Second Lien Lenders, in their
capacity as unsecured creditors in connection with an Insolvency Proceeding of
any Borrower or Guarantor, shall be permitted to exercise all other rights as
unsecured creditors, including, without limitation, the right to take the
following actions (but with respect to the exercise of any such rights, only to
the extent that doing so would not be inconsistent with clauses (i) through (xi)
of the foregoing sentence): (I) object to or support the retention of one or
more professionals for the Borrowers, Guarantors or any committee appointed in
an Insolvency Proceeding (the "Insolvency Professionals"); (II) object to or
support the fees and expenses of Insolvency Professionals; (III) object to or
support the approval of settlements and compromises of claims of parties (other
than First Lien Agent,
16
First Lien Co-Agent and the First Lien Lenders); (IV) object to motions for
relief from the automatic stay (other than any such motion filed by First Lien
Agent, First Lien Co-Agent and/or the First Lien Lenders); (V) object to or
support motions to assume or reject or compel assumption or rejection of
executory contracts and leases of non-residential real property; (VI) seek to
terminate any exclusive periods for filing or soliciting acceptances to a plan
or plans of reorganization; and (VII) take actions similar to the actions
described in the clauses (I) through (VI) of this sentence.
h. Other Waivers by First Lien Agent and First Lien Co-Agent. Until
the Discharge of Second Lien Indebtedness has occurred, each of First Lien Agent
and First Lien Co-Agent, on behalf of itself and the First Lien Lenders, agrees
that it shall not without Second Lien Agent's written consent to the contrary,
take any action or vote in any way so as to directly or indirectly challenge or
contest (A) the validity or the enforceability of the Second Lien Credit
Agreement, the other Second Lien Loan Documents or the liens and security
interests granted to Second Lien Agent and the Second Lien Lenders with respect
to the Second Lien Indebtedness, (B) the rights and duties of Second Lien Agent
and the Second Lien Lenders established in the Second Lien Credit Agreement or
any other Second Lien Loan Document to the extent that such rights and duties
are not and/or have not been exercised in contravention of this Agreement, or
(C) the validity or enforceability of this Agreement.
i. Rights of Second Lien Agent and Second Lien Lenders to Adequate
Protection. Each of First Lien Agent and First Lien Co-Agent, on behalf of
itself and the First Lien Lenders, agrees that it will raise no objection to a
request for adequate protection by Second Lien Agent and the Second Lien Lenders
in the form of (i) payment of interest on the Second Lien Indebtedness during
the pendency of an Insolvency Proceeding so long as (A) the rate of interest so
requested by Second Lien Agent and the Second Lien Lenders does not exceed the
default rate of interest applicable to the Second Lien Indebtedness immediately
prior to the commencement of such Insolvency Proceeding and (B) the First Lien
Agent, First Lien Co-Agent and the First Lien Lenders receive adequate
protection in the form of payment of interest on the First Lien Indebtedness
during the pendency of such Insolvency Proceeding at a rate at least equal to
the greater of (x) the non-default contractual rate of interest applicable to
the First Lien Indebtedness immediately prior to the commencement of such
Insolvency Proceeding and (y) the rate of interest so requested by the Second
Lien Agent and the Second Lien Lenders ("Permitted Interest Payments"), (ii)
Adequate Protection Liens and (iii) a replacement lien on post-petition assets
to the same extent granted to First Lien Agent, with the same priority as
existed prior to the commencement of the case under applicable law (a "Permitted
Replacement Lien").
6. Modifications of Indebtedness.
a. First Lien Indebtedness. All First Lien Indebtedness at any time
incurred by any Obligor shall be deemed to have been incurred, and all First
Lien Indebtedness held by any First Lien Lender or other holder of First Lien
Indebtedness shall be deemed to have been extended, acquired or obtained, as
applicable, in reliance upon this Agreement, and, to the extent not otherwise
required herein, Second Lien Agent, on behalf of itself and each Second Lien
Lender, hereby waives (i) notice of acceptance, or proof of reliance, by First
Lien Agent, First Lien Co-Agent, the First Lien Lenders or any other holder of
First Lien Indebtedness of this
17
Agreement, and (ii) notice of the existence, renewal, extension, accrual,
creation, or non-payment of all or any part of the First Lien Indebtedness.
Nothing contained in this Agreement shall preclude First Lien Agent, First Lien
Co-Agent, First Lien Lenders or any other holder of First Lien Indebtedness from
discontinuing the extension of credit to any Obligor (whether under the First
Lien Credit Agreement or otherwise). Anything in the Second Lien Loan Documents
to the contrary notwithstanding, Second Lien Agent, on behalf of itself and each
Second Lien Lender, hereby agrees that First Lien Agent and First Lien Co-Agent
shall have the right, at any time and from time to time, in its sole discretion
without the consent of or notice to Second Lien Agent or any Second Lien Lender
(except to the extent such notice or consent is required pursuant to the express
provisions of this Agreement), and without incurring any liability to Second
Lien Agent or any Second Lien Lender amend, restate, waive, supplement, replace,
refinance, extend, consolidate, restructure, or otherwise modify (collectively,
any "First Lien Modification") the First Lien Loan Documents, in any manner
whatsoever, including any renewals, extensions or shortening of time of payments
(even if such shortening causes any First Lien Indebtedness to be due on demand
or otherwise), and Second Lien Agent, on behalf of itself and each Second Lien
Lender, consents and agrees to any such First Lien Modification. Second Lien
Agent, on behalf of itself and each Second Lien Lender, waives notice of any
such First Lien Modification, and agrees that no such First Lien Modification
shall affect, release, or impair the subordinations or any other obligations of
Second Lien Agent or any Second Lien Lender contained herein.
b. Second Lien Indebtedness. Anything in the First Lien Loan
Documents to the contrary notwithstanding, Second Lien Agent shall not amend,
restate, waive, supplement, replace, refinance, extend, consolidate,
restructure, or otherwise modify the Second Lien Loan Documents in any manner
whatsoever without the prior written consent of the First Lien Agent or First
Lien Co-Agent (acting upon the direction of the requisite First Lien Lenders).
c. Notice of Acceptance and Other Waivers.
(1) To the fullest extent permitted by applicable law, Second Lien
Agent, on behalf of itself and each Second Lien Lender, hereby waives: (i)
notice of acceptance hereof; (ii) notice of any loans or other financial
accommodations made or extended under the First Lien Credit Agreement, or the
creation or existence of any First Lien Indebtedness; (iii) notice of the amount
of the First Lien Indebtedness; (iv) notice of any adverse change in the
financial condition of any Obligor or of any other fact that might increase such
Second Lien Agent's or such Second Lien Lender's risk hereunder; (v) notice of
presentment for payment, demand, protest, and notice thereof as to any
instrument among the First Lien Loan Documents; (vi) notice of any Default or
Event of Default under the First Lien Loan Documents or otherwise relating to
the First Lien Indebtedness; and (vii) all other notices (except if such notice
is specifically required to be given to Second Lien Agent under this Agreement)
and demands to which Second Lien Agent or any Second Lien Lender might otherwise
be entitled. To the fullest extent permitted by applicable law, Second Lien
Agent, on behalf of itself and each Second Lien Lender, waives the right by
statute or otherwise to require First Lien Agent, First Lien Co-Agent or any
holder of First Lien Indebtedness to institute suit against any Obligor or to
exhaust any rights and remedies which First Lien Agent, First Lien Co-Agent, any
First Lien Lender or any holder of First Lien Indebtedness has or may have
against any Obligor. Second Lien Agent, on behalf of itself and each Second Lien
Lender, further waives any defense arising by reason of
18
any disability or other defense of any Obligor or by reason of the cessation
from any cause whatsoever of the liability of such Obligor in respect thereof.
(2) To the fullest extent permitted by applicable law, Second Lien
Agent, on behalf of itself and each Second Lien Lender, hereby waives: (i) any
rights to assert against First Lien Agent, First Lien Co-Agent, the First Lien
Lenders or any other holder of First Lien Indebtedness any defense (legal or
equitable), set-off, counterclaim, or claim which such Second Lien Agent or any
Second Lien Lender may now or at any time hereafter have against any Obligor;
(ii) except as otherwise set forth in this Agreement, any defense, set-off,
counterclaim, or claim, of any kind or nature, arising directly or indirectly
from the present or future lack of perfection, sufficiency, validity, or
enforceability of any First Lien Indebtedness, any Second Lien Indebtedness or
any security for either; and (iii) the benefit of any statute of limitations
affecting Second Lien Agent's or any Second Lien Lender's obligations hereunder
or the enforcement thereof, and any act which shall defer or delay the operation
of any statute of limitations applicable to the First Lien Indebtedness shall
similarly operate to defer or delay the operation of such statute of limitations
applicable to such Second Lien Agent's or any such Second Lien Lender's
obligations hereunder.
(3) Until such time as the Discharge of First Lien Indebtedness
shall have occurred, Second Lien Agent, on behalf of itself and each Second Lien
Lender, hereby postpones any right of subrogation Second Lien Agent or any
Second Lien Lender has or may have as against any Obligor with respect to any
First Lien Indebtedness.
(4) None of First Lien Agent, First Lien Co-Agent, any First Lien
Lender or any other holder of First Lien Indebtedness or any of their respective
affiliates, directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon any of the Collateral or any
Proceeds or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral or Proceeds thereof or to take any other
action whatsoever with regard to the Collateral or any part or Proceeds thereof.
If First Lien Agent, First Lien Co-Agent or any First Lien Lender honors (or
fails to honor) a request by the Borrowers for an extension of credit pursuant
to the First Lien Credit Agreement or any of the other First Lien Loan
Documents, whether First Lien Agent, First Lien Co-Agent or any First Lien
Lender has knowledge that the honoring of (or failure to honor) any such request
would constitute a default under the terms of the Second Lien Loan Documents or
an act, condition, or event that, with the giving of notice or the passage of
time, or both, would constitute such a default, or if First Lien Agent, First
Lien Co-Agent or any First Lien Lender otherwise should exercise any of its
contractual rights or remedies under the First Lien Loan Documents (subject to
the express terms and conditions hereof), neither First Lien Agent, First Lien
Co-Agent nor any First Lien Lender shall have any liability whatsoever to Second
Lien Agent or any Second Lien Lender as a result of such action, omission, or
exercise. Each of First Lien Agent, First Lien Co-Agent and each First Lien
Lender will be entitled to manage and supervise its loans and extensions of
credit under the First Lien Loan Documents as First Lien Agent, First Lien
Co-Agent and First Lien Lenders may, in their sole discretion, deem appropriate,
and First Lien Agent, First Lien Co-Agent, each First Lien Lender and each other
holder of First Lien Indebtedness may manage their loans and extensions of
credit without regard to any rights or interests that Second Lien Agent or any
Second Lien Lender may have in the Collateral or otherwise except as otherwise
expressly set forth in this Agreement. Second Lien Agent, on behalf of itself
and each Second
19
Lien Lender, agrees that none of First Lien Agent, First Lien Co-Agent, any
First Lien Lender or any other holder of First Lien Indebtedness shall incur any
liability as a result of a sale, lease, license, application or other
disposition of all or any portion of the Collateral or any part or Proceeds
thereof conducted in accordance with applicable law and the terms hereof.
Subject to the express terms and conditions of this Agreement, First Lien Agent,
First Lien Co-Agent, each First Lien Lender and each other holder of First Lien
Indebtedness may, from time to time, enter into agreements and settlements with
Obligors as it may determine in its sole discretion without impairing any of the
subordinations, priorities, rights or obligations of the parties under this
Agreement, including substituting Collateral, releasing any Lien and releasing
any Obligor. Second Lien Agent, on behalf of itself and each Second Lien Lender,
waives any and all rights it may have to require First Lien Agent, First Lien
Co-Agent, any First Lien Lender or any holder of First Lien Indebtedness to
marshal assets, to exercise rights or remedies in a particular manner, or to
forbear from exercising such rights and remedies in any particular manner or
order.
7. Indebtedness Owed Only to Lenders. The entire Second Lien Indebtedness
is owing only to the Second Lien Agent and the Second Lien Lenders. None of
Second Lien Agent nor the Second Lien Lenders may sell or assign or otherwise
transfer any part of its interest in the Second Lien Indebtedness or the
Collateral, other than (a) assignments to entities that are Second Lien Lenders
prior to such assignment and (b) participations in accordance with the Second
Lien Credit Agreement, unless, in each case, the transferee executes and
delivers to First Lien Agent and First Lien Co-Agent a written acknowledgment in
which the transferee acknowledges its agreement to be bound by the terms hereof.
Any assignment in violation of the immediately preceding sentence shall be null
and void. Second Lien Agent under any Second Lien Credit Agreement that replaces
or refinances the Original Second Lien Credit Agreement shall not be entitled to
any of the benefits of this Agreement unless and until such Second Lien Agent
acknowledges its agreement to be bound by the terms hereof, but shall be subject
to the burdens and obligations, including, without limitation, the lien
subordination, provided for herein.
8. Payments Received by Second Lien Agent or the Second Lien Lenders. If
at any time prior to the date upon which the Discharge of First Lien
Indebtedness shall have occurred, Second Lien Agent or any Second Lien Lender
receives any payment or distribution of any kind or character, whether as a
result of an Exercise of Any Secured Creditor Remedies or otherwise, whether in
cash, property or securities, from or of any assets of any Obligor (or any
Obligor's Subsidiaries), irrespective of whether such payment or distribution
was of Collateral or of Proceeds thereof, in each case, in contravention of the
express terms of this Agreement, Second Lien Agent or such Second Lien Lender
shall be deemed to receive and hold the same in trust as trustee for the benefit
of First Lien Agent, First Lien Co-Agent and the First Lien Lenders and shall
forthwith deliver such payment, distribution, or proceeds to First Lien Agent in
precisely the form received (except for the endorsement or assignment by Second
Lien Agent or such Second Lien Lender where necessary), for application on any
of the First Lien Indebtedness, whether then due or yet to become due. In the
event of the failure of Second Lien Agent or any Second Lien Lender to make any
such endorsement or assignment to First Lien Agent within five (5) Business Days
after receipt of written request therefor from First Lien Agent or First Lien
Co-Agent, First Lien Agent, First Lien Co-Agent and any of their respective
officers or agents are hereby irrevocably authorized to make such endorsement or
assignment and Second Lien Agent, on behalf of itself and each Second Lien
Lender, hereby irrevocably appoints each of First Lien Agent and First Lien
Co-Agent as the lawful attorney in fact of Second Lien Agent
20
and Second Lien Lenders solely for the purpose of enabling First Lien Agent
and/or First Lien Co-Agent to make such endorsement or assignment in the name of
Second Lien Agent or any Second Lien Lender.
9. Application of Proceeds.
a. Revolving Nature of First Lien Indebtedness. Second Lien Agent,
for and on behalf of itself and the Second Lien Lenders, expressly acknowledges
and agrees that (i) a portion of the First Lien Credit Agreement is a revolving
commitment, that in the ordinary course of business First Lien Agent, First Lien
Co-Agent and the First Lien Lenders will apply payments and make advances
thereunder, and that no application of any Payment Collateral or Cash Collateral
in the ordinary course of business and absent any affirmative enforcement action
or remedies by First Lien Agent, First Lien Co-Agent or any First Lien Lender to
collect or otherwise realize upon such Payment Collateral or Cash Collateral
(such Payment Collateral or Cash Collateral, "Ordinary Course Collections")
shall constitute the Exercise of Secured Creditor Remedies under this Agreement;
and (ii) all Ordinary Course Collections received by First Lien Agent, First
Lien Co-Agent or First Lien Lenders may be applied, reversed, reapplied,
credited, or reborrowed, in whole or in part, to the portion of the First Lien
Credit Agreement that is a revolving commitment without reducing the Maximum
Amount at any time. Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto hereby agree that all applications of Payment
Collateral or Cash Collateral by First Lien Agent, First Lien Co-Agent or any
First Lien Lender to First Lien Indebtedness (x) from and after an Exercise of
Secured Creditor Remedies by First Lien Agent, First Lien Co-agent or any First
Lien Lender (it being understood and agreed that, subject to clause (y) below,
First Lien Agent shall not be obligated to apply Ordinary Course Collections in
accordance with Section 9.b even if First Lien Agent, First Lien Co-Agent or any
First Lien Lender is otherwise Exercising Secured Creditor Remedies at such time
so long as such Ordinary Course Collections do not arise from such Exercise of
Secured Creditor Remedies) or (y) from and after the termination or expiration
of the Application of Proceeds Blockage Period (if at such time any payment
default has occurred and is continuing with respect to the Second Lien
Indebtedness) shall constitute Proceeds of Collateral and shall be applied in
accordance with Section 9.b.
b. All Collateral and all Proceeds, received by any of First Lien
Agent, First Lien Co-Agent, First Lien Lenders, Second Lien Agent or Second Lien
Lenders in connection with any Exercise of Secured Creditor Remedies shall be
applied:
first, to the payment of costs and expenses of First Lien Agent and
First Lien Co-Agent in connection with such Exercise of Secured
Creditor Remedies,
second, to the payment of the First Lien Indebtedness in accordance
with the First Lien Loan Documents, together with the concurrent
permanent reduction of any credit commitment thereunder in an amount
equal to the amount of such payment, and
third, to the payment of the Second Lien Indebtedness in accordance
with the Second Lien Loan Documents.
21
10. Second Lien Lender Purchase Option.
a. Upon (i) receipt by Second Lien Agent of a notice (a "Trigger
Notice") by First Lien Agent or First Lien Co-Agent of the intent of First Lien
Agent, First Lien Co-Agent and the First Lien Lenders to Exercise Any Secured
Creditor Remedies, (ii) the commencement of an Insolvency Proceeding with
respect to any Obligor, or (iii) receipt by Second Lien Agent of a Standstill
Notice (each a "Trigger Event"), Second Lien Agent and the Second Lien Lenders
shall have the option, exercised by delivery of written notice by Second Lien
Agent to First Lien Agent and First Lien Co-Agent (a "Purchase Notice"), to
purchase all (but not less than all) of the First Lien Indebtedness from First
Lien Agent, First Lien Co-Agent and the First Lien Lenders. The Purchase Notice
shall be irrevocable.
b. First Lien Agent or First Lien Co-Agent shall deliver to Second
Lien Agent any Trigger Notice referred to in Section 10.a(i) above (i) in the
absence of an Exigent Circumstance (defined below), not less than 5 Business
Days prior to the taking of the actions described in Section 10.a(i) or (ii) if
Exigent Circumstances exist, as soon as practicable and in any event
contemporaneously with the taking of such action. Second Lien Agent may send to
First Lien Agent and First Lien Co-Agent a Purchase Notice within 5 Business
Days of the occurrence of a Trigger Event, in which event, First Lien Agent,
First Lien Co-Agent and the First Lien Lenders shall not Exercise Any Secured
Creditor Remedies, to the extent such action has not been taken, provided, that,
the purchase and sale with respect to the First Lien Indebtedness provided for
in this Section 10 shall have closed within 5 Business Days after receipt by
First Lien Agent and First Lien Co-Agent of the Purchase Notice and First Lien
Agent (on behalf of itself and First Lien Co-Agent and the First Lien Lenders)
shall have received payment in full of the First Lien Indebtedness as provided
for herein within such 5 Business Day period. As used herein, "Exigent
Circumstance" shall mean an event or circumstance that materially and imminently
threatens the ability of First Lien Agent or First Lien Co-Agent to realize upon
all or a material part of the Collateral, such as, without limitation,
fraudulent removal, concealment, or abscondment thereof, destruction (other than
to the extent covered by insurance) or material waste thereof, or the failure of
any Obligor after reasonable demand to maintain or reinstate adequate casualty
insurance coverage with respect thereto.
c. On the date specified by Second Lien Agent in the Purchase Notice
(which shall not be more than 5 Business Days after the receipt by First Lien
Agent and First Lien Co-Agent of the Purchase Notice), First Lien Agent, First
Lien Co-Agent and the First Lien Lenders shall sell to Second Lien Agent and the
Second Lien Lenders, and Second Lien Agent and the Second Lien Lenders shall
purchase from First Lien Agent, First Lien Co-Agent and the First Lien Lenders,
the First Lien Indebtedness.
d. Upon the date of such purchase and sale, Second Lien Agent and
the Second Lien Lenders shall (i) pay to First Lien Agent, First Lien Co-Agent
and the First Lien Lenders as the purchase price therefor the full amount of all
the First Lien Indebtedness then outstanding and unpaid, (ii) furnish cash
collateral to First Lien Agent, First Lien Co-Agent and the First Lien Lenders
in such amounts as First Lien Agent and First Lien Co-Agent determine is
reasonably necessary to secure First Lien Agent, First Lien Co-Agent and the
First Lien Lenders in connection with (A) any issued and outstanding letters of
credit provided by First Lien Agent, First Lien Co-Agent or any First Lien
Lender (or letters of credit that First Lien Agent, First Lien
22
Co-Agent or any First Lien Lender has arranged to be provided by third parties
pursuant to the First Lien Loan Documents) to any Obligor (but not in any event
in an amount greater than 105% of the aggregate undrawn face amount of such
letters of credit), (B) Bank Product Obligations owing to the Bank Product
Providers (as defined in the Original First Lien Credit Agreement) (but not in
any event in an amount greater than the Bank Product Reserve (as defined in the
Original First Lien Credit Agreement) established in respect thereof in
accordance with the Original First Lien Credit Agreement), or (C) Ledger Product
Obligations owing to the providers of Ledger Products (as defined in the
Original First Lien Credit Agreement) (but not in any event in an amount greater
than any reserves established in respect thereof in accordance with the Original
First Lien Credit Agreement), and (iii) agree to reimburse First Lien Agent,
First Lien Co-Agent and the First Lien Lenders for all expenses to the extent
earned or due and payable in accordance with the First Lien Loan Documents
(including the reimbursement of extraordinary expenses, financial examination
expenses and appraisal fees), including principal, interest and fees thereon and
costs and expense of collection thereof (including reasonable attorneys' fees
and legal expenses). Such purchase price and cash collateral shall be remitted
by wire transfer in federal funds to such bank account of First Lien Agent as
First Lien Agent may designate in writing to Second Lien Agent for such purpose.
Interest shall be calculated to but excluding the Business Day on which such
purchase and sale shall occur if the amounts so paid by Second Lien Agent and
the Second Lien Lenders to the bank account designated by First Lien Agent are
received in such bank account prior to 2:00 p.m., New York City time, and
interest shall be calculated to and including such Business Day if the amounts
so paid by Second Lien Agent and the Second Lien Lenders to the bank account
designated by First Lien Agent are received in such bank account later than 2:00
p.m., New York City time.
e. Such purchase shall be expressly made without representation or
warranty of any kind by First Lien Agent, First Lien Co-Agent and the First Lien
Lenders as to the First Lien Indebtedness so purchased or otherwise and without
recourse to First Lien Agent, First Lien Co-Agent or any First Lien Lender,
except that each First Lien Lender shall represent and warrant: (i) the amount
of the First Lien Indebtedness being purchased from it, (ii) that such First
Lien Lender owns its portion of the First Lien Indebtedness so purchased free
and clear of any Liens or encumbrances and (iii) such First Lien Lender has the
right to assign such First Lien Indebtedness and the assignment is duly
authorized by such First Lien Lender.
11. Representations. Each of First Lien Agent and First Lien Co-Agent
represents and warrants to Second Lien Agent that it has the requisite power and
authority to enter into, execute, deliver, and carry out the terms of this
Agreement on behalf of itself and the First Lien Lenders. Second Lien Agent
represents and warrants that it has the requisite power and authority to enter
into, execute, deliver, and carry out the terms of this Agreement on behalf of
itself and the Second Lien Lenders.
12. Additional Remedies. If Second Lien Agent or any Second Lien Lender
violates any of the terms of this Agreement, in addition to any remedies in law,
equity, or otherwise, First Lien Agent or First Lien Co-Agent may restrain such
violation in any court of law and may, in its own or in any Obligor's name,
interpose this Agreement as a defense in any action by Second Lien Agent or any
Second Lien Lender. Upon First Lien Agent's or First Lien Co-Agent's written
request and at the sole expense of Borrowers, Second Lien Agent and the Second
Lien
23
Lenders will promptly take all actions reasonably requested by First Lien Agent
or First Lien Co-Agent, as the case may be, to carry out the purposes and
provisions of this Agreement.
13. Amendments. No amendment or waiver of any provision of this Agreement
nor consent to any departure by any party hereto shall be effective unless it is
in a written agreement executed by Second Lien Agent, First Lien Agent and First
Lien Co-Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
14. Instrument Legends. Second Lien Agent agrees that the Second Lien
Credit Agreement, the face of each promissory note evidencing the Second Lien
Indebtedness or any portion thereof and any agreement purporting to grant any
security therefor, shall be inscribed with a legend conspicuously indicating
that such Second Lien Credit Agreement, promissory note or security agreement is
subject to the terms of this Agreement. Any promissory note evidencing any of
the Second Lien Indebtedness or any portion thereof, and any agreement granting
any security therefor, which is hereafter executed will, on the date thereof, be
inscribed with a similar legend. The Second Lien Credit Agreement shall provide
that each Second Lien Lender shall be required to execute a writing, which may
include the Second Lien Credit Agreement, agreeing to be bound by the terms
hereof, and providing that any assignment or transfer of any or all of the
Second Lien Indebtedness to any other Person without such other Person's written
agreement to be bound hereby shall be null and void.
15. Information Concerning Financial Condition. Each of Second Lien Agent
and each Second Lien Lender hereby assumes responsibility for keeping itself
informed of the financial condition of Obligors and of all other circumstances
bearing upon the risk of nonpayment of the Second Lien Indebtedness, and agrees
that First Lien Agent, First Lien Co-Agent and the First Lien Lenders have and
shall have no duty to advise Second Lien Agent or any Second Lien Lender of
information known to First Lien Agent, First Lien Co-Agent or any First Lien
Lender regarding such condition or any such circumstances. In the event First
Lien Agent, First Lien Co-Agent or any First Lien Lender, in their sole
discretion, undertake, at any time or from time to time, to provide any such
information to Second Lien Agent or the Second Lien Lenders, none of First Lien
Agent, First Lien Co-Agent or the First Lien Lenders shall be under any
obligation (i) to provide any such information to Second Lien Agent or Second
Lien Lenders on any subsequent occasion, (ii) to undertake any investigation, or
(iii) to disclose any information which, pursuant to its commercial finance
practices, First Lien Agent, First Lien Co-Agent or any First Lien Lender wishes
to maintain confidential. Second Lien Agent, on behalf of itself and the Second
Lien Lenders, acknowledges and agrees that none of First Lien Agent, First Lien
Co-Agent or any First Lien Lender has made any warranties or representations
with respect to the legality, validity, enforceability, collectability or
perfection of the First Lien Indebtedness or any liens or security interests
held in connection therewith.
16. Third Party Beneficiaries. This Agreement is solely for the benefit of
First Lien Agent, First Lien Co-Agent, First Lien Lenders, Second Lien Agent,
and the Second Lien Lenders, and their respective successors and assigns, and
neither any Obligor nor any other Persons are intended to be a third party
beneficiary hereunder or to have any right, benefit, priority or interest under,
or because of the existence of, or to have any right to enforce, this Agreement.
Nothing in this Agreement is intended to or shall be deemed to amend or modify
the
24
terms and conditions of the First Lien Loan Documents or the Second Lien Loan
Documents. First Lien Agent, First Lien Co-Agent and Second Lien Agent shall
have the right to modify or terminate this Agreement at any time without notice
to or approval of any Obligor or any other Person. The Obligors and the Second
Lien Agent, on behalf of itself and each Second Lien Lender, hereby agree that
First Lien Agent, First Lien Co-Agent and the First Lien Lenders are entitled to
rely on and are intended beneficiaries of each of Section 7.28 and Section 9.3
of the Second Lien Credit Agreement and shall have the right to enforce such
provisions against the Obligors, Second Lien Agent and the Second Lien Lenders.
17. No Impairment. Nothing in this Agreement is intended to or shall
impair, as between Obligors and Second Lien Agent and the Second Lien Lenders,
the obligation of Obligors, which is absolute and unconditional, to pay the
Second Lien Indebtedness as and when the same shall become due and payable in
accordance with its terms, or affect the relative rights of Second Lien Agent
and the Second Lien Lenders and creditors of Obligors other than First Lien
Agent, First Lien Co-Agent and the First Lien Lenders.
18. Subrogation. Solely after the Discharge of First Lien Indebtedness
shall have occurred, Second Lien Agent and the Second Lien Lenders shall be
subrogated to the rights of First Lien Agent, First Lien Co-Agent and the First
Lien Lenders to the extent that distributions otherwise payable to Second Lien
Agent or any Second Lien Lender have been applied to the payment of the First
Lien Indebtedness in accordance with the provisions of this Agreement. First
Lien Agent, First Lien Co-Agent and the First Lien Lenders shall have no
obligation or duty to protect Second Lien Agent and the Second Lien Lenders'
rights of subrogation arising pursuant to this Agreement or under any applicable
law, nor shall First Lien Agent, First Lien Co-Agent, First Lien Lenders or any
other holder of First Lien Indebtedness be liable for any loss to, or impairment
of, any subrogation rights held by Second Lien Agent or any Second Lien Lender.
19. Notices. All demands, notices, and other communications provided for
hereunder shall be in writing and, if to Second Lien Agent, mailed or sent by
telecopy or delivered to it, addressed to it as follows:
THE BANK OF NEW YORK
[-----------------]
[-----------------]
[-----------------]
With a copy to:
[ ]
[ ]
[ ]
Attn: [ ], Esq.
Fax No.: ( )
25
and if to First Lien Agent, mailed, sent or delivered thereto, addressed to it
as follows:
XXXXX FARGO FOOTHILL, INC.
0000 Xxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Business Finance Division Manager
Fax No.: (000) 000-0000
With a copy to:
XXXXXXX XXXX & XXXXX LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
and if to First Lien Co-Agent, mailed, sent or delivered thereto, addressed to
it as follows:
SILVER POINT FINANCE, LLC
Two Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Fax No.: (000) 000-0000
With a copy to:
XXXXXXXX & XXXXXXXX LLP
1290 Avenue of the Americas, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
or as to any party at such other address as shall be designated by
such party in a written notice to the other parties complying as to delivery
with the terms of this Section 19. All such demands, notices and other
communications shall be effective, when mailed, three Business Days after
deposit in the mails, postage prepaid, when sent by telecopy, when receipt is
acknowledged by the receiving telecopy equipment (or at the opening of the next
Business Day if receipt is after normal business hours), or when delivered, as
the case may be, addressed as aforesaid.
20. Costs and Attorneys Fees. In the event it becomes necessary for First
Lien Agent, First Lien Co-Agent, any First Lien Lender, Second Lien Agent, or
any Second Lien Lender to commence or become a party to any proceeding or action
to enforce the provisions of this Agreement, the court or body before which the
same shall be tried shall award to the prevailing party all costs and expenses
thereof, including reasonable attorneys' fees, the usual
26
and customary and lawfully recoverable court costs, and all other expenses in
connection therewith.
21. Consent to Jurisdiction; Waiver of Jury Trial and Other Waivers.
Second Lien Agent, First Lien Agent and First Lien Co-Agent each consent to the
jurisdiction of any state or federal court located within the County of New
York, State of New York. Each Agent waives personal service of any and all
process upon it, and consents that all service of process be made in the manner
set forth in Section 19 of this Agreement for notices. Each Agent waives, to the
fullest extent each may effectively do so, any defense or objection based upon
forum non conveniens and any defense or objection to venue of any action
instituted within the County of New York, State of New York. EACH OF THE PARTIES
HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT.
22. Governing Law. This Agreement has been delivered and accepted at and
shall be deemed to have been made in the State of New York, and shall be
interpreted, and the rights and liabilities of the parties hereto determined, in
accordance with the laws of the State of New York.
23. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors and assigns,
subject to the provisions hereof.
24. Integrated Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the within matters and may not be
modified or amended except upon a writing signed by all parties.
25. Authority. Each of the parties hereto certifies that such party has
all necessary authority to execute this Agreement.
26. Counterparts. This Agreement may be executed in one or more
counterparts, each one of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement by facsimile or
electronic mail shall be equally as effective as delivery of an original
executed counterpart.
27. Headings. The headings contained in this Agreement are for convenience
only and shall not affect the interpretation of this Agreement.
28. Severability. Any provision of this Agreement that is prohibited by
law or unenforceable shall be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision. To the extent
permissible, the parties waive any law that prohibits any provision of this
Agreement or renders any provision hereof unenforceable.
29. Conflicts. To the extent that there is a conflict or inconsistency
between any provision hereof, on the one hand, and any provision of any First
Lien Loan Document or any Second Lien Loan Document, on the other hand, this
Agreement shall control and prevail. The foregoing to the contrary
notwithstanding, a covenant in the First Lien Loan Documents
27
prohibiting the Obligors from voluntarily prepaying the Second Lien Indebtedness
shall not be deemed to be in conflict with or inconsistent with the terms of
this Agreement. To the extent that there is a conflict or inconsistency between
any provision hereof, on the one hand, and any provision of that certain
Agreement Among Lenders dated as of August 30, 2004 among First Lien Agent,
First Lien Co-Agent and the First Lien Lenders (the "First Lien Lender Side
Letter Agreement"), on the other hand, the First Lien Lender Side Letter
Agreement shall control and prevail, and, without limiting the foregoing, First
Lien Agent (as opposed to First Lien Co-Agent) shall only have the ability to
deliver a Standstill Notice and to exercise remedies under this Agreement to the
extent otherwise permitted under the First Lien Loan Documents and the First
Lien Lender Side Letter Agreement.
30. Termination. This Agreement shall continue in full force and effect
until the Discharge of First Lien Indebtedness shall have occurred and shall
thereafter be revived to the extent provided for in Section 5.c.
[Remainder of page left intentionally blank]
28
IN WITNESS WHEREOF, First Lien Agent and First Lien Co-Agent, for
and on behalf of itself and the First Lien Lenders, and Second Lien Agent, for
and on behalf of itself and the Second Lien Lenders, have caused this Agreement
to be duly executed and delivered as of the date first above written.
XXXXX FARGO FOOTHILL, INC., a California
corporation, as First Lien Agent
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
SILVER POINT FINANCE, LLC, a Delaware limited
liability company, as First Lien Co-Agent
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
THE BANK OF NEW YORK, a national banking
association, as Second Lien Agent
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
[SIGNATURE PAGE OF INTERCREDITOR AGREEMENT]
ACKNOWLEDGMENT
Each Borrower and each Guarantor hereby acknowledges that it has
received a copy of the foregoing Intercreditor Agreement, consents thereto and
agrees to recognize all rights granted thereby to First Lien Agent, First Lien
Co-Agent, the First Lien Lenders, Second Lien Agent, and the Second Lien Lenders
and will not do any act or perform any obligation which is not in accordance
with the agreements set forth therein. Each Borrower and each Guarantor further
acknowledge and agree that they are not an intended beneficiary or third party
beneficiary under this Agreement.
ACKNOWLEDGED AS OF THE DATE FIRST WRITTEN ABOVE:
BORROWERS:
SALTON, INC., a Delaware corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
TOASTMASTER INC., a Missouri corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
SALTON TOASTMASTER LOGISTICS LLC, a
Delaware limited liability company
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
GUARANTORS:
HOME CREATIONS DIRECT, LTD.,
a Delaware corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
[SIGNATURE PAGE OF INTERCREDITOR AGREEMENT]
SONEX INTERNATIONAL CORPORATION, a
Delaware corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
ICEBOX, LLC, an Illinois limited liability
company
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
FAMILY PRODUCTS INC., a Delaware
corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
SALTON HOLDINGS, INC., a Delaware
corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
[SIGNATURE PAGE OF INTERCREDITOR AGREEMENT]
EXHIBIT 6
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of July
5, 2005 by and among (i) Salton, Inc. a Delaware corporation (the "Company"),
(ii) [Beneficial Owners of Old Notes, defined in the Support Agreement, that
enter into - directly or through their investment managers or advisers - the
Support Agreement] (collectively, the "Investors") and (iii) each person or
entity that subsequently becomes a party to this Agreement pursuant to, and in
accordance with, the provisions of Section 9 hereof (each an "Investor Permitted
Transferee" and collectively, the "Investor Permitted Transferees").
WHEREAS, the Company and the Investors have entered into the Support
Agreement dated as of the date hereof ("Support Agreement") providing for the
Investors to support the Exchange Offer (as defined in the Support Agreement);
and
WHEREAS, it is a condition of the exchange transaction contemplated by the
Support Agreement that the Company and the Investors execute and deliver this
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. Definitions. The following terms shall have the meanings provided
therefor below or elsewhere in this Agreement as described below. Capitalized
terms used and not defined in this Agreement have the meanings ascribed to them
in the Support Agreement or the Term Sheet.
"Affiliate" of a party means any other Person controlling, controlled by
or under common control with the specified Person. For the purposes of this
definition, "control" means the power to direct the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Board" shall mean the board of directors of the Company.
"Demand Registration" shall have the meaning as set forth in Section
2(a) herein.
"Designated Counsel" shall have the meaning set forth in Section 4(a)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Filing Date Deadline" shall be forty-five (45) days following the date of
receipt by the Company of a request for Demand Registration.
"Initial Registrable Securities" are the Registrable Securities
outstanding upon consummation of the Exchange Offer.
"Investor Indemnified Person" has the meaning set forth in Section 7(a)
hereof.
"Investors" shall mean, collectively, the Investors and the Investor
Permitted Transferees; provided, however, that the term "Investors" shall not
include any of the Investors or any of the Investor Permitted Transferees that
ceases to own or hold any Registrable Securities.
"NASD" shall mean the National Association of Securities Dealers.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean an individual, corporation, company, partnership,
firm, association, joint venture, trust, unincorporated organization,
government, governmental body, agency, political subdivision or other entity.
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" shall mean (i) the shares of Common Stock issued
to the Investors upon consummation of the Exchange Offer and held by the
Investors, (ii) any shares of Common Stock issued or issuable with respect to
such shares of Common Stock by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any shares of Series C Preferred Stock held
by the Investors; provided, however, that shares of Common Stock and Series C
Preferred Stock that are considered to be Registrable Securities shall cease to
be Registrable Securities (A) upon the sale thereof pursuant to an effective
Registration Statement, (B) upon the sale thereof pursuant to Rule 144 or upon
the availability for such sale of Rule 144(k) (or successor or substitute rule,
law or provision), or (C) when such securities cease to be outstanding.
"Registration Expenses" has the meaning set forth in Section 6 hereof.
"Registration Statement" means the initial registration statement
required to be filed in accordance with Section 2(a), including (in each case)
the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act and
any successor or substitute rule, law or provision.
"SEC" shall mean the U.S. Securities and Exchange Commission.
2
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
2. Demand Registration.
(a) Requests for Registration. At any time on or after December 31,
2005, subject to Section 2(d) below, the Investors shall have the right to make
a written request to the Company for registration with the SEC under the
Securities Act of all or part of their Registrable Securities (a "Demand
Registration"). All requests made pursuant to this Section 2(a) shall specify
the number of Registrable Securities to be registered and the intended methods
of disposition thereof. All such requests shall be delivered to the Company in
accordance with the provisions of Section 14(e)(i) of this Agreement.
(b) Procedures. Following the receipt of a request for Demand
Registration, the Company will promptly give written notice of such request to
all Investors other than those that were parties to such request, and,
thereupon, will use its commercially reasonable best efforts to cause to be
filed and declared effective, as soon as practicable, a Registration Statement
on such appropriate form as the Company in its reasonable discretion shall
determine providing for the sale of all of such Registrable Securities requested
to included by the Investors that were parties to such request and all other
Registrable Securities that the Company has been requested to register by other
Investors by written request (which shall specify the number of Registrable
Securities to be registered and the intended method of disposition thereof)
received by the Company within 30 days after the giving of such written notice
by the Company; provided, however, that, subject to Section 2(d), below, such
Registration Statement shall be filed with the SEC not later than the Filing
Date Deadline. Promptly after expiration of the 20 day period referred to in
this Section 2(b), the Company will notify all the Investors entitled to be
included in the Registration Statement of the other Investors that have
requested inclusion and the number of Registrable Securities requested to be
included therein.
(c) Number of, and Limitations on, Registrations. The Investors will be
entitled to request three (3) Demand Registrations. The Company will not be
obligated to register any Registrable Securities pursuant to such a Demand
Registration unless there is requested to be included in such registration at
least five percent (5%) of the then outstanding shares of Common Stock.
(d) Suspension Periods. Notwithstanding Section 2(b), the Company may
postpone the filing or effectiveness of any Registration Statement for any
Demand Registration or the filing or effectiveness of any amendment or
supplement to any such Registration Statement (whether required by Section 4(c)
or otherwise), if the Company in good faith determines and notifies the
Investors that (i) such registration (or such amendment or supplement) would
have an adverse effect on any plan or proposal by the Company with respect to
any financing, acquisition, recapitalization, reorganization or other material
transaction, or (ii) the Company is in possession of material non-public
information which would be required to be disclosed in such Registration
Statement (or such amendment or supplement) and the Company has a bona fide
business purpose for preserving such information as confidential; provided,
however, that the Company shall not exercise its rights under this Section 2(d)
(A) to the extent that the postponement or postponements relating to any Demand
Registration(s) and amendments and
3
supplements thereto would exceed an aggregate of 90 days in any calendar year or
(B) to the extent that the postponement or postponements relating to any Demand
Registration(s) and amendments and supplements thereto would exceed an aggregate
of 30 days in the first six months of 2006.
(e) Expenses. In any registration initiated as a Demand Registration,
the Company will pay all Registration Expenses, whether or not the Registration
Statement has become effective.
(f) Effectiveness of Registration Statement. Subject to Section 2(g), a
Registration Statement will not count as a registration pursuant to a Demand
Registration until it has been declared effective by the SEC.
(g) Selection of Underwriters. If any of the Registrable Securities
covered by a Demand Registration are to be sold in an underwritten offering, or
in a best efforts underwritten offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Investors, subject to the approval of the Company, which will
not be unreasonably withheld or delayed. If the Investors disapprove of the
terms and conditions of the underwriting, the Investors may elect to withdraw
all their respective Registrable Securities by written notice to the Company and
the managing underwriter and, at the election of the Investors, either (i) pay
the costs and expenses associated therewith (in which case such withdrawn
registration shall not constitute a Demand Registration) or (ii) permit the
Company to pay the same (in which case such withdrawn registration shall
constitute one of the Investors' two Demand Registrations); provided, however,
that, if the Company has already filed a Registration Statement pursuant to such
demand by the Investor, the Investor's withdrawn registration will nevertheless
constitute a Demand Registration pursuant to this Agreement. For purposes of
this Section 2(g), the Investors holding a majority of the Registrable
Securities (treating shares of Common Stock and shares of Series C Preferred
Stock as fungible) to be registered on the Registration Statement filed for the
Demand Registration shall have the right to act for the Investors.
(h) Underwriter Cutback. If the managing underwriter of any offering of
Registrable Securities pursuant to a Demand Registration that is an underwritten
offering advises the Company in writing that, in its reasonable opinion, the
aggregate amount of Registrable Securities requested to be included in such
offering exceeds the number which can be sold in such offering without adversely
affecting the success of the offering, the Company will include in such
Registration Statement the aggregate amount of Registrable Securities which in
the opinion of such managing underwriter can be sold without any such material
adverse effect, and such amount of Registrable Securities shall be allocated in
the following order: (i) first, to the Investors, pro rata in accordance with
the number of Registrable Securities sought to be registered by them on the
Registration Statement; and (ii) second, to the Company and to any holder of
Common Stock exercising piggyback or incidental registration rights with respect
to such Demand Registration.
4
3. Piggyback Registration Rights.
(a) If the Company at any time following the date hereof proposes to
register any of its shares of Common Stock on its own behalf or any of its
shares of Common Stock on behalf of other stockholders on a form and in a manner
that would permit registration of Registrable Securities under the Securities
Act, it will each such time give prompt notice in accordance with the provisions
of Section 14(e)(ii) of this Agreement to the Investors of its intention to do
so, specifying the form and manner and the other relevant facts involved in such
proposed registration (including, without limitation, the identity of the
managing underwriter, if any). Upon the written request of the Investors
delivered to the Company within thirty (30) days after such notice shall have
been delivered to the Investors (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its commercially reasonable best
efforts to effect the registration under the Securities Act, as expeditiously as
is reasonable, of all Registrable Securities that the Company has been so
requested to register by the Investors, to the extent requisite to permit the
sale of the Registrable Securities to be so registered; provided, however, that:
(i) if, at any time after giving such written notice of its
intention to register any Common Stock proposed to be registered by the
Company and prior to the effective date of the Registration Statement
filed in connection with such registration, the Company shall determine
for any reason not to register such Common Stock, the Company shall, at
its election, give written notice of such determination to the Investors,
and thereupon the Company shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith to the extent provided in Section 6); and
(ii) if the managing underwriter of such offering shall advise the
Company that, in its judgment, the number of shares of Common Stock
proposed to be included in such offering should be limited because the
inclusion of Registrable Securities is likely to adversely impact the
purchase price obtained for the Common Stock proposed to be included in
such offering, then the Company will promptly advise the Investors thereof
and may require, by written notice to the Investors accompanying such
advice, that, to the extent necessary to meet such limitation, all holders
of Registrable Securities and of other shares of Common Stock proposing
pursuant to piggyback or incidental registration rights to sell Common
Stock in such offering shall share pro rata in the number of shares of
Common Stock to be excluded from such offering, such sharing to be based
on the respective numbers of Registrable Securities and other shares of
Common Stock as to which registration has been requested by such holders,
and that the distribution of such Registrable Securities and other shares
of Common Stock as are so excluded be deferred (in case of a deferral as
to a portion of such Registrable Securities and other shares of Common
Stock, such portion to be allocated among such holders in proportion to
the respective numbers of Common Stock so requested to be registered by
such holders) until the completion of the distribution of such Common
Stock and any other securities by such underwriters.
5
(b) The holders of Registrable Securities to be distributed by
underwriters in an underwritten offering shall be parties to the underwriting
agreement between the Company and the underwriters. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law.
(c) In any registration initiated pursuant to this Section 3, the
Company will pay all Registration Expenses, whether or not the Registration
Statement has become effective, except as otherwise provided on Section 6.
(d) Notwithstanding anything in this Section 3 to the contrary, in the
event that the Company is registering shares of Common Stock and no other class
of security pursuant to a demand registration under the Registration Rights
Agreement dated as of July 15, 1998 by and among the Company and the Purchasers
(as listed on the signature page thereto), then the rights of the Investors
under this Section 3 shall apply only with respect to shares of Common Stock
that are Registrable Securities and not any shares of Series C Preferred Stock.
4. Obligations of the Company. In connection with the Company's
obligation under Sections 2 and 3, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC such amendments and supplements to the
Registration Statement and the Prospectus as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement; provided, however,
that before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, or comparable statements under securities or blue sky laws
of the States of New York, ________________ and ____________, the Company will
furnish to counsel to the Investors participating in the planned offering
("Designated Counsel"), upon delivery by Designated Counsel of its agreement, on
terms reasonably satisfactory to the Company, to maintain the confidentiality of
material and information furnished pursuant to this Section 4(a), copies of the
"Selling Securityholder" and "Plan of Distribution" sections of such filings,
or, at the request of an Investor, of all such documents proposed to be filed
(including all exhibits thereto), which documents will be subject to the
reasonable review and reasonable comment of such counsel.
(b) Furnish to the Investors such number of copies of the Prospectus,
including a preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents (including, without limitation,
Prospectus amendments and supplements as are prepared by the Company in
accordance with Section 4(a) above) as the Investors may reasonably request in
order to facilitate the disposition of such Investors' Registrable Securities.
(c) Promptly notify the Investors, at any time when the Prospectus
relating to the Registration Statement is required to be delivered under the
Securities Act, of the happening of any event (without disclosing the nature or
substance of such event) as a result of which the Prospectus included in or
relating to the Registration Statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein, in
light of the
6
circumstances under which they were made, not misleading; and, thereafter, and
subject to Section 2(d), the Company will use commercially reasonable efforts to
promptly prepare (and, when completed, give notice to each Investor) a
supplement or amendment to such Prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities pursuant to the Registration
Statement, such Prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided
that upon such notification by the Company of the foregoing and instructing each
Investor to cease to offer and sell Registrable Securities, each Investor will
use commercially reasonable efforts to cease its offer and sale of Registrable
Securities until the Company has notified the Investors that it has prepared a
supplement or amendment to such Prospectus and delivered copies of such
supplement or amendment to the Investors (it being understood and agreed by the
Company that the foregoing proviso shall in no way diminish or otherwise impair
the Company's obligation to promptly prepare a Prospectus amendment or
supplement as above provided in this Section 4(c) and deliver copies of same as
above provided in Section 4(b) hereof).
(d) If, at the time, the Common Stock is not a covered security
described by Section 18(b)(1) of the Securities Act, use commercially reasonable
efforts to register and qualify the Registrable Securities covered by the
Registration Statement under the securities or "blue sky" laws of New York,
______________ and _____________.
(e) Promptly notify (i) each Investor (A) any time when the Registration
Statement, the Prospectus or any Prospectus supplement related thereto or post
effective amendment has been filed, and with respect to the Registration
Statement or any post-effective amendment, when the same has become effective,
and with respect to the Registration Statement, provide each Investor who has
provided its current e-mail address to Counsel to the Company, a copy of the
Prospectus by e-mail prior to the opening of trading of the Company's Common
Stock on the first business day following the date on which the Registration
Statement has become effective, (B) of the issuance of any stop order by the SEC
suspending the effectiveness of such Registration Statement or the initiation,
known to the Company, of any proceedings by the SEC to such effect, and promptly
use all commercially reasonable efforts to obtain the release of such
suspension, (C) of the receipt by the Company of any notification with respect
to the suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the initiation of
any proceeding for such purpose, (D) when a Prospectus relating to the
registration of the Registrable Securities is required to be delivered under the
Securities Act, or (E) of the happening of any event as a result of which the
Prospectus included, as then in effect, includes any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; and (ii) Designated Counsel of any request by the
SEC for amendments or supplements to the Registration Statement or Prospectus or
for additional information.
(f) Cause all Common Stock included in such Registrable Securities
registered pursuant to this Agreement to be quoted or listed on each securities
exchange or market on which similar securities issued by the Company are then
quoted or listed.
7
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to this Agreement and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
registration and, at the time of the sale of the Registrable Securities pursuant
to an effective Registration Statement, use commercially reasonable efforts to
cause the transfer agent to remove restrictive legends on such Registrable
Securities.
(h) Upon delivery by Designated Counsel of its agreement, on terms
reasonably satisfactory to the Company, to maintain the confidentiality of
material and information furnished pursuant to this Section 4(h), promptly
deliver to Designated Counsel copies of all correspondence between the SEC and
the Company, its counsel or auditors and all memoranda relating to discussions
with the SEC or its staff with respect to the Registration Statement, and make
reasonably available for inspection by Designated Counsel participating in any
disposition to be effected pursuant to the Registration Statement, all pertinent
financial and other records, pertinent corporate documents and properties of the
Company, and cause all of the Company's officers, directors and employees to
supply all information reasonably requested by Designated Counsel in connection
with such Registration Statement.
(i) Use commercially reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement in New
York, __________ or __________.
(j) Upon written request, furnish to each Investor participating in the
offering, without charge, at least one (1) conformed copy of the Registration
Statement and any post-effective amendments thereto, including financial
statements, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference).
(k) Comply with applicable law and regulation, including without
limitation, the rules and regulations of the SEC, the NASD, and the NYSE.
5. Furnish Information; Other Sales. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Agreement
(including, without limitation, to maintain the accuracy of any information
previously furnished by Investors for use in the Registration Statement) that
the Investors shall furnish to the Company such information regarding them and
the securities held by them as the Company shall reasonably request and as shall
be required by applicable securities laws and regulations in order to effect any
registration by the Company pursuant to this Agreement. The Investors agree,
during the 10-day period prior to, and during the 90-day period commencing on,
the effective date of the registration statement filed with the Commission
(other than on Form S-8) in connection with an underwritten offering of
securities of the same class as the then outstanding (or any securities issuable
upon conversion or exchange thereof), not to make any sales of Registrable
Securities (or such other securities) pursuant to Rule 144, provided that they
were given the opportunity, if required by (and subject to) Section 3 hereof, to
include in such registration statement all such Registrable Securities as they
may have requested.
6. Expenses of Registration. Except as otherwise provided herein, all
expenses incident to the Company's performance of or compliance with this
Agreement including without limitation all registration and filing fees,
including with respect to filings required to be made
8
with the NASD, fees and expenses of compliance with securities or blue sky laws
of the States of New York, _______ and _________ (including reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities and determination of their
eligibility for investment under the laws of the States of New York,
_________________, and ______________, printing expenses, messenger, telephone
and delivery expenses, and fees and disbursements of counsel for the Company and
counsel (but only a single law firm) representing the Investors in connection
with each Demand Registration (selected in the manner set forth in the last
sentence of Section 2(g)), the fees and disbursements of the Company's
independent certified public accountants (including the expenses of any special
audit and "comfort" letters required by or incident to such performance), the
fees and expenses incurred in connection with the listing of the Common Stock to
be registered on each securities exchange on which similar securities issued by
the Company are then listed, the reasonable fees and expenses of any special
experts retained by the Company in connection with such registration and fees
and expenses of other Persons retained by the Company (all such expenses being
herein called the "Registration Expenses") will be borne by the Company. The
Company shall, in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties) and the expense of any annual audit which are not
"Registration Expenses" for purposes of this Agreement. In no event shall the
Company be liable for the payment (which shall be made by the Investors
registering Registrable Securities) of any discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar industry professionals
relating to the distribution of the Registrable Securities or any fees of
counsel (except as specifically provided in this Section 6) or other advisers to
the Investors.
7. Indemnification.
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor, its directors, officers, employees, fiduciaries,
members, managers, or general or limited partners (and the directors, officers,
employees and stockholders thereof), any underwriter (as defined in the
Securities Act) for each Investor, and each Person, if any, who controls such
Investor or underwriter within the meaning of the Securities Act (each, an
"Investor Indemnified Person"), against any losses, claims, damages or
liabilities, joint or several, and expenses (including reasonable counsel fees
and disbursements, any amounts paid in any settlement effected with the
Company's prior written consent) to which they may become subject under the
Securities Act, the Exchange Act, state securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue or alleged untrue
statement of any material fact contained in any Registration Statement pursuant
to which Registrable Securities are registered pursuant to Section 2 or Section
3 hereof (including any preliminary prospectus or final prospectus relating
thereto, any amendments or supplements thereto and any exhibits thereto) or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein in light of the circumstance under which they were made not
misleading or any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, state securities laws or any rule or
regulation promulgated under the Securities Act, the Exchange Act, the NASD,
state securities laws or the NYSE or (ii) any failure of the Company to fulfill
any undertaking included in any Registration Statement
9
pursuant to which Registrable Securities are registered pursuant to Section 2 or
Section 3 hereof (including any preliminary prospectus or final prospectus
relating thereto, any amendments or supplements thereto and any exhibits
thereto); and will reimburse such Investor Indemnified Person for any fees and
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action (including
reasonable fees and expenses of legal counsel); provided, however, that the
Company shall not be liable in any such case for any such losses, claims,
damages, liabilities or expenses to the extent that they arise out of or are
based upon an untrue statement or alleged untrue statement or omission made in
connection with the Registration Statement in reliance upon and in conformity
with written information furnished by the Investors expressly for use in
connection with such Registration Statement. Such indemnity and reimbursement of
expenses shall remain in full force and effect regardless of any investigation
made by or on behalf of such Investor Indemnified Person and shall survive the
sale of such Registrable Securities by such Investor.
(b) To the extent permitted by law, each Investor will severally, and
not jointly, indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed a Registration Statement pursuant to which
Registrable Securities are registered pursuant to Section 2 or Section 3 hereof,
any underwriter (as defined in the Securities Act) for each Investor or acting
on behalf of the Company, and each person, if any, who controls, within the
meaning of the Securities Act, the Company or any such underwriter (as defined
in the Securities Act) (a "Company Indemnified Person") against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, controlling person, or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in a
Registration Statement pursuant to which Registrable Securities are registered
pursuant to Section 2 or Section 3 hereof or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent and only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, in reliance upon and in conformity with written information furnished
by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any expenses reasonably incurred by
a Company Indemnified Person in connection with investigating or defending any
such loss, claim, damage, liability or action (including reasonable counsel fees
and disbursements); provided, however, that the liability of each Investor
hereunder shall be limited to the proceeds (net of underwriting discounts and
commissions, if any) received by such Investor from the sale of Registrable
Securities covered by such Registration Statement; as the case may be. Such
indemnity and reimbursement of expenses shall remain in full force and effect
regardless of any investigation made by or on behalf of such Company Indemnified
Person and, as relevant, shall survive the sale of such Registrable Securities
by any Investor.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to
10
participate in and, to the extent the indemnifying party desires, jointly with
any other indemnifying party similarly noticed, to assume at its expense the
defense thereof with counsel mutually satisfactory to the indemnifying parties
with the consent of the indemnified party (which consent will not be
unreasonably withheld, conditioned or delayed). If the indemnifying party
assumes any such defense, the indemnified party may participate in such defense
with its own counsel and at its own expense.
(d) If the indemnification provided for in this Section 7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions that resulted in such loss, claim, damage, liability or expense as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. If, however, the indemnification provided
for in this Section 7 and allocation provided in the first sentence of this
paragraph are both not permitted by applicable law, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative faults but also
the relative benefits of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 7(d) were to be determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in the preceding sentences of this Section 7(d). The amount paid or
payable in respect of any claim shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending such loss, claim, damage or liability. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Notwithstanding anything in
this Section 7(d) to the contrary, no Investor shall be required pursuant to
this Section 7(d) to contribute any amount in excess of the net proceeds
received by such Investor from the sale of Registrable Securities in the
offering to which the loss, claims, damage or liability relates, less the amount
of any indemnification payment previously made by such indemnifying party
pursuant to Section 7(b).
(e) The obligations of the Company and the Investors under this Section
7 shall survive the completion of any offering of Registrable Securities
pursuant to a Registration Statement.
(f) Notwithstanding anything to the contrary herein, the indemnifying
party shall not be entitled to settle any claim, suit or proceeding unless in
connection with such settlement the indemnified party receives an unconditional
release with respect to the subject matter of such
11
claim, suit or proceeding and such settlement does not contain any admission of
fault by the indemnified party.
8. Reports under the Exchange Act. With a view to making available to
the Investors the benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit the Investors to sell the Registrable Securities
to the public without registration, the Company agrees to use commercially
reasonable efforts: (i) to make and keep public information available, as that
term is understood and defined in Rule 144; (ii) to file with the SEC in a
timely manner all reports and other documents required to be filed by an issuer
of securities registered under the Securities Act or the Exchange Act; (iii) as
long as any Investor owns any Registrable Securities, to furnish in writing upon
such Investor's request a written statement by the Company that it has complied
with the reporting requirements of Rule 144 and of the Exchange Act; and (iv)
subject to Section 2(d) and Section 4(c), undertake any additional actions
reasonably necessary to maintain the availability of the Registration Statement
(but not for more than nine months after it first became effective) or the use
of Rule 144.
9. Transfer of Registration Rights. None of the rights of any Investor
under this Agreement shall be transferred or assigned to any person unless (i)
such person is (A) an Affiliate of an Investor; or (B) after such transfer or
assignment, holds at least 10% of the aggregate number of Initial Registrable
Securities; and (ii) such transferee or assignee agrees in writing to become
subject to the terms and conditions of this Agreement.
10. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Investor to sell any
Registrable Securities pursuant to any effective registration statement.
11. Nominees for Beneficial Owners. If Registrable Securities are held
by a nominee for the beneficial owner thereof, the beneficial owner thereof may,
at its option, be treated as the holder of such Registrable Securities for
purposes of any request or other action by any Investor pursuant to this
Agreement (or any determination of any number or percentage of shares
constituting Registrable Securities held by any Investor contemplated by this
Agreement); provided that the Company shall have received assurances reasonably
satisfactory to it of such beneficial ownership.
12. Limitations on Subsequent Registration Rights. The Company
represents and warrants that from and after the date of this Agreement, it shall
not, without the prior written consent of the holders of at least 50% of the
Registrable Securities then outstanding, enter into any agreement (or amendment
or waiver of the provisions of any agreement) with any holder or prospective
holder of any securities of the Company that would grant such holder
registration rights that are pari passu (except with respect to piggyback or
incidental registration rights) or senior to those granted to the Investors
hereunder.
13. Entire Agreement. This Agreement and exhibits attached hereto and
incorporated herewith constitute and contain the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes any and all prior negotiations, correspondence, agreements or
understandings with respect to the subject matter hereof and
12
supercedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether oral or written.
14. Miscellaneous.
(a) Amendment. No amendment, modification, alteration, waiver or change
in any of the terms of this Agreement shall be valid or binding upon the parties
hereto unless made in writing and duly executed by the Company and the holders
of at least 50% of the Registrable Securities held by all of the Investors;
provided, however, that in each case, no such amendment shall increase the
obligations of, or have any adverse effect upon, any Investor without such
Investor's written consent.
(b) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to any conflicts of laws concepts that would apply the laws of another
jurisdiction.
(c) Assignment; Termination. The rights and obligations of the parties
hereto shall inure to the benefit of, and shall be binding upon the authorized
successors and permitted assigns of each party; provided, that the terms and
conditions of Section 9 hereof are satisfied. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall terminate for all purposes on
January 1, 2008 or, if the Exchange Offer has not been consummated by September
15, 2005, this Agreement shall terminate for all purposes on September 15, 2005.
In addition, if at any time any Investor shall have materially breached its
obligations under the Support Agreement or shall cease to own any Registrable
Securities, all of such Investor's rights under this Agreement shall immediately
terminate; provided, however, that if such Investor ceases to own Registrable
Securities because all or a portion of such shares were sold pursuant to a
Registration Statement, then such Investor shall continue to have the rights and
obligations set forth in Section 7 hereof, as provided in Section 7(e) hereof.
(d) Specific Performance. Each party acknowledges and agrees that the
other parties would be damaged irreparably if any provision of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. Accordingly, the parties will be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and its provisions in any action or
proceeding instituted in any state or federal court sitting in New York, New
York having jurisdiction over the parties and the matter, in addition to any
other remedy to which they may be entitled, at law or in equity. Except as
expressly provided herein, the rights, obligations and remedies created by this
Agreement are cumulative and in addition to any other rights, obligations or
remedies otherwise available at law or in equity. Except as expressly provided
herein, nothing herein will be considered an election of remedies.
(e) Notice. Any notices, reports or other correspondence required or
permitted to be given hereunder shall be sent by courier (overnight or same day)
or facsimile or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. The date of giving any notice shall
be the date of its actual receipt.
13
(i) All notice to the Company shall be addressed as follows:
Salton, Inc.
0000 X. Xxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
Attn: President and Chief Operating Officer
with a copy to (which shall not constitute notice):
Xxxx Xxxxxxxxxx, Esq.
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
(ii) All notices to the Investors shall be shall be addressed as
follows:
Xxxxxx Xxxxxx & Co.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: [to come]
Attn: [to come]
with a copy to (which shall not constitute notice):
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
[INSERT NOTICE PROVISIONS FOR OTHER INVESTORS]
(iii) Any Person may change the address to which correspondence to
it is to be addressed by notification as provided for herein.
(f) Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
15
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date and year first above written.
SALTON, INC.
By:
------------------------------------
Name:
Title:
[XXXXXX XXXXXX ENTITIES]
By:
------------------------------------
Name:
Title:
[INSERT SIGNATURE LINES FOR
OTHER INVESTORS]
16
EXHIBIT 7
12 1/4% SENIOR SUBORDINATED NOTES DUE 2008
FIRST SUPPLEMENT TO INDENTURE
DATED AS OF , 2005
SALTON, INC.,
AS ISSUER,
HOME CREATIONS DIRECT LTD.
TOASTMASTER INC.
SONEX INTERNATIONAL CORPORATION
SASAKI PRODUCTS COMPANY
AND
EACH NEWLY ACQUIRED OR
CREATED DOMESTIC SUBSIDIARY
OF ISSUER, AS GUARANTORS
AND
SUNTRUST BANK,
AS TRUSTEE
EXHIBIT 7
FIRST SUPPLEMENT TO INDENTURE
The First Supplement to Indenture is dated as of __________, 2005 by and
between Salton, Inc., a Delaware corporation (the "Company"), and SunTrust Bank,
a national banking association duly organized and existing under the laws of the
United States of America and having its principal corporate office at 000
Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxxxx, Xxxxxxx 00000 (the "Trustee"), as successor to
Xxxxx Fargo Bank, National Association, with respect to the Company's 12 1/4%
Senior Subordinated Notes due 2008 (this "First Supplement"). Capitalized terms
used but not otherwise defined in this First Supplement shall have the meanings
ascribed to such terms in the Indenture (hereinafter defined).
WHEREAS, the Company and the Trustee entered into that certain Indenture,
dated as April 23, 2001 (as may be amended and supplemented from time to time in
accordance with its terms, the "Indenture");
WHEREAS, Section 9.2 of the Indenture provides that, when authorized by
resolutions of its Board of Directors, the Company and the Trustee may, with the
consent of the Holders of not less than a majority in principal amount of the
outstanding Notes, enter into one or more indentures supplemental to the
Indenture for the purpose of, among other things, changing in any manner or
eliminating any of the provisions of the Indenture or of modifying in any manner
the rights of the Holders, subject to certain exceptions set forth therein;
WHEREAS, Holders of a majority in principal amount of the Notes
outstanding have consented to this First Supplement;
WHEREAS, pursuant to Section 9.2 of the Indenture, the Trustee is
authorized to execute and deliver this First Supplement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree, for the equal and proportionate benefit
of all Holders of the Securities, as follows:
1.
INDENTURE AMENDMENTS
A. Amendment to Article 4. Sections 4.2 through 4.9 of the
Indenture, inclusive, Sections 4.11 through 4.14 of the Indenture, inclusive,
and Sections 4.16 through 4.19 of the Indenture, inclusive, are hereby deleted
in their entirety and each Section is replaced with the following: "Reserved."
B. Amendment to Article 5. Article 5 of the Indenture is hereby
deleted in its entirety and replaced with the following: "Reserved."
C. Amendment to Article 6. Clauses (c) through (j) of Section 6.1 of
the Indenture, inclusive, are hereby deleted in their entirety and each clause
is replaced with the following: "Reserved."
D. Amendment to Article 7. The second to last paragraph of Section
7.7 is hereby deleted in its entirety and replaced with the following:
"When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(b) hereof occurs or (b) after
the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law (i) commence a voluntary case,
(ii) consent to the entry of an order for relief against them in an
involuntary case, (iii) consent to the appointment of a Custodian of
them or for all or substantially all of their property, (iv) make a
general assignment for the benefit of their creditors, or (v)
generally are not paying their debts a they become due, the expenses
and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute
expenses of administration under any Bankruptcy Law."
2.
MISCELLANEOUS PROVISIONS
A. Instruments to be Read Together. This First Supplement is an
indenture supplement to and an implementation of the Indenture, and said
Indenture and this Supplement shall henceforth be read together.
B. Confirmation. The Indenture, as amended and supplemented by this
First Supplement, is in all respects confirmed and preserved.
C. Counterparts. This First Supplement may be executed in any number
of counterparts, each of which, when so executed, shall be deemed to be an
original, but all of which shall together constitute one and the same
instrument.
D. Effectiveness. This First Supplement shall become effective
immediately upon its execution in accordance with the provisions of Article 9 of
the Indenture.
E. GOVERNING LAW. THIS FIRST SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. THE
COMPANY AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK, COUNTY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS FIRST SUPPLEMENT.
F. Disclaimer of Trustee's Responsibility. In executing this First
Supplement, the Trustee shall be entitled to all the privileged and immunities
afforded to the Trustee under the terms and conditions of the Indenture.
-3-
IN WITNESS WHEREOF, the parties hereto have caused this First Supplement
to Indenture to be duly executed as of the date first above written.
SALTON, INC.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
SUNTRUST BANK
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
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