REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of March 2, 1999
among
GOLDEN BOOKS PUBLISHING COMPANY, INC.,
a debtor and debtor-in-possession
AS BORROWER,
THE FINANCIAL INSTITUTIONS PARTY HERETO,
AS LENDERS,
and
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT,
$55,000,000
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of March 2,
1999 among GOLDEN BOOKS PUBLISHING COMPANY, INC., a Delaware corporation and a
debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (as
hereinafter defined)(the "Borrower"), the financial institutions from time to
time party hereto (collectively, the "Lenders" and individually, a "Lender"), in
each case including CIT (as defined below), and THE CIT GROUP/BUSINESS CREDIT,
INC. ("CIT"), as Agent for the Lenders (in such capacity, the "Agent").
BACKGROUND
WHEREAS, the Borrower has filed in the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court") a voluntary
petition for relief under chapter 11 of the Bankruptcy Code (as hereinafter
defined);
WHEREAS, Golden Books Family Entertainment, Inc. ("Parent") and Golden
Books Home Video, Inc. ("Video"; Parent and Video, each a "Guarantor" and,
collectively, the Guarantors") have filed in the United States Bankruptcy Court
for the Southern District of New York voluntary petitions for relief under
chapter 11 of the Bankruptcy Code;
WHEREAS, the Borrower has requested that the Lenders provide to the
Borrower a revolving credit facility of up to $45,000,000 and a term loan in the
amount of $10,000,000 secured by the Collateral (as defined below), the proceeds
of which are to be used, in each case, to repay indebtedness under the Existing
Credit Facilities (as defined below) and for other working capital and general
corporate purposes;
WHEREAS, as a condition of making the financial accommodations set
forth herein, the Guarantors have agreed to guaranty all the Obligations of the
Borrower hereunder and in connection herewith in the case of the Parent (as
defined below) secured by certain assets; and
WHEREAS, the Lenders have agreed to make available to the Borrower a
debtor- in-possession credit facility upon the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and terms
defined elsewhere in this Agreement, as used herein the following words and
terms shall have the following meanings, respectively, unless the context hereof
clearly requires otherwise:
"Accountant's Opinion" shall have the meaning given that term in
Section 7.01(a) hereof.
"Accounts" shall mean all of the Borrower's now existing and future
(excluding Accounts relating to the Borrower's "Christmas Classics", "▇▇▇▇▇ the
Cat", "Film Library", "Lassie", "Lone Ranger" and "Underdog" properties and
Other Entertainment Works): (a) accounts receivable (whether or not specifically
listed on schedules furnished to the Lenders), and any and all instruments,
documents, contract rights, chattel paper, general intangibles, including,
without limitation, all accounts created by or arising from any of the
Borrower's sales of goods or rendition of services to its customers, and all
accounts arising from sales or rendition of services made under any of the
Borrower's trade names or styles, whether or not presently in effect, or through
any of the Borrower's divisions; (b) unpaid seller's rights (including
rescission, replevin, reclamation and stoppage in transit) relating to the
foregoing or arising therefrom; (c) rights to any goods represented by any of
the foregoing, including rights to returned or repossessed goods; (d) reserves
and credit balances arising hereunder; (e) guarantees or collateral for any of
the foregoing; (f) insurance policies or rights relating to any of the
foregoing; and (g) cash and non-cash proceeds of any and all of the foregoing.
"Additional Authorized Party" shall have the meaning set forth in
Section 2.03(b) hereof.
"Adult Division" shall mean the adult hardcover and adult trade
paperback books published by the Company and distributed by St. ▇▇▇▇▇▇'▇ Press
pursuant to the Agreement between the Company and St. ▇▇▇▇▇▇'▇ Press,
Incorporated dated as of February 6, 1998; including, but not limited to, the
following current titles: A Guide Book of United States Coins, The Official Red
Book of U.S. Coins, Handbook Of United States Coins, United States And Canada
Coin Collector's Checklist And Record Book, Official ▇.▇.▇. Grading Standards
For United States Coins, Coins: Questions And Answers, United States Coin Price
Trends, Photograde Coin Grading Guide, Handbook Of Ancient Greek And Roman
Coins, A Collector's Guide To Nevada Gaming Checks & Chips, Guidebook Of United
States Currency, Let's Collect Coins!, When I'm Afraid with A Parent's Guide To
Fear, When I'm Angry With A Parent's Guide to Anger, When I'm Jealous with A
Parent's Guide To Jealousy, When I'm Sad with A Parent's Guide To Sadness,
Jewish Family & Life, Stopping Cancer Before It Starts, The Women's Complete
Wellness Book, The Touch Of The Master's Hand, The Mourning Dove, The Joy Of
Ritual, Don't Bet On The Prince!, Lassie's Guide To A Family's Best Friend, The
7 Habits of Highly Effective Families, Interior Designing For All Five Senses,
How To Talk To Your Child About Sex, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ Family Entertaining, A
Woman's Path, When The Man You Love Won't Take Care Of His Health, Finding Help
When Your Child Is Struggling In School, Positively You!, Smart Women, Smart
Choices, Real-World Fitness, Everything Your Baby Would Ask..., The Energy
Break, Sunday, Happiness, The Parents Answer Book, Parents Magazine's It Worked
For Me!, Don't Be Afraid To Discipline, It's Never Too Soon, Grow Up!, The Halo
Effect, I've Been Rich. I've Been Poor. Rich Is Better., The Rich Is Better
Workbook, Estrogen, Voices Of Children Of Divorce, What's Heaven?, Is It "Just A
Phase"?, Nurturing Good Children Now, The Decline Of Males, We Love Each Other,
But..., Grace, A Woman's
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Guide To Changing Her Man, "I'm Afraid Of The Vampire State Building",
Hand-Me-Down Blues, Birds Of North America, Eastern Birds, Reptiles Of North
America, Rocks And Minerals, Seashells Of North America, Skyguide, Trees Of
North America, Wildflowers Of North America, Bats, Bird Life, Birds, Butterflies
And Moths, Dinosaurs, Endangered Animals, Exploring Space, Fishes, Fishing,
Flowers, Fossils, Geology, Insects, Mammals, North American Indian Arts,
Planets, Pond Life, Reptiles And Amphibians, Rocks And Minerals, Seashells Of
The World, Seashores, Sky Observer's Guide, Spiders And Their Kin, Stars, Trees,
Tropical Fish, Venomous Animals, Weather, Weeds, Whales And Other Marine
Mammals.
"Affiliate" of a Person shall mean any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 20% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agent" shall have the meaning given to that term in the introductory
paragraph of this Agreement.
"Agent Account" shall mean an account in the name of the Agent
designated by the Agent to the Borrower from time to time into which the
Borrower shall make all payments to the Agent, for the account of the Agent or
the Lenders, as the case may be, under this Agreement.
"Agent Advances" shall have the meaning given to that term in Section
11.08 hereof.
"Agreed Administrative Expense Claim Priorities" means the following
administrative expense claims incurred by the Borrower and shall have the
following order of priority:
(a) first, (i) amounts payable pursuant to 28 U.S.C. ss.
1930(a)(6) and (ii) upon the occurrence and during the continuance of
an Event of Default, the payment of unpaid and subsequently
Court-allowed professional fees and expenses (whether incurred prior
to or subsequent to such Event of Default) of attorneys, accountants,
financial advisors and consultants retained by the Borrower or any
official unsecured creditors' committee appointed in the Chapter 11
Cases pursuant to ▇▇.▇▇. 327 and 1103 of the Bankruptcy Code (except
to the extent that such fees and expenses represent services or were
incurred in the prosecution of actions, claims, demands or causes of
action against the Agent or the Lenders or in preventing, hindering or
declaring, whether directly or indirectly, the Lenders' assertion or
enforcement of their liens or realization upon any collateral)
(collectively, "Professional Expenses"), provided, that the aggregate
amount of Professional Expenses entitled to priority under this clause
(ii) ("Priority Professional Expenses") shall not exceed $1,000,000 in
the
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aggregate (the "Priority Professional Expense Cap"); provided,
further, that any retainers or any payments to such professionals
under 11 U.S.C. ▇▇.▇▇. 330 and 331 in respect of fees and expenses
incurred which were actually paid to such professionals prior to the
occurrence and continuance of an Event of Default, shall not reduce
the Priority Professional Expense Cap; and provided, further, that the
agreement to a limited priority for Priority Professional Expenses
shall not waive any right of the Lenders or the Agent to object to
fees and expenses constituting such priority Professional Expenses;
(b) second, all Obligations;
(c) third, all allowed administrative expense claims under 11
U.S.C. 507(b); and
(d) fourth, all other allowed administrative expense claims.
"Agreement" shall mean this Revolving Credit and Term Loan Agreement,
as amended, modified, supplemented or restated from time to time.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Agent,
substantially in the form of Exhibit D hereto.
"Availability" shall mean the aggregate sum of cash and the maximum
amount available to be drawn under the Revolving Credit Commitments at such time
after taking into account all outstanding Revolving Loans and Letter of Credit
Exposure.
"Bank" shall mean The Chase Manhattan Bank, its successors or any
other bank designated by the Agent to the Borrower from time to time that is
reasonably acceptable to the Borrower.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.
ss. 101 et. seq.), as amended, and any successor statute.
"Bankruptcy Court" has the meaning specified in the recitals to this
Agreement.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA that is subject to Title IV of ERISA (other than a Multiemployer
Plan) and in respect of which the Borrower or any ERISA Affiliate is or within
the immediately preceding six (6) years was an "employer" as defined in Section
3(5) of ERISA.
"Board" means the Board of Governors of the Federal Reserve System of
the United States.
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"Book Value" shall mean as to any Inventory in respect of which such
amount is to be determined, the lower of (i) cost (as reflected in the general
ledgers of the Borrower) or (ii) market value (both cost and market value being
determined in accordance with GAAP calculated on a first in, first out basis).
"Borrower" shall have the meaning given that term in the introductory
paragraph to this Agreement.
"Borrowing Base" shall mean an amount equal to the difference between
(A) the sum of (i) seventy-five percent (75%) of Eligible Accounts Receivable
(which will be subject to a dilution reserve of twenty percent (20%)) plus (ii)
the lesser of (x) fifty percent (50%) of the Book Value of Eligible Inventory
and (y) $5,000,000 from the Closing Date through the Final Financing Order Date
and $10,000,000 from the day after the Final Financing Order Date and
thereafter) and (B) the sum of (i) Letter of Credit Exposure plus (ii) such
other reserves as the Agent, in its sole discretion, may deem appropriate,
including, without limitation, with respect to royalties which may be payable at
a future date in connection with the disposition of Inventory pursuant to the
exercise of remedies under the Loan Documents.
"Borrowing Base Certificate" shall have the meaning given that term in
Sec tion 4.04(a) hereof.
"Borrower Licensor Agreements" shall mean Material Contracts pursuant
to which the Borrower is a licensor of any trademarks, copyrights or other
intellectual property, all as set forth on Schedule 1.01(E).
"Building Equipment" shall mean all machinery, apparatus, equipment,
personal property and fixtures of every kind and nature whatsoever now or
hereafter located in, on or about the Premises, or attached to or used or usable
in connection with the operation or maintenance of the Premises, or any part
thereof, and now owned or hereafter acquired.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which banking institutions are authorized or obligated to close in New
York, New York.
"Business Plan" shall mean the budget of the Borrower dated not later
than February 25, 1999 which contains, inter alia, projected consolidating
balance sheets, income statements, Availability and cash flow statements on a
monthly basis for fiscal year 1999.
"Capital Expenditures" means, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with GAAP,
including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with GAAP) and, without duplication, the
amount of all Capitalized Leases incurred by such Person.
5
"Capitalized Lease" shall mean any lease which is required under GAAP
to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean the aggregate amount which
is required under GAAP to be reported as a liability on the balance sheet of a
Person as lessee under a Capitalized Lease.
"Carve-Out Expenses" means those amounts, fees, expenses and claims
set forth in subparagraph "(a)", clauses "(i)" and "(ii)" thereof, of the
definition of the term "Agreed Administrative Expense Claim Priorities".
"Carve-Out Reserve" means from the Closing Date until the Final
Financing Order Date an amount equal to $250,000, and from the day after the
Final Financing Order Date until all of the Obligations are indefeasibly paid in
full hereunder an amount equal to $1,000,000.
"Change of Control" shall mean (a) any person or group of persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said Act) of
20% or more of the voting power of the then outstanding common stock of the
Parent; or (b) during any period of 12 consecutive calendar months, individuals
who were directors of the Parent on the first day of such period shall cease to
constitute a majority of the board of directions of the Parent, provided that a
director who has resigned or is replaced during such time shall not be included
in any determination of whether a change of control default has occurred
pursuant to this clause (b) to the extent such director is replaced by a
successor director elected by a majority of those directors who were directors
at the commencement of such period.
"Chapter 11 Cases" means the cases under Chapter 11 of the Bankruptcy
Code commenced on the Filing Date by the Borrower, the Parent and Video pending
in the Bankruptcy Court.
"Chattel Paper" shall have the meaning given to that term in the UCC.
"Christmas Classics" shall have the meaning given to that term in the
Security Agreement in the form of Exhibit B-1 attached hereto and dated of even
date herewith, as amended, modified or supplemented from time to time.
"CIT" shall have the meaning given to that term in the introductory
paragraph to this Agreement.
"Closing Date" shall mean the date on or after the date hereof upon
which all the conditions set forth in Section 5.01 hereof have either been met
to the Agent's satisfaction or waived by the Agent.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall mean all of the property (tangible and intangible)
of any Person purported to be subject to the Lien purported to be created by any
Security Document heretofore or hereafter executed by such Person as security
for all or any part of the Obligations.
"Collective Bargaining Agreements" shall have the meaning given to
that term in Section 5.01(d)(xvi) hereof.
"Credit Extension" shall mean (a) the making of any Loan by a Lender
or the Agent on behalf of the Lenders or (b) the issuance, increase in the
Stated Amount, or extension of the expiration date of any Letter of Credit which
CIT or any Lender assists the Borrower in opening or establishing.
"Current Commitment" shall have the meaning given to that term in
Section 2.01 hereof.
"Designated Borrowing Officer" shall mean (a) the Chairman, President,
Chief Financial Officer, Chief Administrative Officer or Vice President of
Accounting or Controller of the Borrower or (b) such other officer as shall be
designated from time to time in writing by the Borrower to the Agent prior to
such designation.
"Designated Financial Officer" of a Person shall mean the individual
designated from time to time by the Board of Directors or governing body
performing like functions of such Person to be the Chief Financial Officer, Vice
President of Accounting or Controller of such Person (and individuals designated
from time to time by the Board of Directors or governing body performing like
functions of such Person to act in lieu of the Chief Financial Officer, Vice
President of Accounting or Controller.
"Disbursement Account" shall mean the deposit account in the name of
the Borrower maintained at a bank in the United States designated by the
Borrower to the Agent into which there shall be deposited proceeds of Loans and
funds disbursed to the Borrower by the Agent.
"Disney License" shall mean the Licensed Book Publishing Agreement,
dated September 26, 1997, between Disney Licensed Publishing and the Borrower,
as the same may be amended, modified or supplemented from time to time.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
7
"EBITDA" shall mean, for any period, the sum of (i) the consolidated
Net Income of the Borrower before consolidated interest expense and provision
for taxes of the Borrower and its Subsidiaries and without giving effect to: (x)
any extraordinary gains or losses, or gains or losses from sales of assets
(including, without limitation, the sale of the Adult Division) other than from
sales of inventory in the ordinary course of business, and (y) any nonrecurring
cash charges incurred by the Borrower in connection with restructuring
(including, without limitation, severance payments, employee costs, professional
fees and external consulting services) plus (ii) all amortization of intangibles
and depreciation deducted for such period in calculating Net Income.
"Eligible Accounts Receivable" shall mean the gross amount of the
Accounts (excluding Accounts relating to the Adult Division and the Borrower's
operations in the United Kingdom), that at all times continue to be acceptable
to the Agent in the exercise of its reasonable business judgment, less, without
duplication, the sum of the following items: (a) any returns, discounts, claims,
credits and allowances of any nature (whether issued, owing, granted or
outstanding) except for discounts and allowances made in the ordinary course of
business for prompt payment, all of which discounts and allowances are reflected
in the calculation of the face value of each respective invoice related thereto
and (b) reserves for (i) sales to the United States of America or to any agency,
department or division thereof; (ii) foreign sales (which term excludes sales to
residents of the United States) except to the extent the Borrower has credit
insurance acceptable to the Agent; (iii) accounts that remain unpaid more than
sixty (60) days from the due date or one hundred and fifty (150) days from
invoice date except that the foregoing time periods shall not apply to Toys R Us
accounts, which accounts shall constitute Eligible Accounts Receivable to the
extent they do not remain unpaid more than thirty (30) days from the due date;
(iv) contras; (v) sales to any Subsidiary, or to any company affiliated with the
Borrower in any way; (vi) ▇▇▇▇ and hold (deferred shipment) or consignment
sales; (vii) except as may otherwise be agreed to in writing by Agent, sales to
any customer which is (A) insolvent, (B) the debtor in any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law that is not approved in writing in advance by the
Agent or (C) negotiating, or has called a meeting of its creditors for purposes
of negotiating, a compromise of its debts; (viii) all sales to any customer if
fifty percent (50%) or more of either (1) all outstanding invoices or (2) the
aggregate dollar amount of all outstanding invoices, are unpaid more than sixty
(60) days from the due date or one hundred and fifty (150) days from invoice
date except that the foregoing time periods shall not apply to Toys R Us
accounts, which accounts constitute Eligible Accounts Receivable to the extent
they do not remain unpaid more than thirty (30) days from the due date; (ix)
receivables payable in cash to the extent such cash receivables exceed ten
percent (10%) of the total gross amount of Eligible Accounts Receivable (and
then only the amount of such excess shall be subtracted hereunder); and (x) any
other reserves deemed necessary by the Agent in its reasonable business judgment
and which are customary in scope and application either in the commercial
finance industry or in the lending practices of the Agent based upon the
assessment of the Agent.
"Eligible Inventory" shall mean raw material and finished goods
Inventory of the Borrower which at the time of determination meets all the
following qualifications:
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(i) it is lawfully owned by the Borrower and not subject to any
Lien, other than a first priority Lien in favor of the Agent and the
second priority lien of the Trustee in connection with the Senior
Notes, that secures the payment of the Obligations and it is not held
on consignment and may be lawfully sold;
(ii) it is (A) located at one of the Borrower's locations listed
on Schedule 1.01(A) hereto or (B) located in other locations in the
continental United States as the Agent shall have approved in writing
from time to time, which approval shall be given upon the Borrower
providing the Agent with evidence, reasonably satisfactory to the
Agent, of (1) the Agent's perfected, first priority Lien on all
Inventory of the Borrower located in such locations and (2) the
absence of any other Liens on any Inventory of the Borrower located in
such locations, which evidence may include the results of Uniform
Commercial Code, tax and judgment lien searches in such locations and
acknowledgment copies of Uniform Commercial Code financing statements
naming the Borrower, as debtor, and the Agent, as secured party, filed
in such locations;
(iii) it is determined in the reasonable judgment of the Agent to
be, when taken as a whole, substantially similar in quality and mix to
the Inventory maintained by the Borrower in recent historical
operations prior to the Closing Date;
(iv) it is Inventory that has been valued after deducting the
aggregate amount of reserves for (1) rejected, defective, damaged,
aged or otherwise unsalable Inventory, (2) Inventory to be returned to
suppliers, (3) Inventory in- transit to third parties (other than the
Borrower's agents or warehouses), (4) supplies, (5) consignment
Inventory, (6) monthly rent for each location listed on Schedule
1.01(A) (including warehouses)for which the Agent has requested and
not received a landlord waiver (in an amount equal to three (3) times
the monthly rent), (7) slow moving or obsolete Inventory, and (8)
other reserves required by the Agent in the exercise of its reasonable
business judgment;
(v) the Agent has received a consent or Orders providing the
substantive equivalent in form and substance satisfactory to the Agent
providing for the sale by the Agent on behalf of the Lenders at such
times and under the circumstances specified in the Loan Documents of
any Inventory containing or utilizing in any way any intellectual
property not owned by the Borrower;
(vi) the Agent has received an Order in form and substance
satisfactory to the Agent to the sale by the Agent on behalf of the
Lenders at such times and under the circumstances specified in the
Loan Documents of any Inventory not owned by the Borrower containing
or utilizing in any way any intellectual property; and
9
(vii) it is Inventory 100% owned by the Borrower and with respect
to which no third party has any ownership claim (for purposes hereof,
the right to a royalty payment shall not alone constitute an ownership
interest), unless such Inventory complies with clauses (v) and (vi)
above.
"Environmental Actions" shall mean any complaint, summons, citation,
notice, assessment, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication from any Governmental
Authority or any third party, involving a Release (i) from or onto any of the
properties presently or formerly owned or leased by the Borrower or its
Subsidiaries or (ii) from or onto any facilities which received Hazardous
Materials from the Borrower or its Subsidiaries, or involving any violation of
any Environmental Law.
"Environmental Law" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect relating to the
regulation and protection of human health, safety, the environment and natural
resources. Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. ss. 9601 et seq.) ("CERCLA"); the Hazardous Material Transportation Act,
as amended (49 U.S.C. ss. 180 et seq.); the Resource Conservation and Recovery
Act, as amended (42 U.S.C. ss. 6901 et seq.) ("RCRA"); the Toxic Substance
Control Act, as amended (15 U.S.C. ss. 2601 et seq.); the Clean Air Act, as
amended (42 U.S.C. ss. 7401 et seq.); the Federal Water Pollution Control Act,
as amended (33 U.S.C. ss. 1251 et seq.); and their state and local counterparts
or equivalents.
"Entry Date" means the date the Interim Financing Order is entered.
"Environmental Liabilities and Costs" shall mean all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, expert and consulting
and costs of investigation and feasibility studies), fines, penalties, sanctions
and interest incurred as a result of any Environmental Action relating to any
environmental condition, violation of Environmental Law, Remedial Actions or a
Release of Hazardous Materials from or onto (i) any property presently or
formerly owned by the Borrower or any of its Subsidiaries or (ii) any facility
which received Hazardous Materials generated by the Borrower or any of its
Subsidiaries.
"Environmental Lien" shall mean any Lien securing Environmental
Liabilities and Costs incurred by a Governmental Authority.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
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"ERISA Affiliate" shall mean any (i) corporation which is a member of
the same controlled group of corporations (within the meaning of Section 414(b)
of the Code) as the Borrower, (ii) partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Event of Default" shall mean any of the Events of Default described
in Section 9.01 hereof.
"Existing Credit Facilities" shall mean that certain Loan and Security
Agreement dated as of June 3, 1998, as the same may have been or be amended and
modified from time to time, by and between NationsCredit Commercial Funding, a
division of NationsCredit Commercial Corporation, and the Borrower.
"Fee Letter" shall mean the letter between the Borrower and the Agent
of even date herewith regarding certain fees.
"▇▇▇▇▇ the Cat" shall have the meaning given to that term in the
Security Agreement in the form of Exhibit B-1 attached hereto and dated of even
date herewith, as amended, modified or supplemented from time to time.
"Filing Date" means the date on which the Chapter 11 Cases are
commenced.
"Film Library" shall have the meaning given to that term in the
Security Agreement in the form of Exhibit B-1 attached hereto and dated of even
date herewith, as amended, modified or supplemented from time to time.
"Final Financing Order" means an order of the Bankruptcy Court in
form, scope and substance acceptable to the Agent and the Lenders approving this
Agreement and the other Loan Documents, as such order may be amended, modified
or supplemented from time to time with the express written consent of the Agent,
the Lenders and the Borrower and the approval of the Bankruptcy Court, which
order shall be in full force and effect, was not objected to with respect to the
question of whether the Agent or any Lender is a good faith lender under Section
364(e) of the Bankruptcy Code or whether the Agent has the right to exercise
remedies with respect to Inventory utilizing the intellectual property owned by
the Borrower or licensed by the Borrower, or has not been vacated, modified
(without the express written consent of the Agent as set forth hereinbefore),
reversed, or stayed.
"Final Financing Order Date" means the date (which shall be no later
than forty-five (45) days after the Entry Date) on which the Final Financing
Order shall have been duly entered by the Bankruptcy Court.
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"GAAP" shall mean generally accepted accounting principles as such
principles shall be in effect in the United States at the relevant date as
consistently applied by Borrower as of the date hereof.
"Goods" shall have the meaning given to that term in the UCC.
"Governmental Authority" shall mean any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GPH" means Golden Press Holding, L.L.C., a Delaware limited liability
company.
"Guarantee" of or by any Person shall mean any obligation of such
Person guaranteeing any Indebtedness of any other Person (the "primary
obligor"), directly or indirectly through an agreement (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness or
to purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Guarantor" shall have the meaning set forth in the second Whereas
clause hereinbefore.
"Hazardous Materials" shall mean (i) any element, compound or chemical
that is defined, listed or otherwise classified as a contaminant, pollutant,
toxic pollutant, hazardous substance, extremely hazardous substance, toxic
substance, hazardous waste, or special waste under any Environmental Law; (ii)
petroleum and its refined fractions, (iii) any polychlorinated biphenyls in
amounts or concentrations regulated under the Environmental Laws, (iv) any
flammable, explosive or radioactive materials regulated under the Environmental
Laws; and (v) any other raw materials used or stored by the Borrower, building
components (including but not limited to asbestos-containing materials) and
manufactured products containing Hazardous Materials within the meaning of
clauses (i) - (iv).
"Improvements" shall mean, with respect to any Premises, all
buildings, structures and other improvements now or hereafter existing, erected
or placed on or under the Premises, or in any way used in connection with the
use, enjoyment, occupancy or operation of the Premises or any portion thereof;
and all fixtures of every kind and nature whatsoever now or hereafter owned by
the Borrower and used or procured for use in connection with such Premises.
12
"Indebtedness" shall mean as to any Person (i) indebtedness for
borrowed money; (ii) indebtedness for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
business and payable in accordance with customary practices); (iii) indebtedness
evidenced by bonds, debentures, notes or other similar instruments (other than
performance, surety and appeal or other similar bonds arising in the ordinary
course of business); (iv) obligations and liabilities secured by a Lien upon
property owned by such Person, whether or not owing by such Person and even
though such Person has not assumed or become liable for the payment thereof; (v)
obligations and liabilities directly or indirectly Guaranteed by such Person;
(vi) obligations or liabilities created or arising under any conditional sales
contract or other title retention agreement with respect to property used and/or
acquired by such Person, even though the rights and remedies of the lessor,
seller and/or lender thereunder are limited to repossession of such property;
(vii) Capitalized Lease Obligations; (viii) all liabilities in respect of
letters of credit, acceptances and similar obligations created for the account
of such Person; (ix) net liabilities of such Person under interest rate cap
agreements, interest rate swap agreements, foreign currency exchange agreements
and other hedging agreements or arrangements calculated on a basis reasonably
satisfactory to the Agent and in accordance with accepted practice; and (x)
intercompany loans and advances from the Borrower to any Subsidiary or
Affiliate.
"Indemnified Parties" shall have the meaning given to that term in
Section 10.06 hereof.
"Initial Termination Date" shall have the meaning given to that term
in Sec tion 2.01 hereof.
"Instrument" shall have the meaning given to that term in the UCC.
"Interim Amount" shall have the meaning given to that term in the
Interim Financing Order.
"Interim Financing Order" means the order of the Bankruptcy Court
substantially in the form attached hereto as Exhibit G, as such order may be
amended, modified or supplemented from time to time with the express written
consent of the Agent, the Lenders and the Borrower and the approval of the
Bankruptcy Court, which order shall be in full force and effect, was not
objected to with respect to the question of whether the Agent or any Lender is a
good faith lender under Section 364(e) of the Bankruptcy Code, or has not been
vacated, modified (without the express written consent of the Agent as set forth
hereinbefore), reversed, or stayed.
"Interim Financing Order Date" means the date (which shall be no later
than five (5) Business Days after the Filing Date) on which each of the
following shall have occurred: (i) the Interim Financing Order shall have been
duly entered by the Bankruptcy Court and shall be in full force and effect, and
(ii) the Agent shall have determined that all conditions set forth in
13
Section 5.1 shall have been duly satisfied or waived by the Agent and the
Lenders (treating the Interim Financing Order Date as the date on which the
initial Revolving Loan is funded).
"Inventory" shall mean all goods and merchandise of the Borrower
(excluding Inventory relating to Borrower's "Christmas Classics", "▇▇▇▇▇ the
Cat", "Film Library", "Lassie", "Lone Ranger" and "Underdog" properties and the
Other Entertainment Works) including, but not limited to, all finished goods,
work-in-process, materials and supplies of every nature used or usable in
connection with the shipping, storing, advertising or sale of such goods and
merchandise, whether now owned or hereafter acquired and all such property, the
sale or disposition of which would give rise to Accounts or cash.
"Lassie" shall have the meaning given to that term in the Security
Agreement in the form of Exhibit B-1 attached hereto and dated of even date
herewith, as amended, modified or supplemented from time to time.
"Lease" shall mean any lease of real property to which the Borrower is
a party as lessee or lessor.
"Lenders" shall have the meaning given to that term in the
introductory paragraph to this Agreement.
"Letters of Credit" shall have the meaning given to that term in
Section 3.01(a) hereof.
"Letter of Credit Amendment" shall have the meaning set forth in
Section 3.01(a) hereof.
"Letter of Credit Application" shall have the meaning given to that
term in Section 3.01(a) hereof.
"Letter of Credit Cash Collateral Account" shall mean the deposit
account maintained at the Bank or such other bank as the Agent may select, which
deposit account shall be under the sole dominion and control of the Agent in
accordance with any relevant terms and conditions of this Agreement, the
Security Agreement and any other Related Document.
"Letter of Credit Exposure" shall mean, at any time, the sum at such
time of (a) the aggregate amount of all Unreimbursed Draws under Letters of
Credit (whether or not such Letters of Credit are then outstanding) and (b) the
aggregate Undrawn Letter of Credit Availability under all outstanding Letters of
Credit.
"Letter of Credit Fee" shall have the meaning given to that term in
Section 2.08(f) hereof.
14
"Letter of Credit Guaranty" shall mean the guaranty delivered by CIT
to the Letter of Credit Issuer, guaranteeing the Borrower's reimbursement
obligations under a reimbursement agreement, Letter of Credit Application or
other like document.
"Letter of Credit Issuer" shall mean the issuer of the Letters of
Credit, which shall be the Bank or The Dai-Ichi Kangyo Bank, Limited, New York
Branch.
"License" shall mean any license naming the Borrower as licensee or
licensor.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
"Loan Account" shall have the meaning given to that term in Section
2.08(a) hereof.
"Loan Documents" shall have the meaning given to that term in the
definition of "Related Documents" set forth in this Section 1.01 hereof.
"Loan Party" shall mean each of the Borrower and the Guarantors, and
collectively, "Loan Parties."
"Loans" shall mean, collectively, the Revolving Loans and the Term
Loan.
"Lock Box Accounts" shall have the meaning set forth in Section
7.13(a) hereof.
"Lock Box Agreements" shall mean the agreements, in form and substance
reasonably satisfactory to the Agent, among the Lock Box Banks, the Borrower and
the Agent delivered to the Agent pursuant to Section 7.13 hereof as such
agreements may be modified and supplemented and in effect from time to time.
"Lock Box Banks" shall have the meaning set forth in Section 7.13(a)
hereof.
"Lone Ranger" shall have the meaning given to that term in the
Security Agreement in the form of Exhibit B-1 attached hereto and dated of even
date herewith, as amended, modified or supplemented from time to time.
"Majority Lenders" shall mean, at any time, Lenders who represent in
the aggregate at least sixty-six and two-thirds percent (66-2/3%) of the sum of
the aggregate Revolving Loan Commitments plus the aggregate unpaid principal
amount of the Term Loan as of such date.
15
"Material Adverse Effect" shall mean a material adverse effect upon
(i) the business, operations, condition (financial or otherwise), or properties
of the Borrower, (ii) the ability of the Borrower to perform its obligations
hereunder or under any other Related Document, (iii) the Lien arising under the
Related Documents on any Collateral, (iv) the legality, validity or
enforceability of this Agreement or any Related Document or the Lien arising
under any Related Document or (v) the aggregate value of the property included
in the calculation of the Borrowing Base.
"Material Contract" means each contract or agreement to which the
Borrower is a party which is material to the business, operations, condition
(financial or otherwise), performance, or properties of the Borrower, including,
without limitation, the Required License Agreements, the Required License
Consents, the Borrower Licensor Agreements and the Required Sublicenses.
"Mattel License" shall mean the License Agreement, dated as of January
1, 1998, between Mattel, Inc. and the Borrower as the same may be amended,
modified or supplemented from time to time.
"Minority Lenders" shall have the meaning given to that term in
Section 10.03(b) hereof.
"Monthly Reports" shall have the meaning given to that term in Section
7.01(f) hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sec tion 4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or
within the immediately preceding six (6) years was, contributed to by the
Borrower or any ERISA Affiliate.
"Net Income" shall mean the net income of such Person as determined in
accordance with GAAP.
"Net Proceeds" shall mean the amount of sales proceeds received by the
Borrower, net of taxes and reasonable expenses directly incurred in connection
with such sale.
"Notes" shall mean the Revolving Credit Notes and the Term Loan Notes.
"Notice of Borrowing" shall have the meaning given to that term in Sec
tion 2.03(b) hereof.
"Notices" shall have the meaning given to that in Section 10.05
hereof.
"Obligations" shall mean all indebtedness, obligations and liabilities
of the Borrower to any Lender or the Agent incurred under or related to this
Agreement, the Notes or any other Related Document, whether such indebtedness,
obligations or liabilities are direct or
16
indirect, secured or unsecured, joint or several, absolute or contingent, due or
to become due, whether for payment or performance, now existing or hereafter
arising, including without limitation those which are described in either of the
following clauses (i) or (ii):
(i) All indebtedness, obligations (including Reimbursement
Obligations) and liabilities of any nature whatsoever, including
amounts due under Section 10.06 and Section 11.08 hereof and similar
agreements contained in the other Related Documents, from time to time
arising under or in connection with or evidenced or secured by this
Agreement, the Notes, the Letters of Credit or any other Related
Document, including but not limited to the principal amount of Loans
outstanding, together with interest thereon (including, without
limitation, all interest that accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Borrower), the amount of the
Letter of Credit Exposure, together with interest thereon and all
expenses, fees and indemnities hereunder or under any other Related
Document. Without limitation, such amounts include all Loans and
interest thereon and the amount of all Letter of Credit Exposure
whether or not such Loans were remade or any Letters of Credit to
which such Letter of Credit Exposure relates were issued in compliance
with the terms and conditions hereof or in excess of any Lender's
obligation to lend and arrange for the issuance of Letters of Credit
hereunder or any Lender's obligation to participate therein. If and to
the extent any amounts in any account (including the Agent Account,
the Lock Box Account, the Letter of Credit Cash Collateral Account),
or otherwise constituting Collateral are applied to Obligations
hereunder, and any Lender or the Agent is subsequently obligated to
return or repay any such amounts to any Person for any reason, the
amount so returned or repaid shall be deemed a Loan hereunder and
shall constitute an Obligation.
(ii) All indebtedness, obligations and liabilities from time to
time arising under or in connection with any account from time to time
maintained by the Borrower or by any Lender or the Agent pursuant to
the terms of this Agreement or any Related Document, including but not
limited to all reimbursement obligations, service charges and interest
in connection with any overdrafts or returned items from time to time
arising in connection with any such account, or arising under or in
connection with any cash management services or other services from
time to time performed by any Lender or the Agent pursuant to or in
connection with this Agreement or any other Related Document.
"Office" when used in connection with the Agent shall mean its office
located at 1211 Avenue of the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such
other office or offices of the Agent as may be designated in writing from time
to time by the Agent to the Borrower and when used in connection with the Bank
or the Letter of Credit Issuer shall mean the office of such entity designated
in writing from time to time by the Agent to the Borrower. In the event The
Chase Manhattan Bank shall be the Bank or the Letter of Credit Issuer, the
Office for such entity
17
shall until further written notice from the Agent to the Borrower be its office
located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Operating Lease Obligations" shall mean all obligations and
indebtedness of the Borrower and its Subsidiaries in respect of leases of
property (whether real, personal or mixed) other than Capitalized Lease
Obligations.
"Orders" shall mean and refer to the Interim Financing Order and the
Final Financing Order.
"Other Entertainment Works" shall have the meaning given to that term
in the Security Agreement in the form of Exhibit B-1 attached hereto and dated
of even date herewith, as amended, modified or supplemented from time to time.
"Other Required Licenses" shall have the meaning given to that term in
the definition of "Required License Agreements."
"Other Taxes" shall have the meaning given to that term in Section
2.15 hereof.
"Parent" shall mean Golden Books Family Entertainment, Inc.
"Parent Guaranty" shall mean the guaranty, substantially in the form
of Exhibit F hereto, dated of even date herewith by Parent in favor of the Agent
on behalf of the Lenders.
"▇▇▇ the Bunny License" shall mean, collectively, the following
license agreements: Agreement made October 9, 1990, by and between ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇. Lodge, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. and
Western Publishing Company, Inc.; Agreement made November 3rd, 1992, between
Western Publishing Company, Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇; Agreement made March 9th,
1984, Western Publishing Company, Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇; and Agreement made
September 5th, 1940, between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Simon and ▇▇▇▇▇▇▇▇ and any
other license agreements pursuant to which the Borrower is a license involving
▇▇▇ the Bunny or any other titles in the ▇▇▇ the Bunny series, in each case as
the same shall have been and amended, modified or supplemented from time to
time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Investments" shall mean (a) direct obligations of the
United States of America or of any agency thereof or obligations guaranteed as
to principal and interest by the United States of America or of any agency
thereof, in either case maturing not more than ninety (90) days from the date of
acquisition thereof by such Person; (b) deposit accounts with or certificates of
deposit and bankers' acceptances issued by any bank or trust company organized
under the laws of the United States of America or any state thereof and having
capital, surplus and undivided profits of at least $500,000,000 maturing not
more than 90 days from the date of
18
acquisition thereof by such Person: (c) commercial paper rated ▇- ▇ or better or
P- 1 or better by Standard & Poor's Corporation ("S&P") or ▇▇▇▇▇'▇ Investors
Services, Inc. ("Moody's"), respectively maturing not more than 90 days from the
date of acquisition thereof by such Person; (d) Investments in money market
funds rated AAAm or AAAm-G by S&P and Aaa by Moody's and; (e) repurchase
agreements having maturities of not more than ninety (90) days from the date of
acquisition which are entered into with a bank or trust company described in
clause (b) above and which are secured by readily available direct obligations
of the United States of America or any agency thereof.
"Permitted Liens" shall have the meaning given that term in Section
8.01 hereof.
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association, joint venture, joint-stock company, government (including political
subdivisions), Governmental Authority or agency, or any other entity.
"Plan" shall mean an employee benefit plan defined in Section 3(3) of
ERISA in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Potential Default" shall mean any event, occurrence or condition
which, with notice or passage of time, or any combination of the foregoing,
would constitute an Event of Default.
"Premises" shall mean all real property owned in fee by the Borrower
described in Schedule 1.01(B) hereto, as well as all of the easements, rights,
privileges and appurtenances (including air rights) thereunto belonging or in
any way appertaining, and all of the estate, right, title, interest, claim or
demand whatsoever of the Borrower therein and in the streets and ways adjacent
thereto, either at law or in equity, in possession or expectancy, now or
hereafter acquired, and as used herein and in any mortgages shall, unless the
context otherwise requires, be deemed to include the Improvements and Building
Equipment on such Premises.
"Prime Loan" shall mean a Loan bearing interest at the Regular Rate.
"Prime Rate" shall mean the interest rate per annum publicly announced
from time to time by The Chase Manhattan Bank, New York, as its Prime Rate, such
interest rate to change automatically from time to time effective as of the
announced effective date of each change in the Prime Rate. The Prime Rate is not
intended to be the lowest rate of interest charged by the Bank to its borrowers.
"Priority Professional Expense Cap" has the meaning specified in the
definition of the term "Agreed Administrative Expense Claim Priorities."
19
"Priority Professional Expenses" means those fees and expenses
entitled to a priority as set forth in subparagraph "(a)", clause "(ii)" of the
term "Agreed Administrative Expense Claim Priorities."
"Professional Expenses" has the meaning specified in the definition of
the term "Agreed Administrative Expense Claim Priorities.
"Pro Rata Share" shall mean, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Revolving Credit Commitment and the denominator of which shall be the
aggregate amount of all of the Lenders' Revolving Credit Commitments, as
adjusted from time to time in accordance with the provisions of Section 10.13
hereof, provided that, if the Revolving Credit Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Exposure and the denominator shall be the aggregate
amount of all unpaid Loans and Letter of Credit Exposure.
"Real Estate" shall mean all estate, right, title and interest of the
Borrower in, to and under any and all of the following described property,
whether now held or hereafter acquired: (i) the Premises; (ii) all of the
Borrower's interests, if any, in and to all rents, royalties, issues, profits,
revenue, income and other benefits of the Premises and all Leases of the
Premises or portions thereof now or hereafter entered into by the Borrower as
lessor and all right, title and interest of the Borrower thereunder, including,
without limitation, cash or securities deposited thereunder to secure
performance by the lessees of their obligations thereunder, whether such cash or
securities are to be held until the expiration of the terms of such leases or
applied to one or more of the installments of rent coming due immediately prior
to the expiration of such terms, including any guaranties of such leases; (iii)
all of the Borrower's interests, if any, in and to all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or
liquidated claims, including, without limitation, proceeds of insurance and
condemnation awards, and all rights of the Borrower to refunds of real estate
taxes and assessments and (iv) the real property leased by the Borrower.
"Register" shall have the meaning given that term in Section 10.13(c)
hereof.
"Regular Rate" shall mean, for any day, the Prime Rate.
"Reimbursement Obligation" shall mean the obligations of the Borrower
to reimburse CIT or the Lenders for amounts payable by CIT or the Lenders under
a Letter of Credit Guaranty in respect of any payment made under any Letter of
Credit issued by the Letter of Credit Issuer, together with interest thereon and
all reasonable fees and expenses related thereto.
"Related Documents" or "Loan Documents" shall mean this Agreement, the
Notes, the Orders, the Letters of Credit, each Letter of Credit Application, the
Letter of Credit Guaranty, the Lock Box Agreements, the Fee Letter, each
Security Document, each Assignment and Acceptance and the other documents,
instruments and agreements referred to in Section 5.01
20
hereof, and all other instruments, agreements and documents from time to time
delivered in connection with or otherwise relating to any Related Document.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, injection, discharging, injecting, escaping, leaching,
dumping or disposing (including abandonment, or discarding of barrels,
containers and other closed receptacles containing any regulated Hazardous
Materials) of a Hazardous Material into the indoor or outdoor environment or
onto or from any property presently or formerly owned or operated by the
Borrower or any of its Subsidiaries, or at any disposal facility that received
Hazardous Materials generated by the Borrower or any of its Subsidiaries.
"Remedial Action" shall mean all actions taken to (i) monitor, assess,
evaluate, investigate, clean up, remove, remedy, treat, contain or in any other
way address Hazardous Materials in the indoor or outdoor environment; (ii)
prevent or minimize a Release or threatened Release of Hazardous Materials so
that the Release or threatened Release does not migrate or endanger or threaten
to endanger public health or welfare or the environment; or (iii) perform
pre-remedial studies and investigations and post-remedial operation and
maintenance activities, or any other actions authorized by 42 U.S.C. 9601.
"Reportable Event" shall mean any of the events described in Section
4043(b) of ERISA (other than events for which the notice requirements have been
waived).
"Required License Agreements" shall mean (x) the Disney License, the
Mattel License, and such other licenses (the "Other Required Licenses") to
trademarks, tradenames or copyrights appearing on any Inventory of the Borrower
identified on Schedule 1.01 and (y) any other license agreement hereafter
entered into between the Borrower and a third party (as to which the Borrower is
a licensee) unless the Agent has provided written consent to the exclusion of
such license as a "Required License Agreement".
"Required License Consents" shall have the meaning set forth in
Section 7.16 hereof.
"Required Sublicenses" shall mean the ▇▇▇ the Bunny License and the
other sublicenses in favor of the Agent listed on Schedule 1.01 (F) and any
other sublicense from time to time granted to the Agent hereunder in form and
substance satisfactory to the Agent granting to the Agent the right to sell
Inventory using or containing the intellectual property set forth in the
underlying license.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the amount set forth on Schedule 1.01(C) to this Agreement or assigned to such
Lender in accordance with Section 10.13 hereof, as such amounts may be reduced
from time to time pursuant to the terms of this Agreement, and "Revolving Credit
Commitments" shall, collectively, mean the aggregate amount of the Revolving
Credit Commitments of all the Lenders, the maximum amount of which shall not
exceed (without in any way limiting the Line Reserve) $45,000,000.
21
"Revolving Credit Notes" shall mean the promissory notes,
substantially in the form of Exhibit A-1 hereto, executed and delivered by the
Borrower to the Lenders to evidence the Revolving Loans under this Agreement, as
modified or restated from time to time and any promissory note or notes issued
in exchange or replacement thereof, including all extensions, renewals,
refinancings or refundings thereof in whole or part.
"Revolving Credit Anniversary" shall have the meaning given that term
in Sec tion 2.01 hereof.
"Revolving Credit Termination Date" shall have the meaning given that
term in Section 2.01 hereof.
"Revolving Loan" or "Revolving Loans" shall mean any and all loan or
loans made (or deemed made, in the case of Letters of Credit) by the Lenders or
by the Agent on behalf of the Lenders to the Borrower pursuant to Section
2.01(b) of this Agreement, or made as a result of charges made to the Loan
Account, in each case pursuant to the terms of this Agreement.
"Security Agreement" shall mean the Security Agreement substantially
in the form of Exhibit B-1 hereto, dated of even date herewith, made by the
Borrower and the Parent in favor of the Agent, for the benefit of the Lenders,
as modified and supplemented and in effect from time to time.
"Security Agreement - Trademarks" shall mean the Security Agreement
and Mortgage - Trademarks and Copyrights, substantially in the form of Exhibit
B-2 hereto, dated of even date herewith, made by the Borrower and the Parent in
favor of the Agent, for the benefit of the Lenders, as modified and supplemented
and in effect from time to time.
"Security Agreements" shall mean, collectively, the Security Agreement
and the Security Agreement -Trademarks.
"Security Documents" shall mean, collectively, the Security Agreements
executed and delivered by the Borrower and the Parent, and all Uniform
Commercial Code financing statements required by this Agreement and the Security
Agreements to be filed with respect to the security interests in personal
property created pursuant to such agreements, the Parent Guaranty, the Video
Guaranty, and all other documents and agreements executed and delivered by the
Parent, Borrower and/or its Subsidiaries in connection with any of the foregoing
documents.
"Senior Notes" means those certain 7.65% Senior Notes due 2002 of the
Borrower issued pursuant to that certain Indenture between Borrower and Marine
Midland Bank, as successor trustee, dated as of September 15, 1992, as amended
and supplemented.
"Senior Notes Collateral" shall mean the property of the Borrower
covered by the Senior Notes Collateral Agreement.
22
"Senior Notes Collateral Agreement" shall mean that certain Security
Agreement dated as of June 2, 1998, between Borrower and Marine Midland Bank, as
trustee.
"Series B Preferred Stock" shall mean the Convertible Preferred Stock
- Series B, no par value, of the Parent.
"Settlement Period" shall have the meaning set forth in Section 2.03
hereof.
"Stated Amount" shall mean, with respect to a Letter of Credit, the
face amount thereof, drawn or undrawn, regardless of the existence or
satisfaction of any conditions or limitations on drawing.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited or general partnership, limited liability company, limited liability
partnership, trust, association or other business entity of which an aggregate
of more than 50% of the outstanding stock or other interests entitled to vote in
the election of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency), managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned or controlled by such Person and/or one or more Subsidiaries
of such Person.
"Taxes" shall have the meaning given to that term in Section 2.13
hereof.
"Term Loan" shall mean, collectively, the term loan in a principal
amount not to exceed $10,000,000 made by the Lenders pursuant to, and repayable
in accordance with, the provisions of this Agreement.
"Term Loan Commitment" shall mean, with respect to each Lender, its
obligation to make a Term Loan to the Borrower in the amount set forth on
Schedule 1.01(D) to this Agreement or assigned to such Lender in accordance with
Section 10.13 hereof, as such amounts may be reduced from time to time pursuant
to the terms of this Agreement and "Term Loan Commitments" shall, collectively,
mean the aggregate amount of the Term Loan Commitments of all the Lenders.
"Term Loan Notes" shall mean the promissory notes, substantially in
the form of Exhibit A-2 hereto, executed and delivered by the Borrower to the
Lenders to evidence the Term Loan under this Agreement, as modified or restated
from time to time and any promissory note or notes issued in exchange or
replacement thereof, including all extensions, renewals, refinancings or
refundings thereof in whole or part.
"Termination Event" shall mean (i) a Reportable Event with respect to
any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate
from a Benefit Plan during a plan year in which the Borrower or any ERISA
Affiliate was a "substantial employer" as defined
23
in Section 4001 (a)(2) of ERISA; (iii) the imposition of an obligation on the
Borrower or any ERISA Affiliate under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041 (c) of ERISA; or (iv) the institution by
the PBGC of proceedings to terminate a Benefit Plan.
"TOPrS" means the unsecured 8 3/4% Convertible Trust Originated
Preferred Securities due 2016 issued by Golden Books Financing Trust, issued
pursuant to the Amended and Restated Declaration of Trust, dated August 20,
1996, as in effect on the date hereof.
"UCC" shall mean the Uniform Commercial Code, as amended, in effect in
the State of New York on the date hereof.
"Underdog" shall have the meaning given to that term in the Security
Agreement in the form of Exhibit B-1 attached hereto and dated of even date
herewith, as amended, modified or supplemented from time to time.
"Undrawn Letter of Credit Availability" shall mean with respect to a
Letter of Credit, at any time, the maximum amount available to be drawn under
such Letter of Credit at such time, regardless of the existence or satisfaction
of any conditions or limitations on drawing.
"Unreimbursed Draws" shall mean with respect to a Letter of Credit, at
any time, the aggregate amount at such time of all payments made by the Letter
of Credit Issuer or payments made by CIT or the Lenders under a Letter of Credit
Guaranty in respect of such payments under such Letter of Credit, to the extent
not repaid by the Borrower, provided that Unreimbursed Draws shall not include
any such payments that have been charged to the Loan Account and constitute a
Revolving Loan pursuant to the terms of this Agreement.
"Unused Line Fee" shall have the meaning given to that term in Section
2.08(e) hereof.
"Video" shall mean Golden Books Home Video, Inc.
"Video Guaranty" shall mean the guaranty, substantially in the form of
Exhibit F hereto, dated of even date herewith by Video in favor of the Agent on
behalf of the Lenders.
"Weekly Reports" shall have the meaning given to that term in Section
7.01(e) hereof.
1.02. Construction. Unless the context of this Agreement otherwise
clearly requires, references to the plural include the singular, to the singular
include the plural, and to the part include the whole; "or" has the inclusive
meaning represented by the phrase "and/or." References in this Agreement to
"determination" by the Agent shall mean the reasonable good faith estimates by
the Agent (in the case of quantitative determinations)or the reasonable good
faith beliefs by the Agent (in the case of qualitative determinations). The
words "hereof,"
24
"herein," "hereunder" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
section and other headings contained in this Agreement and the Table of Contents
preceding this Agreement are for reference purposes only and shall not control
or affect the construction of this Agreement or the interpretation thereof in
any respect. Section, subsection and exhibit references are to this Agreement
unless otherwise specified.
1.03. Accounting Principles. Except as otherwise provided in this
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Agreement
shall be made and prepared in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP. Notwithstanding the definition
of GAAP contained in this Agreement, no change in GAAP that would affect the
method or calculation of any covenants, restrictions or standards or definitions
of terms used herein shall be given effect in such calculations until such
covenants, restrictions or standards or definitions are amended in a manner
satisfactory to the Borrower and the Majority Lenders so as to reflect such
change in GAAP.
ARTICLE 2.
THE LOANS
2.01. Term Loan and Revolving Loans.
(a) Subject to the terms and conditions and relying upon, as
applicable, the representations and warranties herein set forth, and subject to
the Interim Financing Order and the Final Financing Order, as the case may be,
each Lender severally agrees to make a Term Loan to the Borrower, on the Closing
Date, in a principal amount that will not exceed the amount of such Lender's
Term Loan Commitment. The Term Loan shall mature as provided in Section 2.07
hereof.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, and subject to the Interim
Financing Order and the Final Financing Order, as the case may be, each Lender
severally agrees to make Revolving Loans to the Borrower at any time and from
time to time on or after the date hereof and through but not including, the
Revolving Credit Termination Date, in an aggregate principal amount for the
Borrower not exceeding at any one time its Pro Rata Share of the Current
Commitment at such time. The "Current Commitment" at any time shall be equal to
the lesser of (A) $45,000,000 ($30,000,000 during the Interim Period)and (B) the
Borrowing Base. No Lender shall have an obligation to make Revolving Loans
hereunder or arrange for the issuance of Letters of Credit on or after the
Revolving Credit Termination Date which, when added to the aggregate amount of
all outstanding and contemporaneous Revolving Loans and the Letter of Credit
Exposure at such time, would cause the aggregate amount of all Revolving Loans
and the Letter of Credit Exposure at any time to exceed the Current Commitment
at such time. The "Revolving Credit Termination
25
Date" means the date on which the Revolving Credit Commitment of each Lender
expires, which initially shall be two (2) years from the date hereof (the
"Initial Termination Date") and shall be automatically renewed thereafter for
one (1) year periods (each annual period ending on a "Revolving Credit
Anniversary") unless terminated in accordance with Section 10.20. Within the
limits of time and amount set forth in this Section 2.01, and subject to the
provisions of this Agreement, the Borrower may borrow, repay and reborrow
hereunder.
(c) The Agent is permitted in its sole discretion, to make Agent
Advances pursuant to the terms of Section 11.08 hereof.
2.02. Notes.
(a) The obligation of the Borrower to repay the unpaid principal
amount of the Term Loan made to it by each Lender and to pay interest thereon
shall be evidenced by a Term Loan Note dated the date of this Agreement in the
principal amount of such Lender's Term Loan Commitment with the blanks
appropriately filled in. An executed Term Loan Note for each Lender shall be
delivered by the Borrower to the Agent on the date of the execution and delivery
of this Agreement.
(b) The obligation of the Borrower to repay the unpaid principal
amount of the Revolving Loans made to it by each Lender and to pay interest
thereon shall be evidenced by a Revolving Credit Note dated the date of this
Agreement in the principal amount of such Lender's Revolving Credit Commitment
with the blanks appropriately filled in. An executed Revolving Credit Note for
each Lender shall be delivered by the Borrower to the Agent on the date of the
execution and delivery of this Agreement.
2.03. Notice of Borrowing; Making of Loans.
(a) Upon receipt of its Term Loan Note, each Lender hereby agrees
to extend to the Borrower in immediately available funds an aggregate principal
amount of the Term Loan equal to such Lender's Term Loan Commitment.
(b) Whenever the Borrower desires the Lenders to make a Revolving
Loan, the Borrower shall provide notice to the Agent of such proposed borrowing
(a "Notice of Borrowing"), each such notice to be given not later than 12:00
noon (New York City time) on the date of such proposed borrowing, in the case of
a borrowing consisting of Prime Loans, setting forth: (a) the date, which shall
be a Business Day, on which such borrowing is to occur, (b) the principal amount
of the Revolving Loan being borrowed and (c) the account information where such
Revolving Loan is to be received. Such notice shall be given by telephone or in
writing by either a Designated Borrowing Officer or such other authorized
officer of Borrower as listed in an officer's certificate delivered on the
Closing Date (each an "Additional Authorized Party"), provided, that, if
requested by the Agent, any such telephonic notice shall be confirmed in writing
by delivery to the Agent, on or before the date on which such Revolving Loan is
to be made, of a written notice substantially in the form of Exhibit E hereto
containing the original or facsimile
26
signature of a Designated Borrowing Officer or Additional Authorized Party, as
the case may be. Except for a Notice of Borrowing when the Agent will fund the
related Revolving Loan pursuant to Section 2.03(f) hereof, the Agent shall
provide each Lender with prompt notice of each Notice of Borrowing. Except as
otherwise provided in Section 2.03(f) hereof, on the date specified in such
notice, each Lender shall, subject to the terms and conditions of this
Agreement, make its Pro Rata Share of such Revolving Loan in immediately
available funds by wire transfer to the Agent at its Office not later than 1:30
p.m. (New York City time). Unless the Agent determines in the exercise of its
reasonable business judgment that any applicable conditions in Section 5.02
hereof have not been satisfied, the Agent shall make the funds so received from
the Lenders available to the Borrower not later than 2:30 p.m. (New York City
time) on the date specified in such notice in immediately available funds by (i)
depositing such proceeds in the Disbursement Account of the Borrower if such
Disbursement Account is located at the Bank or (ii) initiating a wire transfer
of same day funds to the Disbursement Account if such Disbursement Account is
not located at the Bank.
(c) The Agent and each Lender shall be entitled to rely
conclusively on each Designated Borrowing Officer's authority to request a
Revolving Loan on behalf of the Borrower until the Agent receives written notice
to the contrary. The Agent and the Lenders shall have no duty to verify the
authenticity of the signature appearing on any written Notice of Borrowing and,
with respect to an oral request for a Revolving Loan, the Agent and the Lenders
shall have no duty to verify the identity of any Person representing himself as
a Designated Borrowing Officer.
(d) The Agent and the Lenders shall not incur any liability to
the Borrower in acting upon any telephonic notice referred to above which the
Agent and the Lenders believe in good faith to have been given by a Designated
Borrowing Officer or for otherwise acting in good faith under this Section 2.03
and, upon the funding of a Revolving Loan by the Lenders (or by the Agent on
behalf of the Lenders) in accordance with this Agreement pursuant to any such
telephonic notice, the Borrower shall have effected a Revolving Loan hereunder.
(e) Each Notice of Borrowing pursuant to this Section 2.03 shall
be irrevocable and the Borrower shall be bound to make a borrowing in accordance
therewith. Each Revolving Loan shall be in a minimum amount of $1,000,000 and in
multiples of $100,000 if in excess thereof.
(f) (i) Except as otherwise provided in this subsection 2.03(f),
all Revolving Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares, it being understood
that no Lender shall be responsible for any default by any other Lender in that
other Lender's obligation to make a Revolving Loan requested hereunder nor shall
the Revolving Credit Commitment of any Lender be increased or decreased as a
result of the default by any other Lender in that other Lender's obligation to
make a Revolving Loan requested hereunder.
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(ii) Notwithstanding any other provision of this Agreement,
and in order to reduce the number of fund transfers among the Borrower, the
Lenders and the Agent, the Borrower, the Lenders and the Agent agree that the
Agent may (but shall not be obligated to), and the Borrower and the Lenders
hereby irrevocably authorize the Agent to, fund, on behalf of the Lenders,
Revolving Loans pursuant to Section 2.01 hereof, subject to the procedures for
settlement set forth in subsection 2.03(g) hereof; provided, however, that (a)
the Agent shall in no event fund such Revolving Loans if the Agent shall have
received written notice from the Majority Lenders on the Business Day prior to
the day of the proposed Revolving Loan that one or more of the conditions
precedent contained in Section 5.02 hereof will not be satisfied on the day of
the proposed Revolving Loan, and (b) the Agent shall not otherwise be required
to determine that, or take notice whether, the conditions precedent in Section
5.02 hereof have been satisfied.
(iii) Unless (A) the Agent has notified the Lenders that the
Agent, on behalf of the Lenders, will fund a particular Revolving Loan pursuant
to subsection 2.03(f)(ii) hereof, or (B) the Agent shall have been notified by
any Lender on the Business Day prior to the day of a proposed Revolving Loan
that such Lender does not intend to make available to the Agent such Lender's
Pro Rata Share of the Revolving Loan requested on such day, the Agent may assume
that such Lender has made such amount available to the Agent on such day and the
Agent, in its sole discretion, may, but shall not be obligated to, cause a
corresponding amount to be made available to the Borrower on such day. If the
Agent makes such corresponding amount available to the Borrower and such
corresponding amount is not in fact made available to the Agent by such Lender,
the Agent shall be entitled to recover such corresponding amount on demand from
such Lender together with interest thereon, for each day from the date such
payment was due until the date such amount is paid to the Agent, at the
customary rate set by the Agent for the correction of errors among banks for
three Business Days and thereafter at the Regular Rate. During the period in
which such Lender has not paid such corresponding amount to the Agent,
notwithstanding anything to the contrary contained in this Agreement or any
other Related Document, the amount so advanced by the Agent to the Borrower
shall, for all purposes hereof, be a Revolving Loan made by the Agent for its
own account. Upon any such failure by a Lender to pay the Agent, the Agent shall
promptly thereafter notify the Borrower of such failure and the Borrower shall
immediately pay such corresponding amount to the Agent for its own account.
(iv) Nothing in this subsection 2.03(f) shall be deemed to
relieve any Lender from its obligation to fulfill its Revolving Credit
Commitment hereunder or to prejudice any rights that the Agent or the Borrower
may have against any Lender as a result of any default by such Lender hereunder.
(g) (i) With respect to all periods for which the Agent has
funded Revolving Loans pursuant to subsection 2.03(f) hereof, within fifteen
(15) days after the last day of each calendar month, or such shorter period as
it may from time to time select (any such month or shorter period being herein
called a "Settlement Period"), the Agent shall notify each Lender of the average
daily unpaid principal amount of the Revolving Loans outstanding during such
28
Settlement Period. In the event that such amount is greater than the average
daily unpaid principal amount of the Revolving Loans outstanding during the
Settlement Period immediately preceding such Settlement Period (or, if there has
been no preceding Settlement Period, the amount of the Revolving Loans made on
the date of such Lender's initial funding), each Lender shall promptly make
available to the Agent its Pro Rata Share of the difference in immediately
available funds. In the event that such amount is less than such average daily
unpaid principal amount, the Agent shall promptly pay over to each other Lender
its Pro Rata Share of the difference in immediately available funds. In
addition, if the Agent shall so request at any time when a Potential Default or
an Event of Default shall have occurred and be continuing, or any other event
shall have occurred as a result of which the Agent shall determine that it is
desirable to present claims against the Borrower for repayment, each Lender
shall promptly remit to the Agent or, as the case may be, the Agent shall
promptly remit to each Lender, sufficient funds to adjust the interests of the
Lenders in the then outstanding Revolving Loans to such an extent that, after
giving effect to such adjustment, each Lender's interest in the then outstanding
Revolving Loans will be equal to its Pro Rata Share thereof. The obligations of
each Lender under this subsection 2.03(g) shall be absolute and unconditional.
Each Lender shall only be entitled to receive interest on its Pro Rata Share of
the Revolving Loans which have been funded by such Lender.
(ii) In the event that any Lender fails to make any payment
required to be made by it pursuant to subsection 2.03(g)(i) hereof, the Agent
shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from the date such payment
was due until the date such amount is paid to the Agent, at the customary rate
set by the Agent for the correction of errors among banks for three Business
Days and thereafter at the Regular Rate. During the period in which such Lender
has not paid such corresponding amount to the Agent, notwithstanding anything to
the contrary contained in this Agreement or any other Related Document, the
amount so advanced by the Agent to the Borrower shall, for all purposes hereof,
be a Revolving Loan made by the Agent for its own account. Upon any such failure
by a Lender to pay the Agent, the Agent shall promptly thereafter notify the
Borrower of such failure and the Borrower shall immediately pay such
corresponding amount to the Agent for its own account. Nothing in this
subsection 2.03(g)(ii) shall be deemed to relieve any Lender from its obligation
to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights
that the Borrower or the Agent may have against any Lender as a result of any
default by such Lender hereunder. The Agent shall consult with the Borrower
about the possible replacement of a defaulting Lender and the Borrower may
recommend other potential lenders to the Agent, but the determination whether to
replace a defaulting Lender and with whom to replace such defaulting Lender
shall be made by the Agent in its sole discretion.
2.04. Reduction of Revolving Credit Commitment; Mandatory Prepayment;
Optional Prepayment.
(a) Optional Reduction of the Revolving Credit Commitment.
Subject to Section 2.04(e) hereof, the Borrower may at any time or from time to
time and without penalty or premium reduce the Revolving Credit Commitments of
the Lenders to an amount not less than the sum of the unpaid principal amount of
all Revolving Loans then outstanding plus the principal
29
amount of all Revolving Loans not yet made as to which notice has been given by
the Borrower under Section 2.03 hereof plus the Letter of Credit Exposure at
such time plus the Stated Amount of all Letters of Credit not yet issued as to
which a request has been made unless the request is withdrawn and the Letter of
Credit is not issued by the Letter of Credit Issuer under Section 3.01 hereof.
Any reduction shall be in an amount which is an integral multiple of $5,000,000.
Reduction of the Revolving Credit Commitments of the Lenders shall be made by
providing not less than two (2) Business Days' written notice (which notice
shall be irrevocable) to such effect to the Agent (which notice the Agent shall
promptly transmit to each Lender). Reductions of the Revolving Credit
Commitments of the Lenders are irrevocable and may not be reinstated. Each such
reduction shall reduce the Revolving Credit Commitment of each Lender
proportionately in accordance with its Pro Rata Share.
(b) Mandatory Prepayment.
(i) Exceeding Current Commitment. Subject to Section 2.04(c)
hereof, if at any time the Current Commitment is less than the aggregate unpaid
principal amount of the Revolving Loans then outstanding plus the Letter of
Credit Exposure at such time, the Borrower shall prepay an amount of the
Revolving Loans not less than the amount of such difference or, if the Revolving
Loans then outstanding are less than the amount of such difference, provide cash
collateral, or other collateral acceptable to the Agent in its sole discretion,
to the Agent in an amount equal to 105% of such excess, which cash collateral
shall be deposited and held in the Letter of Credit Cash Collateral Account
until such time as such excess no longer exists. Any such prepayment will not
otherwise reduce the Revolving Credit Commitments of the Lenders. Concurrently
with any notice of reduction of the Revolving Credit Commitments of the Lenders,
the Borrower shall give notice to the Agent of any mandatory prepayment which
notice shall specify a prepayment date no later than the effective date of such
reduction of the Revolving Credit Commitments of the Lenders.
(ii) Other Mandatory Prepayments. The Agent shall on each
Business Day apply funds deposited in the Agent Account to the payment, in whole
or in part, of the Obligations outstanding. To the extent that sale proceeds
referred to in Section 8.04 hereof are required to be a mandatory prepayment,
such prepayment shall be deemed to be made under this subsection (ii).
(c) Optional Prepayment. The Borrower may at any time or from
time to time prepay, in whole or in part, any or all Loans then outstanding,
together with all interest thereon accrued but unpaid.
(d) Prepayment Penalty. All prepayments of Loans under this Sec
tion 2.04 shall be without premium or penalty.
30
2.05. Interest Rate.
(a) Each Revolving Loan shall bear interest at a rate per annum
for each day until paid equal to the Regular Rate plus one-eighth of one percent
(0.125%) for such day.
(b) The Term Loan shall bear interest at a rate per annum equal
to the Regular Rate plus five-eighths of one percent (0.625%).
2.06. Interest Payment Dates. The Borrower shall pay interest on the
unpaid principal amount of each Loan from the date of such Loan until such
principal amount shall be paid in full, which interest shall be payable if such
Loan is a Prime Loan, monthly in arrears on the first day of each month,
commencing March 1, 1999. After maturity of any principal amount of any Loan (by
acceleration, at scheduled maturity or otherwise), interest on such amount shall
be due and payable on demand.
2.07. Amortization.
(a) The principal amount of the Term Loan plus all accrued and
unpaid interest and fees thereon shall be repaid to the Lenders by the Borrower
on the Revolving Credit Termination Date, unless this Agreement or the Revolving
Credit Commitments are terminated by either the Agent or the Borrower as
provided herein, in which case, the Term Loan shall become due and payable on
the effective date of such termination.
(b) To the extent not due and payable earlier pursuant to the
terms of this Agreement, the entire unpaid principal amount of each of the
Revolving Credit Loans shall be due and payable on the Revolving Credit
Termination Date.
2.08. Payments.
(a) Time, Place and Manner. All payments and prepayments to be
made in respect of principal, interest, fees or other amounts due from the
Borrower hereunder, the Notes or any other Related Document shall be payable at
or before 12:00 Noon, New York City time, on the day when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived. Such payments shall be made to the Agent for the account of
the Agent, or the Lenders, as the case may be, to the Agent Account in Dollars
in funds immediately available at the Bank's Office without setoff, counterclaim
or other deduction of any nature. The Agent shall maintain a loan account (the
"Loan Account") on its books in the name of the Borrower in which the Borrower
will be charged with Loans made by the Agent or the Lenders to the Borrower
hereunder and with any other Obligations. The Borrower and the Lenders hereby
authorize the Agent to, and the Agent may, from time to time charge the Loan
Account with any interest, fees, expenses and other Obligations that are due and
payable under this Agreement or any Related Document. The Borrower and the
Lenders confirm that any charges which the Agent may so make to the Loan Account
as herein provided will be made as an accommodation to the Borrower and solely
at the Agent's discretion and shall constitute a
31
Revolving Loan to the Borrower funded by the Agent on behalf of the Lenders and
subject to subsections 2.03(f) and 2.03(g) of this Agreement. Each of the
Lenders and the Borrower agree that the Agent shall have the right to make such
charges regardless of whether any Event of Default or Potential Default shall
have occurred and be continuing or whether any of the conditions precedent in
Section 5.02 hereof have been satisfied. The Loan Account will be credited upon
receipt of "good funds" in the Agent Account with all amounts actually received
by the Agent from the Borrower or others for the account of the Borrower.
Interest on all Loans and all fees that accrue on a per annum basis shall be
computed on the basis of the actual number of days elapsed in the period during
which interest or such fee accrues and a year of 360 days. In computing interest
on any Loan, the date of the making of such Loan shall be included and the date
of payment shall be excluded; provided, however, that if a Loan is repaid on the
same day in which it is made, one day's interest shall be paid on such Loan.
(b) Periodic Statements. The Agent shall provide the Lenders and
the Borrower promptly after the end of each calendar month a summary statement
(in the form from time to time used by the Agent) of (A) the opening and closing
daily balances in the Loan Account during such month, (B) the amounts, and dates
of all Loans made during such month, (C) the amounts, dates and applications of
all payments on account of the Loans made during such month and each Lender's
interest in the Loans, (D) the amount of interest accrued on the Loans during
such month, (E) any Letters of Credit issued by the Letter of Credit Issuer
during such month, specifying the Stated Amount thereof, (F) the amount of
charges to the Loan Account or Revolving Loans to be made during such month to
reimburse CIT, the Lenders or the Letter of Credit Issuer for drawings made
under Letters of Credit or payments made by CIT or the Lenders under the Letter
of Credit Guaranty, and (G) the amount and nature of any charges to the Loan
Account made during such month on account of interest, fees and expenses and
other Obligations. All entries on any such statement shall, thirty (30) days
after the same is sent, be presumed to be correct and shall constitute prima
facie evidence of the information contained in such statement, subject to the
Borrower's and each Lender's express right to rebut such presumption by
conclusively demonstrating the existence of any error on the part of the Agent.
(c) Apportionment of Payments. Except as otherwise provided in
this subsection, aggregate principal and interest payments shall be apportioned
among all outstanding Loans to which such payments relate and payments of the
fees required to be paid by the Borrower under this Agreement (and not the Fee
Letter) to the Agent shall be apportioned ratably or to the extent separately
agreed to by the Agent and any Lender. All payments shall be remitted to the
Agent and all such payments and any other amounts, including, without
limitation, proceeds of Collateral received by the Agent from or as to the
Borrower shall be applied subject to the provisions of this Agreement first, to
pay principal of and interest on any Loans funded by the Agent on behalf of the
Lenders (including, without limitation, under Section 11.08 hereof) and any
fees, expense reimbursements or indemnities then due to the Agent from the
Borrower; second, to pay any fees, expense reimbursements or indemnities then
due to the Lenders or the Letter of Credit Issuer hereunder; third, to pay
interest due in respect of the Loans and Unreimbursed Draws under Letters of
Credit; and fourth, to pay, prepay or provide cash collateral, if then required,
in respect of principal of Loans and Letter of Credit Exposure. The
32
Agent shall promptly distribute to each Lender at its primary address set forth
on the appropriate signature page hereof, or at such other address as such
Lender may designate in writing, such funds as it may be entitled to receive.
The foregoing apportionment of payments is solely for the purpose of determining
the obligations of the Borrower hereunder and, notwithstanding such
apportionment, any Lender may on its books and records allocate payments
received by it in a manner different from that contemplated hereby. No such
different allocation shall alter the rights and obligations of the Borrower
under this Agreement determined in accordance with the apportionments
contemplated by this Section 2.08(c). To the extent that the Borrower makes a
payment or payments to the Agent or the Agent receives any payment or other
amount, which payment(s) or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause then, to the
extent of such payment or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by the Agent.
(d) Interest Upon Events of Default. To the extent permitted by
law, after there shall have occurred and so long as there is continuing an Event
of Default pursuant to Section 9.01 hereof, all principal, interest, fees,
indemnities or any other Obligations of the Borrower hereunder or under any Note
or any other Related Document (and including interest accrued under this
subsection 2.08(d)) shall compound on a daily basis as provided in this
subsection 2.08(d) and shall bear interest for each day until paid (before and
after judgment), payable on demand, at a rate per annum of three percent (3%)
above the Prime Rate for such day, such interest rate to change automatically
from time to time effective as of the announced effective date of each change in
the Prime Rate.
(e) Unused Line Fee. From and after the Closing Date until the
Revolving Credit Termination Date, the Borrower shall pay to the Agent an unused
line fee (the "Unused Line Fee") accruing at the rate of one-half of one percent
(1/2 of 1%) per annum, on the excess, if any, of the aggregate Revolving Credit
Commitments over the sum of the Revolving Loans and Letter of Credit Exposure
(computed on an average daily basis) outstanding from time to time. All Unused
Line Fees shall be payable monthly in arrears on the last day of each month
commencing February 28, 1999.
(f) Letter of Credit Fees. From and after the date of the
effectiveness of the Letter of Credit Amendment until the Revolving Credit
Termination Date, the Borrower shall pay to the Agent a letter of credit fee
(the "Letter of Credit Fee") at a rate equal to two percent (2%) per annum on
the average daily outstanding balance of issued and outstanding Letters of
Credit for the immediately preceding month payable in arrears on the first day
of each succeeding month. The Borrower shall also pay the customary letter of
credit fees and charges of CIT and the Letter of Credit Issuer for the
administration, issuance, amendment and processing of any Letters of Credit
issued by the Letter of Credit Issuer. Promptly following the Agent's receipt of
any Letter of Credit Fees described above, the Agent shall pay to each Lender
its Pro Rata Share of the amount of the Letter of Credit Fees received by the
Agent.
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(g) Fee Letter. The Borrower shall pay all fees and other amounts
required to be paid pursuant to the Fee Letter.
(h) All fees under this Agreement and the other Related Documents
may be charged to the Borrower's Loan Account and are non-refundable under all
circumstances (except for a computational error agreed to by the Borrower and
the Agent).
2.09. Use of Proceeds. The Borrower hereby covenants, represents and
warrants that the proceeds of the Loans will be used (i) to repay in full the
existing Indebtedness of the Borrower under the Existing Credit Facilities
outstanding on the Closing Date, and (ii) for other working capital and general
corporate purposes. The Borrower hereby covenants, represents and warrants that
the proceeds of the Letters of Credit will be used for general corporate
purposes, including but not limited to payroll and payroll-related taxes,
workers compensation insurance and general liability insurance programs.
2.10. Reserve Requirements; Capital Adequacy Circumstances.
(a) Notwithstanding any other provision of this Agreement, if any
change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall impose any tax on or change the basis of taxation of payments to the
Letter of Credit Issuer or any Lender or any Affiliate of a Lender or of any
amounts payable hereunder (other than any franchise tax and taxes imposed on the
overall net income of the Letter of Credit Issuer or such Lender or such
Affiliate by any Governmental Authority, including those for the jurisdiction in
which the Letter of Credit Issuer or such Lender or such Affiliate has its
principal office or by any political subdivision or taxing authority therein),
or shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of or
credit extended by the Letter of Credit Issuer or such Lender or Affiliate of
such Lender (except any such reserve requirement that is reflected in Reserve
Requirements) or shall impose on the Letter of Credit Issuer or such Lender or
such Affiliate any other condition affecting this agreement or any Letter of
Credit Issuer and the result of any of the foregoing shall be to increase the
cost to the Letter of Credit Issuer or such Lender of or issuing any Letter of
Credit or to reduce the amount of any sum received or receivable by the Letter
of Credit Issuer or such Lender hereunder (whether of principal, interest or
otherwise) in respect thereof by an amount deemed by the Letter of Credit Issuer
or such Lender to be material, then the Borrower shall pay to the Letter of
Credit Issuer or such Lender such additional amount or amounts as will
compensate the Letter of Credit Issuer or such Lender for such additional costs
incurred or reduction suffered. Any amount or amounts payable by the Borrower to
the Letter of Credit Issuer or any Lender in accordance with the provisions of
this Section 2.10(a) shall be paid by the Borrower to the Letter of Credit
Issuer or such Lender within ten (10) days after receipt by the Borrower from
the Letter of Credit Issuer or such Lender of a statement setting forth in
reasonable detail the amount or amounts due and the basis for the determination
from time to time of such amount or amounts, which statement shall be conclusive
and binding absent manifest error.
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(b) If the Letter of Credit Issuer or any Lender shall have
reasonably determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Letter of Credit Issuer or by such
Lender (or any lending office of such Lender) or by any Affiliate of such
Lender, as the case may be, with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has the effect of reducing the rate of return on the
Letter of Credit Issuer's or such Lender's capital or on the capital of such
Lender's Affiliate, as the case may be, as a consequence of the Letter of Credit
Issuer's obligations or such Lender's obligations under this Agreement and the
Related Documents to a level below that which the Letter of Credit Issuer or
such Lender or such Lender's Affiliate, as the case may be, could have achieved
but for such adoption, change or compliance (taking into consideration the
Letter of Credit Issuer's or such Lender's policies or such Lender's Affiliate's
policies, as the case may be, with respect to capital adequacy) by an amount
deemed by the Letter of Credit Issuer or such Lender to be material, then, from
time to time, the Borrower shall reimburse the Letter of Credit Issuer or such
Lender for such reduction. Any amount or amounts payable by the Borrower to the
Letter of Credit Issuer or any Lender in accordance with the provisions of this
Section 2.10(b) shall be paid by the Borrower to the Letter of Credit Issuer or
such Lender within ten (10) days after receipt by the Borrower from the Letter
of Credit Issuer or such Lender of a statement setting forth (i) in reasonable
detail the amount or amounts due, (ii) the basis for the determination from time
to time of such amount or amounts and (iii) that such amount(s) have been
determined in good faith, which statement shall be conclusive and binding absent
manifest error.
(c) The Letter of Credit Issuer or any Lender may demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period;
provided that the Letter of Credit Issuer or such Lender shall provide to the
Borrower a certificate setting forth in reasonable detail the basis on which
such demand is made. The protection of this Section 2.10 shall be available to
the Letter of Credit Issuer or any Lender regardless of any possible contention
of the invalidity or inapplicability of the law, rule, regulations, guideline or
other change or condition which shall have occurred or been imposed.
2.11. Indemnity. The Borrower shall indemnify each Lender against any
loss or expense that such Lender actually sustains or incurs as a consequence of
any failure by the Borrower to fulfill on the date of any borrowing hereunder
the applicable conditions set forth in Article 5. A certificate of any Lender
setting forth in reasonable detail any amount or amounts that such Lender is
entitled to receive pursuant to this Section 2.12 and the basis for the
determination of such amount or amounts shall be delivered to the Borrower and
shall be conclusive and binding absent manifest error.
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2.12. Sharing of Setoffs. Each Lender agrees that if it shall, through
the exercise of a right of banker's lien, setoff or counterclaim against the
Borrower or other security or interest arising from, or in lieu of, such secured
claim, received by such Lender under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by any other means, obtain payment (voluntary
or involuntary) in respect of any Obligation as a result of which the aggregate
unpaid amount of the Obligations owing to it shall be proportionately less than
the aggregate unpaid amount of the Obligations owing to any other Lender, it
shall simultaneously purchase from such other Lender at face value a
participation in the Obligations owing to such other Lender, so that the
aggregate unpaid amount of the Obligations and participations in Obligations
held by each Lender shall be in the same proportion to the aggregate unpaid
amount of all Obligations owing to such Lender prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the aggregate unpaid
amount of all Obligations outstanding prior to such exercise of banker's lien,
setoff or counterclaim or other event; provided that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.12 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustments restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in an Obligation deemed to have been so purchased
may exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such Lender by reason
thereof as fully as if such Lender had made a loan directly to the Borrower in
the amount of such participation.
2.13. Taxes.
(a) All payments made by the Borrower hereunder, under the Notes
or under any Loan Document will be made without setoff, counterclaim, deduction
or other defense. All such payments shall be made free and clear of and without
deduction for any present or future income, franchise, sales, use, excise, stamp
or other taxes, levies, imposts, deductions, charges, fees, withholdings,
restrictions or conditions of any nature now or hereafter imposed, levied,
collected, withheld or assessed by any jurisdiction (whether pursuant to United
States Federal, state, local or foreign law) or by any political subdivision or
taxing authority thereof or therein, and all interest, penalties or similar
liabilities, excluding taxes on the overall net income of the Lenders or the
Letter of Credit Issuer (such nonexcluded taxes are hereinafter collectively
referred to as the "Taxes"). If the Borrower shall be required by law to deduct
or to withhold any Taxes from or in respect of any amount payable hereunder, (i)
the amount so payable shall be increased to the extent necessary so that after
making all required deductions and withholdings (including Taxes on amounts
payable to the Lenders or the Letter of Credit Issuer pursuant to this sentence)
the Lenders or the Letter of Credit Issuer receive an amount equal to the sum
they would have received had no such deductions or withholdings been made, (ii)
the Borrower shall make such deductions or withholdings, and (iii) the Borrower
shall pay the full amount deducted or withheld to the relevant taxation
authority in accordance with applicable law. Whenever any Taxes are payable by
the Borrower, as promptly as possible thereafter, the Borrower shall send the
Lenders, the Letter of Credit Issuer and the Agent an official receipt showing
payment. In addition, the Borrower agrees to pay any present or future taxes,
charges or similar levies which arise from any
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payment made hereunder (other than related to the net income of a Lender) or
from the execution, delivery, performance, recordation or filing of, or
otherwise with respect to, this Agreement, the Notes, the Letters of Credit or
any other Loan Document (hereinafter referred to as "Other Taxes").
(b) The Borrower will indemnify the Lenders and the Letter of
Credit Issuer for the amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.13) paid by any Lender or the Letter of Credit
Issuer and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be paid within 30 days from the date on
which such Lender or such Letter of Credit Issuer makes written demand.
(c) Each Lender which is a foreign person (i.e., a Person other
than a United States Person for United States Federal income tax purposes)
hereby agrees that:
(i) it shall, no later than the Closing Date (or, in the
case of a Lender which becomes a party hereto pursuant to Section 10.13 hereof
after the Closing Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower through the Agent:
(a) two accurate and complete signed originals of
Internal Revenue Service Form 4224, or
(b) two accurate and complete signed originals of
Internal Revenue Service Form 1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest, fees, and other amounts
under this Agreement for the account of its lending installation under this
Agreement free from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending
installation or installations or selects an additional lending installation it
shall, at the same time or reasonably promptly thereafter, deliver to the
Borrower through the Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder:
(a) if such changed or additional lending installation
is located in the United States, two accurate and complete signed originals of
Form 4224, or
(b) otherwise, two accurate and complete signed
originals of Form 1001,
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in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest, fees, and other amounts
under this Agreement for the account of such changed or additional lending
installation under this Agreement free from withholding of United States Federal
income tax; and
(iii) it shall, promptly upon the Borrower's reasonable
request to that effect, deliver to the Borrower such other forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation in order to establish such Lender's tax status for
withholding purposes.
(d) If the Borrower fails to perform its obligations under this
Sec tion 2.13, the Borrower shall indemnify the Lenders and the Letter of Credit
Issuer for any incremental taxes, interest or penalties that may become payable
as a result of any such failure.
ARTICLE 3.
LETTERS OF CREDIT
3.01. Letters of Credit.
(a) General. In order to assist the Borrower in establishing or
opening standby letters of credit, which shall not have expiration dates that
exceed one year from the date of issuance (the "Letters of Credit") with the
Letter of Credit Issuer, the Borrower has requested CIT (after giving effect to
the Letter of Credit Amendment) to join in the applications for such Letters of
Credit, and/or guarantee payment or performance of such Letters of Credit and
any drafts or acceptances thereunder through the issuance of a Letter of Credit
Guaranty, thereby lending CIT's credit to that of the Borrower. CIT has agreed
that it shall do so only upon the effectiveness of an amendment to this
Agreement causing to become effective Article 3 of this Agreement and any other
provisions of this Agreement in any way relating to Letters of Credit (Article 3
and such other provisions to the extent they require the Agent to facilitate the
opening of letters of credit to have no force and effect unless and until such
amendment is entered into in the sole discretion of Agent, such amendment to
contain a maximum aggregate face amount of letters of credit which may be
outstanding at any time) (the "Letter of Credit Amendment"). These arrangements
shall be handled by CIT subject to the terms and conditions set forth below. CIT
shall have no obligation to arrange for the issuance of Letters of Credit on or
after the Revolving Credit Termination Date or which, when added to the
aggregate amount of all outstanding and contemporaneous Revolving Loans and the
Letter of Credit Exposure at such time, would cause the amount of all Revolving
Loans and the Letter of Credit Exposure at any time to exceed the Current
Commitment at such time. In addition, CIT shall not be required to be the issuer
of any Letter of Credit. The Borrower will be the account party for any
application for a Letter of Credit, which shall be a computer transmission
system approved by CIT and the Letter of Credit Issuer or such other written
form or computer transmission system or such other form as may from time to time
be approved by the Letter of Credit Issuer and CIT, and shall be duly completed
in a manner acceptable to CIT, together with such other certificates,
agreements,
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documents and other papers and information as the Letter of Credit Issuer or CIT
may request (the "Letter of Credit Application"). In the event of any conflict
between the terms of the Letter of Credit Application and this Agreement, for
purposes of this Agreement, the terms of this Agreement shall control.
(i) The aggregate Letter of Credit Exposure shall not exceed
the amount set forth in the Letter of Credit Amendment. In addition, changes or
modifications of the Letters of Credit by the Borrower and/or the Letter of
Credit Issuer of the terms and conditions thereof shall in all respects be
subject to the prior approval of CIT in the exercise of its reasonable
discretion, provided, however, that (x) the expiry date of all Letters of Credit
shall be no later than 15 days prior to the Revolving Credit Termination Date
unless on or prior to 15 days prior to the Revolving Credit Termination Date
such Letters of Credit shall be cash collateralized in an amount equal to at
least 105% of the Stated Amount of such Letters of Credit and (y) the Letters of
Credit and all documentation in connection therewith shall be in form and
substance satisfactory to CIT and the Letter of Credit Issuer.
(ii) The Agent shall have the right, without notice to the
Borrower, to charge the Loan Account with the amount of any and all
indebtedness, liability or obligation of any kind (including indemnification for
breakage costs, capital adequacy and reserve requirement charges) incurred by
the Agent, CIT or the Lenders under the Letter of Credit Guaranty at the earlier
of (x) payment by CIT or the Lenders under the Letter of Credit Guaranty, and
(y) with respect to any Letter of Credit which is not cash collateralized as
provided in this Agreement, the occurrence of an Event of Default. Any amount
charged to the Loan Account shall be deemed a Revolving Loan hereunder made by
the Lenders to the Borrower, funded by the Agent on behalf of the Lenders and
subject to sections 2.03(f) and (g) hereof. Any charges, fees, commissions,
costs and expenses charged to CIT for the account of the Borrower by the Letter
of Credit Issuer in connection with or arising out of Letters of Credit issued
pursuant to this Agreement or out of transactions relating thereto will be
charged to the Loan Account in full when charged to or paid by CIT and any such
charges by CIT to the Loan Account shall be conclusive and binding on the
Borrower and the Lenders absent manifest error. Each of the Lenders and the
Borrower agrees that the Agent shall have the right to make such charges
regardless of whether any Event of Default or Potential Default shall have
occurred and be continuing or whether any of the conditions precedent in Section
5.02 hereof have been satisfied.
(iii) The Borrower agrees to unconditionally indemnify the
Agent, CIT and each Lender and to hold the Agent, CIT and each Lender harmless
from any and all loss, claim or liability incurred by the Agent, CIT or any such
Lender arising from any transactions or occurrences relating to Letters of
Credit established or opened for the Borrower's account and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any action taken by the Letter of Credit Issuer, other than for
any such loss, claim or liability arising out of the gross negligence or willful
misconduct of the Agent, CIT or any Lender as determined by a final judgment of
a court of competent jurisdiction.
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(iv) The Borrower further agrees to hold the Agent, CIT and
each Lender harmless from any errors or omission, negligence or misconduct by
the Letter of Credit Issuer (unless such Letter of Credit Issuer shall be, in
such instance, the Agent, CIT or such Lender). The Borrower's unconditional
obligation to the Agent, CIT and each Lender hereunder shall not be modified or
diminished for any reason or in any manner whatsoever, other than as a result of
the Agent's, CIT's or such Lender's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction. The
Borrower agrees that any charges incurred by CIT for the Borrower's account by
the Letter of Credit Issuer shall be conclusive and binding on the Borrower
absent manifest error and may be charged to the Loan Account in accordance with
the provisions of this Agreement.
(v) None of the Agent, CIT, the Letter of Credit Issuer or
any of the Lenders shall be responsible for the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; the validity, sufficiency or genuineness of any
documents or of any endorsements thereof even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
the time, place, manner or order in which shipment is made; partial or
incomplete shipments, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with any such goods or the shipping thereof; or any breach of
contract between the shipper or vendors and the Borrower. Furthermore, without
being limited by the foregoing, none of the Agent, CIT, the Letter of Credit
Issuer or any of the Lenders shall be responsible for any act or omission with
respect to or in connection with any goods covered by Letters of Credit.
(vi) The Borrower agrees that any action taken by the Agent,
CIT, the Letter of Credit Issuer or any Lender, if taken in good faith, under or
in connection with the Letters of Credit, the guarantees, the drafts or
acceptances or the goods purported to be represented by any documents, shall be
binding on the Borrower (with respect to the Letter of Credit Issuer, the Agent,
CIT and the Lenders) and shall not put the Agent, CIT or the Lenders in any
resulting liability to the Borrower, except for any action taken by the Agent,
CIT, the Letter of Credit Issuer or any Lender which is grossly negligent or the
result of willful misconduct. In furtherance thereof, CIT shall have the full
right and authority to clear and resolve any questions of non-compliance of
documents; to give any instructions as to acceptance or rejection of any
documents or goods; to execute any and all steamship or airways guaranties (and
applications therefore), indemnities or delivery orders; to grant any extensions
of the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; all in CIT's sole
name, and the Letter of Credit Issuer shall be entitled to comply with and honor
any and all such documents or instruments executed by or received solely from
CIT, all without any notice to or any consent from the Borrower.
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(vii) Without CIT's express consent in writing or through a
computer transmission, the Borrower agrees: (x) not to execute any applications
for steamship or airway guaranties, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances or documents; or to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
and (y) after the occurrence of an Event of Default which is not cured within
any applicable grace period, if any, or waived by the Agent, not to (A) clear
and resolve any questions of non-compliance of documents, or (B) give any
instructions as to acceptances or rejection of any documents or goods.
(viii) The Borrower agrees that any necessary and material
import, export or other license or certificates for the import or handling of
Inventory required to be obtained by the Borrower will have been timely
procured; all foreign and domestic governmental laws and regulations applicable
to the Borrower in regard to the shipment and importation of Inventory or the
financing thereof will have been timely and fully complied with, and any
certificates in that regard that CIT may at any time reasonably request will be
promptly furnished. In this connection, the Borrower represents and warrants
that all shipments made under any such Letters of Credit are in compliance with
the laws and regulations of the countries in which the shipments originate and
terminate except where all instances of such non-compliance taken together will
not have a Material Adverse Effect. As between the Borrower, on the one hand,
and the Agent, CIT, the Lenders and the Letter of Credit Issuer, on the other
hand, the Borrower assumes all risk, liability and responsibility for, and
agrees to pay and discharge, all present and future local, state, federal or
foreign taxes, duties, or levies. As between the Borrower, on the one hand, and
the Agent, CIT, the Lenders and the Letter of Credit Issuer, on the other hand,
any embargo, restriction, laws, customs or regulations of any country, state,
city, or other political subdivision, where such Inventory is or may be located,
or wherein payments are to be made, or herein drafts may be drawn, negotiated,
accepted, or paid, shall be solely the Borrower's risk, liability and
responsibility.
(ix) Upon any payments made to the Letter of Credit Issuer
under the Letter of Credit Guaranty, CIT or the Lenders, as the case may be,
shall, without prejudice to its rights under this Agreement (including that such
unreimbursed amounts shall constitute Revolving Loans hereunder), acquire by
subrogation any rights, remedies, duties or obligations granted or undertaken by
the Borrower to the Letter of Credit Issuer in any Letter of Credit Application,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agent and apply in all respects to
the Agent and shall be in addition to any rights, remedies, duties or
obligations contained herein.
(x) In the event that the Borrower is required to provide
cash collateral for any Letter of Credit in accordance with this Agreement, the
Borrower shall deposit such cash collateral in the Letter of Credit Cash
Collateral Account, which cash collateral shall be held in the Letter of Credit
Cash Collateral Account until either all Obligations have been paid in full in
cash or cash collateral is no longer required under the terms of this Agreement.
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(b) Request for Issuance. The Borrower may from time to time,
upon notice (an "L/C Notice") not later than 12:00 noon, New York City time, at
least three Business Days in advance, request CIT to assist the Borrower in
establishing or opening a Letter of Credit by delivering to the Agent, with a
copy to the Letter of Credit Issuer, a Letter of Credit Application, together
with any necessary related documents. CIT shall not provide support, pursuant to
the Letter of Credit Guaranty, if the Agent shall have received written notice
from the Majority Lenders on the Business Day immediately preceding the proposed
issuance day for such Letter of Credit that one or more of the conditions
precedent in Section 5.02 hereof will not have been satisfied on such date, and
neither CIT nor the Agent shall otherwise be required to determine that, or take
notice whether, the conditions precedent set forth in Section 5.02 hereof have
been satisfied.
3.02. Participations.
(a) Purchase of Participations. Immediately upon the issuance by
the Letter of Credit Issuer of any Letter of Credit in accordance with the
procedures set forth in Sec tion 3.01 hereof, each Lender (other than CIT) shall
be deemed to have irrevocably and unconditionally purchased and received from
CIT, without recourse or warranty, an undivided interest and participation, to
the extent of such Lender's Pro Rata Share, in all obligations of CIT with
respect to such Letter of Credit (including, without limitation, all Undrawn
Letter of Credit Availability and Reimbursement Obligations of the Borrower with
respect thereto, pursuant to the Letter of Credit Guaranty or otherwise).
(b) Sharing of Letter of Credit Payments. In the event that CIT
makes any payment in respect of the Letter of Credit Guaranty and the Borrower
shall not have repaid such amount to the Agent for the account of CIT, the Agent
shall charge the Loan Account in the amount of the Reimbursement Obligation, in
accordance with Section 3.01(a)(ii) hereof.
(c) Obligations Irrevocable. The obligations of a Lender to make
payments to the Agent for the account of the Agent or CIT with respect to a
Letter of Credit shall be irrevocable, not subject to any qualification or
exception whatsoever and shall be made in accordance with, but not subject to,
the terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Related Documents;
(ii) the existence of any claim, set off, defense or other
right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit or any transferee of any Letter of Credit
(or any Person for whom any such transferee may be acting), the Agent,
Letter of Credit Issuer, any Lender, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transactions between the Borrower or any other party and
the beneficiary named in any Letter of Credit);
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(iii) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Related
Documents;
(v) any failure by the Agent to provide any notices required
pursuant to this Agreement relating to Letters of Credit; or
(vi) the occurrence of any Event of Default or Potential
Default.
ARTICLE 4.
BORROWING BASE
4.01. Condition of Lending and Assisting in Establishing or Opening
Letters of Credit. CIT and the other Lenders shall have no obligation to make a
Revolving Loan or assist in establishing or opening a Letter of Credit to the
extent that the aggregate unpaid principal amount of the Revolving Loans and the
Letter of Credit Exposure exceeds, or after giving effect to a requested Credit
Extension would exceed, the Current Commitment at such time.
4.02. Mandatory Prepayment. Concurrently with the delivery of any
Borrowing Base Certificate, the Borrower shall give notice to the Agent of any
mandatory prepayment pursuant to Section 2.04(b)(i) hereof, which notice shall
specify a prepayment date no later than the earlier of (x) the date on which
such Borrowing Base Certificate is given and (y) the date on which such
Borrowing Base Certificate is required to be provided to the Lenders.
4.03. Rights and Obligations Unconditional. Without limitation of any
other provision of this Agreement, the rights of the Agent, CIT and the Lenders
and the obligations of the Borrower under this Article 4 are absolute,
unconditional and the Agent, CIT and the Lenders shall not be deemed to have
waived the condition set forth in Section 4.01 hereof or their right to payment
in accordance with Section 4.02 hereof in any circumstance whatever, including
but not limited to circumstances wherein the Agent or the Lenders (knowingly or
otherwise) make an advance hereunder in excess of the Borrowing Base.
4.04. Borrowing Base Certificate.
(a) By 12:00 noon, New York City time three (3) Business Days
after the Saturday of each week if a part of a Weekly Report which contains a
calculation of ineligibles with respect to Accounts and Inventory on a monthly
basis, or five (5) Business Days after the last day of the preceding month if a
part of a Monthly Report (and on any other date on which the Agent reasonably
requests), the Borrower shall furnish to the Agent a certificate ("Borrowing
Base Certificate") in the form provided to the Borrower by the Agent, certified
as true and correct
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by a Designated Financial Officer, setting forth the Borrowing Base and the
other information required therein as of the Borrower's close of business on the
Saturday of the preceding week, together with such other information with
respect to the Accounts and Inventory of the Borrower as the Agent may
reasonably request.
(b) In the event of any dispute about the eligibility of any
asset for inclusion in the Borrowing Base or the valuation thereof, the Agent's
good faith judgment shall control, but the Agent agrees to consult with the
Borrower concerning any such dispute.
(c) The Borrowing Base set forth in a Borrowing Base Certificate
shall be effective from and including the date such Borrowing Base Certificate
is duly received by the Agent to but not including the date on which a
subsequent Borrowing Base Certificate is duly received by the Agent, unless the
Agent disputes the eligibility of any asset for inclusion in the Borrowing Base
or the valuation thereof by notice of such dispute to the Borrower, in which
case the value of such asset shall, at the discretion of the Borrower, either
not be included in the Borrowing Base or be included in the Borrowing Base with
a value reasonably acceptable to the Agent.
(d) Each Borrowing Base Certificate shall be accompanied by an
accounts receivable aging report and perpetual inventory report, and containing
such detail and such other and further information as the Agent may reasonably
request from time to time.
4.05. General Provisions. Notwithstanding anything to the contrary in
this Article 4, in no event shall any single element of value or asset be
counted twice in determining the Borrowing Base.
ARTICLE 5.
CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING
5.01. Conditions Precedent to Effectiveness. This Agreement shall
become effective as of the Business Day when each of the following conditions
precedent shall have been satisfied and the obligation of any Lender to make the
initial Loan(s) hereunder or the obligation of CIT or any Lender to assist the
Borrower in obtaining the issuance of the initial Letter of Credit hereunder
shall be subject to the satisfaction of the following conditions precedent,
unless the Agent agrees that any one or more of the following conditions
precedent may be satisfied post-closing:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees,
costs, expenses and taxes then payable by the Borrower including, without
limitation, those due and payable pursuant to Sections 2.08 and 10.06
hereof. The Borrower shall have paid to counsel to the Agent all reasonable
fees and other client charges due to such counsel on the Closing Date for
which counsel has invoiced Borrower.
44
(b) Representations and Warranties; No Event of Default. The
representations and warranties contained in Article 6 of this Agreement and
in each other Loan Document and certificate or other writing delivered to
the Agent, the Lenders or the Letter of Credit Issuer pursuant hereto or
thereto or prior to the Closing Date shall be correct in all material
respects on and as of the Closing Date as though made on and as of such
date (except to the extent such representation or warranty expressly
relates to an earlier period); and no Potential Default or Event of Default
shall have occurred and be continuing on the Closing Date or would result
from this Agreement becoming effective in accordance with its terms.
(c) Delivery of Documents. The Agent shall have received on or
before the Closing Date the following, each in form and substance
satisfactory to the Agent and, unless indicated otherwise, dated the
Closing Date:
(i) a Revolving Credit Note and a Term Loan Note, each
payable to the order of each Lender, duly executed by the Borrower;
(ii) the Security Agreements, duly executed by the Borrower
and the Parent;
(iii) appropriate financing statements on Form UCC-1 and the
appropriate forms for recording liens on trademarks and copyrights all duly
executed by the Borrower and, in the Agent's sole discretion, to be filed
in such office or offices as may be necessary or, in the opinion of the
Agent, desirable to perfect the security interests purported to be created
by the Security Documents(including with respect to any liens on trademarks
and copyrights recorded in any federal registry maintained for such
purpose), all in form and substance satisfactory to the Agent;
(iv) copies of (x) all effective financing statements which
name as debtor the Borrower or any other entity requested by the Agent, tax
liens and judgment liens and which are filed in the offices referred to in
paragraph (iii) above, together with copies of such financing statements,
none of which, except as otherwise agreed to in writing by the Agent, shall
cover any of the Collateral; and (y) searches with respect to trademarks
and copyrights as to which the Agent has been granted a lien pursuant to
the Security Documents.
(v) the Parent Guaranty and the Video Guaranty;
(vi) a copy of the resolutions adopted by the Board of
Directors of each of the Loan Parties, certified as of the Closing Date by
authorized officers thereof, authorizing (A) the borrowings hereunder
and/or the transactions contemplated by the Loan Documents to which the
Borrower or such Loan Party is or will be a party, and (B) the execution,
delivery and performance by the Borrower or such Loan Party of each
45
Loan Document and the execution and delivery of the other documents to be
delivered by the Borrower or such Loan Party in connection therewith;
(vii) a certificate of an authorized officer of each of the
Loan Parties, certifying the names and true signatures of the officers of
such Person authorized to sign each Loan Document to which the Borrower or
such Loan Party is or will be a party and the other documents to be
executed and delivered by the Borrower or such Loan Party in connection
therewith, together with evidence of the incumbency of such authorized
officers;
(viii) a certificate, as of a recent date, of the
appropriate official(s) of the state of organization of each Loan Party,
and solely for the Borrower, the appropriate official(s) in each of the
parenthetically noted states of foreign qualification of the Borrower
(Arkansas, Indiana, New York, Tennessee and Wisconsin), certifying as to
the subsistence in good standing of, and (where such state customarily so
indicates) the payment of taxes by, such Person in such states and listing
all organizational documents of such Person on file with such official(s),
together with confirmation by telephone or telegram (where available) on
the Closing Date from such official(s) as to such matters and copies of
each certified certificate of authority (or similar document of the
Borrower) from each foreign state where such Person is qualified to do
business;
(ix) a copy of the organizational documents of the Borrower
and each Loan Party certified as of a recent date by the appropriate
official(s) of the state of organization of such Person and as of the
Closing Date by an authorized officer of such Loan Party, as applicable;
(x) a copy of (i) the certificate of incorporation of any
Loan Party and all amendments thereto, and (ii) the by-laws of each Loan
Party, and all amendments thereto;
(xi) a certificate of the Designated Financial Officer of
the Borrower certifying as to the matters set forth in subsection (b) of
this Section 5.01;
(xii) a copy of the financial statements and cash flow
projections referred to in Section 6.07 hereof and a balance sheet of the
Borrower as of December 31, 1998 certified by a Designated Financial
Officer of the Borrower;
(xiii) a Borrowing Base Certificate current as of the close
of business on a date not earlier than February 24, 1999, certified by the
Designated Financial Officer of the Borrower;
(xiv) a certificate of an authorized officer of the
Borrower, certifying the names and true signatures of those officers of the
Borrower, as applicable,
46
that are authorized to provide Notices of Borrowing and all other notices
under this Agreement and the Loan Documents;
(xv) a copy of each Material Contract certified as a true
and correct copy thereof by the Designated Financial Officer of the
Borrower;
(xvi) copies, certified as true and correct by a Designated
Financial Officer of the Borrower, of any collective bargaining agreements
or any other similar agreement or arrangements covering the employees of
the Borrower or any of its Subsidiaries (collectively, the "Collective
Bargaining Agreements");
(xvii) a certificate of insurance evidencing insurance on
the property of the Borrower as is required by Section 7.07 hereof, naming
the Agent as additional insured and loss payee, using a long form loss
payee endorsement, for all insurance maintained by the Borrower;
(xviii) the most recent management letter or (if no
management letter has been issued) the equivalent prepared by the
independent accountants of the Borrower and any Loan Party;
(xix) such other agreements, instruments, approvals, and
other documents as the Agent may reasonably request; and
(xx) such opinions of counsel for the Borrower as the Agent
or any Lender shall request, each such opinion to be in a form, scope, and
substance satisfactory to the Agent, the Lenders and their respective
counsel.
(d) Proceedings; Receipt of Documents. All proceedings in
connection with the transactions contemplated by this Agreement and the
Related Documents and all documents incidental thereto, shall be
satisfactory to the Agent and its special counsel, and the Agent and such
special counsel shall have received all such information and such
counterpart originals or certified or other copies of such documents, in
form and substance reasonably satisfactory to the Agent, as the Agent or
such special counsel may reasonably request.
(e) Cash Management System. The cash management system of the
Borrower shall be satisfactory to the Agent (including with respect to the
segregation from the accounts of the Borrower amounts received by the
Borrower which are not the property of the Borrower other than accounts
which may as a matter of law belong to employees, amounts payable for sales
taxes and the like). In addition, the Agent shall have received Lockbox
Agreements in form and substance satisfactory to the Agent.
(f) Collateral Audit. The Agent shall have completed and shall be
satisfied (in its sole discretion) with the results of an audit of the
Accounts, Inventory,
47
other Collateral, assets and liabilities and books and records of the
Borrower and the Borrower shall have paid all fees and expenses payable in
connection with such audit.
(g) [Intentionally left blank].
(h) Lien Priority. The Lien in favor of the Agent pursuant to the
Related Documents shall be a valid and perfected first priority Lien on the
Collateral, which shall be subject to no other Liens except for Permitted
Liens.
(i) [Intentionally left blank].
(j) Legal Restraints/Litigation. On the Closing Date, except as
set forth on Schedule 6.06 hereto, there shall be no (1) litigation,
investigation or proceeding (judicial or administrative) pending or, to the
knowledge of the Borrower, threatened, against the Borrower or its
Subsidiaries, or their assets, by any agency, division or department of any
county, city, state or federal government arising out of the transactions
contemplated by the Loan Documents, (2) injunction, writ or restraining
order restraining or prohibiting the transactions contemplated pursuant to
the transactions contemplated by the Loan Documents, or (3) suit, action,
investigation or proceeding (judicial or administrative) pending or, to the
knowledge of the Borrower, threatened against the Borrower or its
Subsidiaries, or its assets, which could have a Material Adverse Effect.
(k) Absence of Material Adverse Change. Other than the filing of
the Chapter 11 Cases, the Agent shall be satisfied that there is an absence
of any material adverse change in the financial condition, business, assets
or operations of the Borrower, excluding defaults (to the extent the Agent
has been advised as to the basis for same) under the (1) Existing Credit
Facilities, (2) Senior Notes, (3) TOPrS, (4) the Disney License (the
default existing as a result of a cross-default provision triggered by the
payment default under the Senior Notes) and (5) Series B Preferred Stock
(it being understood and agreed that any adverse change in the terms,
conditions, assumptions or projections (to the extent projections have been
delivered and deemed acceptable by the Agent and then there is an adverse
change which affects such previously delivered projections) supplied to the
Agent by the Borrower may be construed by the Agent as a material adverse
change).
(l) [Intentionally left blank]
(m) Pay-off of Existing Facilities. The Agent shall be satisfied
in all respects with the "pay-off" letter from the existing lenders under
the Existing Credit Facilities and the termination of all UCC financing
statements and trademark and copyright filings in the U.S. Patent and
Trademark Office and the U.S. Copyright Office, respectively, relating
thereto.
48
(n) Minimum Availability. Upon making the Revolving Loans, on the
Closing Date the Borrower shall have Availability in an amount no less than
$17,500,000.
(o) Financial Reports and Projections. The Agent shall have
received the preliminary balance sheet and income statement for the fiscal
year ended December 31, 1998, the projected monthly balance sheets, income
statements, and Availability schedule for the fiscal year ending December
31, 1999, and shall have been satisfied, in its sole discretion, with its
review thereof.
(p) First Day Pleadings. The Agent and the Lenders shall have
received all "first day" pleadings filed or to be filed with the Bankruptcy
Court in connection with the Chapter 11 Cases, and been satisfied with all
such pleadings, including, without limitation, any pleadings concerning the
payment of claims which arose or accrued prior to the Filing Date;
(q) There shall have been no objections to the Interim Financing
Order by the United States trustee or any creditors or interested parties,
which remain subject to appeal;
(r) The Interim Financing Order shall have been entered by the
Bankruptcy Court and the Agent shall have received a certified copy of
same, and such order shall be in full force and effect.
5.02. Conditions Precedent to Revolving Loans and Letters of Credit
and to Loans in excess of the Interim Amount. In addition to the requirements of
(x) Section 5.01 hereof, the obligation of each Lender to make any Loan after
the initial Loans in connection with the Interim Financing (as defined in the
Interim Financing Order), (y) CIT or any Lender to assist the Borrower in
obtaining the issuance of any Letter of Credit and (z) any Lender, after the
entry of a Final Financing Order, to make any loan in an amount of up to the
Current Commitment is, in each case, subject to the fulfillment, in a manner
satisfactory to the Agent, of each of the following conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees,
costs, expenses and taxes then payable by the Borrower pursuant to Sections
2.08 and 10.06 hereof.
(b) Representations and Warranties; No Event of Default. The
following statements shall be true, and the submission by the Borrower to
the Agent of a Notice of Borrowing with respect to a Revolving Loan and the
Borrower's acceptance of the proceeds of such Revolving Loan, or the
submission by the Borrower to the Agent and the Letter of Credit Issuer of
an L/C Notice with respect to a Letter of Credit and the issuance of such
Letter of Credit shall be deemed to be a representation and warranty by the
Borrower on the date of such Revolving Loan and the date of the issuance of
such Letter of Credit, as the case may be, that, (i) the representations
and warranties contained
49
in Article 6 of this Agreement and in each other Loan Document and
certificate or other writing delivered to the Agent, the Lenders and the
Letter of Credit Issuer pursuant hereto on or prior to the date of such
Revolving Loan or Letter of Credit are correct in all material respects on
and as of such date as though made on and as of such date (except for
representations and warranties which relate to a specific date), and (ii)
no Potential Default or Event of Default has occurred and is continuing or
would result from the making of the Revolving Loan to be made on such date
or the issuance of the Letter of Credit to be issued on such date.
(c) Borrowing Notice. The Agent shall have received a Notice of
Borrowing pursuant to Section 2.03 hereof no later than 12:00 noon (New
York City time) on the date of a proposed borrowing or an L/C Notice and a
Letter of Credit Application pursuant to Section 3.01 hereof not later than
12:00 noon (New York City time) three Business Days prior to the proposed
date of issuance of a Letter of Credit.
(d) Financing Orders. The Interim Financing Order (if prior to
the Final Financing Order Date) or the Final Financing Order (if after the
Final Financing Order Date), as the case may be, is in form and substance
satisfactory to the Agent and the Lenders, shall be in full force and
effect and shall not have been reversed, stayed, modified or amended,
except for such modifications, and amendments mutually agreed to by the
Borrower, the Agent and the Lenders.
(e) Licensor Consents or Entry of Final Financing Order. With
respect to Loans made in excess of the Interim Amount, the Agent and the
Lenders shall be satisfied that the Final Financing Order and/or consents
from licensors permits the Agent and the Lenders notwithstanding whether
any license agreement is in default or has been terminated to take
possession of, transfer or sell, or cause the Borrower to transfer or sell,
inventory in which the Agent and the Lenders have been granted herein first
priority, perfected security interests, including, without limitation, the
out-of-the ordinary course sale of any such inventory under section 363(b)
of the Bankruptcy Code, without any restriction whatsoever which might be
otherwise applicable to and contained in any licensing agreements subject
only to the obligation to pay earned royalties for inventory actually sold
or disposed of hereunder at the applicable percentage of sales royalty rate
as may be contained in the applicable license agreements, if any; provided,
however, that no royalties shall be payable which are based on, or
constitute, a minimum, past due or guaranteed royalty rate or otherwise
compute the applicable earned royalty rate using criteria other than a
percentage of sales for the actual inventory sold as aforesaid.
(f) Absence of Material Adverse Change. Other than the filing of
the Chapter 11 Cases, the Agent shall be satisfied that there is an absence
of any material adverse change in the financial condition, business, assets
or operations of the Borrower, excluding defaults (to the extent the Agent
has been advised as to the basis for same) under the (1) Existing Credit
Facilities, (2) Senior Notes, (3) TOPrS, (4) the Disney License (the
default existing as a result of a cross-default provision triggered by the
50
payment default under the Senior Notes) and (5) Series B Preferred Stock
(it being understood and agreed that any adverse change in the terms,
conditions, assumptions or projections (to the extent projections have been
delivered and deemed acceptable by the Agent and then there is an adverse
change which affects such previously delivered projections) supplied to the
Agent by the Borrower may be construed by the Agent as a material adverse
change).
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Agent and the
Lenders as follows:
6.01. Organization, Good Standing, Etc. The Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization, (ii) has all requisite
power and authority to conduct its business as now conducted and as presently
contemplated and (in the case of the Borrower), subject to Bankruptcy Court
approval ,to make the borrowings hereunder and to consummate the transactions
contemplated hereby and (iii) is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary, except, with respect to this clause (iii), where all
instances of such failure to qualify taken together will not have a Material
Adverse Effect.
6.02. Authorization, Etc. The execution, delivery and performance by
the Borrower of each Loan Document to which it is a party, (i) has been duly
authorized by all necessary corporate action, (ii) does not and will not
contravene its certificate of incorporation or by-laws, any other applicable
law, (iii) does not and will not result in or require the creation of any Lien
(other than pursuant to any such Loan Document or the Orders) upon or with
respect to any of its properties, and (iv) does not and will not result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to its operations or any of its
properties.
6.03. Governmental Approvals. Except for Bankruptcy Court approval, no
authorization, consent, approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing with, any
Governmental Authority is or will be necessary in connection with the execution
and delivery by the Borrower of the Loan Document to which it is a party,
consummation of the transactions therein contemplated, performance of or
compliance with the terms and conditions thereof or to ensure the legality,
validity, enforceability and admissibility in evidence thereto, except for the
filings and recordings in respect of the Liens created pursuant to the Security
Documents.
51
6.04. Enforceability of Loan Documents. This Agreement is, and each
other Loan Document to which the Borrower is or will be a party, when delivered
hereunder, will be, a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
6.05. Subsidiaries. Schedule 6.05 hereto is a complete and correct
description of the name, jurisdiction of incorporation and ownership of the
outstanding capital stock of each Subsidiary of the Borrower in existence on the
Closing Date. All shares of such stock owned by the Borrower or one or more of
its Subsidiaries, as indicated in such Schedule, are owned free and clear of all
Liens, except for the Liens in favor of the Agent that secure payment of the
Obligations. There are no options, warrants or other rights to acquire shares of
capital stock of any Subsidiary of the Borrower. The Borrower may not form a
Subsidiary without the consent of the Agent, which consent shall not be
unreasonably withheld.
6.06. Litigation. Except as set forth on Schedule 6.06 hereto, there
is no pending or, to the knowledge of the Borrower, threatened action, suit or
proceeding requesting damages in an amount in excess of $100,000 affecting the
Borrower, any Subsidiaries or any Loan Party before any court or other
Governmental Authority or any arbitrator in existence on the Closing Date. There
is no pending or, to the knowledge of the Borrower, threatened action, suit or
proceeding affecting the Borrower or any of its Subsidiaries before any court or
other Governmental Authority or any arbitrator which may have a Material Adverse
Effect.
6.07. Financial Condition.
(a) Historical Statements. The Borrower has heretofore furnished
to the Lenders a balance sheet of the Parent and its Consolidated Subsidiaries
for the fiscal year ended December 31, 1997 and the related statements of
operations and cash flows for the fiscal year then ended, as examined and
reported on by Ernst & Young LLP, independent certified pubic accountants, and a
balance sheet and related statements of operations and cash flows of the Parent
and its Consolidated Subsidiaries for and as of the end of the nine-month period
ended September 30, 1998, as certified by a Designated Financial Officer of the
Parent. Such financial statements (including the notes thereto) present fairly,
in all material respects, the financial condition of the Parent and its
Consolidated Subsidiaries as of the end of such fiscal year and such nine month
period and the results of its operations and the cash flows for the fiscal year
and such nine month period then ended, all in conformity with GAAP applied on a
basis consistent with that of the preceding fiscal year except as disclosed
therein. Except as disclosed in the schedules hereto, the Parent and its
Consolidated Subsidiaries do not have any material contingent liabilities
(including liabilities for taxes), unusual forward or long term commitments or
unrealized or anticipated losses from unfavored commitments.
52
(b) The Borrower has heretofore furnished to the Lenders cash
flow projections of the Parent and its Consolidated Subsidiaries for the period
ending December 31, 1999 and such projections have been prepared in accordance
with the standard set forth in the second sentence of Section 6.17 hereof.
6.08. Compliance with Law, Etc. None of the Borrower or its
Subsidiaries is in violation of its certificate of incorporation, or by-laws,
any law (including but not limited to violations pertaining to the conduct of
its business or the use, maintenance or operation of the real and personal
properties owned or possessed by it) or any term of any material agreement or
instrument binding on or otherwise affecting it or any of its properties,
except, in the case of violations of law, where all such violations taken
together will not have a Material Adverse Effect and, except in the case of
violations of the terms of the Existing Credit Facilities, the Senior Notes, the
TOPrS, the Disney License (limited to the cross-default referred to in Section
5.01(k) hereof and the Series B Preferred Stock).
6.09. ERISA. (i) Each Plan is in substantial compliance with the
applicable provisions of ERISA and the Code, (ii) no Termination Event has
occurred or is reasonably expected to occur with respect to any Benefit Plan,
(iii) the most recent annual report (Form 5500 Series) with respect to each
Plan, including Schedule B (Actuarial Information) thereto, copies of which have
been filed with the Internal Revenue Service, is complete and correct in all
material respects and fairly presents the funding status of such Benefit Plan,
and since the date of such report there has been no material adverse change in
such funding status, (iv) no Benefit Plan had an accumulation or waived funding
deficiency or permitted decreases which would create a deficiency in its funding
standard account within the meaning of Section 412 of the Code at any time
during the previous 60 months, and (v) no Lien imposed under the Code or ERISA
exists or is likely to arise on account of any Benefit Plan within the meaning
of Section 412 of the Code. Neither the Borrower nor any of their respective
ERISA Affiliates has incurred any withdrawal liability under ERISA with respect
to any Multiemployer Plan (which is unpaid as of the date hereof), and the
Borrower is not aware of any facts indicating that the Borrower or any of its
ERISA Affiliates may in the future incur any such withdrawal liability. Except
as required by Section 4980B of the Code or as disclosed on Schedule 6.09, the
Borrower does not maintain a welfare plan (as defined in Section 3(1) of ERISA)
which provides benefits or coverage after a participant's termination of
employment. Neither the Borrower nor any of their respective ERISA Affiliates
have incurred any liability under the Worker Adjustment and Retraining
Notification Act (which is unpaid as of the date hereof). All Plans in existence
on the Closing Date are set forth on Schedule 6.09 hereto.
6.10. Taxes, Etc. All tax returns required to be filed by the Borrower
and its Subsidiaries have been properly prepared, executed and filed. All taxes,
assessments, fees and other governmental charges upon the Borrower and its
Subsidiaries or upon any of their respective properties, income, sales or
franchises which are shown thereon as due and payable have been paid, unless
payment thereof is being contested in good faith by appropriate proceedings
which stay the imposition of any penalty, fine or Lien resulting from the
non-payment thereof and with respect to which adequate reserves therefor are
being maintained. The reserves and provisions for
53
taxes, if any, on the books of the Borrower are adequate for all open years and
for its current fiscal period. Except as set forth on Schedule 6.10, the
Borrower does not know of any proposed additional assessment or basis for any
material assessment for additional taxes (whether or not reserved against). The
federal income tax liabilities of the Borrower and its Subsidiaries have been
finally determined by the Internal Revenue Service, or the time for audit has
expired, for all fiscal periods ending on or prior to January 28, 1995 and all
such liabilities (including all deficiencies assessed following audit) have been
satisfied.
6.11. Regulation G, T, U or X. The Borrower is not and will not be
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation G, T, U or X issued by
the Board), and no proceeds of any Loan will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
6.12. Nature of Business. The Borrower is not engaged in any business
other than the manufacture, production, distribution, licensing and marketing of
books and other media and entertainment products.
6.13. Adverse Agreements, Etc. None of the Borrower or any of its
Subsidiaries is a party to any agreement or instrument, or subject to any
charter or other corporate or partnership restriction or any judgment, order,
regulation, ruling or other requirement of a court or other Governmental
Authority or regulatory body, which has a Material Adverse Effect, or, to the
best knowledge of the Borrower, is reasonably likely to have a Material Adverse
Effect.
6.14. Holding Company and Investment Company Acts. Neither the
Borrower nor any of its Subsidiaries is (i) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or (ii) an "investment company" or an "affiliated person" or "promoter"
of or "principal underwriter" of or for an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
6.15. Permits, Etc. The Borrower and its Subsidiaries have all
material permits, licenses, authorizations and approvals required for them
lawfully to own and operate their business except where the failure to have such
permits, licenses, authorizations and approvals would not have a Material
Adverse Effect.
6.16. Priority, Title. The Borrower is the holder of all right, title
and interest in and to the Collateral with full right to pledge, sell, consign,
transfer and create Liens therein. No Person has any right of first refusal,
option or other preferential right to purchase any Collateral. The Borrower will
at its expense forever warrant and, at the Agent's request, defend the same from
any and all claims and demands of any other Person other than the Permitted
Liens; and the Borrower will not grant, create or permit to exist any Lien upon
the Collateral, or any proceeds thereof, in favor of any other Person other than
Permitted Liens. The Borrower and its respective
54
Subsidiaries have good and marketable title to all of their properties and
assets, free and clear of all Liens except Permitted Liens and the Liens granted
the Security Documents.
6.17. Full Disclosure. The representations or warranties made by the
Borrower under this Agreement and the other Loan Documents, taken as a whole,
are not false or misleading in any material respect and the Loan Documents, the
schedules and exhibits thereto and the certificates, reports, statements and
other documents or information furnished to the Agent or the Lenders in
connection herewith or therewith or with the consummation of the transactions
contemplated hereby and thereby, taken as a whole, do not contain any material
misstatement of fact or omit to state a material fact or any fact necessary to
make the statements contained herein or therein not misleading. To the extent
the Borrower furnishes any projections of the financial position and results of
operations of the Borrower for, or as at the end of, certain future periods,
such projections were believed at the time furnished to be reasonable, have been
or will have been prepared on a reasonable basis and in good faith by the
Borrower, and have been or will be based on assumptions believed by the Borrower
to be reasonable at the time made and upon the best information then available
to the Borrower.
6.18. Operating Lease Obligations. On the Closing Date, (i) the
Borrower does not have any obligations as lessee for the payment of rent for any
Lease other than the Operating Lease Obligations (A) respecting real property
and (B) other Operating Leases with aggregate annual rental payments of greater
than $500,000, all as set forth in Schedule 6.18 hereto and the Capital Lease
Obligations set forth in Schedule 6.29 hereto and (ii) the Borrower does not
have any personal property leases providing for total rent payments in 1999 in
excess of $500,000 in the aggregate.
6.19. Environmental Matters. Except as disclosed in Schedule 6.19
hereto, (i) none of the operations of the Borrower is the subject of any
federal, state or local investigation to determine whether any Remedial Action
is needed to address the presence, disposal, Release or threatened Release of
Hazardous Materials; (ii) the operations of the Borrower and its Subsidiaries
are in compliance with all Environmental Laws; (iii) there has been no Release
at any of the properties owned or operated by the Borrower or its Subsidiaries
or any predecessor in interest or title, or at any disposal or treatment
facility which received Hazardous Materials generated by the Borrower or its
Subsidiaries or any predecessor in interest or title which is reasonably likely
to result in Environmental Liabilities and Costs of $150,000 or more; (iv) no
Environmental Actions have been asserted against the Borrower or its
Subsidiaries or any predecessor in interest or title nor does the Borrower or
its Subsidiaries have knowledge or notice of any threatened or pending
Environmental Action against the Borrower or its Subsidiaries or any predecessor
in interest or title which, if adversely determined, is reasonably likely to
result in Environmental Liabilities and Costs of $150,000 or more; (v) the
Borrower and its Subsidiaries have obtained all permits, approvals,
authorizations and licenses required by Environmental Laws necessary for the
Borrower's or its Subsidiaries' operations, and all such permits, approvals,
authorizations and licenses are in effect and the Borrower and its Subsidiaries
are in material compliance with all terms and conditions of such permits,
approvals, authorizations and licenses; (vi) no Environmental Actions have been
asserted against any facilities that may have received
55
Hazardous Materials generated by the Borrower or its Subsidiaries or any
predecessor in interest or title which, if adversely determined, is reasonably
likely to result in Environmental Liabilities and Costs of $150,000 or more.
6.20. Schedules. All of the information which is required to be
scheduled to this Agreement is set forth on the Schedules attached hereto, is
correct and accurate and does not omit to state any information material
thereto.
6.21. Insurance. The Borrower and its Subsidiaries keep their
properties adequately insured and maintain (i) insurance to such extent and
against such risks, including fire, as is customary with companies in the same
or similar businesses, (ii) workers compensation insurance in the amount
required by applicable law, (iii) public liability insurance in the amount
customary with companies in the same or similar business against claims for
personal injury or death on properties owned, occupied or controlled by it, and
(iv) such other insurance as may be required by law or by the Loan Documents.
Schedule 6.21 hereto sets forth a list of all insurance maintained by the
Borrower and its Subsidiaries on the Closing Date.
6.22. [Intentionally left blank]
6.23. Security Documents. The Orders and the Security Documents create
and grant to the Agent, for the benefit of the Lenders, a legal, valid and
perfected first priority Lien on the Collateral subject to no other Liens except
for Permitted Liens.
6.24. Financial Accounting Practices, Etc.
(a) The Borrower and its Subsidiaries make and keep books,
records and accounts which, in reasonable detail, accurately and fairly reflect
their respective transactions and dispositions of their respective assets and
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary (A) to permit preparation of financial statements in conformity
with GAAP except as previously disclosed to the Agent and (B) to maintain
accountability for assets, and (iii) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(b) The Borrower and its Subsidiaries maintain a system of
internal procedures and controls sufficient to provide reasonable assurance that
the information required to be set forth in each Borrowing Base Certificate
(including, without limitation, information relating to the identification of
assets which are Inventory and the valuation thereof) is accurate in all
material respects.
6.25. No Material Adverse Change. Since September 30, 1998, there has
not occurred any material adverse change or any event which could have a
Material Adverse Effect with respect to the Borrower (other than the filing of
the Chapter 11 cases).
56
6.26. Real Estate; Leases.
(a) Schedule 6.26 hereto sets forth a complete and accurate
description and list as of the Closing Date of the location, by state and street
address, of all Real Estate owned by the Borrower under the heading "Fee
Properties" and all Real Estate leased by the Borrower under the heading "Leased
Properties", together with, in the case of Real Estate that is owned, a
statement as to whether such Real Estate is the subject of a contract of sale
(and, if so, a statement as to the status of such sale). A true, correct and
complete legal description for each such owned property has been previously
delivered to the Agent.
(b) With respect to Real Estate or interests in Real Estate, the
Borrower has (i) good and marketable fee title to all of its real property which
is listed on Schedule 6.26 under the heading "Fee Properties" and will have good
and marketable fee title to such other Real Estate title to which it may acquire
after the Closing Date, and (ii) good and valid title to the leasehold estates
in all of the Real Estate leased by it and which is listed in Schedule 6.26
under the heading "Leased Properties" and will have good and valid title to
leasehold estates in such other Real Estate to which it may lease after the
Closing Date, in each case free and clear of all mortgages, liens, security
interests, easements, covenants, rights-of-way and other similar restrictions of
any nature whatsoever, except Permitted Liens.
(c) Schedule 6.26 hereto sets forth, with respect to each Lease,
the commencement date, termination date, renewal options (if any) and annual
base rents. Each such Lease is valid and enforceable in accordance with its
terms in all material respects and is in full force and effect. Except for the
landlord waivers required to be delivered pursuant to this Agreement, no consent
or approval of any landlord or other third party in connection with the Leases
is necessary for the Borrower to enter into and execute the Loan Documents,
except as set forth on Schedule 6.26 hereto. Neither the Borrower nor, to the
knowledge of the Borrower, any other party to any Lease is in default of its
obligations thereunder and the Borrower has not at any time delivered or
received any notice of default which remains uncured under any such Lease and,
as of the Closing Date, no event has occurred which, with the giving of notice
or the passage of time, or both, would constitute a default under any such
Lease, except for defaults the consequence of which in the aggregate would have
no Material Adverse Effect.
(d) All permits required to have been issued to the Borrower with
respect to the Real Estate owned or leased by the Borrower to enable such
property to be lawfully occupied and used for all of the purposes for which it
is currently occupied and used (separate and apart from any other properties),
have been lawfully issued and are in full force and effect, other than such
permits which if not obtained, would not have a Material Adverse Effect, and all
such Real Estate complies in all material respects with all applicable legal and
insurance requirements.
(e) The Borrower has not received any notice, nor does the
Borrower have any knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting any Real Estate owned or leased by the
Borrower or any Subsidiary.
57
(f) No portion of any Real Estate owned or leased by the Borrower
or any of its Subsidiaries has suffered any damage by fire or other casualty
loss which has not heretofore been completely repaired and restored to its
condition existing prior to such casualty or which if not repaired or restored
is not reasonably likely to result in a Material Adverse Effect.
6.27. Location of Bank Accounts. Schedule 6.27 hereto sets forth a
complete and accurate list as of the Closing Date of all deposit and other
accounts, maintained by the Borrower and its Subsidiaries together with a
description thereof (i.e., the bank at which such deposit or other account is
maintained and the account number and the purpose thereof).
6.28. No Event of Default. No event has occurred and is continuing,
and no condition exists, which constitutes an Event of Default or Potential
Default.
6.29. Capitalized Leases. As of the Closing Date, Capitalized Lease
Obligations of the Borrower and its respective Subsidiaries which are set forth
on Schedule 6.29 hereto do not exceed $0 in the aggregate.
6.30. Tradenames. Schedule 6.30 hereto sets forth a complete and
accurate list as of the Closing Date of all tradenames used by the Borrower and
its Subsidiaries.
6.31. [Intentionally left blank.]
6.32. Inventory. There is no location at which the Borrower has any
Inventory (except for Inventory in transit) other than (i) those locations
listed on Schedule 1.01(A) hereto and (ii) any other locations approved in
writing by the Agent pursuant to the definition of "Eligible Inventory".
Schedule 1.01(A) hereto contains a true, correct and complete list, as of the
Closing Date, of the legal names and addresses of each warehouse at which
Inventory of the Borrower is stored. None of the receipts received by the
Borrower from any warehouse states that the goods covered thereby are to be
delivered to bearer or to the order of a named Person or to a named Person and
such named Person's assigns.
6.33. Intellectual Property. The Borrower and its Subsidiaries own or
license or otherwise have the right to use all material licenses, permits,
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, copyright applications, franchises, authorizations and
other intellectual property rights that are necessary for the operations of
their businesses and, to the knowledge of the Borrower or such Subsidiary,
without infringement upon or conflict with the rights of any other Person with
respect thereto. To the best knowledge of the Borrower and its Subsidiaries, 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
or its Subsidiaries infringes upon or conflicts with any rights owned by any
other Person, and no claim or litigation regarding any of the foregoing is
pending or threatened, except for such infringements and conflicts which could
not have, individually or in the aggregate, a Material Adverse Effect. To the
knowledge of the Borrower and its Subsidiaries, no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or
58
code is pending or proposed, which, individually or in the aggregate, could have
a Material Adverse Effect.
6.34. Material Contracts. Set forth in Schedule 6.34 hereto is a
complete and accurate list as of the Closing Date of all Material Contracts of
the Borrower and its Subsidiaries, showing the parties and subject matter
thereof and amendments and modifications thereto. Each such Material Contract
(i) is in full force and effect and is binding upon and enforceable against the
Borrower or its Subsidiaries, as the case may be, and, to the Borrower's
knowledge, all other parties thereto in accordance with its terms, (ii) has not
been otherwise amended or modified in any material respect, and (iii) there
exists no default under any Material Contract by the Borrower or any of its
Subsidiaries or, to the Borrower's knowledge, any other party thereto which has
not been cured or waived, except with respect to the Senior Notes, the TOPrS,
the Disney License (limited to the cross-default referred to in Section 5.01(m)
hereof and the Series B Preferred Stock).
6.35. Labor Relations; Collective Bargaining Agreements.
(a) Set forth on Schedule 6.35 hereto is a list (including dates
of termination) of all Collective Bargaining Agreements between or applicable to
the Borrower or any of its Subsidiaries and any union, labor organization or
other bargaining agent in respect of the employees of the Borrower or any of its
Subsidiaries.
(b) Neither the Borrower nor any Subsidiary is engaged in any
activity which, to their knowledge, constitutes an unfair labor practice that is
reasonably likely to have a Material Adverse Effect. There is (i) no significant
unfair labor practice complaint pending against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower or any of its
Subsidiaries, threatened against any of them, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any Collective Bargaining Agreement is now
pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower or any of its Subsidiaries, threatened against any of
them, (ii) no significant strike, labor dispute, slowdown or stoppage is pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower or any of its Subsidiaries, threatened against the Borrower or any of
its Subsidiaries, and (iii) to the best knowledge of the Borrower or any of its
Subsidiaries, no union representation question existing with respect to the
employees of the Borrower or any of its Subsidiaries, except (with respect to
any matter specified in clause (i), (ii) or (iii) herein above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
6.36. Accounts. The chief executive office of the Borrower and the
location of its books and records are set forth on Schedule 6.36 hereto. Each
Account is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers, made by the Borrower in the ordinary course
of its business; such Accounts are, and the Goods and Inventory sold to create
such Accounts were, the exclusive property of the Borrower and such Accounts are
not, and such Goods and Inventory were not, subject to any Lien, consignment
arrangement,
59
encumbrance, security interest or financing statement whatsoever, other than
Permitted Liens; the invoices evidencing such Accounts are in the name of the
Borrower; the customers of the Borrower have accepted the goods or services,
owe, and are obligated to pay, the full amounts stated in the invoices according
to their terms, without dispute, offset, defense, counterclaim or contra, except
for disputes, returns and other matters arising in the ordinary course of
business. No amount payable to the Borrower under or in connection with any
Account is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Agent.
6.37. Appointment of Trustee or Examiner; Liquidation. No order has
been entered (i) for the appointment of a chapter 11 trustee or examiner with
enlarged powers with respect to the operation of the Borrower's business beyond
those set forth in subsections 1106(a)(3) and 1106(a)(4) of the Bankruptcy Code,
or (ii) to convert all of the Chapter 11 Cases to a Chapter 7 case or to dismiss
any Chapter 11 Cases.
ARTICLE 7.
AFFIRMATIVE COVENANTS
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any other Obligations (whether or not due) shall
remain unpaid or the Lenders shall have any Revolving Credit Commitment
hereunder, the Borrower, unless the Majority Lenders shall otherwise consent in
writing, will:
7.01. Reporting Requirements. Furnish to the Lenders:
(a) As soon as practicable and in any event within ninety (90)
days after the close of each fiscal year of the Borrower, a consolidated
statement of operations and cash flows of the Borrower for such fiscal year
and a balance sheet of the Borrower as of the close of such fiscal year,
and notes to each, all in reasonable detail, setting forth in comparative
form the corresponding figures for the preceding fiscal year, which
consolidated statements and balance sheet shall be audited and accompanied
by an opinion of independent certified public accountants of recognized
national standing selected by the Borrower and reasonably satisfactory to
the Agent. Except with respect to fiscal year 1998, the opinion of such
accountants (the "Accountant's Opinion") shall be without a "going concern"
qualification or like qualification or exception or qualification arising
out of the scope of the audit with respect to such statements and balance
sheet being prepared in compliance with GAAP and shall in any event contain
a written statement of such accountants substantially to the effect that
(i) such accountants examined such statements and balance sheet in
accordance with generally accepted auditing standards and accordingly made
such tests of accounting records and such other auditing procedures as such
accountants considered necessary in the circumstances and (ii) in the
opinion of such accountants such statements and balance sheet present
fairly, in all material respects, the financial position of the Borrower as
of the end of such fiscal year and the results of its operations and the
changes in its financial position for such fiscal year, in conformity with
60
GAAP (except for changes in application in which such accountants concur).
A copy of the Accountant's Opinion shall be delivered to the Agent and each
Lender and signed by such independent public accountants. Each set of
statements and balance sheets delivered pursuant to this Section 7.01(a)
shall be accompanied by (1) a certificate or report dated the date of such
statements and balance sheet by the accountants who certified or reported
on such statements and balance sheet stating in substance that they have
reviewed this Agreement and that in making the examination necessary for
their certification of such statements and balance sheet they did not
become aware of any Event of Default or Potential Default, or if they did
become so aware, such certificate or report shall state the nature and
period of existence thereof, if determinable and (2) a certificate dated
the date of the delivery of such statements and balance sheet by the
Designated Financial Officer of the Borrower stating in substance that he
has reviewed this Agreement and that in making the examination necessary
for this certification, he did not become aware of any Event of Default or
Potential Default, or if he did become so aware, such certificate shall
state the nature and period of existence thereof if determinable in form
and substance satisfactory to the Agent.
(b) As soon as practicable and in any event within forty-five
(45) days after the close of each of the first three fiscal quarters of
each of the Borrower's fiscal years, unaudited consolidated statements of
operations and cash flows of the Borrower as of the close of such fiscal
quarter and a balance sheet of the Borrower as of the close of such fiscal
quarter, and notes to each, all in reasonable detail setting forth in
comparative form the corresponding figures for the corresponding fiscal
quarter for the preceding fiscal year, which statements and balance sheet
shall be certified by a Designated Financial Officer of the Borrower as
presenting fairly, in all material respects, the financial position of the
Borrower as of the end of such quarter and the results of its operations
and the changes in its financial position for such quarter, in conformity
with GAAP applied in a manner consistent except as otherwise disclosed
therein with that of the most recent audited financial statements furnished
to the Lenders, subject to year-end adjustments. Each set of statements and
balance sheets delivered pursuant to this Section 7.01(b) shall be
accompanied by a certificate of a Designated Financial Officer of the
Borrower dated the date of delivery of such statements and balance sheet
stating that he has reviewed this Agreement and that to the best of his
knowledge he did not become aware of any Event of Default or Potential
Default, or if he did become so aware, such certificate shall state the
nature and period of existence thereof, if determinable, in form and
substance satisfactory to the Agent.
(c) As soon as practicable and in any event within thirty (30)
days after the end of each fiscal month of the Borrower (other than the
last month of each of the first three fiscal quarters of the Borrower)
unaudited statements of operations and cash flows for the Borrower for such
fiscal month and for the period from the beginning of such fiscal year to
the end of such fiscal month, and an unaudited balance sheet of the
Borrower as of the end of such fiscal month, all in reasonable detail,
setting forth in comparative form the corresponding figures for the same
periods during the preceding fiscal year, and
61
accompanied by (1) a certificate of a Designated Financial Officer of the
Borrower (A) stating that such statements present fairly, in all material
respects, the financial position of the Borrower as of the end of such
fiscal month and the results of its operations and cash flows for such
fiscal month, applied in a manner consistent with prior practice, and,
subject to year-end adjustments, and (2) a certificate of the Designated
Financial Officer of the Borrower stating that he has reviewed this
Agreement and that to the best of his knowledge he did not become aware of
any Event of Default or Potential Default, or if he did become so aware,
such certificate shall state the nature and period of existence thereof, if
determinable.
(d) As soon as practicable and in any event within five (5)
Business Days after the end of each fiscal month (including the fiscal
month in which this Agreement is executed), the Borrower shall furnish to
the Lenders a monthly inventory report in form and substance reasonably
satisfactory to the Agent and certified by a Designated Financial Officer
of the Borrower.
(e) As soon as practicable and in any event within three (3)
Business Days after the end of each week (including the week in which this
Agreement is executed) unless a Monthly Report is to be furnished in such
week, the Borrower shall furnish to the Lenders weekly sales reports,
weekly inventory reports (collectively, "Weekly Reports"), each as of the
Borrower's close of business on the Saturday of the preceding week and in
form and substance reasonably satisfactory to the Agent and certified by a
Designated Financial Officer of the Borrower.
(f) As soon as practicable and in any event within five (5)
Business Days after the end of each month (including the month in which
this Agreement is executed) the Borrower shall furnish to the Lenders
weekly sales reports, weekly inventory reports and a Borrowing Base
Certificate which contains a calculation of ineligibles with respect to
Accounts and Inventory on a monthly basis (collectively, "Monthly
Reports"), each as of the Borrower's close of business on the last day of
the preceding month and in form and substance reasonably satisfactory to
the Agent and certified by a Designated Financial Officer of the Borrower.
(g) As soon as possible, and in any event within three (3) days
after the occurrence of a Potential Default or an Event of Default or a
Material Adverse Effect, the written statement of the Designated Financial
Officer of the Borrower, setting forth the details of the Potential Default
or Event of Default, Material Adverse Effect and the action which the
Borrower proposes to take with respect thereto.
(h) Promptly upon their becoming available, a copy of (1) all
reports, financial statements or other information delivered by the
Borrower to its shareholders or the Securities Exchange Commission, (2) all
reports, proxy statements, financial statements and other information
generally distributed by the Borrower to its creditors or the financial
community in general, and (3) any accountant's management letters and any
62
audit or other reports submitted to the Borrower by independent accountants
in connection with any annual, interim or special audit of the Borrower.
(i) (1) As soon as possible and in any event (A) within thirty
(30) days after the Borrower or any of its ERISA Affiliates knows or has
reason to know that any Termination Event described in clause (i) of the
definition of Termination Event with respect to any Benefit Plan has
occurred, and (B) within twenty (20) days after the Borrower or any of its
ERISA Affiliates knows or has reason to know that any other Termination
Event with respect to any Benefit Plan has occurred, or that the Borrower
or any of its ERISA Affiliates has failed to make a required installment to
a Benefit Plan within the meaning of Section 412(m) of the Code, a
statement of the Designated Financial Officer of the Borrower describing
such Termination Event and the action, if any, which the Borrower or such
ERISA Affiliate proposes to take with respect thereto, (2) promptly and in
any event within three (3) Business Days after receipt thereof by the
Borrower or any of its ERISA Affiliates from the PBGC, copies of each
notice received by the Borrower or any of its ERISA Affiliates of the
PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan, (3) promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) with
respect to each Benefit Plan and Multiemployer Plan, (4) promptly and in
any event within five Business Days after receipt thereof by the Borrower
or any of its ERISA Affiliates from a sponsor of a Multiemployer Plan or
from the PBGC, a copy of each notice received by the Borrower or any of its
ERISA Affiliates concerning the imposition or amount of withdrawal
liability under Section 4202 of ERISA or indicating that such Multiemployer
Plan may enter reorganization status under Section 4241 of ERISA, (5)
promptly, and in any event within ten (10) days after the Borrower or any
of their respective ERISA affiliates is required to send a notice of a
plant closing or mass layoff (as defined in the Worker Adjustment and
Retraining Notification Act), and (6) promptly and in any event within 30
days after the Borrower or any ERISA Affiliate takes action to establish
Benefit Plan or contribute to a Multiemployer Plan, a statement of the
Designated Financial Officer of the Borrower describing such Benefit Plan
or Multiemployer Plan.
(j) Promptly after, and in any event within five (5) days after,
an officer of the Borrower learns of any of the following, notice thereof:
(A) the receipt by the Borrower or any of its
Subsidiaries of notification that any real or personal property of the
Borrower or such Subsidiary is subject to any Environmental Lien;
(B) notice of violation of any Environmental Law which
could reasonably be expected to subject the Borrower or any of its
Subsidiaries to Environmental Liabilities and Costs of $100,000 or more; or
63
(C) notice of the commencement of any Environmental
Action by the Borrower or any of its Subsidiaries of any Environmental Law,
which if adversely determined, could reasonably be expected to subject the
Borrower or any of its Subsidiaries to Environmental Liabilities and Costs
of $100,000 or more.
(k) Promptly after the commencement thereof but in any event not
later than three (3) days after service of process with respect thereto on,
or the obtaining of knowledge thereof by the Borrower or any of its
Subsidiaries, notice of each action, suit or proceeding involving the
Borrower or any of its Subsidiaries before any court or other Governmental
Authority or other regulatory body or any arbitrator which could have a
Material Adverse Effect.
(l) Promptly after submission to any Governmental Authority all
documents and information furnished to such Governmental Authority in
connection with any investigation of the Borrower or any of its
Subsidiaries other than routine inquiries by such Governmental Authority.
(m) As soon as available, and in any event within five (5)
Business Days after (1) receipt or delivery thereof, copies of any material
notices that the Borrower receives or delivers in connection with any
Material Contract and, (2) the Borrower enters into a Material Contract, a
copy of such Material Contract.
(n) Within five (5) Business Days after the end of each month, a
receivables aging report.
(o) Promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of the Borrower or any of
its respective Subsidiaries as the Agent or any Lender from time to time
may reasonably request.
(p) [Intentionally left blank]
(q) Promptly, and in any event within three (3) days, after a
Designated Borrowing Officer knows of any matters (whether or not arising
in the ordinary course of business) materially affecting the value,
enforceability or collectibility of any Account in excess of $500,000 and
of all material customer disputes, offsets, defenses, counterclaims,
returns, rejections and all reclaimed or repossessed merchandise or goods,
notice thereof.
7.02. Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and orders
(including, without limitation, Environmental Laws and compliance in respect of
their businesses, or use, maintenance or operation of real and personal
properties owned or leased by them), such compliance to include, without
limitation, (i) paying before the same become delinquent all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or upon any of its properties, and (ii) paying all lawful claims which if unpaid
might become a Lien or charge upon
63
any of its properties, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which adequate reserves in
accordance with GAAP have been set aside for the payment thereof, except, in the
case of all such non-compliance (other than non-compliance in the payment of
federal, state and local taxes which, if unpaid, could result in a Lien on any
Collateral or any other non-compliance that may result in a Lien on Collateral),
where all such instances of non-compliance taken together will not have a
Material Adverse Effect.
7.03. Preservation of Existence, Etc. Maintain and preserve its
existence, rights and privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by them or in which the transaction of their business makes such
qualification necessary, except where all instances of such failure to qualify
or remain in good standing or such failure to maintain rights and privileges
taken together will not have a Material Adverse Effect.
7.04. Keeping of Records and Books of Account. Keep, and cause each of
its Subsidiaries to keep, adequate records and books of account, with complete
entries made in accordance with generally accepted accounting principles
consistently applied.
7.05. Inspection Rights. Permit, and cause each of its Subsidiaries to
permit, the Agent or any Lender, or any agents or representatives thereof or
such professionals or other Persons as the Agent may designate (i) to examine
and inspect the books and records of the Borrower and take copies and extracts
therefrom (except for employee-related documents to the extent prohibited by
applicable law) at reasonable times and during normal business hours, (ii) to
verify materials, leases, notes, receivables, deposit accounts and other assets
of the Borrower from time to time, and (iii) to enter upon the Borrower's
premises or any other properties on or in which any of the Borrower's
Collateral, including, but not limited to Inventory for the purpose of
conducting appraisals and/or valuations, provided that, in the absence of a
continuing Event of Default, all such action described in clauses (i) through
(iii) above shall be conducted at reasonable times, during normal business hours
and upon reasonable prior notice to Borrower.
7.06. Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of their properties
(including all real estate leased or owned by them and all equipment) which are
necessary or useful in the proper conduct of their business in good working
order and condition, ordinary wear and tear excepted, making any and all repairs
and replacements when and where necessary, and comply, and cause each of its
Subsidiaries to comply, at all times with the provisions of all Leases to which
each of them is a party as lessee or under which each of them occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.
7.07. Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, with responsible and reputable insurance companies or
associations, insurance (including, without limitation, comprehensive general
liability, hazard and business interruption insurance) with respect to their
properties (including all Real Estate leased or owned by them) and
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business, in such amounts and covering such risks, as is required by any
Governmental Authority or other regulatory body having jurisdiction with respect
thereto or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event in amount,
adequacy and scope reasonably satisfactory to the Agent. All policies covering
the Collateral are to be made payable to the Agent, in case of loss, under a
standard non-contributory "lender" or "secured party" clause and are to contain
such other provisions as the Agent may require to fully protect the Agent's
interest in the Collateral and to any payments to be made under such policies.
All original policies or true copies thereof are to be delivered to the Agent,
premium prepaid, with the loss payable and additional insured endorsement in the
Agent's favor, and shall provide for not less than thirty (30) days prior
written notice to the Agent of the exercise of any right of cancellation. At the
Borrower's request, or if the Borrower fails to maintain such insurance, the
Agent may arrange for such insurance, but at the Borrower's expense and without
any responsibility on the Agent's part for: obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence and during the continuance of an Event
of Default, the Agent shall have the sole right, in the name of the Agent and
the Borrower, to file claims under any insurance policies, to receive, receipt
and give acquittance for any payments that may be payable thereunder, and to
execute any and all endorsements, receipts, releases, assignments, reassignments
or other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
7.08. Environmental. Comply, and cause each of its Subsidiaries to
comply in all material respects, with the requirements of all Environmental Laws
and provide to the Agent all material documents relating to such compliance that
the Agent may reasonably request; not cause or permit the Collateral or any
property or facility owned, operated or occupied by the Borrower or its
Subsidiaries to be used for any activities involving, directly or indirectly,
the use, generation, treatment, storage, release or disposal of any Hazardous
Materials except in compliance with applicable Environmental Laws or a permit
issued under any applicable Environmental Law; and immediately notify the Agent
of any Release of Hazardous Materials in excess of any reportable quantity and
take any Remedial Actions required to ▇▇▇▇▇ such Release; provided, however,
that Borrower and its Subsidiaries may use all lawful means to challenge or
contest any requirement of a governmental regulatory authority relating to said
Remedial Actions. On behalf of the Borrower and its Subsidiaries, the Borrower
hereby agrees to defend (with counsel satisfactory to the Agent), indemnify, and
hold harmless the Agent, the Lenders, their employees, agents, officers, and
directors, from and against any claims, demands, penalties, fines, liabilities
(including strict liability), settlements, damages, costs, or expenses
(including, without limitation, reasonable attorney and consultant fees,
investigation and laboratory fees, court costs, and litigation expenses) and
Environmental Liabilities and Costs (collectively, "Environmental Losses")
arising out of (i) any Release, or threatened Release on any property presently
or formerly owned or occupied by the Borrower or its Subsidiaries (or their
predecessors in interest or title) or at any disposal facility which received
Hazardous Materials generated by the Borrower or its Subsidiaries; (ii) any
violation of Environmental Laws; (iii) any Environmental Actions; (iv) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to exposure to Hazardous Materials used, handled,
stored, generated, transported
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or deposited by the Borrower or its Subsidiaries (or any predecessor in interest
or title); and/or (v) the breach of any representation or warranty made by the
Borrower in Section 6.19 hereof or the breach of any covenant made by any of the
Borrower in this Section 7.08. This environmental indemnity shall survive the
repayment of the Obligations and discharge or release of any security interest
granted under the Loan Documents; provided, however, that this indemnity shall
not apply to any Environmental Losses (a) arising from any negligent or wilful
misconduct of the Agent, the Lenders or any of their employees, agents, officers
and directors or (b) arising from any actions, omissions, events or conditions
occurring after the terminations of the Loans, the foreclosure of any mortgages
or the issuance of a deed in lieu of foreclosure.
7.09. Further Assurances. Do, execute, acknowledge and deliver, and
cause its Subsidiaries to do, execute, acknowledge and deliver, at the sole cost
and expense of the Borrower all such further acts, deeds, conveyances,
mortgages, assignments, estoppel certificates, financing statements, notices of
assignment, transfers and assurances as the Agent may reasonably require from
time to time in order (a) to carry out more effectively the purposes of this
Agreement or any other Related Document, (b) to subject to valid and perfected
first priority Liens all of the Collateral (subject to Permitted Liens), (c) to
perfect and maintain the validity, effectiveness and priority of any of the
Related Documents and the Liens intended to be created thereby, (d) to better
assure, convey, grant, assign, transfer and confirm unto the Agent, the Lenders
and the Letter of Credit Issuer the rights now or hereafter intended to be
granted to the Agent, the Lenders and the Letter of Credit Issuer under this
Agreement, any Loan Document or any other instrument under which the Borrower or
any Subsidiary may be or may hereafter become bound to convey, mortgage or
assign to the Agent, the Lenders and the Letter of Credit Issuer, and (e) to
comply fully, or to cause full compliance, with applicable law in respect of the
Real Estate and all transactions related to the Real Estate, and will at all
times provide the Agent with reasonable satisfactory evidence of such compliance
and notify the Agent of the information reported in connection with such
compliance.
7.10. Borrowing Base. Maintain all Revolving Loans and Letters of
Credit in compliance with the then current Borrowing Base.
7.11. Change in Collateral; Collateral Records. Give the Agent not
less than thirty (30) days' prior written notice of any change in the location
of any Collateral, other than to locations, that as of the date hereof, are
known to the Agent and at which the Agent has filed financing statements and
otherwise fully perfected its Liens thereon. Except with respect to Collateral
which is sold in the ordinary course of business, the Borrower shall also advise
the Agent promptly of any other change in the location of any Collateral. The
Borrower shall also advise the Agent promptly, in sufficient detail, of any
material adverse change relating to the type quantity or quality of the
Collateral or the security interests granted therein. The Borrower agrees to
execute and deliver to the Agent for the benefit of the Agent from time to time,
solely for the Agent's convenience in maintaining a record of the Collateral,
such written statements and schedules as the Agent may reasonably require,
designating, identifying or describing the Collateral. The Borrower's failure,
however, to promptly give the Agent such statements or
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schedules shall not affect, diminish, modify or otherwise limit the Agent's
security interest in the Collateral.
7.12. Financial Accounting Practices, Etc.
(a) Make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization, (ii) transactions are recorded as necessary
(A) to permit preparation of financial statements in conformity with GAAP and
(B) to maintain accountability for assets, and (iii) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(b) Maintain a system of internal procedures and controls
sufficient to provide reasonable assurance that the information required to be
set forth in each Borrowing Base Certificate (including, without limitation,
information relating to the identification of assets which are Eligible
Inventory as provided herein and the valuation thereof) is accurate in all
material respects.
7.13. Lock Box Accounts.
(a) On or prior to the Closing Date, the Borrower shall establish
lock box bank accounts (the "Lock Box Accounts") in accordance with lock box
agreements and arrangements which shall be satisfactory to the Agent hereunder
in the name of the Agent with a bank or banks mutually satisfactory to the
Borrower and the Agent (the "Lock Box Banks") to be designated as the Lock Box
Accounts. The Lock Box Accounts on the Closing Date are identified on Schedule
7.13 hereto. The only bank accounts of the Borrower which are permitted at any
time not to be lock box accounts are separately designated on Schedule 7.13. The
Borrower shall instruct its customers to remit payment of all Accounts on which
such customers are debtors directly to the Lock Box Account, and the Borrower
shall promptly deposit in the Lock Box Accounts all amounts nevertheless or
otherwise remitted to the Borrower on the Accounts and all other amounts
received by the Borrower in respect of any Collateral, whether from a
disposition of assets or otherwise, on or after the Closing Date; provided,
however, that monies generated from operations in the United Kingdom may be used
to fund such operations in the ordinary course with any excess funds to be
remitted to the Lock Box Accounts. Only monies due and owing to the Borrower,
and not monies which are the property of any other entity (except for
employee-related amounts, amounts payable for sales taxes and the like), shall
be in any bank account of the Borrower.
(b) The Agent shall credit (based on one (1) collection Business
Day) all amounts deposited in the Lock Box Accounts pursuant to this Section
7.13 which are "good funds" in New York City to the repayment of Revolving Loans
and to the repayment of other outstanding Obligations due and payable from time
to time. The Lock Box Accounts are, and
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shall remain, under the sole dominion and control of the Agent. Subject to
subsection (a) above, the Borrower acknowledges and agrees that (A) the Borrower
has no right of withdrawal from any Lock Box Account and (B) the funds on
deposit in any Lock Box Account shall continue to be Collateral for all of the
Obligations.
7.14. Additional Subsidiaries. If a Person shall become a Subsidiary
of the Borrower after the Closing Date, notify the Agent promptly after such
Person becomes a Subsidiary of the Borrower and promptly, and in any event
within ten (10) Business Days of such Person becoming a Subsidiary, cause such
Subsidiary to execute and deliver a guaranty in form and substance satisfactory
to the Agent, in respect of the Obligations and to deliver proof of corporate
action, incumbency of officers, opinions of counsel and other documents as the
Agent may reasonably request.
7.15. ERISA. Upon the Agent's request, deliver to the Agent a copy of
each Plan and for each such Plan (a) that is a "single employer plan" (as
defined in Section 4001(a)(15) of ERISA), the most recently completed actuarial
valuation prepared therefore by such Plan's regular enrolled actuary and the
Schedule B, "Actuarial Information" to the IRS Form 5500 (Annual Report) most
recently filed with the Internal Revenue Service and (b) that is a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), each of the
documents referred to in clause (a) either in the possession of the Borrower or
reasonably available thereto from the sponsor or trustees of such Plan.
7.16. Right to Sell Inventory. Agent shall at all times have the right
(when it has such right under the Loan Documents) to sell Inventory using
intellectual property licensed by the Borrower pursuant to either a court order
and/or written consents from licensors.
7.17. Intellectual Property. Notify the Agent of any intellectual
property developed or otherwise acquired by the Borrower, the Parent or any
Subsidiary within thirty (30) Business Days of the acquisition of same, and
deliver at the same time to the Agent appropriate documentation to perfect in
favor of the Agent liens on such intellectual property.
7.18. Liens. Notwithstanding anything to the contrary contained herein
or elsewhere:
(i) The Liens granted to the Agent and the Lenders shall be
deemed valid and perfected by entry of the Interim Financing Order and the Final
Financing Order, as the case may be, which entry of the Interim Financing Order
shall have occurred on or prior to the Closing Date. The Agent and the Lenders
shall not be required to file any financing statements, mortgages, notices of
lien or similar instruments in any jurisdiction or filing office, or to take
possession of any Collateral or to take any other action in order to validate or
perfect the Liens granted by or pursuant to this Agreement, the Interim
Financing Order, the Final Financing Order or any other Loan Document. If the
Agent shall, in its sole discretion, from time to time elect to file any such
financing statements, mortgages, notices of lien or similar instruments, take
possession of any Collateral or take any other action to validate or perfect all
or any portion of the
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Liens granted to the Agent and the Lenders, all such documents and actions shall
be deemed to have been filed or recorded or taken at the time and on the date of
entry of the Interim Financing Order or the Final Financing Order, whichever is
earlier.
(ii) The Liens, lien priorities, administrative expense
claim priorities and other rights and remedies granted to the Agent and the
Lenders pursuant to this Agreement, the Interim Financing Order, the Final
Financing Order or the other Loan Documents (specifically including, but not
limited to, the existence, perfection and priority of the Liens provided for
herein and therein, and the administrative expense claim priority provided
herein and therein) shall not be modified, altered or impaired in any manner by
any other financing or extension of credit or incurrence of debt by the Borrower
(pursuant to Section 364 of the Bankruptcy Code or otherwise), or by dismissal
or conversion to cases under chapter 7 of the Bankruptcy Code of the Chapter 11
Cases, or by any other act or omission whatsoever. Without limiting the
generality of the foregoing, notwithstanding any such order, financing,
extension, incurrence, dismissal, conversion, act or omission:
(A) except for the Carve-Out Expenses having priority
over the Obligations to the extent set forth in the defined term "Agreed
Administrative Expense Claim Priorities", no costs or expenses of administration
which have been or may be incurred in the Chapter 11 Cases or any conversion of
the same to cases under chapter 7 of the Bankruptcy Code or in any other
proceedings related thereto, and no priority claims, are or will be prior to or
on a parity with any claim of any the Lenders or the Agent against the Borrower
in respect of any Obligation; and
(B) The Liens granted to the Agent and the Lenders
shall constitute valid and perfected first priority Liens on all of the real and
personal property of the Borrower subject only to Permitted Liens, and as to
which Permitted Liens, the Liens granted to the Agent and the Lenders shall or
may be subordinate and junior, and shall be prior to all other Liens, now
existing or hereafter arising, in favor of any other creditor or other Person.
ARTICLE 8.
NEGATIVE COVENANTS
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any Obligations (whether or not due) shall remain
unpaid or any Lender shall have any Revolving Credit Commitment hereunder, the
Borrower will not, without the prior written consent of the Majority Lenders:
8.01. Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of their properties, rights or other assets, whether now owned or hereafter
acquired, or assign or otherwise transfer, or permit any of its Subsidiaries to
assign or otherwise transfer, any right to receive income, other than the
following Liens (to the extent, with respect to the Borrower or any of its
assets or properties (x) if
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created, incurred or assumed by the Borrower on or after the Filing Date are
approved and authorized by the Bankruptcy Court and (y) if created, incurred or
assumed by the Borrower before the Filing Date and are valid, perfected and
non-avoidable in accordance with applicable law)("Permitted Liens"):
(a) Liens created pursuant to the Loan Documents or the Interim
Financing Order or the Final Financing Order;
(b) Liens existing on the date hereof, as set forth in Schedule
8.01 hereto;
(c) Liens for taxes, assessments or governmental charges or
levies to the extent that the payment thereof shall not be required by
Section 7.02 hereof;
(d) Liens created by operation of law other than Environmental
Liens, such as liens of materialmen, mechanics, carriers, warehousemen,
suppliers, and other similar liens, arising in the ordinary course of
business which secure amounts not overdue for a period of more than thirty
(30) days or which are being contested in good faith by appropriate
proceedings;
(e) deposits, pledges or Liens (other than Liens arising under
ERISA) securing (1) obligations incurred in respect of workers'
compensation, unemployment insurance or other forms of governmental
insurance or benefits, (2) the performance of bids, tenders, leases,
contracts (other than for the payment of money) and statutory obligations,
or (3) obligations on surety or appeal bonds, but only to the extent such
deposits, pledges or Liens are incurred or otherwise arise in the ordinary
course of business and secure obligations which are not past due;
(f) restrictions on the use of Real Estate and minor
irregularities in the title thereto which (1)do not secure obligations for
the payment of money, other than those created pursuant to the Loan
Documents or are permitted under clauses (b) and (j) of this Section 8.01
or (2) do not materially impair the value of such Real Estate or its use by
the Borrower or any of its Subsidiaries in the normal conduct of such
Person's business;
(g) purchase money Liens on or purchase money security interests
in equipment or Real Estate acquired or held in the ordinary course of its
business securing Indebtedness, provided that the Indebtedness secured by
such Liens or security interests shall not exceed the aggregate principal
amount of $100,000 per annum;
(h) Liens securing Capitalized Leases;
(i) [Intentionally left blank];
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(j) Liens on Real Estate of the Borrower which secure
Indebtedness incurred by the Borrower;
(k) [Intentionally left blank];
(l) Liens upon any property or assets of any Subsidiary of the
Borrower existing at the time such Subsidiary is acquired by, merged into
or consolidated with the Borrower in accordance with the terms of this
Agreement, provided that such Liens were not created in contemplation of
any such acquisition, merger or consolidation;
(m) pre-existing Liens upon any property or assets existing at
the time such property or assets are acquired by the Borrower, provided
that such Liens were not created in contemplation of such acquisition;
(n) Liens created pursuant to the Senior Notes Collateral
Agreement;
(o) Liens of GPH; and
(p) renewals and replacements of the Liens described in clauses
(b), (g), (l), (m) and (n) of this Section 8.01, provided that any such
renewal or replacement Lien shall be limited to the property or assets
covered by the Lien renewed or replaced and the Indebtedness secured by any
such renewal or replacement Lien shall be in an amount not greater than the
amount of Indebtedness secured by the Lien renewed or replaced.
8.02. Indebtedness. Create, incur or suffer to exist, or permit any of
its Subsidiaries to create, incur or suffer to exist, any Indebtedness, other
than:
(a) Indebtedness created hereunder or under the Notes or any
Letter of Credit;
(b) Indebtedness existing on the date hereof, as set forth in
Schedule 8.02 hereto (such schedule shall not include indebtedness under
the Existing Credit Facilities), and any extension of maturity, refinancing
or other modification of the terms thereof, provided, however, that such
extension, refinancing or modification (A) is pursuant to terms that are
not less favorable to the Borrower and its Subsidiaries than the terms of
the Indebtedness being extended, refinanced or modified, and (B) after
giving effect to the extension, refinancing or modification of such
Indebtedness, the amount of such Indebtedness outstanding is not greater
than the amount of such Indebtedness outstanding immediately prior to such
extension, refinancing or modification;
(c) Indebtedness in connection with Capitalized Leases;
(d) Indebtedness under surety, performance or appeal bonds
incurred in the ordinary course of business;
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(e) To the extent the same constitutes Indebtedness, Indebtedness
secured by Liens or security interests permitted by Section 8.01 hereof;
(f) To the extent same shall constitute Indebtedness, Collective
Bargaining Agreements or extensions or renewals of same; and
(g) Indebtedness representing loans to the Guarantors not to
exceed on an aggregate net basis (reflecting the netting of amounts
advanced against payments received) at any time the sum of $5,000,000 (such
loans only to be made to the extent necessary or advisable in connection
with the operation of Video or the Parent, respectively as chapter 11
Debtors (but not for any purpose for which the Borrower would be restricted
by the terms of this Agreement or the Orders).
8.03. Guarantees, Etc. Become liable, or permit any of its
Subsidiaries to become liable, under any Guarantee in connection with any
Indebtedness of any other Person, other than:
(a) guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business; and
(b) guaranties existing on the date hereof, as set forth in
Schedule 8.03 hereto, but not any renewal or other modification thereof.
8.04. Merger, Consolidation, Sale of Assets, Etc.
(a) Merge or consolidate with any Person, or permit any of its
Subsidiaries to merge or consolidate with any Person (except that any Subsidiary
of the Borrower may be merged with or into Borrower or any wholly-owned
Subsidiary of Borrower, or be liquidated, wound up or dissolved, or all or any
part of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to Borrower or any wholly-owned Subsidiary of Borrower); and
(b) Sell, assign, lease or otherwise transfer or dispose of, or
permit any of its Subsidiaries to sell, assign, lease or otherwise transfer or
dispose of, whether in one transaction or in a series of related transactions,
any of their properties, rights or other assets whether now owned or hereafter
acquired to any Person other than sales of Inventory in the ordinary course of
business, provided that:
(i) the Borrower and its Subsidiaries may dispose of, to the
extent the same is not Collateral, obsolete or worn-out property and
property not used or deemed useful by the Borrower in the ordinary course
of business; and
(ii) the Borrower may sell the Adult Division so long as the
sale price is reasonably acceptable to the Agent and either the lesser of
(i) $2,500,000 or (ii)
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fifty percent (50%) of the Net Proceeds are delivered in permanent
reduction of the Term Loan. In the event of a sale of assets by the
Borrower which satisfies the requirements of this Section 8.04(b)(ii), the
assets subject thereto shall be released from the liens and security
interests granted to the Agent under the Loan Documents, whereupon the
Agent, upon request of the Borrower, shall promptly execute and deliver to
the Borrower such proper releases of lien (including, without limitation,
UCC-3 termination statements, releases of liens and security interests with
respect to intellectual property, and releases and satisfactions of
mortgages) as are necessary and appropriate to evidence such release, and
any such instrument, when duly executed by the Agent, shall conclusively
evidence the release of such liens and security interests.
8.05. Change in Nature of Business. Make, or permit its Subsidiaries
to make, any change in the nature of its business as carried on at the date
hereof except for changes that will not fundamentally and substantively alter
the character of its business from that conducted by the Borrower on the Closing
Date.
8.06. Loans, Advances and Investments, Etc. Make, or permit any of its
Subsidiaries to make, any loan or advance (the term "advance" not to refer to a
royalty payment or a payment to a packager of creative products) to any Person
or purchase or otherwise acquire, or permit any of its Subsidiaries to purchase
or otherwise acquire, any capital stock, properties, assets or obligations of,
or any interest in, any Person, other than:
(a) Permitted Investments;
(b) receivables owing to the Borrower or any of its Subsidiaries
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with the customary trade terms of the Borrower
or its applicable Subsidiary as the case may be;
(c) investments existing on the date hereof as set forth in
Schedule 8.06 hereto; and
(d) deposits made in the ordinary course of business consistent
with past practices to secure the performance of leases, supply
arrangements and contracts not in excess of $250,000 and to employees for
travel expenses not in excess of $200,000 per annum.
8.07. Dividends, Distributions, Prepayments, Etc. Declare or pay any
dividends or distributions, pay any management fees, purchase or otherwise
acquire for value any of their capital stock now or hereafter outstanding,
return any capital to their stockholders or make any other payment or
distribution of assets to its stockholders, or permit any of their Subsidiaries
to do any of the foregoing or to purchase or otherwise acquire for value any
stock of the Borrower or make any payment or prepayment of principal of,
premium, if any, or interest on, or redeem, defease or otherwise retire, any
other Indebtedness of the Borrower before its scheduled due date
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or make any payment or prepayment of principal of, premium, if any, or interest
on the Senior Notes, the TOPrS or any other Indebtedness prior to the
indefeasible payment in full of all Obligations and the termination of the
Revolving Credit Commitments, provided, however, if the Agent has determined as
otherwise provided herein that it is satisfied with the Business Plan and such
Business Plan contemplates making interest payments with respect to Indebtedness
which would otherwise be barred under this Section 8.07, the Borrower shall be
permitted to make such interest payments.
8.08. Federal Reserve Regulations. Permit any Loan or the proceeds of
any Loan under this Agreement to be used for any purpose which violates or is
inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
8.09. Transactions with Affiliates. Except as set forth on Schedule
8.09 hereto, enter into or be a party to, or permit any of their Subsidiaries to
enter into or be a party to, any transaction with any Affiliate of the Borrower
except as otherwise provided herein or in the ordinary course of business in a
manner and to an extent consistent with past practice and necessary or desirable
for the prudent operation of its business for fair consideration and on terms no
less favorable to the Borrower or the Subsidiary as are available from
unaffiliated third parties. Notwithstanding the foregoing, the Borrower may
advance monies to Parent or otherwise reimburse Parent for amounts paid by
Parent as set forth in Section 8.02(g).
8.10. Environmental. Permit the use, handling, generation, storage,
treatment, Release or disposal of any Hazardous Material at property owned or
leased by the Borrower or its Subsidiaries except in material compliance with
Environmental Laws.
8.11. ERISA.
(a) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction described in Section 406 of ERISA or 4975 of the Code for
which a statutory or class exemption is not available or a private exemption has
not previously been obtained from the Department of Labor and that would have a
Material Adverse Effect;
(b) permit, or permit any ERISA Affiliate to permit, any
enforceable Lien from arising under Section 412(n) of the Code;
(c) amend or permit any ERISA Affiliate to amend any Benefit Plan
in a manner that would require security under Section 307 of ERISA; or
(d) request or permit any ERISA Affiliate to request a waiver of
the minimum funding requirements under Section 412 of the Code in respect of any
Benefit Plan.
8.12. Business Plan. The Business Plan for the fiscal year 2000 shall
be delivered to the Agent on or before December 15, 1999 and such plan shall be
in form and substance satisfactory to the Agent and the Lenders in all respects,
in their sole discretion.
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8.13. Interim Financing Order; Final Financing Order; Administrative
Expense Claim Priority; Lien Priority; Payments.
(a) The Borrower shall not at any time seek, consent to or suffer
to exist any modification, stay, vacation or amendment of the Interim Financing
Order or the Final Financing Order, as the case may be, except for modifications
and amendments mutually agreed to by the Lenders, the Borrower and the Agent.
(b) The Borrower shall not at any time suffer to exist a priority
for any administrative expense claim or unsecured claim against the Borrower
(now existing or hereafter arising of any kind or nature whatsoever, including
without limitation any administrative expense claim of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code) equal or superior to the
priority of the Lenders and the Agent in respect of the Obligations, except for
the Carve-Out Expenses (as limited by the Priority Professional Expense Cap).
(c) The Borrower shall not at any time suffer to exist any Lien
on any properties, assets or rights (including, without limitation, Accounts,
Inventory and other Collateral) of the Borrower having a priority equal or
superior to the Liens granted to the Agent and the Lenders, except for Permitted
Liens.
(d) Prior to the date on which the Obligations have been paid in
full in cash and the Current Commitments have been terminated, the Borrower
shall not pay any administrative expense claims except (i) Priority Professional
Expenses, (ii) administrative expense claims incurred in the ordinary course of
the business of the Borrower, in each case to the extent and having the order of
priority set forth in the term "Agreed Administrative Expense Claim Priorities"
and (iii) the fees and expenses of attorneys, accountants, financial advisors
and consultants retained by the Lenders and the Agent.
(e) Notwithstanding the foregoing, the Borrower shall be
permitted to pay as the same may become due and payable (i) administrative
expenses of the kind specified in Section 503(b) of the Bankruptcy Code incurred
in the ordinary course of its business and (ii) compensation and reimbursement
of expenses to professionals allowed and payable under section 330 and 331 of
the Bankruptcy Code, subject after the occurrence and continuance of an Event of
Default to the Priority Professional Expense Cap.
(f) Prior to the date on which the Obligations have been paid in
full in cash and the Current Commitments have been terminated, the Borrower
shall not pay any Indebtedness which existed pre-petition, except for those
described in the pre-petition payroll application and the pre-petition royalty
application provided to CIT's counsel.
8.14. Capital Expenditures. The Borrower will not, and will not permit
any of its Subsidiaries to, make any Capital Expenditures in excess of
$2,000,000 during any fiscal quarter; provided, however, that any portion of
such $2,000,000 amount (i) expended in the first three quarters of any fiscal
year may be rolled over into another quarter of that fiscal year and (ii)
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cumulated and unexpended by the end of the fourth quarter of such fiscal year
shall be deemed extinguished and shall not be available for expenditure in any
other fiscal year.
8.15. Minimum EBITDA. The Borrower shall not permit its EBITDA at any
time for the following periods in excess of the amounts:
Period Ending Amount
March 31, 1999 ($7,800,000)
June 30, 1999 ($15,100,000)
September 30, 1999 ($18,800,000)
December 31,1999 ($9,400,000)
ARTICLE 9.
DEFAULTS
9.01. Events of Default. An Event of Default shall mean the occurrence
or existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of law):
(a) The Borrower shall fail to make any payment of principal
under this Agreement on any Loan or any Reimbursement Obligation when due
or the Borrower shall fail to pay when due any other amount payable under
this Agreement or any other Related Document (including but not limited to
the making of deposits in the Lock Box Accounts or the Letter of Credit
Cash Collateral Account) including any interest or fee due hereunder or
under any other Related Document; or
(b) Any representation or warranty, made by the Borrower or any
Loan Party under this Agreement or any other Related Document or any
statement made by the Borrower or any Loan Party in any financial
statement, certificate report or document furnished to the Agent or the
Lenders pursuant to or in connection with this Agreement or any other
Related Document, shall prove to have been false or misleading in any
material respect as of the time when made (including by omission of
material information necessary to make such representation, warranty or
statement, in light of the circumstances under which it was made, not
misleading); or
(c) The Borrower shall default in the performance or observance
of the covenants contained in (i) Section 7.01, 7.02, 7.03, 7.05, 7.09,
7.10, 7.11, 7.13, 7.16, 7.17 and 7.18 or Article 8 hereof or Section 5 of
the Security Agreement or (ii) Section 7.07 if such default shall have
continued unremedied for a period of five (5) days; or
(d) The Borrower or any Loan Party shall default in the
performance or observance of any other covenant, agreement or duty under
this Agreement or any other
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Related Document (to the extent not otherwise set forth in this Section
9.01) and such default shall have continued unremedied for a period of ten
(10) days; or
(e) The Borrower or any Subsidiary shall have entered into any
consent or settlement decree or agreement or similar arrangement with a
Governmental Authority or any judgment, order, decree or similar action
shall have been entered against any such Person based on or arising from
the violation of or pursuant to any Environmental Law, or the generation,
storage, transportation, treatment, disposal or Release of any Hazardous
Material and, in connection with any of the foregoing, any such Person
shall incur Environmental Liabilities and Costs which are unstayed, due and
owing in an amount in excess of $500,000; or
(f) The Borrower or any Subsidiary shall fail to pay any
principal or interest on any of its Indebtedness (excluding Indebtedness
evidenced by the Notes) in excess of $100,000, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after
the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness, or any other default under any
agreement or instrument relating to any such Indebtedness, or any other
event, shall occur and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
default or event is to accelerate, or to permit the acceleration to the
maturity of such Indebtedness; or any such Indebtedness in excess of such
amount shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof; or
(g) Intentionally left blank
(h) Intentionally left blank
(i) Any material provision of any Loan Document shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by the Borrower, or a proceeding
shall be commenced by the Borrower, or by any Governmental Authority or
other regulatory body having jurisdiction over the Borrower, seeking to
establish the invalidity or unenforceability thereof, or the Borrower shall
deny in writing that the Borrower has any liability or obligation purported
to be created under any Loan Document; or
(j) The Security Agreements or any other Security Document, after
delivery thereof pursuant hereto, shall for any reason fail or cease to
create a valid and perfected and, except to the extent permitted by the
terms hereof or thereof, first priority Lien on or security interest in any
Collateral purported to be covered thereby; or
(k) One or more judgments or orders (other than a judgment
described in subsections (g) or (h) of this Section 9.01) for the payment
of money exceeding any
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applicable insurance or bond coverage by more than $100,000 in the
aggregate shall be rendered against the Borrower or any Subsidiary and
either (i) enforcement proceedings shall have been commenced by any
creditor upon any such judgment or order or (ii) there shall be any period
of five (5) consecutive days during which a stay of enforcement of any such
judgment or order by reason of a pending appeal or otherwise shall not be
in effect unless such judgment or order has been discharged prior to the
expiration of such period; or
(l) [Intentionally left blank]
(m) The Borrower or any of its ERISA Affiliates shall have made a
complete or partial withdrawal from a Multiemployer Plan and as a result of
such complete or partial withdrawal the Borrower or such ERISA Affiliate
incurs a withdrawal liability in an annual amount exceeding $250,000 or a
Multiemployer Plan enters reorganization status under Section 4241 of
ERISA, and, as a result thereof, the Borrower's or such ERISA Affiliate's
annual contribution requirement with respect to such Multiemployer Plan
increases in an annual amount exceeding $250,000;
(n) Any Termination Event with respect to any Benefit Plan shall
have occurred, and, thirty (30) days after notice thereof shall have been
given to the Borrower by Agent, (i) such Termination Event (if correctable)
shall not have been corrected, and (ii) the then current value of such
Benefit Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Benefit Plan by more than $250,000 (or
in the case of a Termination Event involving liability under Section 515,
4062, 4063, 4064, 4069, 4201 or 4204 of ERISA, the liability is in excess
of such amount);
(o) There shall be a Change of Control;
(p) [Intentionally left blank];
(q) There shall be a termination of any Required License
Agreement, any material Required Sublicense, any Required License Consent
or any material Borrower Licensor Agreement;
(r) An order (which has not been stayed) with respect to any of
the Chapter 11 Cases shall be entered by the Bankruptcy Court (i)
appointing a chapter 11 trustee or (ii) appointing an examiner with
enlarged powers relating to the operation of the Borrower's business beyond
those set forth in subsections 1106(a)(3) and 1106(a)(4) of the Bankruptcy
Code; or
(s) an order (which has not been stayed) with respect to the
Chapter 11 Cases shall be entered by the Bankruptcy Court converting all of
the Chapter 11 Cases to chapter 7 of the Bankruptcy Code; or
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(t) an order shall be entered by the Bankruptcy Court confirming
a plan of reorganization in any of the Chapter 11 Cases which does not (x)
contain a provision for termination of all of the Lenders' Commitments and
payment in full in cash of all Obligations and the cash collateralization
or return of all Letters of Credit in a manner satisfactory to the Agent
and the Lenders on or before the effective date of such plan and (y)
provide for the continuation of the Agent's Liens and priorities until such
effective date; or
(u) an order (which has not been stayed) shall be entered by the
Bankruptcy Court dismissing any of the Chapter 11 Cases which does not
contain a provision for termination of all of the Lenders' Commitments and
payment in full in cash of all Obligations and the cash collateralization
or return of all Letters of Credit in a manner satisfactory to the Agent
and the Lenders upon such dismissal; or
(v) an order (which has not been stayed) with respect to any of
the Chapter 11 Cases shall be entered, in each case without the express
prior written consent of the Agent and the Lenders, (i) to revoke, vacate,
reverse, stay, modify, supplement or amend the credit facility herein
contemplated, any Loan Document, the Interim Financing Order or the Final
Financing Order, as the case may be, or (ii) to permit any administrative
expense claim or any claim (now existing or hereafter arising, of any kind
or nature whatsoever) to have administrative priority as to the Borrower
equal or superior to the priority of the Lenders and the Agent in respect
of the Obligations, except for allowed administrative expense claims having
priority over the Obligations to the extent set forth in the definition of
the term "Agreed Administrative Expense Claim Priorities," or (iii) to
grant or permit the grant of a Lien on any Collateral, other than Permitted
Liens hereunder;
(w) an application for any of the orders described in clause (r),
(s), (t), (u) or (v) above shall be made by the Borrower or any other
Person and such application (if made by any Person other than the Borrower)
is not contested by the Borrower in good faith or the relief requested is
granted in an order that is not stayed pending appeal;
(x) an order (which has not been stayed) shall be entered by the
Bankruptcy Court granting relief from the automatic stay to the holder or
holders of any Liens on any assets of the Borrower or the aggregate value
or property subject to such Liens is greater than $100,000;
(y) the Interim Financing Order shall not have occurred within
five (5) Business Days of the Filing Date or the Final Financing Order Date
shall not have occurred by the date which is forty-five (45) days after the
Entry Date;
(z) the Borrower shall attempt to invalidate, reduce or otherwise
impair the Agent's or any Lender's Liens, claims or rights against the
Borrower or to subject any Collateral to assessment pursuant to Section
506(c) of the Bankruptcy Code or any lien
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purported to be created by this Agreement, the Interim Financing Order or
the Final Financing Order in any property shall, for any reason, cease to
be valid or any action is commenced by the Borrower or any Affiliate which
contests the validity, perfection or enforceability of any liens of the
Lenders created by this Agreement, the Interim Financing Order or the Final
Financing Order;
(aa) there shall be any payment on, or application for authority
to pay, any claim or Indebtedness in excess of $100,000 which, other than
as described in Section 8.13(f), arose or accrued prior to the Filing Date,
without the express prior written consent of the Agent and Majority
Lenders; or
(bb) an order (which has not been stayed) shall be entered by the
Bankruptcy Court with respect to the Chapter 11 Cases granting any creditor
of the Borrower relief from the automatic stay which would allow any such
creditor to prosecute and collect from or be paid by the Borrower an amount
in excess of $100,000.
9.02. Consequences of an Event of Default. Notwithstanding the
provisions of Section 362 of the Bankruptcy Code and without order of or
application or motion to the Bankruptcy Court, if an Event of Default shall
occur and be continuing or shall exist the Agent may, and upon the direction of
the Majority Lenders, shall by notice to the Borrower,
(a) declare the Revolving Credit Commitment of each Lender and
the Current Commitment terminated, whereupon the Revolving Credit
Commitment of each Lender and the Current Commitment will terminate
immediately without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived, and an action therefor
shall immediately accrue; or
(b) declare the unpaid principal amount of the Notes, interest
accrued thereon, the total amount of the Letter of Credit Exposure that is
not cash collateralized in accordance with this Agreement, any fees due
hereunder and all other amounts owing by the Borrower hereunder or under
the Notes to be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived, and an action therefor shall immediately accrue; or
(c) give notice to the Borrower of the occurrence and continuance
of an Event of Default; or
(d) any time when there are no Revolving Loans outstanding,
maintain cash collateral (to the extent the Borrower has or receives cash)
equal to 105% of all outstanding Letters of Credit; or
(e) apply all funds deposited in the Letter of Credit Cash
Collateral Account to the payment in whole or in part, of the Obligations;
or
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(f) set-off amounts in the Lock Box, the Letter of Credit Cash
Collateral Account, or any other account under the dominion and control of
the Agent and apply such amounts to the Obligations of the Borrower
hereunder and under the Related Documents.
9.03. Deposit for Letters of Credit. Upon demand by the Letter of
Credit Issuer after the occurrence of any Event of Default, the Borrower shall
deposit with the Agent for the benefit of the Letter of Credit Issuer with
respect to each Letter of Credit then outstanding cash in an amount equal to the
greatest amount for which such Letter of Credit may be drawn. Such deposits
shall be held by the Agent for the benefit of the Letter of Credit Issuer in the
Letter of Credit Cash Collateral Account as security for, and to provide for the
payment of, the Letter of Credit Exposure.
9.04. Certain Remedies. If an Event of Default occurs, each of the
Agent and the Lenders may exercise all rights and remedies which it may have
hereunder or under any Security Document or other Related Document or at law or
in equity or otherwise. All such remedies shall be cumulative and not exclusive.
ARTICLE 10.
MISCELLANEOUS
10.01. Holidays. Except as otherwise provided herein, whenever any
payment or action to be made or taken hereunder or under any Note shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
10.02. Records. The unpaid principal amount of the Notes, the unpaid
interest accrued thereon, the interest rate or rates applicable to such unpaid
principal amount, the duration of such applicability, the Current Commitment,
the Stated Amount of each Letter of Credit, the principal amount of all
Reimbursement Obligations, the Letter of Credit Exposure, Unused Line Fee and
Letter of Credit Fees shall at all times be ascertained from the records of
Agent, which shall be conclusive and binding absent manifest error.
10.03. Amendments and Waivers.
(a) No amendment or modification of any provision of this
Agreement or of any Note or of any other Related Document shall be effective
without the written agreement of the Majority Lenders and the Borrower and no
termination or waiver of any provision of this Agreement or of any of the Notes,
or consent to any departure by the Borrower therefrom, shall in any event be
effective without the written concurrence of the Majority Lenders, which the
Majority Lenders shall have the right to grant or withhold at their sole
discretion; except that any amendment, modification, or waiver (i) of any
provision of Article 2 or 3 which amendment,
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modification or waiver increases the Revolving Credit Commitment of any Lender,
reduces the principal of, or interest on, any Loan or the Reimbursement
Obligations payable to any Lender, reduces the amount of any fee payable for the
account of any Lender, or postpones or extends any date fixed for any payment of
principal of, or interest or fees on, any Loan or Letter of Credit Exposure
payable to any Lender, (ii) that increases the aggregate amount of the Revolving
Credit Commitments, the advance rates or Term Loan Commitments of the Lenders,
(iii) of the definitions of "Revolving Credit Termination Date", "Majority
Lenders" or "Pro Rata Shares", (iv) of the definitions of "Eligible Accounts
Receivable", "Eligible Inventory" or "Borrowing Base" if the effect of such
amendment, modification or waiver is to increase the amount available to be
borrowed by the Borrower, (v) of any provision of this Agreement or any Related
Document that would permit Liens on the Collateral or release all or a
substantial portion of Collateral (except as set forth in Section 11.08 hereof
or except as otherwise permitted herein) or (vi) of the provisions contained in
this Section 10.03, shall be effective only if evidenced by a writing signed by
or on behalf of (A) any Lender affected thereby in the case of the amendments,
modifications or waivers described in clause (i) above or (B) all Lenders in the
case of the amendments, definitions or waivers described in clauses (ii) through
(vi) above. No amendment, modification, termination, or waiver of any provision
of Article 11 or any other provision referring to the Agent shall be effective
without the written concurrence of the Agent. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances except to the extent such notice is expressly required under this
Agreement. Any amendment, modification, waiver or consent effected in accordance
with this Section 10.03 shall be binding on each Lender, each future Lender,
and, if signed by the Borrower, on the Borrower.
(b) Notwithstanding anything to the contrary contained in
subsection 10.03(a), in the event that the Borrower requests that this Agreement
or any other Related Document be amended or otherwise modified in a manner which
would require the unanimous consent of all of the Lenders and such amendment or
other modification is agreed to by the Majority Lenders, then with the consent
of the Borrower and the Majority Lenders, the Borrower and the Majority Lenders
may amend this Agreement without the consent of the Lender or Lenders which did
not agree to such amendment or other modification (collectively the "Minority
Lenders") to provide for (w) the termination of the Revolving Credit Commitment
and/or the Term Loan Commitment of each of the Minority Lenders, (x) the
addition to this Agreement of one or more other Lenders, or an increase in the
Revolving Credit Commitment and/or the Term Loan Commitment of one or more of
the Majority Lenders, so that the Revolving Credit Commitments and/or the Term
Loan Commitment, as applicable, after giving effect to such amendment shall be
in the same aggregate amount as the Revolving Credit Commitments and/or the Term
Loan Commitment, as applicable, immediately before giving effect to such
amendment, (y) if any Loans are outstanding at the time of such amendment, the
making of such additional Loans by such new Lenders or Majority Lenders, as the
case may be, as may be necessary to repay in full the outstanding Loans of the
Minority Lenders immediately before giving effect to such amendment and (z) the
payment of all interest, fees and other Obligations payable or accrued
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in favor of the Minority Lenders and such other modifications to this Agreement
as the Borrower and the Majority Lenders may determine to be appropriate.
(c) No provision of this Agreement relating to Letters of Credit
is effective unless and until the Letter of Credit Amendment is entered into.
10.04. No Implied Waiver; Cumulative Remedies. No course of dealing
and no delay or failure of the Lenders or the Agent in exercising any right,
power or privilege under this Agreement, any Note or any other Related Document
shall affect any other or future exercise thereof or exercise of any other
right, power or privilege; nor shall any single or partial exercise of any such
right, power or privilege or any abandonment or discontinuance of steps to
enforce such a right, power or privilege preclude any further exercise thereof
or of any other right, power or privilege. The rights and remedies of the
Lenders or the Agent under this Agreement, the Notes and the other Related
Documents are cumulative and not exclusive of any rights or remedies which the
Lenders or the Agent have thereunder or at law or in equity or otherwise. The
Lenders or the Agent may exercise their rights and remedies against the Borrower
and the Collateral as the Lenders and the Agent may elect, regardless of the
existence or adequacy of any other right or remedy.
10.05. Notices.
(a) All notices, requests, demands, directions and other
communications (collectively "Notices") under the provisions of this Agreement
or any Note shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, or delivered by recognized
overnight courier and shall be effective (i) if mailed, three (3) days after
being deposited in the mails, (ii) if telecopied, when sent, confirmation
received (with such telecopy properly confirmed by personal delivery or by mail
in accordance with this Section 10.05) and (iii) if delivered, upon delivery
with a receipt therefor. All Notices shall be sent to the applicable party at
the address stated on the signature page hereof together with, in the case of a
letter of credit request and Letter of Credit Application sent pursuant to
Section 3.01(a) hereof, a copy to the Agent at the address for the Agent
provided on the signature page hereof, or in accordance with the last unrevoked
written direction from such party to the other parties hereto.
(b) The Lenders and the Agent may rely, and shall be fully
protected in relying, on any Notice purportedly made by or on behalf of the
Borrower and the Lenders and the Agent shall have no duty to verify the identity
or authority of any Person giving such notice. The preceding sentence shall
apply to all Notices whether or not made in a manner authorized or required by
this Agreement or any other Related Document.
10.06. Expenses; Taxes; Attorneys' Fees; Indemnification. The Borrower
agrees to pay or cause to be paid, on demand, and to save the Agent (and, in the
case of clauses (c) through (m) below, the Lenders) harmless against liability
for the payment of all reasonable out-of-pocket expenses, regardless of whether
the transactions contemplated hereby are consummated, including but not limited
to reasonable fees and expenses of counsel for the Agent
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and, in the case of clauses (c) through (m) below, the Lenders), accounting, due
diligence, periodic field audits, appraisals, investigations, monitoring of
assets, syndication, miscellaneous disbursements, examination, travel, lodging
and meals, incurred by the Agent (and, in the case of clauses (c) through (m)
below, the Lenders) from time to time arising from or relating to: (a) the
negotiation, preparation, execution, delivery, performance and administration of
this Agreement and the other Related Documents, (b) any requested amendments
waivers or consents to this Agreement or the other Related Documents whether or
not such documents become effective or are given, (c) the preservation and
protection of any of the Agent's, and the Lenders' rights under this Agreement
or the other Related Documents, (d) the defense of any claim or action asserted
or brought against the Agent or the Lenders by any Person that arises from or
relates to this Agreement, any other Related Document, the Agent's or the
Lenders' claims against the Borrower, or any and all matters in connection
therewith, (e) the commencement or defense of, or intervention in, any court
proceeding arising from or related to this Agreement or any other Related
Document, (f) the filing of any petition, complaint, answer, motion or other
pleading by the Agent or the Lenders, or the taking of any action in respect of
the Collateral or other security, in connection with this Agreement or any other
Related Document, (g) the protection, collection, lease, sale, taking possession
of or liquidation of, any Collateral or other security in connection with this
Agreement or any other Related Document, (h) any attempt to enforce any Lien on
any Collateral or other security in connection with this Agreement or any other
Related Document, (i) any attempt to collect from the Borrower, (j) the receipt
of any advice with respect to any of the foregoing, (k) all Environmental
Liabilities and Costs arising from or in connection with the past, present or
future operations of the Borrower or its Subsidiaries involving any damage to
real or personal property or natural resources or harm or injury alleged to have
resulted from any Release of Hazardous Materials on, upon or into such property,
(l) any costs or liabilities incurred in connection with the investigation,
removal, cleanup and/or remediation of any Hazardous Materials present or
arising out of the operations of any facility of the Borrower or any of its
Subsidiaries, or (m) any costs or liabilities incurred in connection with any
Environmental Lien. Without limitation of the foregoing or any other provision
of any Related Document: (x) the Borrower agrees to pay all stamp, document,
transfer, recording or filing taxes or fees (including, without limitation,
mortgage recording taxes) and similar impositions now or hereafter determined by
the Agent or any of the Lenders to be payable in connection with this Agreement
or any other Related Document, and the Borrower agrees to save the Agent and the
Lenders harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions, and (y) if the Borrower
either fails to perform any covenant or agreement contained herein or in any
other Related Document, the Agent may itself perform or cause performance of
such covenant or agreement, and the expenses of the Agent incurred in connection
therewith shall be reimbursed on demand by the Borrower. The Borrower agrees to
indemnify and defend the Agent and the Lenders and their directors, officers,
agents, employees and affiliates (collectively, the "Indemnified Parties") from,
and hold each of them harmless against, any and all losses, liabilities, claims,
damages, costs or expenses of any nature whatsoever (including reasonable
attorneys' fees and amounts paid in settlement) incurred by, imposed upon or
asserted against any of them arising out of or by reason of any investigation,
litigation or other proceeding or claim brought or threatened relating to, or
otherwise arising out of or relating to, the execution of this
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Agreement or any other Related Document, the transactions contemplated hereby or
thereby or any Loan or proposed Loan or Letter of Credit or proposed Letter of
Credit hereunder (including, but without limitation, any use made or proposed to
be made by the Borrower or any of its Affiliates of the proceeds of any thereof,
or the delivery or use or transfer of or the payment or failure to pay under any
Loan or Letter of Credit) but excluding any such losses, liabilities, claims,
damages, costs or expenses to the extent finally judicially determined to have
resulted from the gross negligence or willful misconduct of the Indemnified
Party.
10.07. Application. Except to the extent, if any, expressly set forth
in this Agreement or in the Related Documents, the Agent and the Lenders shall
have the right to apply any payment received or applied by it in connection with
the Obligations to such of the Obligations then due and payable as it may elect.
10.08. Severability. The provisions of this Agreement are intended to
be severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
10.09. Governing Law. This Agreement and each of the Notes shall be
deemed to be contracts entered into in the State of New York and governed by the
laws of the State of New York, without regard to choice of law principles, and
for all purposes, other than as governed by the Bankruptcy Code, shall be
governed by and construed and enforced in accordance with the laws of said
State.
10.10. Prior Understandings. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties hereto
relating to the transactions provided for herein.
10.11. Duration; Survival. All representations and warranties of the
Borrower contained herein or made in connection herewith shall survive the
making of the Loans and the issuance of any Letter of Credit and shall not be
waived by the execution and delivery of this Agreement, the Notes or any other
Related Document, any investigation by or knowledge of the Agent, or the
Lenders, the making of any Loan or the issuance of any Letter of Credit
hereunder, or any other event whatsoever. All covenants and agreements of the
Borrower contained herein shall continue in full force and effect from and after
the date hereof so long as the Borrower may borrow hereunder and until the
Obligations have been paid in full and no Letters of Credit remain outstanding.
Without limitation, it is understood that all obligations of the Borrower to
make payments to or indemnify the Agent, and the Lenders (including, without
limitation, obligations arising under Section 10.06 hereof) shall survive the
payment in full of the Notes and all Reimbursement Obligations and of all other
obligations of the Borrower thereunder and hereunder.
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10.12. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
10.13. Assignments; Participations.
(a) Each Lender may with the written consent of the Agent, which
consent shall not be unreasonably withheld, assign to one or more commercial
banks or other financial institutions a portion of its rights and obligations
under this Agreement (including, without limitation, a portion of its Revolving
Credit Commitment, a portion of its Term Loan Commitment, the Loans owing to it
and its rights and obligations as a Lender with respect to Letters of Credit)
and the other Related Documents; provided, however, that (i) each such
assignment shall be in a principal amount of not less than $10,000,000 and in
multiples of $5,000,000 in excess thereof (or the remainder of such Lender's
Revolving Credit Commitment, Term Loan Commitment or Term Loan), (ii) no such
assignment shall be made, other than by CIT, and (iii) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register (as hereinafter defined), an Assignment and
Acceptance. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (A) the
assignee thereunder shall be a party hereto and to the other Related Documents
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
(including, without limitation, the obligation to participate in Letters of
Credit) of a Lender hereunder and thereunder and (B) the assigning Lender shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement.
(b) By executing and delivering an Assignment and Acceptance, the
assignor 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, the 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
any other Related Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Related
Document furnished pursuant hereto; (ii) the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any of its Subsidiaries or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other Related Document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Related Documents, together with such other documents and information 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 assigning Lender, the Agent or any 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 and the other Related Documents; (v) such
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assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Related
Documents as are delegated to the Agent by the terms thereof together with such
powers 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 and the other Related Documents are required to be
performed by it as a Lender.
(c) The Agent shall maintain at its address referred to on the
signature page hereto, a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Revolving Credit Commitment and Term Loan Commitment of, and
principal amount of the Loans owing to and the participation interest in the
Letters of Credit of, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender, an assignee Lender together with the Note(s) subject to
such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit D hereto, (i) accept such
Assignment and Acceptance, (ii) give prompt notice thereof to the Borrower and
(iii) record the information contained therein in the Register. Within five
Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent in exchange for any surrendered
Note a new Note to the order of such assignee Lender in an aggregate principal
amount equal to the Revolving Credit Commitment and/or, the Term Loan
Commitment, as applicable, assumed by it pursuant to such Assignment and
Acceptance, and a new Note to the order of the assigning Lender in an aggregate
principal amount equal to the Revolving Credit Commitment and/or the Term Loan
Commitment, as applicable, retained by it hereunder, in each case prepared by
the Agent. Such new Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, shall be dated the date of
the Agent's acceptance of such assignment and acceptance and shall otherwise be
in substantially the form of Exhibit A-1 or A-2 hereto, as applicable.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Related Documents (including, without limitation,
all or a portion of its Revolving Credit Commitment and/or Term Loan Commitment,
and the Loans owing to it and its participation in Letters of Credit); provided
that (i) such Lender's obligations under this Agreement (including, without
limitation, its Revolving Credit Commitment hereunder) and the other Related
Documents shall remain unchanged; (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
and the Borrower, the Agent and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Related Documents; and (iii) a
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participant shall not be entitled to require such Lender to take or omit to take
any action hereunder except (A) action directly effecting an extension of the
maturity dates or decrease in the principal amount of the Loans or Reimbursement
Obligations, or (B) action directly effecting an extension of the due dates of
or a decrease in the rate of interest payable on the Loans or the fees payable
under this Agreement, or (C) actions directly effecting a release of all or a
substantial portion of the Collateral (except as set forth in Section 11.08
hereof or any Related Document).
(f) Notwithstanding the foregoing provisions of this Section
10.13, each Lender may at any time sell, assign, transfer, or negotiate all or
any part of its rights and obligations under this Agreement and the Related
Documents to any Affiliate of such Lender.
10.14. Successors and Assigns. This Agreement and the other Related
Documents shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns except that the Borrower may not
assign or transfer any of its rights hereunder or thereunder without the prior
written consent of all of the Lenders.
10.15. Confidentiality. Upon delivering to any Lender, or the Agent,
or permitting any Lender, or the Agent to inspect, any written information
pursuant to this Agreement or the other Related Documents, each Lender, and the
Agent shall treat such information as confidential. Subject to the other
provisions of this Section 10.15, each Lender and the Agent may disclose
confidential information to its officers, directors, employees, attorneys,
accountants or other professionals engaged by any Lender and the Agent only
after determining that such third party has been instructed to hold such
information in confidence to the same extent as if it were a Lender.
Notwithstanding the foregoing, the provisions of this Section 10.15 shall not
apply to information within any one of the following categories or any
combination thereof: (i) information the substance of which, at the time of
disclosure by any Lender or the Agent, has been disclosed to or is known to any
creditor (other than information as to which such creditor is then under an
obligation of nondisclosure), or any Person including by virtue of any filings
with the Bankruptcy Court other than (A) a director, officer, employee or agent
of any of the Borrower or a professional engaged by the Borrower or (B) a Person
who is then under an obligation of nondisclosure (otherwise than as a
consequence of a wrongful act of any Lender or the Agent), (ii) information
which any Lender or the Agent had in its possession prior to receipt thereof
from the disclosing party, or (iii) information received by any Lender or the
Agent from a third party having no obligations of nondisclosure with respect
thereto. Nothing contained in this Sec tion 10.15 shall prevent any disclosure:
(x) believed in good faith by any Lender and Agent to be required by any law or
guideline or interpretation or application thereof by any Governmental
Authority, arbitrator or grand jury charged with the interpretation or
administration thereof or compliance with any request or directive of any
Governmental Authority, arbitrator or grand jury (whether or not having the
force of law), (y) determined by counsel for any Lender, or the Agent to be
necessary or advisable in connection with enforcement or preservation of rights
under or in connection with this Agreement or any other Related Document or (z)
of any information which has been made public by a Person other than any Lender,
or Agent. The Lenders and the Agent shall have the right to disclose any
confidential information described in this Section 10.15 to the Letter of Credit
Issuer and to an assignee or prospective assignee or to a participant or
prospective participant in Loans hereunder, provided that the assigning or
selling Lender shall have obtained from such assignee or
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prospective assignee or participant or prospective participant a written
agreement to hold such information in confidence to the same extent as if it
were a Lender.
10.16. Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE AGENT, EACH LENDER AND THE BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY OTHER RELATED DOCUMENT, ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS, OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE AGENT, AND THE LENDERS TO ENTER INTO THIS
AGREEMENT.
10.17. Right of Setoff. Upon the occurrence and during the continuance
of any Event of Default any Lender, the Agent and the Letter of Credit Issuer
may, and is hereby authorized to, at any time from time to time, without notice
to the Borrower (any such notice being expressly waived by the Borrower) and to
the fullest extent permitted by law, set off and apply any and all deposits
(general or special, time or demand, provision or final) at any time held and
other Indebtedness at any time owing by such Lender, the Agent or the Letter of
Credit Issuer to or for the credit or the account of the Borrower against any
and all Obligations of the Borrower now or hereafter existing under the Loan
Documents, irrespective of whether or not any Lender, the Agent and the Letter
of Credit Issuer shall have made any demand hereunder or thereunder and although
such Obligations may be contingent or unmatured. Each Lender, the Agent and the
Letter of Credit Issuer agrees promptly to notify the Borrower after any such
setoff and application made by such Lender, the Agent or the Letter of Credit
Issuer; provided, however, that the failure to give such notice shall not affect
the validity of such setoff and application. The rights of each Lender, the
Agent and the Letter of Credit Issuer under this Section 10.17 are in addition
to the other rights and remedies (including, without limitation, other rights of
setoff under applicable law or otherwise) which such Lender, the Agent or the
Letter of Credit Issuer may have.
10.18. Headings. Section headings herein are included for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
10.19. Consent to Jurisdiction. To the extent that the Borrower has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the other Loan Documents.
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10.20. Termination.
10.20A Termination of this Agreement. Subject to Section 10.20B below,
the Borrower or the Majority Lenders may terminate this Agreement as of the next
occurring Revolving Credit Termination Date by giving the other at least sixty
(60) Business Days' prior written notice of termination.
10.20B Termination Upon an Event of Default. Notwithstanding the
foregoing, and subject to Section 9.02 hereof, the Agent may, and if required by
the Majority Lenders to do so shall, terminate this Agreement immediately upon
the occurrence of an Event of Default.
10.20C Maturity of Obligations Upon Termination. All Obligations shall
become due and payable as of any termination under this Agreement and, pending a
final accounting, if the Agent determines in its good faith judgment that there
is a reasonable basis for doing so, the Agent may withhold any balances in the
Borrower's account (unless supplied with an indemnity satisfactory to the Agent)
to cover all of the Obligations then due and payable hereunder. All of the
Lenders' and the Agent's rights, liens and security interests shall continue
after any termination until payment in full of all Loans and other amounts then
due and payable hereunder at the date of such termination.
10.20D Termination by Lenders. All or any Lender's obligations under
this Agreement shall terminate with respect to such Lender on the Initial
Termination Date by such Lender giving the Agent, the Borrower and the other
Lenders at least ninety (90) days' prior written notice of termination. Within
sixty (60) days of receipt of such notice from any Lender, the Agent shall
either: (i) give notice to the Borrower of termination of this Agreement in
accordance with the terms hereof and thereof, in which event the obligations of
the Lenders hereunder and thereunder shall terminate as of the Initial
Termination Date, or (ii) if the other Lenders so elect, they shall have the
right to purchase the terminating Lender's or Lenders' pro rata share of its or
their interest hereunder for the full amount thereof on a pro rata basis among
such electing Lenders, together with any accrued interest. Termination of this
Agreement by any Lender as herein provided shall not affect the Lenders'
respective rights and obligations under this Agreement incurred prior to the
effective date of termination as set forth in the preceding sentence.
ARTICLE 11.
THE AGENT
11.01. Appointment. Each Lender (and each subsequent holder of any
Note by its acceptance thereof) hereby irrevocably appoints and authorizes CIT,
in its capacity as Agent (i) to receive on behalf of each Lender any payment of
principal of or interest on the Notes outstanding hereunder and all other
amounts accrued hereunder for the account of the Lenders and paid to the Agent,
and, subject to Section 2.03 hereof, to distribute promptly to each Lender its
pro rata share of all payments so received, (ii) to distribute to each Lender
copies of all material
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notices and agreements received by the Agent and not required to be delivered to
each Lender pursuant to the terms of this Agreement, provided that the Agent
shall not have any liability to the Lenders for the Agent's inadvertent failure
to distribute any such notice or agreements to the Lenders, and (iii) subject to
Section 10.03 hereof, to take such action as the Agent deems appropriate on its
behalf to administer the Loans, Letters of Credit and the Loan Documents and to
exercise such other powers delegated to the Agent by the terms hereof or the
Loan Documents (including, without limitation, the power to give or to refuse to
give notices, waivers, consents, approvals and instructions and the power to
make or to refuse to make determinations and calculations) together with such
powers as are reasonably incidental thereto to carry out the purposes hereof and
thereof. As to any matters not expressly provided for by this Agreement and the
other Loan Documents (including, without limitation, enforcement or collection
of the Notes), the Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders, and such instructions of the Majority
Lenders shall be binding upon all Lenders and all holders of Notes; provided,
however, that the Letter of Credit Issuer shall not be required to refuse to
honor a drawing under any Letter of Credit and the Agent shall not be required
to take any action which, in the reasonable opinion of the Agent, exposes the
Agent to liability or which is contrary to this Agreement or any Loan Document
or applicable law.
11.02. Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
Related Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement
or any Related Document a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the Related Documents, express or implied,
is intended to or shall be construed to impose upon the Agent any obligations in
respect of this Agreement or any of the Related Documents except as expressly
set forth herein or therein. Each Lender shall make its own independent
investigation of the financial condition and affairs of the Borrower in
connection with the making and the continuance of the Loans hereunder and with
the issuance of the Letters of Credit and shall make its own appraisal of the
creditworthiness of the Borrower and the value of the Collateral, and the Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the initial Credit Extension hereunder
or at any time or times thereafter, provided that, upon the reasonable request
of a Lender, the Agent shall provide to such Lender any documents or reports
delivered to the Agent by the Borrower pursuant to the terms of this Agreement
or any Related Document. If the Agent seeks the consent or approval of the
Majority Lenders to the taking or refraining from taking any action hereunder,
the Agent shall send notice thereof to each Lender. The Agent shall promptly
notify each Lender any time that the Majority Lenders have instructed the Agent
to act or refrain from acting pursuant hereto.
11.03. Rights, Exculpation, Etc. The Agent and its directors,
officers, agents or employees shall not be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Loan Documents, except for their own gross negligence or willful
misconduct as determined by a final judgment of a court of competent
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jurisdiction. Without limiting the generality of the foregoing, the Agent (i)
may treat the payee of any Note as the holder thereof until the Agent receives
written notice of the assignment or transfer thereof, pursuant to Section 10.13
hereof, signed by such payee and in form satisfactory to the Agent: (ii) may
consult with legal counsel (including, without limitation, counsel to the Agent
or counsel to the Borrower), independent public accountants, and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, certificates,
warranties or representations made in or in connection with this Agreement or
the other Loan Documents; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents; (iv) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement or the other Loan
Documents on the part of any Person, the existence or possible existence of any
Potential Default or Event of Default, or to inspect the Collateral or other
property (including, without limitation, the books and records) of any Person;
(v) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (vi) shall not be deemed to have made any representation
or warranty regarding the existence, value or collectibility of the Collateral,
the existence, priority or perfection of the Agent's Lien thereon, or the
Borrowing Base or any certificate prepared by the Borrower in connection
therewith, nor shall the Agent be responsible or liable to the Lenders for any
failure to monitor or maintain the Borrowing Base or any portion of the
Collateral. The Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith pursuant to Sec tion 2.08(c) hereof, and if
any such apportionment or distribution is subsequently determined to have been
made in error the sole recourse of any Lender to whom payment was due but not
made shall be to recover from other Lenders any payment in excess of the amount
which they are determined to be entitled. The Agent may at any time request
instructions from the Lenders with respect to any actions or approvals which by
the terms of this Agreement or of any of the Related Documents the Agent is
permitted or required to take or to grant, and if such instructions are promptly
requested, the Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval under any of the Related Documents until it
shall have received such instructions from the Majority Lenders. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
under this Agreement, any Note, or any of the other Related Documents in
accordance with the instructions of the Majority Lenders.
11.04. Reliance. The Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Related Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it.
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11.05. Indemnification. To the extent that the Agent is not reimbursed
and indemnified by the Borrower in accordance with this Agreement, the Lenders
will reimburse and indemnify the Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by, or asserted against the Agent in any way relating to
or arising out of this Agreement or any of the Related Documents or any action
taken or omitted by the Agent under this Agreement or any of the Related
Documents, on a pro rata basis, including, without limitation, advances and
disbursements made pursuant to Section 11.08 hereof; provided, however, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements for which there has been a final judicial determination that such
resulted from the Agent's gross negligence or willful misconduct. The
obligations of the Lenders under this Sec tion 11.05 shall survive the payment
in full of the Loans and Reimbursement Obligations and the termination of this
Agreement.
11.06. CIT Individually. With respect to its Pro Rata Share of the
Revolving Credit Commitments hereunder, the Loans made by it and the Notes
issued to or held by it, CIT shall have and may exercise the same rights and
powers hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender or holder of a Note. The
terms "Lenders" or "Majority Lenders" or any similar term shall, unless the
context clearly otherwise indicates, include CIT in its individual capacity as a
Lender or one of the Majority Lenders. CIT and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with the Borrower or any of its Subsidiaries as if it were not
acting as Agent pursuant hereto without any duty to account to the Lenders. The
Lenders acknowledge and agree that The Dai-Ichi Kangyo Bank, Limited, New York
Branch, as the Letter of Credit Issuer, is an Affiliate of the Agent, and may
take actions which are not in the interests of, or may have an adverse effect
on, the Lenders, or may omit to take actions which would be in the interests of,
or would have a favorable effect on, the Lenders, and the Lenders will not
assert any claim against the Agent based on actions or omissions by the Letter
of Credit Issuer and will not assert any such actions or omissions as a defense
or offset to the Lenders' obligations hereunder.
11.07. Successor Agent.
(a) The Agent may resign from the performance of all its
functions and duties hereunder and under the other Related Documents at any time
by giving at least thirty (30) Business Days' prior written notice to the
Borrower and each Lender. Such resignation shall take effect upon the acceptance
by a successor Agent of appointment pursuant to clauses (b) and (c) herein below
or as otherwise provided below.
(b) Upon any such notice of resignation, the Majority Lenders
shall appoint a successor Agent who shall be reasonably satisfactory to the
Borrower. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of
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the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement and the other Related Documents. After any
Agent's resignation hereunder as the Agent, the provisions of this Article 11
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement and the other Related Documents.
(c) If a successor Agent shall not have been so appointed within
said thirty (30) Business Day period, the retiring Agent, with the consent of
the Borrower, shall then appoint a successor Agent who shall serve as Agent
until such time, if any, as the Majority Lenders, with the consent of the
Borrower, appoint a successor Agent as provided above.
11.08. Collateral Matters.
(a) The Agent may from time to time, make such disbursements and
advances ("Agent Advances") which the Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the Collateral or any portion
thereof, to enhance the likelihood or maximize the amount of repayment by the
Borrower of the Loans and other Obligations or to pay any other amount
chargeable to the Borrower pursuant to the terms of this Agreement, including,
without limitation, costs, fees and expenses as described in Section 10.06
hereof. Such Agent Advances may be in excess of (x) the Borrowing Base or (y)
the Current Commitment ((y) the "Overline Advance") (subject to a (i) $2,000,000
limitation on the Overline Advance during the period the Interim Amount is in
effect and (ii) limitation on such Overline Advance, if and to the extent so
limited in the Final Financing Order. The Agent Advances shall be repayable on
demand and be secured by the Collateral and shall constitute Revolving Loans and
Obligations hereunder. The Agent shall notify each Lender and the Borrower in
writing of each such Agent Advance, which notice shall include a description of
the purpose of such Agent Advance. Without limitation to its obligations
pursuant to Section 11.05 hereof, each Lender agrees that it shall make
available to the Agent, upon the Agent's demand, in Dollars in immediately
available funds, the amount equal to such Lender's Share of each such Agent
Advance which is in excess of the Borrowing Base (but not the Overline Advance).
If such funds are not made available to the Agent by such Lender the Agent shall
be entitled to recover such funds, on demand from such Lender together with
interest thereon, for each day from the date such payment was due until the date
such amount is paid to the Agent, at the customary rate set by the Agent for the
correction of errors among banks for three (3) Business Days and thereafter at
the Regular Rate. In the event an Agent Advance is an Overline Advance, a Lender
may but is not required to make available to the Agent such Lender's Share of
such Agent Advance. If such Lender declines to do so, then the Agent shall be
paid first with respect to any Overline Advance before any payments are made to
any Lender with respect to any Revolving Loans.
(b) The Lenders hereby irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral upon termination of the Revolving Credit Commitments
and payment and satisfaction of all Loans, Reimbursement Obligations, other
Letter of Credit Exposure (whether or not due) and all other Obligations which
have matured and which the Agent has been notified in writing are then due and
payable; or constituting property being sold or disposed of if the Borrower
certifies to the
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Agent that the sale or disposition is made in compliance with Section 8.04(b)
hereof (and the Agent may rely conclusively on any such certificate, without
further inquiry); or constituting property in which the Borrower owned no
interest at the time the Lien was granted or at any time thereafter.
(c) Without in any manner limiting the Agent's authority to act
without any specific or further authorization or consent by the Majority Lenders
(as set forth in Sec tion 11.08(b) hereinabove), each Lender agrees to confirm
in writing, upon request by the Agent, the authority to release Collateral
conferred upon the Agent under Section 11.08(b) hereinabove. So long as no Event
of Default is then continuing, upon receipt by the Agent of confirmation from
the Majority Lenders of its authority to release any particular item or types of
Collateral, and upon at least five (5) Business Days' prior written request by
the Borrower the Agent shall (and is hereby irrevocably authorized by the
Lenders to) execute such documents as may be necessary to evidence the release
of the Liens granted to the Agent for the benefit of the Lenders 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 obligations 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 Lien upon (or obligations of the Borrower in respect of) all interests in
the Collateral retained by the Borrower.
(d) The Agent shall have no obligation whatsoever to any Lenders
to assure that the Collateral exists or is owned by the Borrower or is cared
for, protected or insured or has been encumbered or that the Lien granted to the
Agent pursuant to the Security Documents has been properly or sufficiently or
lawfully created, perfected, protected or enforced or is 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 in this Section
11.08 or in any of the Related 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 as one of the Lenders and that
the Agent shall have no duty or liability whatsoever to any other Lender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Agreement as of the date first
above written.
GOLDEN BOOKS PUBLISHING COMPANY, INC., a
debtor and debtor-in-possession
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
Address for Notices:
Golden Books Publishing Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to (for information purposes only):
Proskauer Rose LLP
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
AGENT AND LENDER
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
96
Address for Notices:
The CIT Group/Business Credit, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to (for information purposes only):
▇▇▇▇, Scholer, Fierman,
▇▇▇▇ & Handler, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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97
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS; CONSTRUCTION......................................1
1.01. Certain Definitions............................................1
1.02. Construction..................................................24
1.03. Accounting Principles.........................................25
ARTICLE 2. THE LOANS.....................................................25
2.01. Term Loan and Revolving Loans.................................25
2.02. Notes.........................................................26
2.03. Notice of Borrowing; Making of Loans..........................26
2.04. Reduction of Revolving Credit Commitment; Mandatory
Prepayment; Optional Prepayment...............................29
2.05. Interest Rate.................................................31
2.06. Interest Payment Dates........................................31
2.07. Amortization..................................................31
2.08. Payments......................................................31
2.09. Use of Proceeds...............................................34
2.10. Reserve Requirements; Capital Adequacy Circumstances..........34
2.11. Indemnity.....................................................35
2.12. Sharing of Setoffs............................................36
2.13. Taxes.........................................................36
ARTICLE 3. LETTERS OF CREDIT.............................................38
3.01. Letters of Credit.............................................38
3.02. Participations................................................42
ARTICLE 4. BORROWING BASE................................................43
4.01. Condition of Lending and Assisting in Establishing or
Opening Letters of Credit.....................................43
4.02. Mandatory Prepayment..........................................43
4.03. Rights and Obligations Unconditional..........................43
4.04. Borrowing Base Certificate....................................43
4.05. General Provisions............................................44
ARTICLE 5. CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING..........................................44
5.01. Conditions Precedent to Effectiveness.........................44
5.02. Conditions Precedent to Revolving Loans and Letters of
Credit and to Loans in excess of the Interim Amount...........49
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ARTICLE 6. REPRESENTATIONS AND WARRANTIES................................51
6.01. Organization, Good Standing, Etc..............................51
6.02. Authorization, Etc............................................51
6.03. Governmental Approvals........................................51
6.04. Enforceability of Loan Documents..............................52
6.05. Subsidiaries..................................................52
6.06. Litigation....................................................52
6.07. Financial Condition...........................................52
6.08. Compliance with Law, Etc......................................53
6.09. ERISA.........................................................53
6.10. Taxes, Etc....................................................53
6.11. Regulation G, T, U or X.......................................54
6.12. Nature of Business............................................54
6.13. Adverse Agreements, Etc.......................................54
6.14. Holding Company and Investment Company Acts...................54
6.15. Permits, Etc..................................................54
6.16. Priority, Title...............................................54
6.17. Full Disclosure...............................................55
6.18. Operating Lease Obligations...................................55
6.19. Environmental Matters.........................................55
6.20. Schedules.....................................................56
6.21. Insurance.....................................................56
6.22. [Intentionally left blank]....................................56
6.23. Security Documents............................................56
6.24. Financial Accounting Practices, Etc...........................56
6.25. No Material Adverse Change....................................56
6.26. Real Estate; Leases...........................................57
6.27. Location of Bank Accounts.....................................58
6.28. No Event of Default...........................................58
6.29. Capitalized Leases............................................58
6.30. Tradenames....................................................58
6.31. [Intentionally left blank.....................................58
6.32. Inventory.....................................................58
6.33. Intellectual Property.........................................58
6.34. Material Contracts............................................59
6.35. Labor Relations; Collective Bargaining Agreements.............59
6.36. Accounts......................................................59
6.37. Appointment of Trustee or Examiner; Liquidation...............60
ARTICLE 7. AFFIRMATIVE COVENANTS.........................................60
7.01. Reporting Requirements........................................60
7.02. Compliance with Laws, Etc.....................................64
7.03. Preservation of Existence, Etc................................65
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7.04. Keeping of Records and Books of Account.......................65
7.05. Inspection Rights.............................................65
7.06. Maintenance of Properties, Etc................................65
7.07. Maintenance of Insurance......................................65
7.08. Environmental.................................................66
7.09. Further Assurances............................................67
7.10. Borrowing Base................................................67
7.11. Change in Collateral; Collateral Records......................67
7.12. Financial Accounting Practices, Etc...........................68
7.13. Lock Box Accounts.............................................68
7.14. Additional Subsidiaries.......................................69
7.15. ERISA.........................................................69
7.16. Right to Sell Inventory.......................................69
7.17. Intellectual Property.........................................69
7.18. Liens.........................................................69
ARTICLE 8. NEGATIVE COVENANTS............................................70
8.01. Liens, Etc....................................................70
8.02. Indebtedness..................................................72
8.03. Guarantees, Etc...............................................73
8.04. Merger, Consolidation, Sale of Assets, Etc....................73
8.05. Change in Nature of Business..................................74
8.06. Loans, Advances and Investments, Etc..........................74
8.07. Dividends, Distributions, Prepayments, Etc....................74
8.08. Federal Reserve Regulations...................................75
8.09. Transactions with Affiliates..................................75
8.10. Environmental.................................................75
8.11. ERISA.........................................................75
8.12. Business Plan.................................................75
8.13. Interim Financing Order; Final Financing Order; Administrative
Expense Claim Priority; Lien Priority; Payments...............76
8.14. Capital Expenditures..........................................76
8.15. Minimum EBITDA................................................77
ARTICLE 9. DEFAULTS......................................................77
9.01. Events of Default.............................................77
9.02. Consequences of an Event of Default...........................81
9.03. Deposit for Letters of Credit.................................82
9.04. Certain Remedies..............................................82
ARTICLE 10. MISCELLANEOUS.................................................82
10.01. Holidays......................................................82
10.02. Records.......................................................82
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10.03. Amendments and Waivers........................................82
10.04. No Implied Waiver; Cumulative Remedies........................84
10.05. Notices.......................................................84
10.06. Expenses; Taxes; Attorneys' Fees; Indemnification.............84
10.07. Application...................................................86
10.08. Severability..................................................86
10.09. Governing Law.................................................86
10.10. Prior Understandings..........................................86
10.11. Duration; Survival............................................86
10.12. Counterparts..................................................87
10.13. Assignments; Participations...................................87
10.14. Successors and Assigns........................................89
10.15. Confidentiality...............................................89
10.16. Waiver of Jury Trial..........................................90
10.17. Right of Setoff...............................................90
10.18. Headings......................................................90
10.19. Consent to Jurisdiction.......................................90
10.20. Termination...................................................91
10.20A Termination of this Agreement.................................91
10.20B Termination Upon an Event of Default..........................91
10.20C Maturity of Obligations Upon Termination......................91
10.20D Termination by Lenders........................................91
ARTICLE 11. THE AGENT.....................................................91
11.01. Appointment...................................................91
11.02. Nature of Duties..............................................92
11.03. Rights, Exculpation, Etc......................................92
11.04. Reliance......................................................93
11.05. Indemnification...............................................94
11.06. CIT Individually..............................................94
11.07. Successor Agent...............................................94
11.08. Collateral Matters............................................95
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EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Term Loan Note
Exhibit B-1 - Form of Security Agreement
Exhibit B-2 - Form of Security Agreement and Mortgage -
Copyrights and Trademarks
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Assignment and Acceptance
Exhibit E - Form of Notice of Borrowing
Exhibit F - Form of Guaranty
Exhibit G - Interim Financing Order
SCHEDULES
Schedule 1.01 - Required License Agreements
Schedule 1.01(A) - Inventory Locations
Schedule 1.01(B) - Premises
Schedule 1.01(C) - Revolving Credit Commitment Amount
Schedule 1.01(D) - Term Loan Commitment Amount
Schedule 1.01(E) - Borrower Licensor Agreement
Schedule 1.01(F) - Required Sublicenses
Schedule 6.05 - Description of Subsidiaries
Schedule 6.06 - Litigation
Schedule 6.09 - Plans
Schedule 6.10 - Taxes
Schedule 6.18 - Operating Lease Obligations
Schedule 6.19 - Environmental Matters
Schedule 6.21 - Insurance
Schedule 6.26 - Real Property Owned and Leased
Schedule 6.27 - Location of Bank Accounts
Schedule 6.29 - Capital Lease Obligations
Schedule 6.30 - Tradenames
Schedule 6.34 - Material Contracts
Schedule 6.35 - List of Collective Bargaining Agreements
Schedule 6.36 - Location of Books and Records
Schedule 7.13 - Lock Box Accounts
Schedule 8.01 - Existing Liens
Schedule 8.02 - Indebtedness
Schedule 8.03 - Guarantees
Schedule 8.06 - Investments
Schedule 8.09 - Transactions with Affiliates
v
