Exhibit 10.2
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CREDIT AGREEMENT
Dated as of September 24, 1999
among
ICON HEALTH & FITNESS, INC.,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender,
and
FLEET NATIONAL BANK,
as Syndication Agent and Lender
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TABLE OF CONTENTS
Page
----
1. AMOUNT AND TERMS OF CREDIT................................................2
1.1. Credit Facilities.................................................2
1.2. Letters of Credit.................................................8
1.3. Prepayments.......................................................8
1.4. Use of Proceeds..................................................12
1.5. Interest and Applicable Margins..................................12
1.6. Eligible Accounts................................................16
1.7. Eligible Inventory...............................................19
1.8. Cash Management Systems..........................................20
1.9. Fees.............................................................21
1.10. Receipt of Payments.............................................21
1.11. Application and Allocation of Payments..........................22
1.12. Loan Account and Accounting.....................................23
1.13. Indemnity.......................................................24
1.14. Access..........................................................25
1.15. Taxes...........................................................26
1.16. Capital Adequacy; Increased Costs; Illegality...................26
1.17. Single Loan.....................................................28
2. CONDITIONS PRECEDENT.....................................................28
2.1. Conditions to the Initial Loans..................................28
2.2. Further Conditions to Each Loan..................................30
3. REPRESENTATIONS AND WARRANTIES...........................................31
3.1. Corporate Existence; Compliance with Law.........................31
3.2. Executive Offices, Collateral Locations, FEIN....................31
3.3. Corporate Power, Authorization, Enforceable Obligations..........32
3.4. Financial Statements and Projections.............................32
3.5. Material Adverse Effect..........................................33
3.6. Ownership of Property; Liens.....................................33
3.7. Labor Matters....................................................34
3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness.....................................................35
3.9. Government Regulation............................................35
3.10. Margin Regulations..............................................35
3.11. Taxes...........................................................35
3.12. ERISA and Canadian Pension and Benefit Plans....................36
3.13. No Litigation...................................................37
3.14. Brokers.........................................................37
3.15. Intellectual Property...........................................38
3.16. Full Disclosure.................................................38
3.17. Environmental Matters...........................................38
3.18. Insurance.......................................................39
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3.19. Deposit and Disbursement Accounts...............................39
3.20. Government Contracts............................................39
3.21. Customer and Trade Relations....................................39
3.22. Agreements and Other Documents..................................40
3.23. Solvency........................................................40
3.24. Year 2000 Representations.......................................40
3.25. Recapitalization................................................40
3.26. Status of New Holdings..........................................41
3.27. Subordinated Debt...............................................41
4. FINANCIAL STATEMENTS AND INFORMATION.....................................41
4.1. Reports and Notices..............................................41
4.2. Communication with Accountants...................................41
5. AFFIRMATIVE COVENANTS....................................................42
5.1. Maintenance of Existence and Conduct of Business.................42
5.2. Payment of Charges...............................................42
5.3. Books and Records................................................43
5.4. Insurance; Damage to or Destruction of Collateral................43
5.5. Compliance with Laws.............................................44
5.6. Canadian Pension and Benefit Plans...............................45
5.7. Supplemental Disclosure..........................................45
5.8. Intellectual Property............................................46
5.9. Environmental Matters............................................46
5.10. Landlords' Agreements, Mortgagee Agreements and Bailee Letters..46
5.11. Interest Rate...................................................47
5.12. Further Assurances..............................................47
5.13. Term Loan C Tax Accrual Periods.................................47
5.14. Year 2000.......................................................48
6. NEGATIVE COVENANTS.......................................................48
6.1. Mergers, Subsidiaries, Etc.......................................48
6.2. Investments; Loans and Advances..................................48
6.3. Indebtedness.....................................................49
6.4. Employee Loans and Affiliate Transactions........................50
6.5. Capital Structure and Business...................................50
6.6. Guaranteed Indebtedness..........................................51
6.7. Liens............................................................51
6.8. Sale of Stock and Assets.........................................51
6.9. ERISA............................................................52
6.10. Financial Covenants.............................................52
6.11. Hazardous Materials.............................................52
6.12. Sale-Leasebacks.................................................52
6.13. Cancellation of Indebtedness....................................52
6.14. Restricted Payments.............................................52
6.15. Change of Corporate Name or Location; Change of Fiscal Year.....53
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6.16. No Impairment of Intercompany Transfers.........................54
6.17. No Speculative Transactions.....................................54
6.18. Leases; Real Estate Purchases...................................54
6.19. Changes Relating to Subordinated Debt and Other Agreements......54
6.20. Holdcos.........................................................54
7. TERM.....................................................................55
7.1. Termination......................................................55
7.2. Survival of Obligations Upon Termination of Financing
Arrangements.....................................................55
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES...................................55
8.1. Events of Default................................................55
8.2. Remedies.........................................................57
8.3. Priority of Payment..............................................58
8.4. Waivers by Credit Parties........................................59
8.5. Receivership.....................................................59
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT......................60
9.1. Assignment and Participations....................................60
9.2. Appointment of Agent.............................................62
9.3. Agents' Reliance, Etc............................................63
9.4. Agents and Affiliates............................................63
9.5. Lender Credit Decision...........................................64
9.6. Indemnification..................................................64
9.7. Successor Agent..................................................64
9.8. Setoff and Sharing of Payments...................................65
9.9. Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert...............................................66
10. SUCCESSORS AND ASSIGNS..................................................68
10.1. Successors and Assigns..........................................68
11. MISCELLANEOUS...........................................................69
11.1. Complete Agreement; Modification of Agreement...................69
11.2. Amendments and Waivers..........................................69
11.3. Fees and Expenses...............................................71
11.4. No Waiver.......................................................73
11.5. Remedies........................................................73
11.6. Severability....................................................73
11.7. Conflict of Terms...............................................73
11.8. Confidentiality.................................................74
11.9. GOVERNING LAW...................................................74
11.10. Notices........................................................75
11.11. Section Titles.................................................75
11.12. Counterparts...................................................76
11.13. WAIVER OF JURY TRIAL...........................................76
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11.14. Press Releases; Etc............................................76
11.15. Reinstatement..................................................76
11.16. Advice of Counsel..............................................77
11.17. No Drafting Presumptions.......................................77
11.18. License........................................................77
iv
INDEX OF APPENDICES
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Closing Checklist
Annex E (Section 4.1(a)) - Financial Statements and Projections
-- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice AddressesAnnex J (from Annex A-
Commitments definition) - Commitments as of Closing Date
Annex K (from Annex A -
Recapitalization Documents
definition) - Recapitalization Documents
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b) - Form of Term Note
Exhibit 1.1(c)(ii) - Form of Swing Line Note
Exhibit 1.1(d) - Form of IP Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Disclosure Schedule 1.1 - Agent's Representatives
Disclosure Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule 3.2 - Executive Offices, Collateral Locations,
FEIN
Disclosure Schedule 3.4(A) - Financial Statements
Disclosure Schedule 3.4(B) - Pro Forma
Disclosure Schedule 3.4(C) - Projections
Disclosure Schedule 3.6 - Real Estate and Leases
Disclosure Schedule 3.7 - Labor Matters
Disclosure Schedule 3.8 - Ventures, Subsidiaries and Affiliates;
Outstanding
Stock
Disclosure Schedule 3.11 - Tax Matters
Disclosure Schedule 3.12 - ERISA Plans
Disclosure Schedule 3.13 - Litigation
Disclosure Schedule 3.15 - Intellectual Property
Disclosure Schedule 3.17 - Hazardous Materials
Disclosure Schedule 3.18 - Insurance
Disclosure Schedule 3.19 - Deposit and Disbursement Accounts
Disclosure Schedule 3.20 - Government Contracts
Disclosure Schedule 3.21 - Relationships with Suppliers
Disclosure Schedule 3.22 - Material Agreements
Disclosure Schedule 5.1 - Trade Names
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Disclosure Schedule 6.3 - Indebtedness
Disclosure Schedule 6.4 - Transactions with Affiliates
Disclosure Schedule 6.7 - Existing Liens
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This CREDIT AGREEMENT (this "Agreement"), dated as of September 24,
1999 among ICON HEALTH & FITNESS, INC., a Delaware corporation ("Borrower"); the
other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation (in its individual capacity, "GE Capital"), for itself, as
Lender, and as Agent for Lenders, FLEET NATIONAL BANK, for itself, as Lender,
and as Syndication Agent for Lenders, and the other Lenders signatory hereto
from time to time.
RECITALS
WHEREAS, Borrower has requested that Lenders extend revolving and
term credit facilities to Borrower of up to Three Hundred Million Dollars
($300,000,000) in the aggregate for the purpose of funding a portion of the
costs of the Recapitalization and to provide (a) working capital financing for
Borrower, (b) funds for other general corporate purposes of Borrower and (c)
funds for certain fees and expenses in connection with the transactions
contemplated hereby; and for these purposes, Lenders are willing to make certain
loans and other extensions of credit to Borrower of up to such amount upon the
terms and conditions set forth herein; and
WHEREAS, Borrower has agreed to secure all of its obligations under
the Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a
security interest in and lien upon all of its existing and after-acquired
personal and real property; and
WHEREAS, HF Holdings, Inc., a Delaware corporation ("New Holdings")
is willing to guarantee all of the obligations of Borrower to Agent and Lenders
under the Loan Documents and to pledge to Agent, for the benefit of Agent and
Lenders, all of the Stock of Borrower to secure such guaranty; and
WHEREAS, the Stock and assets of each direct and indirect domestic
and Canadian Subsidiary of Borrower will be pledged as Collateral for the Loans
and each such Subsidiary will guarantee payment thereof; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A and, for purposes of this Agreement and the
other Loan Documents, the rules of construction set forth in Annex A shall
govern. All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified to this Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1. Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available to Borrower from time to time until the
Commitment Termination Date its Pro Rata Share of advances (each, a
"Revolving Credit Advance"). The Pro Rata Share of the Revolving Loan of
any Revolving Lender shall not at any time exceed its separate Revolving
Loan Commitment. The obligations of each Revolving Lender hereunder shall
be several and not joint. The aggregate amount of Revolving Credit
Advances outstanding shall not exceed at any time the lesser of (A) the
Maximum Amount and (B) the Borrowing Base, in each case less the sum of
the Letter of Credit Obligations and the Swing Line Loan outstanding at
such time ("Borrowing Availability"). Borrowing Availability may be
further reduced by Reserves imposed by Agent in its reasonable credit
judgment. Until the Commitment Termination Date, Borrower may from time to
time borrow, repay and reborrow under this Section 1.1(a). Each Revolving
Credit Advance shall be made on notice by Borrower to one of the
representatives of Agent identified in Schedule 1.1 at the address
specified therein. Those notices must be given no later than (1) noon (New
York time) on the Business Day of the proposed Revolving Credit Advance,
in the case of an Index Rate Loan, or (2) noon (New York time) on the date
which is three (3) Business Days prior to the proposed Revolving Credit
Advance, in the case of a LIBOR Loan. Each such notice (a "Notice of
Revolving Credit Advance") must be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(a)(i), and
shall include the information required in such Exhibit and such other
information as may be required by Agent. If Borrower desires to have the
Revolving Credit Advances bear interest by reference to a LIBOR Rate, it
must comply with Section 1.5(e).
(ii) Except as provided in Section 1.12, Borrower shall
execute and deliver to each Revolving Lender a note to evidence the
Revolving Loan Commitment of that Revolving Lender. Each note shall be in
the principal amount of the Revolving Loan Commitment of the applicable
Revolving Lender, dated the Closing Date and substantially in the form of
Exhibit 1.1(a)(ii) (each a "Revolving Note" and, collectively, the
"Revolving Notes"). Each Revolving Note shall represent the obligation of
Borrower to pay the amount of Revolving Lender's Revolving Loan Commitment
or, if less, such Revolving Lender's Pro Rata Share of the aggregate
unpaid principal amount of all Revolving Credit Advances to Borrower
together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the Revolving Loan and all other non-contingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date.
(iii) Clean Down. Borrower shall cause the outstanding
principal balance of the Swing Line Loan and Revolving Loan to be reduced
to $25,000,000 or less
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for a period of sixty (60) consecutive days or more, during the period of
May 1st through August 31st of each year.
(b) Term Loans.
(i) Subject to the terms and conditions hereof, each Term
Lender agrees to make term loans (individually, "Term Loan A," "Term Loan
B" and "Term Loan C," and collectively, the "Term Loans") on the Closing
Date to Borrower in the original principal amount of its Term Loan A
Commitment, Term Loan B Commitment and/or Term Loan C Commitment, as
applicable. The obligations of each Term Lender hereunder shall be several
and not joint with respect to each Term Loan. The Term Loans shall be
evidenced by promissory notes substantially in the form of Exhibit 1.1(b)
(each a "Term Note" and collectively the "Term Notes"), and, except as
provided in Section 1.12, Borrower shall execute and deliver each Term
Note to the applicable Term Lender. Each Term Note shall represent the
obligation of Borrower to pay the amount of the applicable Term Lender's
Term Loan A Commitment, Term Loan B Commitment or Term Loan C Commitment,
as applicable, together with interest thereon as prescribed in Section
1.5.
(ii) Borrower shall repay the principal amount of Term Loan A
in twenty (20) consecutive quarterly installments on the last day of
February, May, August and November of each year, commencing November 30,
1999, as follows:
Payment Installment
Dates Amounts
------- -----------
November 30, 1999 $681,818
February 29, 2000 $681,818
May 31, 2000 $681,818
August 31, 2000 $681,818
November 30, 2000 $1,363,636
February 28, 2001 $1,363,636
May 31, 2001 $1,363,636
August 31, 2001 $1,363,636
November 30, 2001 $1,363,636
February 28, 2002 $1,363,636
May 31, 2002 $1,363,636
August 31, 2002 $1,363,636
November 30, 2002 $2,045,455
February 28, 2003 $2,045,455
May 31, 2003 $2,045,455
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August 31, 2003 $2,045,455
November 30, 2003 $2,045,455
February 28, 2004 $2,045,455
May 31, 2004 $2,045,455
The final installment due on August 31, 2004 shall be in the
amount of $2,045,455 or, if different, the remaining principal balance of
Term Loan A.
(iii) Borrower shall repay the principal amount of Term Loan B
in twenty-one (21) consecutive quarterly installments on the last day of
February, May, August and November of each year, commencing November 30,
1999, as follows:
Payment Installment
Dates Amounts
------- -----------
November 30, 1999 $275,000
February 29, 2000 $275,000
May 31, 2000 $275,000
August 31, 2000 $275,000
November 30, 2000 $275,000
February 28, 2001 $275,000
May 31, 2001 $275,000
August 31, 2001 $275,000
November 30, 2001 $275,000
February 28, 2002 $275,000
May 31, 2002 $275,000
August 31, 2002 $275,000
November 30, 2002 $275,000
February 28, 2003 $275,000
May 31, 2003 $275,000
August 31, 2003 $275,000
November 30, 2003 $275,000
February 28, 2004 $275,000
May 31, 2004 $275,000
August 31, 2004 $275,000
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The final installment due on November 29, 2004 shall be in the
amount of $74,500,000 or, if different, the remaining principal balance of
Term Loan B.
(iv) Borrower shall repay the principal amount of Term Loan C
in twenty-two (22) consecutive quarterly installments on the first day of
March, June, September and December of each year, commencing December 1,
1999, as follows:
Payment Installment
Dates Amounts
------- -----------
December 1, 1999 $100,000
March 1, 2000 $100,000
June 1, 2000 $100,000
September 1, 2000 $100,000
December 1, 2000 $100,000
March 1, 2001 $100,000
June 1, 2001 $100,000
September 1, 2001 $100,000
December 1, 2001 $100,000
March 1, 2002 $100,000
June 1, 2002 $100,000
September 1, 2002 $100,000
December 1, 2002 $100,000
March 1, 2003 $100,000
June 1, 2003 $100,000
September 1, 2003 $100,000
December 1, 2003 $100,000
March 1, 2004 $100,000
June 1, 2004 $100,000
September 1, 2004 $100,000
December 1, 2004 $100,000
The final installment due on March 1, 2005 shall be in the
amount of $52,900,000 or, if different, the remaining principal balance of
Term Loan C.
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(v) Notwithstanding Section 1.1(b)(ii), (iii) and (iv), the
aggregate outstanding principal balance of the Term Loans shall be due and
payable in full in immediately available funds on the Commitment
Termination Date, if not sooner paid in full.
(vi) Each payment of principal with respect to the Term Loans
shall be paid to Agent for the ratable benefit of each Term Lender,
ratably in proportion to each such Term Lender's respective Term Loan A
Commitment, Term Loan B Commitment or Term Loan C Commitment, as
applicable. Amounts repaid with respect to any Term Loan may not be
reborrowed.
(c) Swing Line Facility.
(i) Agent shall notify the Swing Line Lender upon Agent's
receipt of any Notice of Revolving Credit Advance. Subject to the terms
and conditions hereof, the Swing Line Lender may, in its discretion, make
available from time to time until the Commitment Termination Date advances
(each, a "Swing Line Advance") in accordance with any such notice. The
aggregate amount of Swing Line Advances outstanding shall not exceed at
any time the lesser of (A) the Swing Line Commitment and (B) the lesser of
the Maximum Amount and the Borrowing Base, in each case, less the
outstanding balance of the Revolving Loan at such time ("Swing Line
Availability"). Until the Commitment Termination Date, Borrower may from
time to time borrow, repay and reborrow under this Section 1.1(c). Each
Swing Line Advance shall be made pursuant to a Notice of Revolving Credit
advance delivered by Borrower to Agent in accordance with Section 1.1(a).
Notwithstanding any other provision of this Agreement or the other Loan
Documents, the Swing Line Loan shall constitute an Index Rate Loan. Unless
the Swing Line Lender has received at least one Business Day's prior
written notice from Requisite Revolving Lenders instructing it not to make
a Swing Line Advance, the Swing Line Lender shall, notwithstanding the
failure of any condition precedent set forth in Sections 2.2(a)-(c), be
entitled to fund that Swing Line Advance, and to have each Revolving
Lender make Revolving Credit Advances in accordance with Section
1.1(c)(iii) or purchase participating interests in accordance with Section
1.1(c)(iv). Those notices from Requisite Revolving Lenders must be given
no later than noon (New York time) on the Business Day preceding the
proposed Swing Line Advance.
(ii) Borrower shall execute and deliver to the Swing Line
Lender a promissory note to evidence the Swing Line Commitment. Such note
shall be in the principal amount of the Swing Line Commitment of the Swing
Line Lender, dated the Closing Date and substantially in the form of
Exhibit 1.1(c)(ii) (the "Swing Line Note"). The Swing Line Note shall
represent the obligation of Borrower to pay the amount of the Swing Line
Commitment or, if less, the aggregate unpaid principal amount of all Swing
Line Advances made to Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the Swing Line
Loan and all other noncontingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment
Termination Date if not sooner paid in full.
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(iii) The Swing Line Lender, at any time and from time to time
in its sole and absolute discretion but no less frequently than once
weekly shall on behalf of Borrower (and Borrower hereby irrevocably
authorizes the Swing Line Lender to so act on its behalf) request each
Revolving Lender (including the Swing Line Lender) to make a Revolving
Credit Advance to Borrower (which shall be an Index Rate Loan) in an
amount equal to that Revolving Lender's Pro Rata Share of the principal
amount of the Swing Line Loan (the "Refunded Swing Line Loan") outstanding
on the date such notice is given. Unless any of the events described in
Sections 8.1(h) or 8.1(i) has occurred (in which event the procedures of
Section 1.1(c)(iv) shall apply) and regardless of whether the conditions
precedent set forth in this Agreement to the making of a Revolving Credit
Advance are then satisfied, each Revolving Lender shall disburse directly
to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of
the Swing Line Lender, prior to 2:00 p.m. (New York time), in immediately
available funds on the Business Day next succeeding the date that notice
is given. The proceeds of those Revolving Credit Advances shall be
immediately paid to the Swing Line Lender and applied to repay the
Refunded Swing Line Loan.
(iv) If, prior to refunding a Swing Line Loan with a Revolving
Credit Advance pursuant to Section 1.1(c)(iii), one of the events
described in Sections 8.1(h) or 8.1(i) has occurred, then, subject to the
provisions of Section 1.1(c)(v) below, each Revolving Lender shall, on the
date such Revolving Credit Advance was to have been made for the benefit
of Borrower, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan in an amount equal to its
Pro Rata Share of such Swing Line Loan. Upon request, each Revolving
Lender shall promptly transfer to the Swing Line Lender, in immediately
available funds, the amount of its participation interest.
(v) Each Revolving Lender's obligation to make Revolving
Credit Advances in accordance with Section 1.1(c)(iii) and to purchase
participation interests in accordance with Section 1.1(c)(iv) shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
that such Revolving Lender may have against the Swing Line Lender,
Borrower or any other Person for any reason whatsoever; (B) the occurrence
or continuance of any Default or Event of Default; (C) any inability of
Borrower to satisfy the conditions precedent to borrowing set forth in
this Agreement on the date upon which such participation interest is to be
purchased or (D) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. If any Revolving Lender
does not make available to Agent or the Swing Line Lender, as applicable,
the amount required pursuant to Sections 1.1(c)(iii) or 1.1(c)(iv), as the
case may be, the Swing Line Lender shall be entitled to recover such
amount on demand from such Revolving Lender, together with interest
thereon for each day from the date of non-payment until such amount is
paid in full at the Federal Funds Rate for the first two Business Days and
at the Index Rate thereafter.
(d) IP Loan.
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(i) Subject to the terms and conditions hereof, each IP Lender
agrees to make a loan (the "IP Loan") on the Closing Date to Borrower in
the amount of its IP Loan Commitment. The obligations of each IP Lender
thereunder shall be several and not joint. The IP Loan shall be evidenced
by promissory notes in the form of Exhibit 1.1(d) (each an "IP Note" and,
collectively, the "IP Notes") and Borrower shall deliver an IP Note to
each IP Lender. The IP Note shall represent the obligation of Borrower to
pay the amount of the applicable IP Loan Commitment, together with
interest thereon as prescribed in Section 1.5.
(ii) Borrower shall repay the principal amount of the IP Loan
in nineteen (19) consecutive quarterly installments of $750,000 each on
the last day of February, May, August and November of each year,
commencing November 30, 1999 with a final installment of $750,000 or, if
different, the remaining principal balance of the IP Loan, due on August
31, 2004.
(iii) Notwithstanding Section 1.1(d)(ii), the aggregate
outstanding principal balance of the IP Loan shall be due and payable in
full in immediately available funds on the Commitment Termination Date, if
not sooner paid in full.
(iv) Each payment of principal with respect to the IP Loan
shall be paid to Agent for the ratable benefit of each IP Lender, in
proportion to such IP Lender's Pro Rata Share of the IP Commitment.
Amounts repaid with respect to the IP Loan may not be reborrowed.
(e) Reliance on Notices. Agent shall be entitled to rely upon, and
shall be fully protected in relying upon, any Notice of Revolving Credit
Advance, Notice of Conversion/Continuation or similar notice believed by Agent
to be genuine. Agent may assume that each Person executing and delivering any
notice in accordance herewith was duly authorized, unless the responsible
individual acting thereon for Agent has actual knowledge to the contrary.
1.2. Letters of Credit. Subject to and in accordance with the terms
and conditions contained herein and in Annex B, Borrower shall have the right to
request, and Revolving Lenders agree to incur, or purchase participations in,
Letter of Credit Obligations in respect of Borrower.
1.3. Prepayments.
(a) Voluntary Prepayments.
(i) Borrower may at any time on at least five (5) days' prior
written notice to Agent (a) voluntarily prepay all or part of Term Loan A,
Term Loan B and the IP Loan and/or (b) voluntarily prepay all or part of
the Revolving Loan and terminate (but not reduce) the Revolving Loan
Commitment; provided that any such prepayments shall be in a minimum
amount of $5,000,000 and integral multiples of $250,000 in excess of such
amount. Upon such termination of the Revolving Loan Commitment, all Loans
and
8
other Obligations shall be immediately due and payable in full and all
Letter of Credit Obligations shall be cash collateralized or otherwise
satisfied in accordance with Annex B hereto. Any voluntary prepayment must
be accompanied by payment of the Fee required by Section 1.9(c), if any,
plus the payment of any LIBOR funding breakage costs in accordance with
Section 1.13(b). Upon any such prepayment and termination of the Revolving
Loan Commitment, Borrower's right to request Revolving Credit Advances, or
request that Letter of Credit Obligations be incurred on its behalf, or
request Swing Line Advances, shall simultaneously be terminated.
(ii) Voluntary prepayments pursuant to clause (a)(i) shall be
applied to payment of the Obligations in accordance with Section 1.3(c).
(b) Mandatory Prepayments.
(i) If at any time the outstanding balance of the Revolving
Loan exceeds the lesser of (A) the Maximum Amount and (B) the Borrowing
Base, in each case, less the outstanding Swing Line Loan at such time,
Borrower shall immediately repay the aggregate outstanding Revolving
Credit Advances to the extent required to eliminate such excess. If any
such excess remains after repayment in full of the aggregate outstanding
Revolving Credit Advances, Borrower shall provide cash collateral for the
Letter of Credit Obligations in the manner set forth in Annex B to the
extent required to eliminate such excess.
(ii) Immediately upon receipt by any Credit Party of proceeds
of any asset disposition, which, together with other asset dispositions in
any Fiscal Year result in proceeds in excess of $200,000 in the aggregate
during such Fiscal Year (including condemnation proceeds, but excluding
proceeds of asset dispositions permitted by Sections 6.8(a), 6.8(c) and
6.8(d)) or any sale of Stock of any Subsidiary of any Credit Party,
Borrower shall prepay the Loans in an amount equal to such proceeds in
excess of $200,000 during such Fiscal Year, net of (A) commissions and
other reasonable and customary transaction costs, fees and expenses
properly attributable to such transaction and payable by Borrower in
connection therewith (in each case, paid to non-Affiliates), (B) transfer
taxes payable by such Credit Party in connection therewith, (C) amounts
payable to holders of senior Liens (to the extent such Liens constitute
Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve
for income taxes in accordance with GAAP in connection therewith. Any such
prepayment shall be applied in accordance with Section 1.3(c).
(iii) If New Holdings or Borrower or any other Credit Party
issues Stock (other than an issuance of additional Stock of New Holdings
to employees of Borrower upon the exercise of stock options or otherwise),
no later than the Business Day following the date of receipt of the
proceeds thereof, Borrower shall prepay the Loans in an amount equal to
all such proceeds, net of underwriting discounts and commissions and other
reasonable costs paid to non-Affiliates in connection therewith. Any such
prepayment shall be applied in accordance with Section 1.3(c).
9
(iv) Until the Termination Date, Borrower shall prepay the
Obligations on the date that is ten (10) days after the earlier of (A) the
date on which Borrower's annual audited Financial Statements for the
immediately preceding Fiscal Year are delivered pursuant to Annex E or (B)
the date on which such annual audited Financial Statements were required
to be delivered pursuant to Annex E, in an amount equal to fifty percent
(50%) of Excess Cash Flow for the immediately preceding Fiscal Year. Any
prepayments from Excess Cash Flow paid pursuant to this clause (iv) shall
be applied in accordance with Section 1.3(c). Each such prepayment shall
be accompanied by a certificate signed by Borrower's chief financial
officer certifying the manner in which Excess Cash Flow and the resulting
prepayment were calculated, which certificate shall be in form and
substance satisfactory to Agent.
(c) Application of Certain Prepayments.
(i) Any prepayments made by Borrower pursuant to clauses
(a)(i), (b)(iii), and (b)(iv) above shall be applied as follows: first, to
Fees and reimbursable expenses of Agents then due and payable pursuant to
any of the Loan Documents; second, to interest then due and payable on
Term Loan A, Term Loan B and the IP Loan, pro rata; third, to prepay the
scheduled principal installments of Term Loan A, Term Loan B and the IP
Loan, pro rata, in inverse order of maturity, until Term Loan A, Term Loan
B and the IP Loan shall have been prepaid in full; fourth, to interest
then due and payable on the Swing Line Loan; fifth, to the principal
balance of the Swing Line Loan until the same has been repaid in full;
sixth, to interest then due and payable on the Revolving Credit Advances;
seventh, to the outstanding principal balance of Revolving Credit Advances
until the same has been paid in full; eighth, to any Letter of Credit
Obligations, to provide cash collateral therefor in the manner set forth
in Annex B, until all such Letter of Credit Obligations have been fully
cash collateralized in the manner set forth in Annex B; ninth, to interest
then due and payable on Term Loan C; and tenth to prepay the scheduled
principal installments of Term Loan C in inverse order of maturity.
Neither the Revolving Loan Commitment nor the Swing Line Commitment shall
be permanently reduced by the amount of any such prepayments. If any
holder of a Term Loan A Commitment declines receipt of its Pro Rata Share
of any mandatory prepayment, that portion of the prepayment shall be
reallocated, pro rata, to the other Term Loan A Commitments. Similarly, if
any holder of a Term Loan B Commitment declines receipt of its Pro Rata
Share of any mandatory prepayment, that portion of the prepayment shall be
reallocated, pro rata, to the other Term Loan B Commitments, and if any
holder of an IP Loan Commitment declines receipt of its Pro Rata Share of
any mandatory prepayment, that portion of the prepayment shall be
reallocated pro rata to the other IP Loan Commitments. If all of the
holders of Term Loan A Commitments, Term Loan B Commitments and the IP
Loan Commitments decline receipt of their Pro Rata Shares of any mandatory
prepayment, that mandatory prepayment shall be applied in payment of the
Obligations in a manner acceptable to all Lenders.
(ii) Any prepayments made by Borrower pursuant to clause
(b)(ii) above shall be applied as follows: first, to Fees and reimbursable
expenses of Agents then due and payable pursuant to any of the Loan
Documents; second, to interest then due and
10
payable on Term Loans A and B, pro rata; third, to prepay the scheduled
principal installments of Term Loan A and Term Loan B, pro rata, in
inverse order of maturity, until Term Loan A and Term Loan B shall have
been prepaid in full; fourth, to interest then due and payable on the
Swing Line Loan; fifth, to the principal balance of the Swing Line Loan
until the same has been repaid in full; sixth, to interest then due and
payable on the Revolving Credit Advances; seventh, to the outstanding
principal balance of Revolving Credit Advances until the same has been
paid in full; eighth, to any Letter of Credit Obligations, to provide cash
collateral therefor in the manner set forth in Annex B, until all such
Letter of Credit Obligations have been fully cash collateralized in the
manner set forth in Annex B; ninth, to interest then due and payable on
the IP Loan; tenth, to prepay scheduled installments on the IP Loan in
inverse order of maturity; eleventh, to interest then due and payable on
Term Loan C; and twelfth to prepay the scheduled principal installments of
Term Loan C in inverse order of maturity. Neither the Revolving Loan
Commitment nor the Swing Line Commitment shall be permanently reduced by
the amount of any such prepayments. If any holder of a Term Loan A
Commitment declines receipt of its Pro Rata Share of any mandatory
prepayment, that portion of the prepayment shall be reallocated, pro rata,
to the other Term Loan A Commitments. Similarly, if any holder of a Term
Loan B Commitment declines receipt of its Pro Rata Share of any mandatory
prepayment, that portion of the prepayment shall be reallocated, pro rata,
to the other Term Loan B Commitments. If all of the holders of Term Loan A
Commitments and Term Loan B Commitments decline receipt of their Pro Rata
Shares of any mandatory prepayment, that mandatory prepayment shall be
applied in payment of the Obligations in a manner acceptable to all
Lenders.
(d) Application of Prepayments from Insurance Proceeds. Prepayments
from insurance proceeds received by Agent in accordance with Section 5.4(c)
shall be applied as follows: insurance proceeds from casualties or losses to
cash or Inventory shall be applied first, to the Swing Line Loans and, second,
to the Revolving Credit Advances; insurance proceeds from casualties or losses
to Equipment, Fixtures and Real Estate shall be applied to scheduled principal
installments of Term Loan A and Term Loan B, pro rata, in inverse order of
maturity. Neither the Revolving Loan Commitment nor the Swing Line Loan
Commitment shall be permanently reduced by the amount of any such prepayments.
If the precise amount of insurance proceeds allocable to Inventory as compared
to Equipment, Fixtures and Real Estate are not otherwise determined, the
allocation and application of those proceeds shall be determined by Agent,
subject to the approval of Requisite Lenders.
(e) Sales of Accounts and Inventory. Proceeds of sales of assets
permitted under Sections 6.8(a), 6.8(c) and 6.8(d) shall be applied to the
Revolving Loan without reduction of the Revolving Loan Commitment.
(f) Voluntary Prepayments of Term Loan C. Term Loan C may be prepaid
in whole or in part but only with proceeds of Permitted Subordinated Debt.
(g) No Implied Consent. Nothing in this Section 1.3 shall be
construed to constitute Agent's or any Lender's consent to any transaction that
is not permitted by other provisions of this Agreement or the other Loan
Documents.
11
1.4. Use of Proceeds. Borrower shall utilize the proceeds of the
Term Loans, the IP Loan, the Revolving Loan and the Swing Line Loan solely for
the Recapitalization (and to pay any related transaction expenses), and for the
financing of Borrower's ordinary working capital and general corporate needs.
Disclosure Schedule (1.4) contains a description of Borrower's sources and uses
of funds received and disbursed on the Closing Date, including Loans and Letter
of Credit Obligations to be made or incurred on that date, and a funds flow
memorandum detailing how funds from each source are to be transferred to
particular uses.
1.5. Interest and Applicable Margins.
(a) (i) Borrower shall pay interest in cash to Agent, for the
ratable benefit of Lenders in accordance with the various Loans being made
by each Lender, in arrears on each applicable Interest Payment Date, at
the following rates: (A) with respect to the Revolving Credit Advances,
the Index Rate plus the Applicable Revolver Index Margin per annum or, at
the election of Borrower, the applicable LIBOR Rate plus the Applicable
Revolver LIBOR Margin per annum, based on the aggregate Revolving Credit
Advances outstanding from time to time; (B) with respect to the Term
Loans, the Index Rate plus the Applicable Term Loan A Index Margin,
Applicable Term Loan B Index Margin or Applicable Term Loan C Index
Margin, as applicable, or, at the election of Borrower, the applicable
LIBOR Rate plus the Applicable Term Loan A LIBOR Margin, Applicable Term
Loan B LIBOR Margin or Applicable Term Loan C LIBOR Margin, as applicable,
per annum; (C) with respect to the Swing Line Loan, the Index Rate plus
the Applicable Revolver Index Margin per annum and (D) with respect to the
IP Loan, the Index Rate plus the Applicable IP Loan Index Margin.
As of the Closing Date, the Applicable Margins are as follows:
Applicable Revolver Index Margin 1.50%
Applicable Revolver LIBOR Margin 3.00%
Applicable Term Loan A Index Margin 1.50%
Applicable Term Loan A LIBOR Margin 3.00%
Applicable Term Loan B Index Margin 2.00%
Applicable Term Loan B LIBOR Margin 3.50%
Applicable Term Loan C Index Margin 5.50%
Applicable Term Loan C LIBOR Margin 7.00%
Applicable IP Loan Index Margin 3.00%
Applicable L/C Margin 2.00%
12
Applicable Unused Line Fee Margin 0.50%
(ii) The Applicable Margins will be adjusted (up or down)
prospectively on a quarterly basis as determined by Borrower's
consolidated financial performance, commencing with the first day of the
first calendar month that occurs more than five (5) days after delivery of
Borrower's quarterly Financial Statements to Lenders for each Fiscal
Quarter commencing with the Fiscal Quarter ending February 29, 2000;
provided however, that the Applicable Term Loan C Index Margin, Applicable
Term Loan C LIBOR Margin and Applicable IP Loan Index Margin set forth
above shall remain in effect for so long as Term Loan C and the IP Loan,
respectively, are outstanding. Adjustments in Applicable Margins will be
determined by reference to the following grids:
-----------------------------------------------------
Level of
If Leverage Ratio is: Applicable Margins:
--------------------- -------------------
-----------------------------------------------------
< 3.25 Level I
-----------------------------------------------------
< 3.75, but >= 3.25 Level II
-----------------------------------------------------
< 4.25, but >= 3.75 Level III
-----------------------------------------------------
< 4.75, but >= 4.25 Level IV
-----------------------------------------------------
< 5.50, but >= 4.75 Level V
-----------------------------------------------------
>= 5.50 Level VI
-----------------------------------------------------
- -------------------------------------------------------------------------------
Applicable Margins
------------------
Level I Level II Level III Level IV Level V Level VI
- -------------------------------------------------------------------------------
Applicable Revolver
Index Margin 0.50% 0.75% 1.00% 1.25% 1.50% 1.75%
- -------------------------------------------------------------------------------
Applicable Revolver
LIBOR Margin 2.00% 2.25% 2.50% 2.75% 3.00% 3.25%
- -------------------------------------------------------------------------------
Applicable Term
Loan A Index Margin 1.00% 1.00% 1.00% 1.25% 1.50% 1.75%
- -------------------------------------------------------------------------------
Applicable Term
Loan A LIBOR Margin 2.50% 2.50% 2.50% 2.75% 3.00% 3.25%
- -------------------------------------------------------------------------------
Applicable Term
Loan B Index Margin 1.75% 1.75% 1.75% 1.75% 2.00% 2.25%
- -------------------------------------------------------------------------------
Applicable Term
Loan B LIBOR Margin 3.25% 3.25% 3.25% 3.25% 3.50% 3.75%
- -------------------------------------------------------------------------------
Applicable L/C Margin 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
- -------------------------------------------------------------------------------
Applicable Unused
Line Fee Margin 0.375% 0.375% 0.50% 0.50% 0.50% 0.50%
- -------------------------------------------------------------------------------
13
All adjustments in the Applicable Margins after February 29, 2000
shall be implemented quarterly on a prospective basis, for each calendar month
commencing at least five (5) days after the date of delivery to Lenders of the
quarterly unaudited or annual audited (as applicable) Financial Statements
evidencing the need for an adjustment. Concurrently with the delivery of those
Financial Statements, Borrower shall deliver to Agent and Lenders a certificate,
signed by its chief financial officer, setting forth in reasonable detail the
basis for the continuance of, or any change in, the Applicable Margins. Failure
to timely deliver such Financial Statements shall, in addition to any other
remedy provided for in this Agreement, result in an increase in the Applicable
Margins to the highest level set forth in the foregoing grid, until the first
day of the first calendar month following the delivery of those Financial
Statements demonstrating that such an increase is not required. If a Default or
an Event of Default has occurred and is continuing at the time any reduction in
the Applicable Margins is to be implemented, that reduction shall be deferred
until the first day of the first calendar month following the date on which such
Default or Event of Default is waived or cured.
(iii) In addition to the interest payable in cash on Term Loan
C pursuant to Section 1.5(a)(i) above, interest shall accrue on the
outstanding principal balance of Term Loan C ("PIK Interest"), for the
ratable benefit of Term Lenders with Term Loan C Commitments, at a rate of
five percent (5%) per annum capitalized quarterly on the first day of
March, June, September and December of each year, beginning on December 1,
1999. PIK Interest accruing pursuant to this Section 1.5(a)(iii) shall not
be paid in cash, but shall be capitalized and added to the aggregate
outstanding principal amount of Term Loan C, effective as of each
applicable quarterly PIK Interest capitalization date. Subject to Sections
1.11 and 8.3, PIK Interest shall be due and payable in cash upon the
earlier to occur of (A) March 1, 2005 and (B) the refinancing of Term Loan
C. In addition, if on a PIK Interest Catch-Up Date, there exists any
Excess PIK Interest, such Excess PIK Interest, if any, shall then be due
and payable in cash.
(b) If any payment on any Loan becomes due and payable on a day
other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and
interest shall be made by Agent on the basis of a 360-day year, in each case for
the actual number of days occurring in the period for which such interest and
Fees are payable. The Index Rate shall be determined each day based upon the
Index Rate as in effect each day. Each determination by Agent of an interest
rate and Fees hereunder shall be conclusive, absent manifest error.
(d) So long as an Event of Default has occurred and is continuing
under Section 8.1(a), (h) or (i), or so long as any other Event of Default has
occurred and is continuing and at the election of Agent (or upon the written
request of Requisite Lenders) confirmed by written notice from Agent to
Borrower, the interest rates applicable to the Loans and the Letter of Credit
Fees shall be increased by two percent (2%) per annum above the rates of
interest or the rate of such Fees otherwise applicable hereunder ("Default
Rate"), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and
14
Letter of Credit Fees at the Default Rate shall accrue from the initial date of
such Event of Default until that Event of Default is cured or waived and shall
be payable upon demand.
(e) Subject to the conditions precedent set forth in Section 2.2,
Borrower shall have the option to (i) request that any Revolving Credit Advance
be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding
Loans (other than the Swing Line Loan and the IP Loan) from Index Rate Loans to
LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan, subject to
payment of LIBOR breakage costs in accordance with Section 1.13(b) if such
conversion is made prior to the expiration of the LIBOR Period applicable
thereto, or (iv) continue all or any portion of any Loan (other than the Swing
Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period
and the succeeding LIBOR Period of that continued Loan shall commence on the
last day of the LIBOR Period of the Loan to be continued. Any Loan or group of
Loans having the same proposed LIBOR Period to be made or continued as, or
converted into, a LIBOR Loan must be in a minimum amount of $5,000,000 and
integral multiples of $500,000 in excess of such amount. Any such election must
be made by noon (New York time) on the third (3rd) Business Day prior to (1) the
date of any proposed Advance which is to bear interest at the LIBOR Rate, (2)
the end of each LIBOR Period with respect to any LIBOR Loans to be continued as
such, or (3) the date on which Borrower wishes to convert any Index Rate Loan to
a LIBOR Loan for a LIBOR Period designated by Borrower in such election. If no
election is received with respect to a LIBOR Loan by noon (New York time) on the
third (3rd) Business Day prior to the end of the LIBOR Period with respect
thereto (or if a Default or an Event of Default has occurred and is continuing
or the additional conditions precedent set forth in Section 2.2 shall not have
been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the
end of its LIBOR Period. Borrower must make such election by notice to Agent in
writing, by telecopy or overnight courier. In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a "Notice
of Conversion/Continuation") in the form of Exhibit 1.5(e). No Loan may be made
as or converted into a LIBOR Loan until the earlier of (i) 45 days after the
Closing Date or (ii) completion of primary syndication as determined by Agents
and no portion of Term Loan C may be converted to a LIBOR Loan after February
28, 2004.
(f) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had the
interest rate payable hereunder been (but for the operation of this paragraph)
the interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of
interest and in the manner provided in Sections 1.5(a) through (e), unless and
until the rate of interest again exceeds the Maximum Lawful Rate, and at that
time this paragraph shall again apply. In no event shall the total interest
received by any Lender pursuant to the terms hereof exceed the amount that such
Lender could lawfully have received had the interest due hereunder been
calculated for the full
15
term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made. If, notwithstanding the provisions of this
Section 1.5(f), a court of competent jurisdiction shall finally determine that a
Lender has received interest hereunder in excess of the Maximum Lawful Rate,
Agent shall, to the extent permitted by applicable law, promptly apply such
excess in the order specified in Section 1.11 and thereafter shall refund any
excess to Borrower or as a court of competent jurisdiction may otherwise order.
1.6. Eligible Accounts. All of the Accounts owned by Borrower or its
domestic or Canadian Subsidiaries and reflected in the most recent Borrowing
Base Certificate delivered by Borrower to Agent shall be "Eligible Accounts" for
purposes of this Agreement, except any Account to which any of the exclusionary
criteria set forth below applies. Agent shall have the right to establish,
modify or eliminate Reserves against Eligible Accounts from time to time in its
reasonable credit judgment. In addition, Agent reserves the right, at any time
and from time to time after the Closing Date, to adjust any of the criteria set
forth below, to establish new criteria and to adjust advance rates with respect
to Eligible Accounts, in its reasonable credit judgment, subject to the approval
of Requisite Revolving Lenders in the case of adjustments or new criteria or
changes in advance rates which have the effect of making more credit available.
Eligible Accounts shall not include any Account of Borrower or its domestic or
Canadian Subsidiaries:
(a) that does not arise from the sale of goods or the performance of
services in the ordinary course of its business;
(b) (i) upon which the right to receive payment is not absolute or
is contingent upon the fulfillment of any condition whatsoever or (ii) as to
which Borrower or one of its domestic or Canadian Subsidiaries is not able to
bring suit or otherwise enforce their remedies against the Account Debtor
through judicial process, or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor's obligation to pay that invoice is
subject to Borrower's or one of its domestic or Canadian Subsidiary's completion
of further performance under such contract or is subject to the equitable lien
of a surety bond issuer;
(c) any Account against which any defense, counterclaim, setoff or
dispute is asserted, but such Account shall only be ineligible to the extent of
any such defense, counterclaim, setoff or dispute;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice, acceptable to Agent in form
and substance, has not been sent to the applicable Account Debtor;
16
(f) that (i) is not owned by Borrower or one of its domestic or
Canadian Subsidiaries or (ii) is subject to any right, claim, security interest
or other interest of any other Person, other than first priority Liens in favor
of Agent, on behalf of itself and Lenders or in favor of Agent and Lenders, as
applicable, and Prior Claims that are unregistered and that secure amounts that
are not yet due and payable;
(g) that arises from a sale to any director, officer, other employee
or Affiliate of any Credit Party, or to any entity that has any common officer
or director with any Credit Party (other than a portfolio company of one of the
Bain Entities or Credit Suisse First Boston or its Affiliates);
(h) that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or department, agency or
instrumentality thereof, or that is the Canadian government (Her Majesty in
Right of Canada) or a political subdivision thereof, or department, agency or
instrumentality thereof, unless Agent, in its sole discretion, has agreed to the
contrary in writing, the Account is assignable by way of security and Borrower,
if necessary or desirable, has complied with the Federal Assignment of Claims
Act of 1940, with respect to such obligation, or, the applicable Canadian
Subsidiary of Borrower, if necessary or desirable, has complied with the
Financial Administration Act (Canada) or any applicable provincial or
territorial statute or municipal ordinance of similar purpose and effect, with
respect to such obligation, as applicable;
(i) that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the province of Newfoundland, the Northwest
Territories and the territory of Nunavut) and in Agent's discretion, Accounts
owing to Regency in New Zealand and Forza in the United Kingdom, in an aggregate
amount not to exceed $1,200,000 in the aggregate, if notice and other perfection
requirements are met, unless payment thereof is assured by a letter of credit
assigned and delivered to Agent, satisfactory to Agent as to form, amount and
issuer;
(j) to the extent Borrower or any Subsidiary thereof is liable for
goods sold or services rendered by the applicable Account Debtor to Borrower or
any Subsidiary thereof but only to the extent of the potential offset;
(k) that arises with respect to goods that are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may be
conditional;
(l) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(i) the Account is not paid within the earlier of: 60 days
following its due date or 120 days following its original invoice date
(provided that Agent may extend such 120 day limitation to 150 days as to
Accounts owing by certain creditworthy Account Debtors as determined by
Agent in its reasonable credit judgment);
17
(ii) the Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors or fails
to pay its debts generally as they come due; or
(iii) a petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other federal,
state or foreign (including any provincial), receivership, insolvency
relief or other law or laws for the relief of debtors, except for Eligible
Service Merchandise Accounts;
(m) that is the obligation of an Account Debtor if fifty percent
(50%) or more of the dollar amount of all Accounts owing by that Account Debtor
are ineligible under the other criteria set forth in this Section 1.6;
(n) as to which Agent's Lien thereon, on behalf of itself and
Lenders, or Agent's and Lenders' Liens thereon, as applicable, is not a first
priority perfected Lien;
(o) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;
(p) to the extent such Account exceeds any credit limit established
by Agent, in its reasonable credit judgment, following prior notice of such
limit by Agent to Borrower;
(q) that is payable in any currency other than Canadian Dollars or
Dollars or, if permitted, British pounds or New Zealand dollars;
(r) that is otherwise unacceptable to Agent in its reasonable credit
judgment;
(s) Accounts owing to Universal Technical Services; or
(t) Accounts owing by consumers, if two or more payments with
respect thereto remain unpaid for more than thirty (30) days or to the extent
that the aggregate of those consumer Accounts exceed $10,000,000.
Borrower agrees that Accounts as to which payments have been
received by Borrower are no longer Eligible Accounts regardless of whether such
payments have been applied to the Revolving Loan. Borrower agrees that the
following Reserves constitute an appropriate exercise of Agent's credit judgment
(i) a co-op advertising Reserve, (ii) a direct response Accounts Reserve, (iii)
an unearned financing charge Reserve; and (iv) a credit memo accrual Reserve.
1.7. Eligible Inventory. All of the Inventory owned by Borrower and
its domestic or Canadian Subsidiaries and reflected in the most recent Borrowing
Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory"
for purposes of this Agreement, except any Inventory to which any of the
exclusionary criteria set forth below applies. Agent shall have the right to
establish, modify, or eliminate Reserves against Eligible Inventory from time to
time in its reasonable credit judgment. In addition, Agent reserves the right,
at any time and from time to time after the Closing Date, to adjust any of the
criteria set forth below, to
18
establish new criteria and to adjust advance rates with respect to Eligible
Inventory in its reasonable credit judgment, subject to the approval of
Requisite Revolving Lenders in the case of adjustments or new criteria or
changes in advance rates which have the effect of making more credit available.
Eligible Inventory shall not include any Inventory of Borrower or its domestic
or Canadian Subsidiaries that:
(a) is not owned by Borrower or one of its domestic or Canadian
Subsidiaries free and clear of all Liens and rights of any other Person
(including the rights of a purchaser that has made progress payments and the
rights of a surety that has issued a bond to assure Borrower's or one of its
domestic or Canadian Subsidiary's performance with respect to that Inventory and
the rights of unpaid suppliers (other than another Credit Party) under Section
81.1 of the Bankruptcy and Insolvency Act (Canada)), except the Liens in favor
of Agent, on behalf of itself and Lenders, or, in favor of Agent and Lenders, as
applicable, and Prior Claims (excluding the rights of unpaid suppliers (other
than another Credit Party) under Section 81.1 of the Bankruptcy and Insolvency
Act (Canada)), subject to Permitted Encumbrances described in clauses (a) and
(e) of the definition thereof;
(b) is (i) not located on premises owned, leased or rented by such
Borrower and set forth in Disclosure Schedule 3.2 or is (ii) stored at a leased
location or with a bailee, warehouseman or similar Person, unless Agent has
given its prior consent thereto and unless (x) a satisfactory bailee letter or
landlord waiver has been delivered to Agent, or (y) Reserves satisfactory to
Agent have been established with respect thereto, or is (iii) located at any
site if the aggregate book value of Inventory at any such location is less than
$50,000 or a lesser minimum amount determined by Agent in its reasonable credit
judgment;
(c) is placed on consignment or (unless Agent is fully perfected in
its sole and absolute discretion) is in transit;
(d) is covered by a negotiable document of title, unless such
document has been delivered to Agent with all necessary endorsements, free and
clear of all Liens except those in favor of Agent and Lenders;
(e) in Agent's reasonable determination, is discontinued Inventory,
excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale;
(f) consists of display or other promotional items or packing or
shipping materials, manufacturing supplies, work-in-process Inventory or
replacement parts for Equipment;
(g) consists of goods which have been returned by the buyer unless
the same have been inspected by Borrower with satisfactory results and returned
to finished goods;
(h) is not of a type held for sale in the ordinary course of
Borrower's business;
(i) is not subject to a first priority Lien in favor of Agent on
behalf of itself and Lenders or in favor of Agent and Lenders, as applicable,
subject to Permitted Encumbrances in accordance with clauses (a) and (e) of the
definition thereof;
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(j) consists of any costs associated with "freight-in" charges;
(k) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
(l) is not covered by casualty insurance acceptable to Agent;
(m) does not meet all standards imposed by Governmental Authorities;
(n) is subject to any agreement which restricts Agent's ability to
sell or dispose of such Inventory;
(o) bears a Reebok trademark unless Agent determines that such
Inventory can be quickly and cost-effectively converted to "Pro Form" or other
Borrower branded Inventory and sold by Agent without restrictions; or
(p) is otherwise unacceptable to Agent in its reasonable credit
judgment.
Borrower agrees that a reserve against Borrowing Availability attributable to
Eligible Inventory equal to sales taxes payable upon the sale of such Inventory
and a Reserve in the amount of intercompany profit attributable to sales of
Inventory among Borrower and its Subsidiaries are reasonable exercises of
Agent's credit judgment.
1.8. Cash Management Systems. On or prior to the date that is ninety
(90) days following the Closing Date, as to Borrower and its domestic
subsidiaries, Borrower will establish and will maintain until the Termination
Date, the cash management systems described in Annex C (the "Cash Management
Systems"). Prior to the date that is ninety (90) days following the Closing
Date, as to Borrower and its domestic subsidiaries, Borrower will maintain its
existing cash management systems with Bank One, NA (formerly The First National
Bank of Chicago). As to Borrower's Canadian Subsidiaries, on or prior to the
Closing Date, Borrower will establish and will maintain until the Termination
Date, the Cash Management Systems.
1.9. Fees. (a) Borrower shall pay to GE Capital and Fleet,
individually, the Fees specified in that certain fee letter dated as of June 11,
1999 among Borrower, GE Capital and Fleet (the "Fee Letter"), at the times
specified for payment therein.
(b) As additional compensation for the Revolving Lenders, Borrower
shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on the
first Business Day of each month prior to the Commitment Termination Date and on
the Commitment Termination Date, a fee for Borrower's non-use of available funds
in an amount equal to the Applicable Unused Line Fee Margin per annum
(calculated on the basis of a 360 day year for actual days elapsed) multiplied
by the "Average Unused Daily Balance," consisting of the difference between (x)
the Maximum Amount and (y) the average for the period of the daily closing
balances of the Revolving Loan and the Swing Line Loan outstanding during the
period for which the such Fee is due. In addition, on the first Business Day of
each calendar quarter prior to the Commitment Termination Date and on the
Commitment Termination Date, Borrower shall pay to Agent for
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the ratable benefit of the Revolving Lenders an additional fee equal to
one-quarter percent (0.25%) per annum multiplied by the Average Unused Daily
Balance for the immediately preceding calendar quarter if the Average Unused
Daily Balance for such quarter exceeded Sixty Million Dollars ($60,000,000).
(c) If Borrower prepays all or any portion of the Term Loans or the
IP Loan or prepays the Revolving Loan and terminates the Revolving Loan
Commitment, whether voluntarily or involuntarily and whether before or after
acceleration of the Obligations, Borrower shall pay to Agent, for the benefit of
Lenders as liquidated damages and compensation for the costs of being prepared
to make funds available hereunder (i) an amount equal to the Revolving Loan
Commitment (in case of a prepayment in full) and the principal amount being
prepaid on Term Loan A multiplied by one percent (1%) upon a prepayment during
the first eighteen (18) months following the Closing Date, (ii) an amount equal
to the principal amount being prepaid on Term Loan B, Term Loan C and the IP
Loan multiplied by two percent (2%) for a prepayment during the first twelve
(12) months following the Closing Date and (iii) an amount equal to the
principal amount being prepaid on Term Loan B, Term Loan C and the IP Loan
multiplied by one percent (1%) for a prepayment during the second twelve months
following the Closing Date. Notwithstanding the foregoing, no prepayment fee
shall be payable by Borrower upon a mandatory prepayment made pursuant to
Sections 1.3(b), 1.3(d) or 1.16(c); provided that in the case of prepayments
made pursuant to Sections 1.3(b)(ii) or (b)(iii), the transaction giving rise to
the applicable prepayment is expressly permitted under Section 6.
(d) Borrower shall pay to Agent, for the ratable benefit of
Revolving Lenders, the Letter of Credit Fee as provided in Annex B.
1.10. Receipt of Payments. Borrower shall make each payment under
this Agreement not later than 1:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be deemed received on
the Business Day of receipt of immediately available funds therefor in the
Collection Account prior to 1:00 p.m. New York time. Payments received after
1:00 p.m. New York time on any Business Day shall be deemed to have been
received on the following Business Day. If Agent receives any payment from or on
behalf of any Credit Party in a currency other than the currency in which an
Obligation payable is denominated, Agent may convert the payment (including the
monetary proceeds of realization upon any Collateral and any funds then held in
a cash collateral account) into the Equivalent Amount of the currency of the
relevant Obligation as determined on the Business Day immediately preceding the
date of actual payment. The Obligations shall be satisfied only to the extent of
the amount actually received by Agent upon such conversion.
1.11. Application and Allocation of Payments.
(a) So long as no Event of Default under Section 8.1(a) has occurred
and is continuing, (i) payments consisting of proceeds of Accounts received in
the ordinary course of business shall be applied, first, to the Swing Line Loan
and, second, to the Revolving Loan; (ii) payments matching specific scheduled
payments then due shall be applied to those scheduled
21
payments; (iii) voluntary prepayments shall be applied as determined by
Borrower, subject to the provisions of Section 1.3(a) and 1.3(f); and (iv)
mandatory prepayments shall be applied as set forth in Sections 1.3(c) and
1.3(d). All payments and prepayments applied to a particular Loan shall be
applied ratably to the portion thereof held by each Lender as determined by its
Pro Rata Share, except as provided in Section 1.3(c). As to all payments
received at a time when an Event of Default under Section 8.1(a) has occurred
and is continuing or following the Commitment Termination Date, Borrower hereby
irrevocably waives the right to direct the application of any and all payments
received from or on behalf of Borrower, and Borrower hereby irrevocably agrees
that all such payments shall be applied against the Obligations as set forth
below notwithstanding any previous entry by Agent in the Loan Account or any
other books and records. In the absence of a specific determination to the
contrary by all Lenders, such payments shall be applied to amounts then due and
payable in the following order: (1) to Fees and Agents' expenses reimbursable
hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on
the Swing Line Loan; (4) to interest on the Revolving Loan, Term Loan A, Term
Loan B and the IP Loan, ratably in proportion to the interest accrued as to each
such Loan; (5) to principal payments on the Revolving Loan, Term Loan A, Term
Loan B and the IP Loan and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the aggregate,
combined principal balance of such Loans and outstanding Letter of Credit
Obligations; (6) to all other Obligations (other than principal and interest on
Term Loan C), including expenses of Lenders to the extent reimbursable under
Section 11.3; (7) to interest on Term Loan C; and (8) to the principal of Term
Loan C. Notwithstanding the preceding sentence, if such payments constitute
proceeds of Collateral received following acceleration of the Obligations or the
Commitment Termination Date, proceeds of Collateral (other than IP Collateral)
shall be applied in the following order: (1) to Fees and Agents' expenses
reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal
payments on the Swing Line Loan; (4) to interest on the Revolving Loan, Term
Loan A and Term Loan B, ratably in proportion to the interest accrued as to each
such Loan; (5) to principal payments on the Revolving Loan, Term Loan A and Term
Loan B and to provide cash collateral for Letter of Credit Obligations in the
manner described in Annex B, ratably to the aggregate, combined principal
balance of such Loans and outstanding Letter of Credit Obligations; (6) to
interest on the IP Loan; (7) to principal of the IP Loan; (8) to all other
Obligations (other than principal and interest on Term Loan C), including
expenses of Lenders to the extent reimbursable under Section 11.3; (9) to
interest on Term Loan C; and (10) to principal of Term Loan C.
Further, notwithstanding the preceding two sentences, if such
payments constitute proceeds of IP Collateral received following acceleration of
the Obligations or the Commitment Termination Date, such proceeds of IP
Collateral shall be applied in the following order: (1) to Agents' expenses
reimbursable hereunder; (2) to interest on the IP Loan; (3) to principal of the
IP Loan; (4) to interest on the Swing Line Loan; (5) to principal payments on
the Swing Line Loan; (6) to Fees and to interest on the Revolving Loan, Term
Loan A and Term Loan B, ratably in proportion to the interest accrued as to each
such Loan; (7) to principal payments on the Revolving Loan, Term Loan A and Term
Loan B and to provide cash collateral for Letter of Credit Obligations in the
manner described in Annex B, ratably to the aggregate, combined principal
balance of such Loans and outstanding Letter of Credit Obligations; (8) to all
other Obligations (other than principal and interest on Term Loan C), including
expenses of Lenders to
22
the extent reimbursable under Section 11.3; (9) to interest on Term Loan C; and
(10) to principal of Term Loan C.
(b) Subject to Section 8.3, Agent is authorized to, and may in its
discretion, charge to the Revolving Loan balance on behalf of Borrower and cause
to be paid all Fees, expenses, Charges, costs (including insurance premiums in
accordance with Section 5.4(a)) and interest and principal, other than principal
of the Revolving Loan, owing by Borrower under this Agreement or any of the
other Loan Documents if and to the extent Borrower fails to pay promptly any
such amounts as and when due, even if such charges would cause the aggregate
balance of the Revolving Loan and the Swing Line Loan to exceed Borrowing
Availability. At Agent's option and to the extent permitted by law, any charges
so made shall constitute part of the Revolving Loan hereunder.
1.12. Loan Account and Accounting. Agent shall maintain a loan
account (the "Loan Account") on its books to record: all Advances, the IP Loan
and the Term Loans, all payments made by Borrower, and all other debits and
credits as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall, absent manifest error, be presumptive evidence
of the amounts due and owing to Agent and Lenders by Borrower; provided that any
failure to so record or any error in so recording shall not limit or otherwise
affect Borrower's duty to pay the Obligations. Agent shall render to Borrower a
monthly accounting of transactions with respect to the Loans setting forth the
balance of the Loan Account. Unless Borrower notifies Agent in writing of any
objection to any such accounting (specifically describing the basis for such
objection), within thirty (30) days after Borrower's receipt thereof, each and
every such accounting shall, absent manifest error, be deemed final, binding and
conclusive on Borrower in all respects as to all matters reflected therein. Only
those items expressly objected to in such notice shall be deemed to be disputed
by Borrower. Notwithstanding any provision herein contained to the contrary, any
Lender may elect (which election may be revoked) to dispense with the issuance
of Notes to that Lender and may rely on the Loan Account as evidence of the
amount of Obligations from time to time owing to it.
1.13. Indemnity.
(a) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and hold harmless (except ICON of Canada which shall only
severally indemnify and hold harmless to the extent permitted by the corporate
statute under which it is incorporated) each of Agent, Lenders and their
respective Affiliates, and each such Person's respective officers, directors,
employees, attorneys, agents and representatives (each, an "Indemnified
Person"), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigation or defense, including those
incurred upon any appeal) that may be instituted or asserted against or incurred
by any such Indemnified Person as the result of credit having been extended,
suspended or terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all
23
Environmental Liabilities and legal costs and expenses arising out of or
incurred in connection with disputes between or among any parties to any of the
Loan Documents (collectively, "Indemnified Liabilities"); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or occurs
as a result of acceleration, by operation of law or otherwise); (ii) Borrower
shall default in making any borrowing of, conversion into or continuation of
LIBOR Loans after Borrower has given notice requesting the same in accordance
herewith; or (iii) Borrower shall fail to make any prepayment of a LIBOR Loan
after Borrower has given a notice thereof in accordance herewith, then Borrower
shall indemnify and hold harmless each Lender from and against all losses, costs
and expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender shall
be deemed to have actually funded its relevant LIBOR Loan through the purchase
of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount
of that LIBOR Loan and having a maturity comparable to the relevant LIBOR
Period; provided, that each Lender may fund each of its LIBOR Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower with its written calculation
of all amounts payable pursuant to this Section 1.13(b), and such calculation
shall be binding on the parties hereto unless Borrower shall object in writing
within ten (10) Business Days of receipt thereof, specifying the basis for such
objection in detail.
1.14. Access. Each Credit Party that is a party hereto shall, during
normal business hours, from time to time upon three (3) Business Days' prior
notice as frequently as either Agent reasonably determines to be appropriate:
(a) provide Agents and any of their officers, employees and agents access to its
properties, facilities, advisors and employees (including officers) of each
Credit Party and to the Collateral, (b) permit Agents, and any of their
officers, employees and agents, to inspect, audit and make extracts from any
Credit Party's books and records, and (c) permit Agents, and their officers,
employees and agents, to inspect, review, evaluate and make test verifications
and counts of the Accounts, Inventory and other Collateral
24
of any Credit Party. If a Default or Event of Default has occurred and is
continuing or if access is necessary to preserve or protect the Collateral as
determined by either Agent, each such Credit Party shall provide such access to
each Agent and to each Lender at all times and without advance notice.
Furthermore, so long as any Event of Default has occurred and is continuing,
each Credit Party shall provide each Agent and each Lender with access to its
suppliers and customers. Each Credit Party shall make available to each Agent
and its counsel, as promptly as is possible under the circumstances, originals
or copies of all books and records that Agent may request. Each Credit Party
shall deliver any document or instrument necessary for each Agent, as it may
from time to time request, to obtain records from any service bureau or other
Person that maintains records for such Credit Party, and shall maintain
duplicate records or supporting documentation on media, including computer tapes
and discs owned by such Credit Party. Agents will give Lenders at least ten (10)
days' prior written notice of regularly scheduled audits. Representatives of
other Lenders may accompany Agents' representatives on regularly scheduled
audits at no charge to Borrower. Without limiting the generality of the
foregoing, Agents will conduct field audits of Borrower and its domestic and
Canadian Subsidiaries within 180 days following the Closing Date and within one
year following the Closing Date.
1.15. Taxes.
(a) Any and all payments by Borrower hereunder or under the Notes
shall be made, in accordance with this Section 1.15, free and clear of and
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.15) Agent
or Lenders, as applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law. Within
thirty (30) days after the date of any payment of Taxes, Borrower shall furnish
to Agent the original or a certified copy of a receipt evidencing payment
thereof; provided that should any Lender actually receive a tax credit or refund
in the future with respect to (and as a result of) any Taxes paid by Borrower as
required by this Section 1.15, and Lender reasonably determines that such credit
or refund relates to Borrower, then such Lender shall return the amount of such
credit or refund (net of any taxes thereon) to Borrower.
(b) Each Credit Party that is a signatory hereto shall indemnify
and, within ten (10) days of demand therefor, pay Agent and each Lender for the
full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts
payable under this Section 1.15) paid by Agent or such Lender, as appropriate,
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes were correctly or legally
asserted; provided that should any Lender actually receive a tax credit or
refund in the future with respect to (and as a result of) any Taxes paid by
Borrower as required by this Section 1.15, and Lender reasonably determines that
such credit or refund relates to Borrower, then such Lender shall return the
amount of such credit or refund (net of any taxes thereon) to Borrower.
25
(c) Each Lender organized under the laws of a jurisdiction outside
the United States (a "Foreign Lender") as to which payments to be made under
this Agreement or under the Notes are exempt from United States withholding tax
under an applicable statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form W-8ECI or Form W-8BEN or other
applicable form, certificate or document prescribed by the IRS or the United
States certifying as to such Foreign Lender's entitlement to such exemption (a
"Certificate of Exemption"). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower and
Agent prior to becoming a Lender hereunder. No foreign Person may become a
Lender hereunder if such Person fails to deliver a Certificate of Exemption.
1.16. Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction; provided, however, that
Borrower shall have no obligation to make any such payment if such Lender fails
to demand payment thereof within 180 days after such Lender becomes aware of an
event giving rise to such a payment. A certificate as to the amount of that
reduction and showing the basis of the computation thereof submitted by such
Lender to Borrower and to Agent shall, absent manifest error, be final,
conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any
law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost; provided,
however, that Borrower shall have no obligation to make any such payment if such
Lender fails to demand payment thereof within 180 days after such Lender becomes
aware of an event giving rise to such payment. A certificate as to the amount of
such increased cost, submitted to Borrower and to Agent by such Lender, shall be
conclusive and binding on Borrower for all purposes, absent manifest error. Each
Lender agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
the affected Lender shall, to the extent not inconsistent with such Lender's
internal policies of general application, use reasonable
26
commercial efforts to minimize costs and expenses incurred by it and payable to
it by Borrower pursuant to this Section 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower through Agent,
(i) the obligation of such Lender to agree to make or to make or to continue to
fund or maintain LIBOR Loans shall terminate and (ii) Borrower shall forthwith
prepay in full all outstanding LIBOR Loans owing to such Lender, together with
interest accrued thereon, unless Borrower, within five (5) Business Days after
the delivery of such notice and demand, converts all LIBOR Loans into Index Rate
Loans.
(d) Replacement of Lender in Respect of Increased Costs. Within
fifteen (15) days after receipt by Borrower of written notice and demand from
any Lender (an "Affected Lender") for payment of additional amounts or increased
costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b), Borrower may, at its
option, notify Agent and such Affected Lender of its intention to replace the
Affected Lender. So long as no Default or Event of Default has occurred and is
continuing, Borrower, with the consent of Agent, may obtain, at Borrower's
expense, a replacement Lender ("Replacement Lender") for the Affected Lender,
which Replacement Lender must be satisfactory to Agent. If Borrower obtains a
Replacement Lender within ninety (90) days following notice of its intention to
do so, the Affected Lender must sell and assign its Loans and Commitments to
such Replacement Lender for an amount equal to the principal balance of all
Loans held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale, provided that Borrower shall have
reimbursed such Affected Lender for the additional amounts or increased costs
that it is entitled to receive under this Agreement through the date of such
sale and assignment.
Notwithstanding the foregoing, Borrower shall not have the right to obtain a
Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts within fifteen (15) days following its receipt of
Borrower's notice of intention to replace such Affected Lender. Furthermore, if
Borrower gives a notice of intention to replace and does not so replace such
Affected Lender within ninety (90) days thereafter, Borrower's rights under this
Section 1.16(d) shall terminate and Borrower shall promptly pay all increased
costs or additional amounts demanded by such Affected Lender pursuant to
Sections 1.15(a), 1.16(a) and 1.16(b).
1.17. Single Loan. Subject to Sections 1.11 and 8.3 hereof, all
Loans to Borrower and all of the other Obligations of Borrower arising under
this Agreement and the other Loan Documents shall constitute one general
obligation of Borrower secured, until the Termination Date, by all of the
Collateral.
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2. CONDITIONS PRECEDENT
2.1. Conditions to the Initial Loans.
No Lender shall be obligated to make any Loan or incur any Letter of
Credit Obligations on the Closing Date, or to take, fulfill, or perform any
other action hereunder, until the following conditions have been satisfied or
provided for in a manner satisfactory to Agent, or waived in writing by Agents
and Requisite Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrower, each other
Credit Party, Agents and Lenders; and Agent shall have received such documents,
instruments, agreements and legal opinions as Agent shall reasonably request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all those listed in the Closing Checklist attached
hereto as Annex D, each in form and substance satisfactory to Agent.
(b) Repayment of Prior Lenders' Obligations; Satisfaction of
Outstanding L/Cs. (i) Agents shall have received a fully executed original of a
pay-off letter satisfactory to Agent confirming that all of the Prior Lenders'
Obligations will be repaid in full from the proceeds of the Term Loans, the IP
Loan and the initial Revolving Credit Advance and all Liens upon any of the
property of Borrower or any of its Subsidiaries in favor of Prior Lenders shall
be terminated by Prior Lenders immediately upon such payment; and (ii) all
letters of credit issued or guaranteed by Prior Lenders shall have been cash
collateralized, supported by a guaranty of Agent or supported by a Letter of
Credit issued pursuant to Annex B, as mutually agreed upon by Agent, Borrower
and Prior Lenders.
(c) Approvals. Agents shall have received (i) satisfactory evidence
that the Credit Parties have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents and the
consummation of the Related Transactions or (ii) an officer's certificate in
form and substance satisfactory to Agent affirming that no such consents or
approvals are required.
(d) Opening Availability/Indebtedness. The Borrowing Base supporting
the initial Revolving Credit Advance and the initial Letter of Credit
Obligations incurred and the amount of the Reserves to be established on the
Closing Date shall be sufficient in value, as determined by Agent, to provide
Borrower with Net Borrowing Availability, after giving effect to the initial
Revolving Credit Advance, the incurrence of any initial Letter of Credit
Obligations and the consummation of the Related Transactions (on a pro forma
basis, with trade payables, expenses and liabilities being paid in the ordinary
course of business and without acceleration of sales) of at least Twenty-Five
Million Dollars ($25,000,000). Total Indebtedness of the Borrower on a
consolidated basis on the Closing Date, after giving effect to the Related
Transactions, shall not exceed Two Hundred Seventy Million Dollars
($270,000,000).
(e) Payment of Fees. Borrower shall have paid the Fees required to
be paid on the Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified
28
in the Fee Letter), and shall have reimbursed Agents for all fees, costs and
expenses of closing presented as of the Closing Date.
(f) Capital Structure; Other Indebtedness. The capital structure of
each Credit Party and the tax consequences of the Recapitalization shall be
acceptable to Agents in their sole discretion. New Holdings will not have any
Indebtedness or Guaranteed Indebtedness after giving effect to the
Recapitalization and the other Related Transactions, except that New Holdings
shall have entered into the New Holdings Guaranty and the CS First Boston Debt.
(g) Consummation of Related Transactions. Agents shall have received
fully executed copies of the Recapitalization Documents and each of the other
Related Transactions Documents, each of which shall be in form and substance
satisfactory to Agents and their counsel. The Recapitalization and the other
Related Transactions shall have been consummated in accordance with the terms of
the Recapitalization Documents and the other Related Transactions Documents.
Borrower shall not have waived or amended any provision of any Recapitalization
Document delivered to Agents without the consent of Agents and Requisite
Lenders.
(h) Rating Agency. Term Loan A and Term Loan B shall have been rated
by Moody's Investor Services, Inc.; such rating shall be satisfactory to Agents
and shall be in full force and effect as of the Closing Date.
(i) Fees Closing Costs. The aggregate fees and closing costs
(excluding compensation to management) incurred in connection with the Loans
advanced hereunder and the Recapitalization shall not have exceeded $17,500,000.
(j) Tenders. All of the 15% Senior Second Discount Notes due 2004 of
Holdings, at least 95% of the 14% Senior Discount Notes due 2006 of Intermediate
Holdings and at least 98.5% in principal amount of the 13% Senior Subordinated
Notes due 2002 of Borrower shall have consented to the Exchange Offer and
exchanged their respective notes as provided therein.
(k) No Filing. No petition shall have been filed by or proceeding
commenced against any of the Old Holdcos or Borrower under the Bankruptcy Code.
2.2. Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Advance, convert or
continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if,
as of the date thereof:
(a) any representation or warranty by any Credit Party contained
herein or in any of the other Loan Document is untrue or incorrect as of such
date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted or
expressly contemplated by this Agreement, and Agent or Requisite Revolving
Lenders have determined not to make such Advance, convert or continue any Loan
as LIBOR Loan or incur such Letter of Credit Obligation as a result of the fact
that such warranty or representation is untrue or incorrect;
29
(b) any event or circumstance having a Material Adverse Effect has
occurred since the date hereof as determined by the Requisite Revolving Lenders,
and Agent or Requisite Revolving Lenders have determined not to make such
Advance, convert or continue any Loan as a LIBOR Loan or incur such Letter of
Credit Obligation as a result of the fact that such event or circumstance has
occurred;
(c) any Default or Event of Default has occurred and is continuing
or would result after giving effect to any Advance or the incurrence of any
Letter of Credit Obligation, and Agent or Requisite Revolving Lenders shall have
determined not to make any Advance, convert or continue any Loan as a LIBOR Loan
or incur any Letter of Credit Obligation as a result of that Default or Event of
Default; or
(d) after giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations), the outstanding principal amount of the Revolving
Loan would exceed the lesser of the Borrowing Base and the Maximum Amount, in
each case, less the then outstanding principal amount of the Swing Line Loan.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan, as the case may be, shall be deemed to
constitute, as of the date of such request, acceptance or incurrence, (i) a
representation and warranty by Borrower that the conditions in this Section 2.2
have been satisfied and (ii) a reaffirmation by Borrower of the granting and
continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the
Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly and severally,
make the following representations and warranties to Agents and each Lender,
effective as of the Closing Date, with respect to all Credit Parties, each and
all of which shall survive the execution and delivery of this Agreement:
3.1. Corporate Existence; Compliance with Law. Each Credit Party (a)
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation; (b) is duly qualified to conduct
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification,
except where effects of the failure to be so qualified would be immaterial; (c)
has the requisite corporate power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease and to conduct its business as now, heretofore
and proposed to be conducted; (d) subject to specific representations regarding
Environmental Laws, has all material licenses, permits, consents or approvals
from or by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter and
bylaws; and (f) subject to specific representations set forth herein regarding
ERISA, Environmental Laws, tax and other laws, is in compliance with all
applicable provisions of law, except where the failure to comply,
30
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.2. Executive Offices, Collateral Locations, FEIN. As of the
Closing Date, the current location of each Credit Party's chief executive
office, domicile (within the meaning of the Quebec Civil Code) and the
warehouses and premises at which any Collateral is located are set forth in
Disclosure Schedule (3.2). In addition, Disclosure Schedule (3.2) lists the
federal employer identification number of each Credit Party.
3.3. Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's corporate power; (b) have been duly authorized by all
necessary or proper corporate and shareholder action; (c) do not contravene any
provision of such Person's charter or bylaws; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (e)
do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage or deed of trust, or material lease,
agreement or other instrument to which such Person is a party or by which such
Person or any of its property is bound; (f) do not result in the creation or
imposition of any Lien upon any of the property of such Person other than those
in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan
Documents; and (g) do not require the consent or approval of any Governmental
Authority or any other Person, except those referred to in Section 2.1(c), all
of which will have been duly obtained, made or complied with prior to the
Closing Date. On or prior to the Closing Date, each of the Loan Documents shall
have been duly executed and delivered by each Credit Party that is a party
thereto and each such Loan Document shall then constitute a legal, valid and
binding obligation of such Credit Party enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting the rights and remedies of creditors
generally.
3.4. Financial Statements and Projections. Except for the
Projections, all Financial Statements concerning Borrower and its Subsidiaries
that are referred to below have been prepared in accordance with GAAP
consistently applied throughout the periods covered (except as disclosed therein
and except, with respect to unaudited Financial Statements, for the absence of
footnotes and normal year-end audit adjustments) and present fairly in all
material respects the financial position of the Persons covered thereby as at
the dates thereof and the results of their operations and cash flows for the
periods then ended.
(a) The following Financial Statements attached hereto as Disclosure
Schedule (3.4(a)) will have been delivered as of the Closing Date:
(i) The audited consolidated and consolidating balance sheets
at May 31, 1999 and the related statements of income and cash flows of
Borrower and its Subsidiaries for the Fiscal Year then ended, certified by
PriceWaterhouseCoopers, LLP.
31
(ii) The unaudited balance sheet(s) and the related
statement(s) of income and cash flows of Borrower and its Subsidiaries for
all interim monthly periods ending at least thirty (30) days prior to the
Closing Date.
(iii) an analysis by PriceWaterhouseCoopers confirming that
Borrower had EBITDA of at least $55,000,000 for Fiscal Year 1999
(excluding losses associated with Accounts due from Service Merchandise,
Inc.).
(b) Pro Forma. The Pro Forma attached hereto as Disclosure Schedule
(3.4(b)) was prepared by Borrower giving pro forma effect to the Related
Transactions, was based on the unaudited consolidated and consolidating balance
sheets of Borrower and its Subsidiaries dated May 31, 1999, and was prepared in
accordance with GAAP, with only such adjustments thereto as would be required in
accordance with GAAP.
(c) Projections. The Projections attached hereto as Disclosure
Schedule (3.4(c)) have been prepared by Borrower in light of the past operations
of its businesses, and reflect projections for the five year period beginning on
June 1, 1999 on a month-by-month basis for the first year and on a year-by-year
basis thereafter. The Projections are based upon estimates and assumptions
stated therein, all of which Borrower believes to be reasonable and fair in
light of current conditions and current facts known to Borrower and, as of the
Closing Date, reflect Borrower's good faith and reasonable estimates of the
future financial performance of Borrower and of the other information projected
therein for the period set forth therein (it being understood that such
Projections are not warranties of future performance).
3.5. Material Adverse Effect. Between February 28, 1999 and the
Closing Date, excluding the effect of the write-off of Accounts owing by Service
Merchandise, Inc. and excluding defaults under credit arrangements refinanced
pursuant to the Related Transactions, (a) no Credit Party has incurred any
obligations, contingent or noncontingent liabilities, liabilities for Charges,
long-term leases or unusual forward or long-term commitments that are not
reflected in the Pro Forma and that, alone or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, (b) no contract, lease or other
agreement or instrument has been entered into by any Credit Party or has become
binding upon any Credit Party's assets and no law or regulation applicable to
any Credit Party has been adopted that has had or could reasonably be expected
to have a Material Adverse Effect, and (c) no Credit Party is in default and to
the best of Borrower's knowledge no third party is in default under any material
contract, lease or other agreement or instrument, that alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect. Excluding the
effect of the write-off of Accounts owing by Service Merchandise, Inc., between
February 28, 1999 and the Closing Date no event has occurred, that alone or
together with other events, could reasonably be expected to have a Material
Adverse Effect.
3.6. Ownership of Property; Liens. As of the Closing Date, the real
estate ("Real Estate") listed in Disclosure Schedule (3.6) constitutes all of
the real property owned, leased, subleased, or used by any Credit Party. Each
Credit Party owns good and marketable fee simple title to all of its owned Real
Estate, and valid and marketable leasehold interests in all of its leased Real
Estate, all as described on Disclosure Schedule (3.6), and copies
32
of all such leases or a summary of terms thereof satisfactory to Agent have been
delivered to Agent. Disclosure Schedule (3.6) further describes any Real Estate
with respect to which any Credit Party is a lessor, sublessor or assignor as of
the Closing Date. Each Credit Party also has good and marketable title to, or
valid leasehold interests in, all of its personal property and assets. As of the
Closing Date, none of the properties and assets of any Credit Party are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Each Credit Party has received all deeds, assignments, waivers,
consents, nondisturbance and attornment or similar agreements, bills of sale and
other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party's right, title and
interest in and to all such Real Estate and other properties and assets.
Disclosure Schedule (3.6) also describes as of the Closing Date any purchase
options, rights of first refusal or other similar contractual rights pertaining
to any Real Estate. As of the Closing Date, no portion of any Credit Party's
Real Estate has suffered any material damage by fire or other casualty loss that
has not heretofore been repaired and restored in all material respects to its
original condition or otherwise remedied. As of the Closing Date, all material
permits required to have been issued or appropriate to enable the Real Estate to
be lawfully occupied and used for all of the purposes for which it is currently
occupied and used have been lawfully issued and are in full force and effect.
3.7. Labor Matters. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party; (d)
except as set forth in Disclosure Schedule (3.7), no Credit Party is a party to
or bound by any collective bargaining agreement, management agreement,
consulting agreement, employment agreement, bonus, stock option, or stock
appreciation plan or agreement (and true and complete copies of any agreements
described on Disclosure Schedule (3.7) have been delivered to Agent); (e) there
is no organizing activity involving any Credit Party pending or, to any Credit
Party's knowledge, threatened by any labor union or group of employees; (f)
there are no representation proceedings pending or, to any Credit Party's
knowledge, threatened with the National Labor Relations Board or any other labor
relations board, and no labor organization or group of employees of any Credit
Party has made a pending demand for recognition; and (g) except as set forth in
Disclosure Schedule (3.7), there are no complaints or charges against any Credit
Party pending or, to the knowledge of any Credit Party, threatened to be filed
with any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.
3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), no Credit Party
has any Subsidiaries, is engaged in any joint venture or partnership with any
other Person, or is an Affiliate of any other Person. All of the issued and
outstanding Stock of each Credit Party is owned by each of the Stockholders and
in the amounts set forth in Disclosure Schedule (3.8). There are no outstanding
rights to purchase, options, warrants or similar rights or agreements
33
pursuant to which any Credit Party may be required to repurchase or redeem any
of its Stock or other equity securities or any Stock or other equity securities
of its Subsidiaries. No Subsidiary of New Holdings is subject to any agreement
or arrangement obligating it to issue or sell any of its Stock. All outstanding
Indebtedness of each Credit Party as of the Closing Date is described in Section
6.3 (including Disclosure Schedule (6.3)). New Holdings has no assets (except
Stock of Borrower) and no Indebtedness or Guaranteed Indebtedness (except the
Obligations and the CS First Boston Debt).
3.9. Government Regulation. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940. No Credit Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, or any other
domestic or foreign federal, state or provincial statute that restricts or
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Loans by Lenders to Borrower, the incurrence of the
Letter of Credit Obligations on behalf of Borrower, the application of the
proceeds thereof and repayment thereof and the consummation of the Related
Transactions will not violate any provision of any such statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
3.10. Margin Regulations. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as "Margin Stock"). No Credit Party owns any Margin Stock, and none of
the proceeds of the Loans or other extensions of credit under this Agreement
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock, for the purpose of reducing or retiring any Indebtedness that
was originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a "purpose credit" within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.
3.11. Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party have been filed with the appropriate Governmental Authority and all
Charges have been paid prior to the date on which any fine or penalty may be
added thereto for nonpayment thereof (or any such fine, penalty, interest, late
charge or loss has been paid), excluding Charges or other amounts being
contested in accordance with Section 5.2(b). Proper and accurate amounts have
been withheld by each Credit Party from its respective employees for all periods
in full and complete compliance with all applicable federal, state, local and
foreign laws and such withholdings have been timely paid to the respective
Governmental Authorities. Disclosure Schedule (3.11) sets forth as of the
Closing Date those taxable years for which any Credit Party's tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority and any assessments or threatened assessments in connection with such
audit, or otherwise currently outstanding. Except as described in Disclosure
Schedule (3.11), no Credit Party has executed or
34
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for assessment
or collection of any Charges. None of the Credit Parties and their respective
predecessors are liable for any Charges: (a) under any agreement (including any
tax sharing agreements) or (b) to each Credit Party's knowledge, as a
transferee. As of the Closing Date, no Credit Party has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, which would have a Material Adverse Effect.
3.12. ERISA and Canadian Pension and Benefit Plans.
(a) Disclosure Schedule (3.12) lists as of the Closing Date all
Plans and separately identifies all Pension Plans, including Title IV Plans,
Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare
Plans. Copies of all such listed Plans, together with a copy of the latest form
5500 for each such Plan, have been delivered to Agent. Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of the
IRC, and nothing has occurred that would cause the loss of such qualification or
tax-exempt status. Each Plan is in compliance in all material respects with the
applicable provisions of ERISA and the IRC, including the timely filing of
IRS/DOL 5500-series form reports required under the IRC or ERISA. No Credit
Party or ERISA Affiliate has failed to make any contribution or pay any amount
due as required by either Section 412 of the IRC or Section 302 of ERISA or the
terms of any such Plan. No Credit Party or ERISA Affiliate has engaged in a
"prohibited transaction," as defined in Section 4975 of the IRC, in connection
with any Plan, that would subject any Credit Party to a material tax on
prohibited transactions imposed by Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title
IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or ERISA Affiliate has been terminated nor has any such Plan with
Unfunded Pension Liabilities been transferred outside of the "controlled group"
(within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or
ERISA Affiliate; (vi) except in the case of any ESOP, Stock of all Credit
Parties and their ERISA Affiliates makes up, in the aggregate, no more than 10%
of fair market value of the assets of any Plan; and (vii) no liability under any
Title IV Plan has been satisfied with the purchase of a contract from an
insurance company that is not rated AAA by the Standard & Poor's Corporation or
the equivalent by another nationally recognized rating agency.
(c) Disclosure Schedule (3.12) lists all Canadian Benefit Plans
(other than, for greater certainty, universal plans created by and to which any
Credit Party is obligated to contribute by statute) and Canadian Pension Plans
adopted by each Credit Party. The Canadian
35
Pension Plans are duly registered under the ITA and all other applicable laws
which require registration and no event has occurred which is reasonably likely
to cause the loss of such registered status. All material obligations of each
Credit Party (including fiduciary, funding, investment and administration
obligations) required to be performed in connection with the Canadian Pension
Plans and the funding agreements therefor have been performed in a timely
fashion. There have been no improper withdrawals or applications of the assets
of the Canadian Pension Plans or the Canadian Benefit Plans. There are no
outstanding disputes concerning the assets of the Canadian Pension Plans or the
Canadian Benefit Plans. Each of the Canadian Pension Plans is fully funded on a
solvency basis (using actuarial methods and assumptions which are consistent
with the valuations last filed with the applicable Governmental Authorities and
which are consistent with generally accepted actuarial principles).
3.13. No Litigation. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party, before any Governmental Authority or
before any arbitrator or panel of arbitrators (collectively, "Litigation"), (a)
that challenges any Credit Party's right or power to enter into or perform any
of its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) that has a reasonable risk of being determined adversely to any Credit
Party and that, if so determined, could have a Material Adverse Effect. Except
as set forth on Disclosure Schedule (3.13), as of the Closing Date there is no
Litigation pending or threatened that seeks damages in excess of $100,000 or
injunctive relief against, or alleges criminal misconduct of any Credit Party.
3.14. Brokers. No broker or finder acting on behalf of any Credit
Party or Affiliate thereof brought about the obtaining, making or closing of the
Loans or the Related Transactions, and no Credit Party or Affiliate thereof has
any obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
3.15. Intellectual Property. As of the Closing Date, each Credit
Party owns or has rights to use all Intellectual Property necessary to continue
to conduct its business as now or heretofore conducted by it or proposed to be
conducted by it, and each Patent, Design, Trademark, Copyright and License is
listed, together with application or registration numbers, as applicable, in
Disclosure Schedule (3.15). To the best of its knowledge, each Credit Party
conducts its business and affairs without infringement of or interference with
any Intellectual Property of any other Person. Except as set forth in Disclosure
Schedule (3.15), no Credit Party is aware of any infringement claim by any other
Person with respect to any Intellectual Property.
3.16. Full Disclosure. None of the information contained in this
Agreement, any of the other Loan Documents, any Projections, Financial
Statements or Collateral Reports or other reports from time to time delivered
hereunder or any written statement furnished by or on behalf of any Credit Party
to Agent or any Lender pursuant to the terms of this Agreement, when taken as a
whole, contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made. The Liens granted to Agent, on behalf of itself and Lenders, pursuant
to the Collateral Documents will at all times be fully perfected first priority
Liens in and to the Collateral
36
described therein, subject, as to priority, only to Permitted Encumbrances with
respect to the Collateral other than Accounts.
3.17. Environmental Matters.
(a) Except as set forth in Disclosure Schedule (3.17), as of the
Closing Date: (i) the Real Estate is free of contamination from any Hazardous
Material except for such contamination that would not adversely impact the value
or marketability of such Real Estate and that would not result in Environmental
Liabilities that could reasonably be expected to exceed $50,000; (ii) no Credit
Party has caused or suffered to occur any Release of Hazardous Materials on, at,
in, under, above, to, from or about any of its Real Estate; (iii) the Credit
Parties are and have been in compliance with all Environmental Laws, except for
such noncompliance that would not result in Environmental Liabilities which
could reasonably be expected to exceed $50,000; (iv) the Credit Parties have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits would not result in
Environmental Liabilities that could reasonably be expected to exceed $50,000,
and all such Environmental Permits are valid, uncontested and in good standing;
(v) no Credit Party is involved in operations or knows of any facts,
circumstances or conditions, including any Releases of Hazardous Materials, that
are likely to result in any Environmental Liabilities of such Credit Party which
could reasonably be expected to exceed $50,000, and no Credit Party has
permitted any current or former tenant or occupant of the Real Estate to engage
in any such operations; (vi) there is no Litigation arising under or related to
any Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses in excess of $50,000 or injunctive
relief, or that alleges criminal misconduct by any Credit Party; (vii) no notice
has been received by any Credit Party identifying it as a "potentially
responsible party" or requesting information under CERCLA or analogous state
statutes, and to the knowledge of the Credit Parties, there are no facts,
circumstances or conditions that may result in any Credit Party being identified
as a "potentially responsible party" under CERCLA or analogous state statutes;
and (viii) the Credit Parties have provided to Agent copies of all existing
environmental reports, reviews and audits and all written information pertaining
to actual or potential Environmental Liabilities, in each case relating to any
Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that Agent (i)
is not now, and has not ever been, in control of any of the Real Estate or any
Credit Party's affairs, and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party's
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.
3.18. Insurance. Disclosure Schedule (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.
3.19. Deposit and Disbursement Accounts. Disclosure Schedule (3.19)
lists all banks and other financial institutions at which any Credit Party
maintains deposit or other
37
accounts as of the Closing Date, including any Disbursement Accounts, and such
Schedule correctly identifies the name, address and telephone number of each
depository, the name in which the account is held, a description of the purpose
of the account, and the complete account number therefor.
3.20. Government Contracts. Except as set forth in Disclosure
Schedule (3.20), as of the Closing Date, no Credit Party is a party to any
contract or agreement with any Governmental Authority and no Credit Party's
Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C. Section
3727), the Financial Administration Act (Canada) or any similar state,
provincial or local law.
3.21. Customer and Trade Relations. As of the Closing Date, except
as set forth on Disclosure Schedule 3.21 attached hereto, there exists no actual
or, to the knowledge of any Credit Party, threatened termination or cancellation
of, or any material adverse modification or change in, the business relationship
of any Credit Party with any customer or group of customers whose purchases
during the preceding twelve (12) months caused them to be ranked among the ten
largest customers of such Credit Party; or the business relationship of any
Credit Party with any supplier material to its operations.
3.22. Agreements and Other Documents. As of the Closing Date, each
Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies (or summaries) of all of the following agreements
or documents to which it is subject and each of which is listed in Disclosure
Schedule (3.22): supply agreements and purchase agreements not terminable by
such Credit Party within sixty (60) days following written notice issued by such
Credit Party and involving transactions in excess of $1,000,000 per annum;
leases of Equipment having a remaining term of one year or longer and requiring
aggregate rental and other payments in excess of $500,000 per annum; licenses
and permits held by the Credit Parties, the absence of which could be reasonably
likely to have a Material Adverse Effect; instruments and documents evidencing
Indebtedness of such Credit Party and any Lien granted by such Credit Party with
respect thereto; and instruments and agreements evidencing the issuance of any
equity securities, warrants, rights or options to purchase equity securities of
such Credit Party.
3.23. Solvency. Both before and after giving effect to (a) the Loans
and Letter of Credit Obligations to be made or incurred on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or incurred, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower, (c) the Recapitalization and the
consummation of the other Related Transactions and (d) the payment and accrual
of all transaction costs in connection with the foregoing, each Credit Party is
and will be Solvent.
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3.24. Year 2000 Representations. Each Credit Party has completed a
Year 2000 Assessment and a Year 2000 Corrective Plan, copies of which have been
delivered to Agent; each Credit Party has completed all Year 2000 Corrective
Actions and completed Year 2000 Implementation Testing, except for Year 2000
Corrective Actions and Year 2000 Implementation Testing with respect to
Healthrider retail stores.
3.25. Recapitalization. As of the Closing Date, Borrower has
delivered to Agent a complete and correct copy of the Recapitalization Documents
(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). No Credit Party and no other Person party thereto is in default in
the performance or compliance with any provisions thereof. The Recapitalization
Documents comply with, and the Recapitalization has been consummated in
accordance with, all applicable laws. The Recapitalization Documents are in full
force and effect as of the Closing Date and have not been terminated, rescinded
or withdrawn. All requisite approvals by Governmental Authorities having
jurisdiction over any Credit Party and other Persons referenced therein, with
respect to the transactions contemplated by the Recapitalization Documents, have
been obtained, and no such approvals impose any conditions to the consummation
of the transactions contemplated by the Recapitalization Documents or to the
conduct by any Credit Party of its business thereafter.
3.26. Status of New Holdings. Prior to the Closing Date, New
Holdings will not have engaged in any business or incurred any Indebtedness or
any other liabilities (except in connection with its corporate formation, the
Related Transactions Documents and this Agreement).
3.27. Subordinated Debt. As of the Closing Date, Borrower has
delivered to Agent a complete and correct copy of the Subordinated Notes
Documents (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith). Borrower has the corporate power and authority to
incur the Indebtedness evidenced by the Subordinated Notes. The subordination
provisions of the Subordinated Notes Documents are enforceable against the
holders of the Subordinated Notes by Agent and Lenders. All Obligations,
including the Letter of Credit Obligations, constitute senior Indebtedness
entitled to the benefits of the subordination provisions contained in the
Subordinated Notes Documents. The principal of and interest on the Notes, all
Letter of Credit Obligations and all other Obligations will constitute "senior
debt" as that or any similar term is or may be used in any other instrument
evidencing or applicable to any other Subordinated Debt. The Subordinated Notes
mature at least six (6) months after the final maturity date of Term Loan C.
Borrower acknowledges that Agent and each Lender are entering into this
Agreement and are extending the Commitments in reliance upon the subordination
provisions of the Subordinated Notes Documents and this Section 3.27.
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4. FINANCIAL STATEMENTS AND INFORMATION
4.1. Reports and Notices.
(a) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agents or to Agents and Lenders, as required, the Financial Statements,
notices, Projections and other information at the times, to the Persons and in
the manner set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agents or to Agents and Lenders, as required, the various Collateral Reports
(including Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the
times, to the Persons and in the manner set forth in Annex F.
4.2. Communication with Accountants. Each Credit Party executing
this Agreement authorizes Agents and, so long as a Default or Event of Default
has occurred and is continuing, each Lender, to communicate directly with its
independent certified public accountants, including PriceWaterhouseCoopers, LLP
and authorizes and at Agents' request shall instruct those accountants and
advisors to disclose and make available to Agents and each Lender any and all
Financial Statements and other supporting financial documents, schedules and
information relating to any Credit Party (including copies of any issued
management letters) with respect to the business, financial condition and other
affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties, except ICON of Canada, which severally agrees
only as to itself, that from and after the date hereof and until the Termination
Date:
5.1. Maintenance of Existence and Conduct of Business. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; at all times maintain, preserve and protect all of its
assets and properties used or useful in the conduct of its business, and keep
the same in good repair, working order and condition in all material respects
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and transact business
only in such corporate and trade names as are set forth in Disclosure Schedule
(5.1).
5.2. Payment of Charges.
(a) Subject to Section 5.2(b), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, and (ii)
lawful claims for labor, materials, supplies and services or otherwise, and
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(iii) all storage or rental charges payable to warehousemen and bailees, in each
case, before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
Charges are maintained on the books of such Credit Party, in accordance with
GAAP; (ii) no Lien shall arise to secure payment of such Charges (other than
payments to bailees) that is superior to any of the Liens securing payment of
the Obligations and such contest is maintained and prosecuted with diligence and
operates to suspend collection or enforcement of such Charges, (iii) none of the
Collateral becomes subject to forfeiture or loss as a result of such contest,
(iv) such Credit Party shall promptly pay or discharge such contested Charges or
claims and all additional charges, interest, penalties and expenses, if any, and
shall deliver to Agent evidence acceptable to Agent of such compliance, payment
or discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this Section 5.2(b) are no longer
met, and (v) Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect.
5.3. Books and Records. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as Disclosure Schedule
(3.4(a)).
5.4. Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described on Disclosure Schedule (3.18) as in
effect on the date hereof or otherwise in form and amounts and with insurers
acceptable to Agent, including property insurance at replacement values and
flood insurance for all properties located in a flood plain (to the extent of
available coverage from the National Flood Insurance Program). If any Credit
Party at any time or times hereafter shall fail to obtain or maintain any of the
policies of insurance required above or to pay all premiums relating thereto,
Agent may at any time or times thereafter obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect thereto
that Agent deems advisable. Agent shall have no obligation to obtain insurance
for any Credit Party or pay any premiums therefor. By doing so, Agent shall not
be deemed to have waived any Default or Event of Default arising from any Credit
Party's failure to maintain such insurance or pay any premiums therefor. All
sums so disbursed, including attorneys' fees, court costs and other charges
related thereto, shall be payable on demand by Borrower to Agent and shall be
additional Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time upon any change in any
Credit Party's risk profile (including any change in the product mix maintained
by any Credit Party or any laws affecting the potential liability of such Credit
Party) to require additional forms and limits of insurance to, in Agent's
opinion, adequately protect both Agent's and Lenders' interests in all or any
portion of the Collateral and to ensure that each Credit Party is protected by
insurance in amounts and with coverage customary for its industry. If requested
by Agent, each Credit Party
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shall deliver to Agent from time to time a report of a reputable insurance
broker, satisfactory to Agent, with respect to its insurance policies.
(c) Borrower shall deliver to Agent, in form and substance
satisfactory to Agent, endorsements to (i) all "All Risk" and business
interruption insurance naming Agent, on behalf of itself and Lenders, as loss
payee, or, in the case of insurance covering assets located in the Province of
Quebec, naming Agent and Lenders as loss payees, and, in the case of "All Risk"
insurance covering Canada, containing the Canadian standard mortgage clause, and
(ii) all general liability and other liability policies naming Agent, on behalf
of itself and Lenders, as additional insured, or, in the case of insurance
covering assets located in the Province of Quebec, naming Agent and Lenders as
additional insureds. Borrower irrevocably makes, constitutes and appoints Agent
(and all officers, employees or agents designated by Agent), so long as any
Default or Event of Default has occurred and is continuing or the anticipated
insurance proceeds exceed $10,000,000, as Borrower's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such "All Risk" policies of insurance, endorsing the name of Borrower on any
check or other item of payment for the proceeds of such "All Risk" policies of
insurance and for making all determinations and decisions with respect to such
"All Risk" policies of insurance. Agent shall have no duty to exercise any
rights or powers granted to it pursuant to the foregoing power-of-attorney.
Borrower shall promptly notify Agent of any loss, damage, or destruction to the
Collateral in the amount of $250,000 or more, whether or not covered by
insurance. After deducting from such proceeds the expenses, if any, incurred by
Agent in the collection or handling thereof, Agent shall apply such proceeds to
the reduction of the Obligations in accordance with Section 1.3(d), or permit or
require Borrower to use such money, or any part thereof, to replace, repair,
restore or rebuild the Collateral in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the loss, damage or destruction. Notwithstanding the foregoing, if the casualty
giving rise to such insurance proceeds could not reasonably be expected to have
a Material Adverse Effect and such insurance proceeds do not exceed $10,000,000
in the aggregate, Agent shall permit Borrower to replace, restore, repair or
rebuild the property; provided that if Borrower has not completed or entered
into binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent shall apply such insurance
proceeds to prepay the Obligations in accordance with Section 1.3(d). All
insurance proceeds that are to be made available to Borrower to replace, repair,
restore or rebuild the Collateral shall be applied by Agent to reduce the
outstanding principal balance of the Revolving Loan (which application shall not
result in a permanent reduction of the Revolving Loan Commitment) and upon such
application, Agent shall establish a Reserve against the Borrowing Base in an
amount equal to the amount of such proceeds so applied. All insurance proceeds
made available to any Credit Party that is not a Borrower to replace, repair,
restore or rebuild Collateral shall be deposited in a cash collateral account.
Thereafter, such funds shall be made available to Borrower to provide funds to
replace, repair, restore or rebuild the Collateral as follows: (i) Borrower
shall request that a Revolving Credit Advance or release from the cash
collateral account be made to Borrower in the amount requested to be released;
(ii) so long as the conditions set forth in Section 2.2 have been met, Revolving
Lenders shall make such Revolving Credit Advance or Agent shall release funds
from the cash collateral account; and (iii) in the case of insurance proceeds
applied against the Revolving Loan, the Reserve established with respect to such
insurance proceeds shall be
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reduced by the amount of such Revolving Credit Advance. To the extent not used
to replace, repair, restore or rebuild the Collateral, such insurance proceeds
shall be applied in accordance with Section 1.3(d).
5.5. Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to ERISA and labor matters and Environmental Laws and
Environmental Permits, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
5.6. Canadian Pension and Benefit Plans.
(a) For each existing Canadian Pension Plan, each Credit Party shall
ensure that such plan retains its registered status under and is administered in
a timely manner in all material respects in accordance with the applicable
pension plan text, funding agreement, the ITA and all other applicable laws.
(b) For each Canadian Pension Plan hereafter adopted by any Credit
Party which is required to be registered under the ITA or any other applicable
laws, that Credit Party shall use its best efforts to seek and receive
confirmation in writing from the applicable Governmental Authorities to the
effect that such plan is unconditionally registered under the ITA and such other
applicable laws.
(c) For each existing and hereafter adopted Canadian Pension Plan
and Canadian Benefit Plan, each Credit Party shall in a timely fashion perform
in all material respects all obligations (including fiduciary, funding,
investment and administration obligations) required to be performed in
connection with such plan and the funding media therefor.
(d) Each Credit Party shall deliver to Agent if requested by Agent,
promptly after the filing thereof by any Credit Party with any applicable
Governmental Authority, copies of each annual and other return, report or
valuation with respect to each Canadian Pension Plan; promptly after receipt
thereof, a copy of any direction, order, notice, ruling or opinion that any
Credit Party may receive from any applicable Governmental Authority with respect
to any Canadian Pension Plan; and notification within 30 days of any increases
having a cost to such Credit Party in excess of C$100,000 per annum, in the
benefits of any existing Canadian Pension Plan or Canadian Benefit Plan, or the
establishment of any new Canadian Pension Plan or Canadian Benefit Plan, or the
commencement of contributions to any such plan to which any Credit Party was not
previously contributing.
5.7. Supplemental Disclosure. From time to time as may be requested
by Agent (which request will not be made more frequently than once each year
absent the occurrence and continuance of a Default or an Event of Default), the
Credit Parties shall supplement each Disclosure Schedule hereto, or any
representation herein or in any other Loan Document, with respect to any matter
hereafter arising that, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or as an exception to such representation or that is necessary to
correct any information
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in such Disclosure Schedule or representation which has been rendered inaccurate
thereby (and, in the case of any supplements to any Disclosure Schedule, such
Disclosure Schedule shall be appropriately marked to show the changes made
therein); provided that (a) no such supplement to any such Disclosure Schedule
or representation shall be or be deemed a waiver of any Default or Event of
Default resulting from the matters disclosed therein, except as consented to by
Agent and Requisite Lenders in writing; and (b) no supplement shall be required
or permitted as to representations and warranties that relate solely to the
Closing Date.
5.8. Intellectual Property. Each Credit Party will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.
5.9. Environmental Matters. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate in all
material respects or to otherwise comply with Environmental Laws and
Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate; (c) notify Agent
promptly after such Credit Party becomes aware of any violation of Environmental
Laws or Environmental Permits or any Release on, at, in, under, above, to, from
or about any Real Estate that is reasonably likely to result in Environmental
Liabilities in excess of $50,000; and (d) promptly forward to Agent a copy of
any order, notice, request for information or any communication or report
received by such Credit Party in connection with any such violation or Release
or any other matter relating to any Environmental Laws or Environmental Permits
that could reasonably be expected to result in Environmental Liabilities in
excess of $50,000, in each case whether or not the Environmental Protection
Agency or any Governmental Authority has taken or threatened any action in
connection with any such violation, Release or other matter. If Agent at any
time has a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Credit Party or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate, that, in
each case, could reasonably be expected to have a Material Adverse Effect, then
each Credit Party shall, upon Agent's written request (i) cause the performance
of such environmental audits including subsurface sampling of soil and
groundwater, and preparation of such environmental reports, at Borrower's
expense, as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance acceptable to Agent, and (ii) permit
Agent or its representatives to have access to all Real Estate for the purpose
of conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrower shall reimburse
Agent for the costs of such audits and tests and the same will constitute a part
of the Obligations secured hereunder.
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5.10. Landlords' Agreements, Mortgagee Agreements and Bailee
Letters. Each Credit Party shall use reasonable commercial efforts to obtain a
landlord's agreement, mortgagee agreement or bailee letter, as applicable, from
the lessor of each leased property, mortgagee of owned property or bailee with
respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located, which agreement or letter shall contain a
waiver or subordination of all Liens or claims that the landlord, mortgagee or
bailee may assert against the Collateral at that location, and shall otherwise
be satisfactory in form and substance to Agent. With respect to such locations
or warehouse space leased or owned as of the Closing Date and thereafter, if
Agent has not received a landlord or mortgagee agreement or bailee letter within
thirty (30) days following the Closing Date (or, if later, as of the date such
location is acquired or leased), Borrower's Eligible Inventory at that location
shall, in Agent's discretion, be excluded from the Borrowing Base or be subject
to such Reserves as may be established by Agent in its reasonable credit
judgment. After the Closing Date, no real property or warehouse space shall be
leased by any Credit Party and no Inventory shall be shipped to a processor,
converter or consignee under arrangements established after the Closing Date
without the prior written consent of Agent (which consent, in Agent's
discretion, may be conditioned upon the exclusion from the Borrowing Base of
Eligible Inventory at that location or the establishment of Reserves acceptable
to Agent) or, unless and until a satisfactory landlord agreement or bailee
letter, as appropriate, shall first have been obtained with respect to such
location. Each Credit Party shall timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased
location or public warehouse where any Collateral is or may be located. If any
Credit Party proposes to acquire a fee ownership interest in Real Estate after
the Closing Date, it shall first provide to Agent a mortgage or deed of trust,
environmental audits, mortgage title insurance commitment, survey, and if
required by Agent supplemental casualty insurance and flood insurance all in
form and substance, satisfactory to Agent.
5.11. Interest Rate. Within thirty (30) days after the Closing Date,
Borrower shall enter into and maintain interest rate cap, swap or collar
agreements, or other agreements or arrangements designed to provide protection
against fluctuations in interest rates, which shall be on terms and with counter
parties acceptable to Agent, and pursuant to which Borrower is protected against
increases in interest rates from and after the date of such contracts as to a
notional amount of not less than Ninety Million Dollars ($90,000,000) for a
period of at least three (3) years.
5.12. Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.
5.13. Term Loan C Tax Accrual Periods. Borrower and New Holdings
agree that, for federal income tax purposes, they will select "accrual periods"
(as defined in section 1272(a)(5) of the IRC and Treasury Regulation section
1.1272-1(b)(1)(ii)) with respect to
45
Term Loan C such that the last day of each accrual period will coincide with an
Interest Payment Date or a date on which principal is paid with respect to Term
Loan C.
5.14. Year 2000. On or prior to November 15, 1999, (i) Borrower
shall install hardware and software and complete Year 2000 Corrective Actions
and Year 2000 Implementation Testing with respect to Healthrider retail stores
and (ii) Credit Parties shall eliminate all Year 2000 Problems, except where the
failure to eliminate the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties, except ICON of Canada, which severally agrees
only as to itself, that, without the prior written consent of Agent and the
Requisite Lenders, from and after the date hereof until the Termination Date:
6.1. Mergers, Subsidiaries, Etc.
No Credit Party shall directly or indirectly, by operation of law or
otherwise, (a) form or acquire any Subsidiary, or (b) merge with, consolidate
with, acquire all or substantially all of the assets or Stock of, or otherwise
combine with or acquire, any Person.
6.2. Investments; Loans and Advances. No Credit Party shall make or
permit to exist any investment in, or make, accrue or permit to exist loans or
advances of money to, any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except that: (a) Borrower may hold
investments comprised of notes payable, or stock or other securities issued by
Account Debtors to Borrower pursuant to negotiated agreements with respect to
settlement of such Account Debtor's Accounts in the ordinary course of business;
(b) each Credit Party may maintain its existing investments in its Subsidiaries
as of the Closing Date; (c) Borrower may make intercompany loans to JumpKing and
ICON New Brunswick (which may only be reloaned to ICON of Canada) or ICON of
Canada in accordance with Section 6.3; (d) Borrower may invest not more than
$15,000,000 in the equity of ICON of Canada on the Closing Date; (e) Borrower
may invest up to $25,000 per year in International Holdings; and (f) so long as
no Default or Event of Default has occurred and is continuing and there is no
outstanding Revolving Loan balance, Borrower may make investments, subject to
Control Letters in favor of Agent for the benefit of Lenders, in (i) marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency thereof maturing within one year from the date of
acquisition thereof, (ii) commercial paper maturing no more than one year from
the date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc.,
(iii) certificates of deposit maturing no more than one year from the date of
creation thereof issued by commercial banks incorporated under the laws of the
United States of America, each having combined capital, surplus and undivided
profits of not less than $300,000,000 and having a senior unsecured rating of
"A" or better by a nationally recognized rating agency (an "A Rated Bank"), (iv)
time deposits maturing no more than 30 days from the date of creation thereof
with A Rated Banks and (v) mutual funds that invest solely in one or more of the
investments
46
described in clauses (i) through (iv) above; (g) investments in European
Subsidiaries not to exceed $100,000 in the aggregate; (h) Borrower may make
loans expressly permitted in this Section 6; and (i) other investments not
exceeding $100,000 in the aggregate at any time outstanding.
6.3. Indebtedness.
(a) No Credit Party shall create, incur, assume or permit to exist
any Indebtedness, except (without duplication) (i) Indebtedness secured by
purchase money security interests and Capital Leases permitted in Section
6.7(c), (ii) the Loans and the other Obligations, (iii) existing Indebtedness as
of the Closing Date described in Disclosure Schedule (6.3) and refinancings
thereof or amendments or modifications thereof that do not have the effect of
increasing the principal amount thereof or changing the amortization thereof
(other than to extend the same) and that are otherwise on terms and conditions
no less favorable to any Credit Party, Agent or any Lender, as determined by
Agent in its reasonable discretion, than the terms of the Indebtedness being
refinanced, amended or modified, (iv) Indebtedness specifically permitted under
Section 6.17, (v) other unsecured Indebtedness not to exceed $100,000 in the
aggregate; (vi) Indebtedness consisting of intercompany loans and advances made
by Borrower to JumpKing, ICON New Brunswick (for the sole purpose of reloaning
the proceeds thereof to ICON of Canada) and ICON of Canada; provided, that: (A)
JumpKing, ICON New Brunswick or ICON of Canada shall have executed and delivered
to Borrower, on the Closing Date, demand notes (the "Intercompany Notes") to
evidence any such intercompany Indebtedness owing by JumpKing, ICON New
Brunswick or ICON of Canada to Borrower, which Intercompany Notes shall be in
form and substance satisfactory to Agent and shall be pledged and delivered to
Agent pursuant to the applicable Pledge Agreement or Security Agreement as
additional collateral security for the Obligations; (B) Borrower shall record
all intercompany transactions on its books and records in a manner reasonably
satisfactory to Agent; (C) the obligations of JumpKing, ICON New Brunswick and
ICON of Canada under such Intercompany Notes shall be subordinated to the
Obligations of JumpKing, ICON New Brunswick and ICON of Canada as a Guarantor in
a manner satisfactory to Agents; and (D) Borrower shall have Net Borrowing
Availability of not less than $15,000,000 after giving effect to any such
intercompany loan; (vii) so long as no Event of Default has occurred and is
continuing, Permitted Subordinated Debt; (viii) Subordinated Debt issued to
terminated employees in accordance with Section 6.14(g); and (ix) the CS First
Boston Debt incurred by New Holdings.
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness prior to its due date or
maturity, other than (i) the Obligations (other than Term Loan C), (ii)
Indebtedness secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance with Section
6.8(b) and (iii) so long as no Event of Default has occurred and is continuing,
the Subordinated Notes and Term Loan C with the proceeds of Permitted
Subordinated Debt; and provided that the CS First Boston Debt may be converted
into equity of New Holdings.
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6.4. Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 6 with
respect to Affiliates and equity investments in New Holdings pursuant to the
Recapitalization Documents, no Credit Party shall enter into or be a party to
any transaction with any other Credit Party or any Affiliate thereof except in
the ordinary course of and pursuant to the reasonable requirements of such
Credit Party's business and upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate of such Credit Party and in
compliance with the restrictions on granting financial assistance under
applicable laws. In addition, if any such transaction or series of related
transactions involves payments by a Credit Party in excess of $250,000 in the
aggregate, the terms of these transactions must be disclosed in advance to Agent
and Lenders. All such transactions existing as of the Closing Date are described
in Disclosure Schedule 6.4, excluding potential indemnification obligations to
Affiliates of Borrower pursuant to the Recapitalization Documents.
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except (i) loans to its
respective employees on an arm's-length basis in the ordinary course of business
consistent with past practices for travel expenses, relocation costs and similar
purposes up to a maximum of $1,200,000 in the aggregate at any one time
outstanding and loans to management employees described in Disclosure Schedule
6.4.
(c) Except for bonus payments on the Closing Date, as described on
Disclosure Schedule 6.4, the Credit Parties shall not pay compensation as
salaries or otherwise in excess of $1,000,000 in the aggregate per year to Scott
Watterson and Gary Stevenson, subject to annual increases approved by a
disinterested majority of Borrower's Board of Directors, plus bonuses in
accordance with the formula set forth in Section 4 of the Employment Agreements
as in effect on the Closing Date, plus, subject to Section 6.14, management fees
to Scott Watterson and Gary Stevenson of $67,000 in the aggregate per year.
6.5. Capital Structure and Business. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations that could
in any way adversely affect the repayment of the Loans or any of the other
Obligations or could reasonably be expected to have or result in a Material
Adverse Effect, (b) make any change in its capital structure as described in
Disclosure Schedule (3.8), including the issuance of any shares of Stock,
warrants or other securities convertible into Stock or any revision of the terms
of its outstanding Stock; provided that New Holdings may make a Public Offering
of its common Stock so long as (i) the proceeds thereof are applied in
prepayment of the Obligations as required by Section 1.3(b)(iii), and (ii) no
Change of Control occurs after giving effect thereto, or (c) amend its charter
or bylaws in a manner that would adversely affect Agent or Lenders or such
Credit Party's duty or ability to repay the Obligations. No Credit Party shall
engage in any business other than the businesses currently engaged in by it.
6.6. Guaranteed Indebtedness. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments
48
or items of payment for deposit to the general account of any Credit Party, and
(b) for Guaranteed Indebtedness incurred for the benefit of any other Credit
Party if the primary obligation is expressly permitted by this Agreement and (c)
a guaranty by Borrower of the obligations of F.G. Aviation, Inc. in an amount
not to exceed $2,100,000.
6.7. Liens. No Credit Party shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other properties
or assets (whether now owned or hereafter acquired) except for (a) Permitted
Encumbrances; (b) Liens in existence on the date hereof and listed on Disclosure
Schedule (6.7); (c) Liens created after the date hereof by conditional sale or
other title retention agreements (including Capital Leases) or in connection
with purchase money Indebtedness with respect to Equipment and Fixtures acquired
by any Credit Party in the ordinary course of business, involving the incurrence
of an aggregate amount of purchase money Indebtedness and Capital Lease
Obligations of not more than $6,000,000 outstanding at any one time for all such
Liens (provided that such Liens attach only to the assets subject to such
purchase money debt and such Indebtedness is incurred within twenty (20) days
following such purchase and does not exceed 100% of the purchase price of the
subject assets); and (d) other Liens securing, other Indebtedness not exceeding
$100,000 in the aggregate at any time outstanding, so long as such Liens do not
attach to any Accounts or Inventory. In addition, no Credit Party shall become a
party to any agreement, note, indenture or instrument, or take any other action,
that would prohibit the creation of a Lien on any of its properties or other
assets in favor of Agent, on behalf of itself and Lenders, as additional
collateral for the Obligations, except operating leases, purchase money
installment contracts, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto.
6.8. Sale of Stock and Assets. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the Stock of any of its Subsidiaries (whether in a public or a private
offering or otherwise) or any of its Accounts, other than (a) the sale of
Inventory in the ordinary course of business, (b) the sale, transfer, conveyance
or other disposition for cash by a Credit Party of (i) Equipment or Fixtures
that are obsolete or no longer used or useful in such Credit Party's business
and having a value not exceeding $500,000 in the aggregate in any Fiscal Year
and (ii) other Equipment and Fixtures having a value not exceeding $1,000,000 in
the aggregate in any Fiscal Year, (c) non-recourse sales of consumer Accounts on
terms approved in advance in writing by Agents and (d) non-recourse sales of
Accounts owing by Account Debtors that are in bankruptcy, or whose Accounts are
excluded from Eligible Accounts for reasons related to the Account Debtor's
creditworthiness, on terms approved in advance in writing by Agents. Without
limiting the generality of the foregoing, no Credit Party will sell any of its
Patents or Trademarks or license any of its Patents or Trademarks to third
parties under licenses that (i) restrict the ability of the Credit Party (or
Agent) to sell the subject Patent or Trademark or (ii) diminish or impair the
value of the subject Patent or Trademark as a salable asset of the applicable
Credit Party. With respect to any disposition of assets or other properties
permitted pursuant to clause (b) above, Agent agrees on reasonable prior written
notice to release its Lien on such assets or other properties in order to permit
the applicable Credit Party to effect such disposition and shall execute and
deliver to Borrower, at Borrower's expense, appropriate UCC-3 termination
statements and other releases as reasonably requested by Borrower.
49
6.9. ERISA. No Credit Party shall, or shall cause or permit any
ERISA Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
6.10. Financial Covenants. Borrower shall not breach or fail to
comply with any of the Financial Covenants.
6.11. Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be
expected to have a Material Adverse Effect.
6.12. Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13. Cancellation of Indebtedness. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business consistent with
past practices.
6.14. Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) intercompany loans and advances between Borrower and
JumpKing or between Borrower and ICON New Brunswick or ICON of Canada, as the
case may be, to the extent permitted by Section 6.3, (b) dividends and
distributions by Subsidiaries of Borrower paid directly or indirectly to
Borrower, (c) employee loans permitted under Section 6.4(b) above, (d) payments
of principal and interest of Intercompany Notes issued in accordance with
Section 6.3; (e) scheduled payments of interest with respect to Subordinated
Notes and scheduled payments of interest and principal with respect to the
Residual 13% Subordinated Notes, provided, that (i) no Event of Default under
Section 8.1(a) has occurred and is continuing and no Payment Blockage Period (as
defined in the Subordinated Notes Documents) is in effect at the time any
payment otherwise permitted under clause (e) is to be made, (ii) the timing of
the payments referred to in clause (e) shall be set at dates that are
satisfactory to Agents; (f) payments of management fees pursuant to the
Management Agreements, not to exceed $800,000 in the aggregate in any Fiscal
Year to all of Bain Capital, Inc., Credit Suisse First Boston, Scott Watterson,
Gary Stevenson and the Affiliates of any of the foregoing and arrearages under
the management agreement between Bain Capital, Inc. and Borrower dated November
17, 1994 (the "Old Management Agreement"); provided, however, that (1) no such
management fees shall be paid so long as any Event of Default has occurred and
is continuing (payments accrued during such period may be paid when the subject
Events of Default have been cured or waived) and (2) the management fees payable
with respect to Fiscal Year 2000 and arrearages under the Old Management
Agreement shall be payable in one installment of $600,000 in the aggregate plus
$585,000 in arrearages payable to Bain Capital, Inc. under the Old Management
Agreement on
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April 30, 2000 and one installment of $200,000 in the aggregate on July 31, 2000
and management fees payable with respect to subsequent Fiscal Years shall be
payable in four equal quarterly installments sixty (60) days after the end of
each Fiscal Quarter, (g) payments to New Holdings necessary to enable New
Holdings: (1) to satisfy its federal, state and local income tax obligations
that are the result of net consolidated income of Borrower and its Subsidiaries
being attributed to New Holdings; (2) to pay the fees and expenses necessary to
maintain New Holdings' corporate existence and good standing; (3) to pay
accounting fees attributable to Borrower and its Subsidiaries; and (4) payments
to buy back the New Holdings' stock of any employee who has died or whose
employment with Borrower or its Subsidiaries has otherwise terminated, such
repurchase payments not to exceed $500,000 in the aggregate in any Fiscal Year
in cash payments or otherwise by the issuance of Subordinated Debt, (h) bonuses
and other payments (including the forgiveness of Indebtedness) to Affiliates of
Borrower as set forth on Disclosure Schedule (6.4) hereto, and (i) conversion of
the CS First Boston Debt into equity of New Holdings..
6.15. Change of Corporate Name or Location; Change of Fiscal Year.
No Credit Party shall (a) change its corporate name, or (b) change its chief
executive office, domicile (within the meaning of the Quebec Civil Code),
principal place of business, corporate offices or warehouses or locations at
which Collateral is held or stored, or the location of its records concerning
the Collateral, in each case without at least thirty (30) days prior written
notice to Agent and after Agent's written acknowledgment that any reasonable
action requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Agent and Lenders, or,
in favor of Agent and Lenders, as applicable, in any Collateral, has been
completed or taken, and provided that any such new location shall be in the
continental United States of America or Canada. Without limiting the generality
of the foregoing, no Credit Party shall change its name, identity or corporate
structure in any manner that might make any financing or continuation statement
filed in connection herewith seriously misleading within the meaning of Section
9-402(7) of the Code or any other then applicable provision of the Code, or
materially misleading within the meaning of any other applicable law, except
upon prior written notice to Agent and Lenders and after Agent's written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in favor of Agent,
on behalf of Agent and Lenders, in any Collateral, has been completed or taken.
No Credit Party shall change its Fiscal Year.
6.16. No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower.
6.17. No Speculative Transactions. No Credit Party shall engage in
any transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
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6.18. Leases; Real Estate Purchases. No Credit Party shall enter
into any operating lease for Equipment, if the aggregate of all such operating
lease payments payable in any year for all Credit Parties on a consolidated
basis would exceed $5,000,000. No Credit Party shall purchase fee simple
ownership interest in Real Estate.
6.19. Changes Relating to Subordinated Debt and Other Agreements. No
Credit Party shall change or amend the terms of the Subordinated Notes Documents
or any other Subordinated Debt (or any indenture or agreement in connection
therewith), the Recapitalization Documents, documents governing or evidencing
the CS First Boston Debt, the Management Agreements, the Employment Agreements,
or the Stockholders Agreement, except changes or amendments that do not
adversely affect the rights or interests of Lenders, as determined by Agents in
advance in writing.
6.20. Holdcos. New Holdings shall not engage in any trade or
business, or own any assets (other than Stock of Borrower) or incur any
Indebtedness or Guaranteed Indebtedness (other than the Obligations and the CS
First Boston Debt). ICON New Brunswick shall not engage in any trade or
business, or own any assets (other than a Borrower Account) or incur any
Indebtedness or Guaranteed Indebtedness (other than a guaranty of the
Obligations). International Holdings shall not engage in any trade or business
or incur any Indebtedness or Guaranteed Indebtedness (other than a guaranty of
the Obligations) or own any assets (other than the Stock of ICON Health &
Fitness, Ltd., ICON OS, Inc., ICON of Canada and ICON New Brunswick. The Old
Holdcos shall not engage in any trade or business or incur any Indebtedness or
Guaranteed Indebtedness, except that Intermediate Holdings may remain obligated
for up to $7,000,000 of its 14% Senior Discount Notes due 2006. The Old Holdcos
will not own any assets, except that Ultimate Holdings may own all of the Stock
of Intermediate Holdings; Intermediate Holdings may own all of the Stock of
Holdings and Holdings may own .01% of the Stock of New Holdings.
7. TERM
7.1. Termination. The financing arrangements contemplated hereby
shall be in effect until the Commitment Termination Date, and the Loans and all
other Obligations shall be automatically due and payable in full on such date.
7.2. Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until
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the Termination Date; provided, that the provisions of Section 11, the payment
obligations under Sections 1.15 and 1.16, and the indemnities contained in the
Loan Documents shall survive the Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agents or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within ten (10) days following Agent's demand for such reimbursement or payment
of expenses.
(b) Any Credit Party fails or neglects to perform, keep or observe
any of the provisions of Sections 1.4, 1.8, 1.14, 5.4(a) and 5.4(c), 5.6 or 6,
or any of the provisions set forth in Annexes C or G, respectively.
(c) Borrower fails or neglects to perform, keep or observe any of
the provisions of Section 4 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for three (3) Business Days
or more.
(d) Any Credit Party fails or neglects to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents
(other than any provision embodied in or covered by any other clause of this
Section 8.1) and the same shall remain unremedied for thirty (30) days or more.
(e) A default or breach occurs under any other agreement, document
or instrument to which any Credit Party is a party that is not cured within any
applicable grace period therefor, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness (other than
the Obligations) of any Credit Party in excess of $500,000 in the aggregate, or
(ii) causes, or permits any holder of such Indebtedness or a trustee to cause,
Indebtedness or a portion thereof in excess of $500,000 in the aggregate to
become due prior to its stated maturity or prior to its regularly scheduled
dates of payment, regardless of whether such default is waived, or such right is
exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect (other than inadvertent, immaterial errors
not exceeding $100,000 in the aggregate in any Borrowing Base Certificate), or
any representation or warranty herein or in any Loan Document or in any written
statement, report, financial statement or certificate (other than a Borrowing
Base Certificate) made or delivered to Agent or any Lender by any Credit Party
is untrue or incorrect in any material respect as of the date when made or
deemed made.
(g) Assets of any Credit Party with a fair market value of $100,000
or more are attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the
53
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of any Credit Party and such condition continues for thirty (30) days
or more.
(h) A case or proceeding is commenced against any Credit Party
seeking a decree or order in respect of such Credit Party (i) under the
Insolvency Laws, as now constituted or hereafter amended or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or for any substantial part of any such Credit
Party's assets, or (iii) ordering the winding-up or liquidation of the affairs
of such Credit Party, and such case or proceeding shall remain undismissed or
unstayed for sixty (60) days or more or a decree or order granting the relief
sought in such case or proceeding by a court of competent jurisdiction.
(i) Any Credit Party (i) files a petition seeking relief under the
Insolvency Laws, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
consents or fails to contest in a timely and appropriate manner to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for such Credit Party or
for any substantial part of any such Credit Party's assets, (iii) makes an
assignment for the benefit of creditors, (iv) files a proposal or notice of
intention to file a proposal under any Insolvency Laws, (v) takes any corporate
action in furtherance of any of the foregoing, (vi) admits in writing its
inability to, or is generally unable to, pay its debts as such debts become due,
or (vii) is not Solvent.
(j) A final judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate at any time are outstanding against one or more
of the Credit Parties and the same are not, within thirty (30) days after the
entry thereof, discharged or execution thereof stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any such stay.
(k) Any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its terms (or any
Credit Party shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any Lien created under any Loan Document shall cease to be a valid and
perfected first priority Lien (except as otherwise permitted herein or therein)
in any of the Collateral purported to be covered thereby.
(l) Any Change of Control occurs.
8.2. Remedies. (a) If any Default or Event of Default has occurred
and is continuing, Agent may (and at the written request of the Requisite
Revolving Lenders shall), without notice, suspend the Revolving Loan facility
with respect to additional Advances and/or the incurrence of additional Letter
of Credit Obligations, whereupon any additional Advances and the incurrence of
additional Letter of Credit Obligations shall be made or extended in Agent's
sole discretion (or in the sole discretion of the Requisite Revolving Lenders,
if such
54
suspension occurred at their direction) so long as such Default or Event of
Default is continuing. If any Event of Default has occurred and is continuing,
Agent may (and at the written request of Requisite Lenders shall), without
notice except as otherwise expressly provided herein, increase the rate of
interest applicable to the Loans and the Letter of Credit Fees to the Default
Rate.
(b) If any Event of Default has occurred and is continuing, Agent
may (and at the written request of the Requisite Lenders shall), without notice,
(i) terminate the Revolving Loan facility with respect to further Advances or
the incurrence of further Letter of Credit Obligations; (ii) declare all or any
portion of the Obligations, including all or any portion of any Loan to be
forthwith due and payable, and require that the Letter of Credit Obligations be
cash collateralized as provided in Annex B, all without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower and each other Credit Party; or (iii) exercise any rights and remedies
provided to Agent under the Loan Documents or at law or equity, including all
remedies provided under the Code; provided, that upon the occurrence of an Event
of Default specified in Sections 8.1(h) or (i), the Revolving Loan facility
shall be immediately terminated and all of the Obligations, including the
Revolving Loan, shall become immediately due and payable without declaration,
notice or demand by any Person.
8.3. Priority of Payment. Notwithstanding any provision of this
Agreement to the contrary, following acceleration of the Loans (including an
automatic acceleration upon the occurrence of an Event of Default under Sections
8.1(h) or (i)), all payments received in payment of the Loans will be applied:
(A) to the extent that such payments arise from a refinancing of the Obligations
or the sale of the Credit Parties as a going concern: (1) to Fees and Agents'
expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to
principal payments on the Swing Line Loan; (4) to interest on the Revolving
Loan, Term Loan A, Term Loan B and the IP Loan, ratably in proportion to the
interest accrued as to each such Loan; (5) to principal payments on the
Revolving Loan, Term Loan A, Term Loan B and the IP Loan and to provide cash
collateral for Letter of Credit Obligations in the manner described in Annex B,
ratably to the aggregate, combined principal balance of such Loans and
outstanding Letter of Credit Obligations; (6) to all other Obligations (other
than principal and interest on Term Loan C), including expenses of Lenders to
the extent reimbursable under Section 11.3; (7) to interest on Term Loan C; and
(8) to the principal of Term Loan C; (B) to the extent that such payments
constitute proceeds from the sale or other disposition of Collateral (other than
IP Collateral) or the exercise of offset rights against a Credit Party's bank
account(s): (1) to Fees and Agents' expenses reimbursable hereunder; (2) to
interest on the Swing Line Loan; (3) to principal payments on the Swing Line
Loan; (4) to interest on the Revolving Loan, Term Loan A and Term Loan B,
ratably in proportion to the interest accrued as to each such Loan; (5) to
principal payments on the Revolving Loan, Term Loan A and Term Loan B and to
provide cash collateral for Letter of Credit Obligations in the manner described
in Annex B, ratably to the aggregate, combined principal balance of such Loans
and outstanding Letter of Credit Obligations; (6) to interest on the IP Loan;
(7) to principal of the IP Loan; (8) to all other Obligations (other than
principal and interest on Term Loan C), including expenses of Lenders to the
extent reimbursable under Section 11.3; (9) to interest on Term Loan C; and (10)
to principal of Term Loan C; (C) to the extent that such payments constitute
proceeds from the sale or other disposition of IP Collateral: (1) to Agents'
expenses reimbursable hereunder; (2) to interest on the IP Loan; (3) to
principal of the IP Loan; (4) to interest on the Swing Line Loan; (5) to
55
principal payments on the Swing Line Loan; (6) to Fees and to interest on the
Revolving Loan, Term Loan A and Term Loan B, ratably in proportion to the
interest accrued as to each such Loan; (7) to principal payments on the
Revolving Loan, Term Loan A and Term Loan B and to provide cash collateral for
Letter of Credit Obligations in the manner described in Annex B, ratably to the
aggregate, combined principal balance of such Loans and outstanding Letter of
Credit Obligations; (8) to all other Obligations (other than principal and
interest on Term Loan C), including expenses of Lenders to the extent
reimbursable under Section 11.3; (9) to interest on Term Loan C; and (10) to
principal of Term Loan C.
8.4. Waivers by Credit Parties. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent on which any Credit Party may in any way be
liable, and hereby ratifies and confirms whatever Agent may do in this regard,
(b) all rights to notice and a hearing prior to Agent's taking possession or
control of, or to Agent's replevy, attachment or levy upon, the Collateral or
any bond or security that might be required by any court prior to allowing Agent
to exercise any of its remedies, and (c) the benefit of all valuation,
appraisal, marshaling and exemption laws.
8.5. Receivership. Without limiting the generality of the foregoing
or limiting in any way the rights of Agent or the Lenders under the Collateral
Documents or otherwise under applicable law, at any time after (i) the entire
principal balance of any Loan shall have become due and payable (whether at
maturity, by acceleration or otherwise) and (ii) the Agent shall have provided
to the Credit Parties not less than ten (10) days' prior written notice of its
intention to apply for a receiver, the Agent shall be entitled to apply for and
have a receiver appointed under state or federal law by a court of competent
jurisdiction in any action taken by the Agent to enforce the Lenders' and
Agent's rights and remedies hereunder and under the Collateral Documents in
order to manage, protect, preserve, sell and otherwise dispose of all or any
portion of the Collateral and continue the operation of the business of the
Credit Parties, and to collect all revenues and profits thereof and apply the
same to the payment of all expenses and other charges of such receivership,
including the compensation of the receiver, and to the payment of the Loans and
other fees and expenses due hereunder and under the Collateral Documents as
aforesaid until a sale or other disposition of such Collateral shall be finally
made and consummated. THE CREDIT PARTIES HEREBY IRREVOCABLY CONSENT TO AND WAIVE
ANY RIGHT TO OBJECT TO OR OTHERWISE CONTEST THE APPOINTMENT OF A RECEIVER AS
PROVIDED ABOVE. THE CREDIT PARTIES (I) GRANT SUCH WAIVER AND CONSENT KNOWINGLY
AFTER HAVING DISCUSSED THE IMPLICATIONS THEREOF WITH COUNSEL, (II) ACKNOWLEDGE
THAT (A) THE UNCONTESTED RIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING
PURPOSES IS CONSIDERED ESSENTIAL BY THE LENDERS IN CONNECTION WITH THE
ENFORCEMENT OF THE LENDERS' AND AGENT'S RIGHTS AND REMEDIES HEREUNDER AND UNDER
THE COLLATERAL DOCUMENTS, AND (B) THE AVAILABILITY OF SUCH APPOINTMENT AS A
REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE
LENDERS TO
56
MAKE THE LOANS TO THE BORROWER; AND (III) AGREE TO ENTER INTO ANY AND ALL
STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN
CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE AGENT AND THE
LENDERS IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE
RECEIVER OVER ALL OR ANY PORTION OF THE COLLATERAL. THE LENDERS AND THE AGENT
ACKNOWLEDGE AND AGREE THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO CONSTITUTE
A WAIVER OF THE CREDIT PARTIES' RIGHT TO FILE FOR PROTECTION UNDER TITLE 11 OF
THE UNITED STATES CODE AT ANY TIME PRIOR TO THE APPOINTMENT OF A RECEIVER.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1. Assignment and Participations.
(a) The Credit Parties signatory hereto consent to the sale of
participations in, at any time or times, the Loan Documents, Loans, Letter of
Credit Obligations and any Commitment or of any portion thereof or interest
therein, including any Lender's rights, title, interests, remedies, powers or
duties thereunder. Any assignment by a Lender shall: (i) require the consent of
Agent (which consent shall not be unreasonably withheld or delayed with respect
to a Qualified Assignee) and the execution of an assignment agreement (an
"Assignment Agreement") substantially in the form attached hereto as Exhibit
9.1(a) and otherwise in form and substance satisfactory to, and acknowledged by,
Agent; (ii) be conditioned on such assignee Lender representing to the assigning
Lender and Agent that it is purchasing the applicable Loans to be assigned to it
for its own account, for investment purposes and not with a view to the
distribution thereof; (iii) if a partial assignment, be in an amount at least
equal to $5,000,000 and, after giving effect to any such partial assignment, the
assigning Lender shall have retained Commitments in an amount at least equal to
$5,000,000; and (iv) include a payment to Agent of an assignment fee of $3,500.
In the case of an assignment by a Lender under this Section 9.1, the assignee
shall have, to the extent of such assignment, the same rights, benefits and
obligations as all other Lenders hereunder. Notwithstanding the foregoing, an
assignment by a Lender to a Qualified Assignee under common ownership and
control with such Lender does not require Agent's consent and is not subject to
the $3,500 assignment fee. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Borrower hereby acknowledges
and agrees that any assignment shall give rise to a direct obligation of
Borrower to the assignee and that the assignee shall be considered to be a
"Lender." In all instances, each Lender's liability to make Loans hereunder
shall be several and not joint and shall be limited to such Lender's Pro Rata
Share of the applicable Commitment. In the event Agent or any Lender assigns or
otherwise transfers all or any part of the Obligations, Agent or any such Lender
shall so notify Borrower and Borrower shall, upon the request of Agent or such
Lender, execute new Notes in exchange for the Notes, if any, being assigned.
Notwithstanding the foregoing provisions of this Section 9.1(a), any Lender may
at any time pledge the Obligations held by it and such Lender's rights under
this Agreement and the other Loan Documents to a Federal Reserve Bank, and any
lender that is an investment fund may assign the Obligations held by it and such
Lender's rights under this Agreement and the other Loan Documents to another
investment fund managed by the same investment advisor;
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provided, that no such pledge to a Federal Reserve Bank shall release such
Lender from such Lender's obligations hereunder or under any other Loan
Document. Upon any transfer of an interest in Term Loan C, the substitute notes
evidencing such transfer shall bear the legend required by IRC Section
1275(c)(1) and Treasury Regulation 1.275-3(b). Credit Parties' consent to an
assignment of Commitments is not required (i) if the assignee is a Qualified
Assignee or (ii) if the assignee is not a Qualified Assignee, but an Event of
Default has occurred and is continuing. Agent's consent to an assignment of
Commitments is not required if the assignment is made by a Lender to one or more
Qualified Assignees and such sale is made in connection with a sale of all or
substantially all of that Lender's loan portfolio.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation (other than a
participant that is a majority-owned Subsidiary of the parent of such Lender)
shall not be entitled to require such Lender to take or omit to take any action
hereunder except actions directly affecting (i) any reduction in the principal
amount of, or interest rate or Fees payable with respect to, any Loan in which
such holder participates, (ii) any extension of the scheduled amortization of
the principal amount of any Loan in which such holder participates or the final
maturity date thereof, and (iii) any release of all or substantially all of the
Collateral (other than in accordance with the terms of this Agreement, the
Collateral Documents or the other Loan Documents). Solely for purposes of
Sections 1.13, 1.15, 1.16(a) and (b) and 9.8, Borrower acknowledges and agrees
that a participation shall give rise to a direct obligation of Borrower to the
participant and the participant shall be considered to be a "Lender." Except as
set forth in the preceding sentence neither Borrower nor any other Credit Party
shall have any obligation or duty to any participant. Neither Agent nor any
Lender (other than the Lender selling a participation) shall have any duty to
any participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.
(c) Except as expressly provided in this Section 9.1, no Lender
shall, as between Borrower and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any
Lender permitted to sell assignments or participations under this Section 9.1 as
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and
the preparation of informational materials for, and the participation of
management in meetings with, potential assignees or participants. Each Credit
Party executing this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of the Credit Parties and their respective affairs
contained in any selling materials provided by it and all other information
provided by it and included in such materials, except that any Projections
delivered by Borrower shall only be certified by Borrower as having been
prepared by Borrower in compliance with the representations contained in Section
3.4(c).
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(e) A Lender may furnish any information concerning Credit Parties
in the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants). Each Lender shall obtain
from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.
(f) So long as no Event of Default has occurred and is continuing,
no Lender shall assign or sell participations in any portion of its Loans or
Commitments to a potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant would be subject
to capital adequacy or similar requirements under Section 1.16(a), increased
costs under Section 1.16(b), an inability to fund LIBOR Loans under Section
1.16(c), or withholding taxes in accordance with Section 1.15(a).
9.2. Appointment of Agent. GE Capital is hereby appointed to act on
behalf of all Lenders as Agent and Fleet is appointed as Syndication Agent under
this Agreement and the other Loan Documents. The provisions of this Section 9.2
are solely for the benefit of Agents and Lenders and no Credit Party nor any
other Person shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement
and the other Loan Documents, each Agent shall act solely as an agent of Lenders
and does not assume and shall not be deemed to have assumed any obligation
toward or relationship of agency or trust with or for any Credit Party or any
other Person. Agents shall have no duties or responsibilities except for those
expressly set forth in this Agreement and the other Loan Documents. The duties
of Agents shall be mechanical and administrative in nature and Agents shall not
have, or be deemed to have, by reason of this Agreement, any other Loan Document
or otherwise a fiduciary relationship in respect of any Lender. No Agent nor any
of their Affiliates nor any of their respective officers, directors, employees,
agents or representatives shall be liable to any Lender for any action taken or
omitted to be taken by it hereunder or under any other Loan Document, or in
connection herewith or therewith, except for damages caused by its or their own
gross negligence or willful misconduct. Except as expressly set forth herein and
in the other Loan Documents, neither Agent shall have any duty to disclose, or
shall be liable for the failure to disclose, any information relating to any
Credit Party or any of their respective Subsidiaries that is communicated to or
obtained by such Agent or any of its Affiliates in any capacity. Neither Agent
shall be deemed to have knowledge of any Default or Event of Default unless and
until written notice thereof is given to such Agent by the Borrower or a Lender,
and neither Agent shall be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in, or in
connection with, this Agreement or the other Loan Documents, (ii) the contents
of any certificate, report or other document delivered hereunder or under any of
the other Loan Documents or in connection herewith of therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, the other Loan
Documents or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Section 2 or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to Agents.
If Agent requests instructions from Requisite Lenders, Requisite
Revolving Lenders or all affected Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Loan
Document, then Agent shall be entitled to
59
refrain from such act or taking such action unless and until Agent shall have
received instructions from Requisite Lenders, Requisite Revolving Lenders or all
affected Lenders, as the case may be, and Agent shall not incur liability to any
Person by reason of so refraining. Each Agent shall be fully justified in
failing or refusing to take any action hereunder or under any other Loan
Document (a) if such action would, in the opinion of such Agent, be contrary to
law or the terms of this Agreement or any other Loan Document, (b) if such
action would, in the opinion of such Agent, expose such Agent to Environmental
Liabilities or (c) if such Agent shall not first be indemnified to its
satisfaction against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against
either Agent as a result of such Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders, Requisite Revolving Lenders or all affected Lenders, as
applicable.
9.3. Agents' Reliance, Etc. No Agent nor any of their Affiliates nor
any of their respective directors, officers, agents or employees shall 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 damages caused by
its or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, each Agent: (a) may treat the payee of any Note as
the holder thereof until Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to Agent; (b) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) 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 Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) 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 (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
9.4. Agents and Affiliates. With respect to its Commitments
hereunder, each Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include GE Capital and Fleet in their individual
capacities. Each Agent and its Affiliates may lend money to, invest in, and
generally engage in any kind of business with, any Credit Party, any of their
Affiliates and any Person who may do business with or own securities of any
Credit Party or any such Affiliate, all as if GE Capital and Fleet were not
Agents and without any duty to account therefor to Lenders. Each Agent and its
Affiliates may accept fees and other consideration from any Credit Party for
services in connection with this Agreement or otherwise without having to
account for
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the same to Lenders. Each Lender acknowledges the potential conflict of interest
between GE Capital and Fleet as Lenders holding disproportionate interests in
the Loans and having differing priorities in the various pools of Collateral
upon acceleration of the Obligations and GE Capital and Fleet as Agents, and
expressly consents to and waives any claim based upon, such conflict of
interest.
9.5. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in Section 3.4(a) and such other documents
and information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon either Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
9.6. Indemnification. Lenders agree to indemnify each Agent (to the
extent not reimbursed by Credit Parties and without limiting the obligations of
Borrower hereunder), ratably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against
either Agent in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted to be taken by such Agent in
connection therewith; provided, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from either Agent's
gross negligence or willful misconduct. Without limiting the foregoing, each
Lender agrees to reimburse each Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by such Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that such Agent is not reimbursed for such expenses by Credit Parties.
9.7. Successor Agent. Either Agent may resign at any time by giving
not less than thirty (30) days' prior written notice thereof to Lenders and
Borrower. Upon any such resignation, the Requisite Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so appointed
by the Requisite Lenders and shall have accepted such appointment within 30 days
after the resigning Agent's giving notice of resignation, then the resigning
Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a
Lender, if a Lender is willing to accept such appointment, or otherwise shall be
a commercial bank or financial institution or a subsidiary of a commercial bank
or financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State thereof
and has a combined capital and surplus of at least $300,000,000. If no successor
Agent has been appointed pursuant to the foregoing, within 30 days after the
date
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such notice of resignation was given by the resigning Agent, such resignation
shall become effective and the Requisite Lenders shall thereafter perform all
the duties of the resigning Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor Agent as provided above. Any successor
Agent appointed by Requisite Lenders hereunder shall be subject to the approval
of Borrower, such approval not to be unreasonably withheld or delayed; provided
that such approval shall not be required if a Default or an Event of Default has
occurred and is continuing. Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor Agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
Agent. Upon the earlier of the acceptance of any appointment as an Agent
hereunder by a successor Agent or the effective date of the resigning Agent's
resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue. After any resigning Agent's resignation hereunder, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was acting as an Agent under this Agreement and the
other Loan Documents.
9.8. Setoff and Sharing of Payments. In addition to any rights now
or hereafter granted under applicable law and not by way of limitation of any
such rights, upon the occurrence and during the continuance of any Event of
Default and subject to Section 9.9(f), each Lender is hereby authorized at any
time or from time to time, without notice to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of Borrower or any Guarantor (regardless of whether such
balances are then due to Borrower or any Guarantor) and any other properties or
assets at any time held or owing by that Lender or that holder to or for the
credit or for the account of Borrower or any Guarantor against and on account of
any of the Obligations that are not paid when due. Any Lender exercising a right
of setoff or otherwise receiving any payment on account of the Obligations in
excess of its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender's
or holder's Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share the amount so offset or otherwise received with each other
Lender or holder in accordance with their respective Pro Rata Shares, (other
than offset rights exercised by any Lender with respect to Sections 1.13, 1.15
or 1.16). Each Lender's obligation under this Section 9.8 shall be in addition
to and not in limitation of its obligations to purchase a participation in an
amount equal to its Pro Rata Share of the Swing Line Loans under Section 1.1.
Borrower and each Guarantor agree, to the fullest extent permitted by law, that
(a) any Lender may exercise its right to offset with respect to amounts in
excess of its Pro Rata Share of the Obligations and may sell participations in
such amounts so offset to other Lenders and holders and (b) any Lender so
purchasing a participation in the Loans made or other Obligations held by other
Lenders or holders may exercise all rights of offset, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation. Notwithstanding the foregoing,
if all or any portion of the offset amount or payment otherwise received is
thereafter recovered from the Lender that has exercised the right of offset, the
purchase of participations by that Lender shall be rescinded and the purchase
price restored without interest.
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9.9. Advances; Payments; Non-Funding Lenders; Information; Actions
in Concert.
(a) Advances; Payments. (i) Revolving Lenders shall refund or
participate in the Swing Line Loan in accordance with clauses (iii) and
(iv) of Section 1.1(c). If the Swing Line Lender declines to make a Swing
Line Loan or if Swing Line Availability is zero, Agent shall notify
Revolving Lenders, promptly after receipt of a Notice of Revolving Advance
and in any event prior to 1:00 p.m. (New York time) on the date such
Notice of Revolving Advance is received, by telecopy, telephone or other
similar form of transmission. Each Revolving Lender shall make the amount
of such Lender's Pro Rata Share of such Revolving Credit Advance available
to Agent in same day funds by wire transfer to Agent's account as set
forth in Annex H not later than 3:00 p.m. (New York time) on the requested
funding date, in the case of an Index Rate Loan and not later than 11:00
a.m. (New York time) on the requested funding date in the case of a LIBOR
Loan. After receipt of such wire transfers (or, in the Agent's sole
discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance to
Borrower. All payments by each Revolving Lender shall be made without
setoff, counterclaim or deduction of any kind.
(ii) On the second (2nd) Business Day of each calendar week or
more frequently as aggregate cumulative payments in excess of $2,000,000
are received with respect to the Loans (other than the Swing Line Loan)
(each, a "Settlement Date"), Agent shall advise each Lender by telephone,
or telecopy of the amount of such Lender's Pro Rata Share of principal,
interest and Fees paid for the benefit of Lenders with respect to each
applicable Loan. Provided that each Lender has funded all payments and
Advances required to be made by it and purchased all participations
required to be purchased by it under this Agreement and the other Loan
Documents as of such Settlement Date, Agent shall pay to each Lender such
Lender's Pro Rata Share of principal, interest and Fees paid by Borrower
since the previous Settlement Date for the benefit of such Lender on the
Loans held by it. To the extent that any Lender (a "Non-Funding Lender")
has failed to fund all such payments and Advances or failed to fund the
purchase of all such participations, Agent shall be entitled to set off
the funding short-fall against that Non-Funding Lender's Pro Rata Share of
all payments received from Borrower. Such payments shall be made by wire
transfer to such Lender's account (as specified by such Lender in Annex H
or the applicable Assignment Agreement) not later than 2:00 p.m. (Chicago
time) on the next Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may assume that
each Revolving Lender will make its Pro Rata Share of each Revolving Credit
Advance available to Agent on each funding date. If such Pro Rata Share is not,
in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled
to recover such amount on demand from such Revolving Lender without setoff,
counterclaim or deduction of any kind. If any Revolving Lender fails to pay the
amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly
notify Borrower and Borrower shall immediately repay such amount to Agent.
Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Agent to advance funds on behalf of any
Revolving Lender or to relieve any
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Revolving Lender from its obligation to fulfill its Commitments hereunder or to
prejudice any rights that Borrower may have against any Revolving Lender as a
result of any default by such Revolving Lender hereunder. To the extent that
Agent advances funds to Borrower on behalf of any Revolving Lender and is not
reimbursed therefor on the same Business Day as such Advance is made, Agent
shall be entitled to retain for its account all interest accrued on such Advance
until reimbursed by the applicable Revolving Lender.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be
received by Agent from Borrower and such related payment is not received
by Agent, then Agent will be entitled to recover such amount from such
Lender on demand without setoff, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to Borrower or paid to any
other Person pursuant to any Insolvency Law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other
Loan Document, Agent will not be required to distribute any portion
thereof to any Lender. In addition, each Lender will repay to Agent on
demand any portion of such amount that Agent has distributed to such
Lender, together with interest at such rate, if any, as Agent is required
to pay to Borrower or such other Person, without setoff, counterclaim or
deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender to
make any Revolving Credit Advance or any payment required by it hereunder, or to
purchase any participation in any Swing Line Loan to be made or purchased by it
on the date specified therefor shall not relieve any other Lender (each such
other Revolving Lender, an "Other Lender") of its obligations to make such
Advance or purchase such participation on such date, but neither any Other
Lender nor Agent shall be responsible for the failure of any Non-Funding Lender
to make an Advance, purchase a participation or make any other payment required
hereunder. Notwithstanding anything set forth herein to the contrary, a
Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Loan Document or constitute a "Lender" or a "Revolving Lender"
(or be included in the calculation of "Requisite Lenders," or "Requisite
Revolving Lenders" hereunder) for any voting or consent rights under or with
respect to any Loan Document. At Borrower's request, Agent or a Person
acceptable to Agent shall have the right with Agent's consent and in Agent's
sole discretion (but shall have no obligation) to purchase from any Non-Funding
Lender, and each Non-Funding Lender agrees that it shall, at Agent's request,
sell and assign to Agent or such Person, all of the Commitments of that
Non-Funding Lender for an amount equal to the principal balance of all Loans
held by such Non-Funding Lender and all accrued interest and fees with respect
thereto through the date of sale, such purchase and sale to be consummated
pursuant to an executed Assignment Agreement.
(e) Dissemination of Information. Agent shall use reasonable efforts
to provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any Event
of Default of which Agent has
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actually become aware and with notice of any action taken by Agent following any
Event of Default; provided, that Agent shall not be liable to any Lender for any
failure to do so, except to the extent that such failure is attributable to
Agent's gross negligence or willful misconduct. Lenders acknowledge that
Borrower is required to provide Financial Statements and Collateral Reports to
Lenders in accordance with Annexes E and F hereto and agree that Agent shall
have no duty to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining the prior written consent of Agent and Requisite Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of Agent.
10. SUCCESSORS AND ASSIGNS
10.1. Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
11. MISCELLANEOUS
11.1. Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2. Any letter of interest, commitment letter, or fee
letter (other than the Fee Letter) between any Credit Party and Agent or any
Lender or any of their respective Affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or effect shall
be superseded by this Agreement.
11.2. Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by Agent, no
amendment, modification, termination or waiver of any provision of this
Agreement or any other Loan Document, or any consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by Agent and Borrower, and by
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Requisite Lenders, Requisite Revolving Lenders or all affected Lenders, as
applicable. Except as set forth in clauses (b) and (c) below, all such
amendments, modifications, terminations or waivers requiring the consent of any
Lenders shall require the written consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement that increases the percentage
advance rates set forth in the definition of the Borrowing Base, or that makes
less restrictive the nondiscretionary criteria for exclusion from Eligible
Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7, or Eligible
Equipment or Eligible Real Estate shall be effective unless the same shall be in
writing and signed by Agent, Requisite Revolving Lenders and Borrower. No
amendment, modification, termination or waiver of or consent with respect to any
provision of this Agreement that waives compliance with the conditions precedent
set forth in Section 2.2 to the making of any Loan or the incurrence of any
Letter of Credit Obligations shall be effective unless the same shall be in
writing and signed by Agent, Requisite Revolving Lenders and Borrower.
Notwithstanding anything contained in this Agreement to the contrary, no waiver
or consent with respect to any Default or any Event of Default shall be
effective for purposes of the conditions precedent to the making of Loans or the
incurrence of Letter of Credit Obligations set forth in Section 2.2 unless the
same shall be in writing and signed by Agent, Requisite Revolving Lenders and
Borrower.
(c) (i) No amendment, modification, termination or waiver shall,
unless in writing and signed by Agent and each Lender directly affected
thereby: (a) increase the aggregate principal amount of the Commitments or
increase the principal amount of any Lender's Term Loan A Commitment, Term
Loan B Commitment, Term Loan C Commitment, Revolving Loan Commitment or IP
Loan Commitment (which action shall be deemed to directly affect all
Lenders); (b) reduce the principal of, rate of interest on or Fees payable
with respect to any Loan or Letter of Credit Obligations of any affected
Lender; (c) extend or waive any payment date or final maturity date of the
principal amount of any Loan of any affected Lender; (d) waive, forgive,
defer, extend or postpone any payment of interest or Fees as to any
affected Lender; (e) release any Guaranty or, except as otherwise
permitted herein or in the other Loan Documents, release, or subordinate
Agent's Liens in, or permit any Credit Party to sell or otherwise dispose
of, any Collateral with a value exceeding $5,000,000 in the aggregate so
long as the Obligations remain outstanding (which action shall be deemed
to directly affect all Lenders); (f) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Loans that
shall be required for Lenders or any of them to take any action hereunder;
(g) amend or waive this Section 11.2 or the definitions of the terms
"Requisite Lenders" or "Requisite Revolving Lenders" insofar as such
definitions affect the substance of this Section 11.2; and (h) amend or
waive Sections 1.3(a)(ii), 1.3(c), 1.3(f), 1.5(a)(iii), 1.11 or 8.3.
Furthermore, no amendment, modification, termination or waiver affecting
the rights or duties of Agents under this Agreement or any other Loan
Document shall be effective unless in writing and signed by Agents, in
addition to Lenders required hereinabove to take such action. Each
amendment, modification, termination or waiver shall be effective only in
the specific instance and for the specific purpose for which it was given.
No amendment, modification, termination or waiver shall be required for
Agent to take additional Collateral pursuant to any Loan Document.
66
No amendment, modification, termination or waiver of any provision of any
Note shall be effective without the written concurrence of the holder of
that Note. No notice to or demand on any Credit Party in any case shall
entitle such Credit Party or any other Credit Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with
this Section 11.2 shall be binding upon each holder of the Notes at the
time outstanding and each future holder of the Notes. All Lenders and
Credit Parties acknowledge that if all Revolving Lenders elect to extend
the maturity date of the Revolving Loan beyond August 31, 2004, the
definition of the Commitment Termination Date will be deemed to be amended
accordingly.
(ii) No voluntary prepayment shall be applied to the
outstanding principal balance of Term Loan C without the prior written
consent of all of the holders of the Revolving Loan Commitments, the Term
Loan A Commitments, the IP Loan Commitments and the Term Loan B
Commitments, except for prepayments of Term Loan C with the proceeds of
Permitted Subordinated Debt.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders, the consent
of Requisite Lenders is obtained, but the consent of other Lenders
whose consent is required is not obtained (any such Lender whose
consent is not obtained as described in this clause (i) and in
clauses (ii) and (iii) below being referred to as a "Non-Consenting
Lender"),
(ii) requiring the consent of Requisite Revolving Lenders, the
consent of Revolving Lenders holding 51% or more of the aggregate
Revolving Loan Commitments is obtained, but the consent of Requisite
Revolving Lenders is not obtained, or
(iii) requiring the consent of Requisite Lenders, the consent
of Lenders holding 51% or more of the aggregate Commitments is
obtained, but the consent of Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower's request
Agent, or a Person acceptable to Agent, shall have the right with Agent's
consent and in Agent's sole discretion (but shall have no obligation) to
purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree
that they shall, upon Agent's request, sell and assign to Agent or such Person,
all of the Commitments of such Non-Consenting Lenders for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lenders and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
(e) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all
67
claims against Agent and Lenders, and so long as no suits, actions proceedings,
or claims are pending or threatened against any Indemnified Person asserting any
damages, losses or liabilities that are Indemnified Liabilities, Agent shall
deliver to Borrower termination statements, mortgage releases and other
documents necessary or appropriate to evidence the termination of the Liens
securing payment of the Obligations.
(f) In order to complete syndication of the Loans, Agents
specifically reserve their rights as to amendments related to syndication as
provided in the Fee Letter.
(g) Notwithstanding any provision herein contained to the contrary,
Credit Parties shall not be permitted to sell or dispose of IP Collateral with a
value in excess of $500,000 in the aggregate so long as the IP Loan is
outstanding without the prior written consent of at least sixty-six and
two-thirds percent (66 2/3%) of the IP Loan Commitment.
(h) Notwithstanding any provision herein contained to the contrary,
the percentage advance rates for Eligible Accounts and Eligible Inventory set
forth in the definition of Borrowing Base may not be increased without the prior
written consent of the holders of at least eighty percent (80%) of the Revolving
Loan Commitment.
11.3. Fees and Expenses. Borrower shall reimburse (i) Agents for all
fees, costs and expenses (including the reasonable fees and expenses of all of
its special counsel, advisors, consultants and auditors) and (ii) Agents (and,
with respect to clauses (c) and (d) below, all Lenders) for all fees, costs and
expenses, including the reasonable fees, costs and expenses of counsel or other
advisors (including environmental and management consultants and appraisers)
incurred in connection with the negotiation and preparation of the Loan
Documents and for advice, assistance, or other representation in connection
with:
(a) the forwarding to Borrower or any other Person on behalf of
Borrower by Agents of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or consent with
respect to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, Borrower or any other Person and
whether as a party, witness or otherwise) in any way relating to the Collateral,
any of the Loan Documents or any other agreement to be executed or delivered in
connection herewith or therewith, including any litigation, contest, dispute,
suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against Borrower or any other Person that
may be obligated to Agent by virtue of the Loan Documents, including any such
litigation, contest, dispute, suit, proceeding or action arising in connection
with any work-out or restructuring of the Loans during the pendency of one or
more Events of Default; provided, that in the case of reimbursement of counsel
for Lenders other than Agent, such reimbursement shall be limited to one counsel
for all such Lenders;
68
(d) any attempt to enforce any remedies of Agent or any Lender
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents,
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default; provided, that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one counsel for all
such Lenders;
(e) any workout or restructuring of the Loans during the pendency of
one or more Events of Default; and
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (f) above, all attorneys' and other
professional and service providers' fees arising from such services, including
those in connection with any appellate proceedings, and all expenses, costs,
charges and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrower to Agents. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees, costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
11.4. No Waiver. Agents' or any Lender's failure, at any time or
times, to require strict performance by the Credit Parties of any provision of
this Agreement or any other Loan Document shall not waive, affect or diminish
any right of Agents or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders and directed to Borrower specifying
such suspension or waiver.
11.5. Remedies. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
69
11.6. Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
11.7. Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.8. Confidentiality. Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintain the confidentiality of its own confidential information) to
maintain as confidential all confidential information provided to them by the
Credit Parties for a period of one (1) year following the Termination Date,
except that Agent and each Lender may disclose such information (a) to Persons
employed or engaged by Agent or such Lender in evaluating, approving,
structuring or administering the Loans and the Commitments; (b) to any bona fide
assignee or participant or potential assignee or participant that has agreed to
comply with the covenant contained in this Section 11.8 (and any such bona fide
assignee or participant or potential assignee or participant may disclose such
information to Persons employed or engaged by them as described in clause (a)
above); (c) as required or requested by any Governmental Authority (including
the Securities Valuation Office of the National Association of Insurance
Commissioners) or reasonably believed by Agent or such Lender to be compelled by
any court decree, subpoena or legal or administrative order or process; (d) as,
on the advise of Agent's or such Lender's counsel, is required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which Agent or such Lender is a party; or
(f) that ceases to be confidential through no fault of Agent or any Lender.
11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT AGENT, LENDERS AND THE CREDIT
70
PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF COOK COUNTY, CITY OF CHICAGO, ILLINOIS AND; PROVIDED,
FURTHER THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY
OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN
ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
11.10. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.10); (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated in Annex I or to such other address
(or facsimile number) as may be substituted by notice given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower or Agent) designated in Annex I
to receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
71
11.11. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14. Press Releases; Etc. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future issue any
press releases or other public disclosure using the name of GE Capital or its
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with GE Capital before issuing such press release or other public disclosure.
Each Credit Party consents to the publication by Agent or any Lender of a
tombstone or similar advertising material relating to the financing transactions
contemplated by this Agreement. Agent or such Lender shall provide a draft of
any such tombstone or similar advertising material to each Credit Party for
review and comment prior to the publication thereof. Agent and Lenders reserve
the right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements with Borrower's consent
which shall not be unreasonably withheld or delayed.
11.15. Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Borrower for liquidation or reorganization, should Borrower become insolvent or
make an assignment for the benefit of any creditor or creditors or should a
receiver or trustee be appointed for all or any significant part of Borrower's
assets, and shall continue to be effective or to be reinstated, as the case may
be, if at any time payment and performance of the Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent
72
conveyance," or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Obligations shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
11.16. Advice of Counsel. Each of the parties represents to each
other party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.17. No Drafting Presumptions. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
11.18. License. Each Credit Party hereby grants to Agent for the
benefit of all of the Lenders a world-wide, royalty-free license to use all of
its Patents and Trademarks after the occurrence of an Event of Default to
complete, the manufacture of, and to sell or otherwise dispose of, all of each
Credit Party's Inventory. Such royalty-free license shall extend to any person
or persons purchasing Inventory from the Lenders.
The IP Lenders acknowledge that any sale or disposition of the
Patents and Trademarks is expressly made subject to the foregoing license and
that the existence thereof may delay the sale or disposition of the Patents and
Trademarks and may affect the prices obtained upon the sale or disposition of
the Patents and Trademarks.
73
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
BORROWER
ICON HEALTH & FITNESS, INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By:________________________________________
Duly Authorized Signatory
FLEET NATIONAL BANK,
as Syndication Agent and Lender
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-1
JACKSON NATIONAL LIFE INSURANCE COMPANY
By: PPM Financial Inc., as attorney-in-fact
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-2
ZIONS FIRST NATIONAL BANK
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-3
LASALLE BUSINESS CREDIT, INC.
By:________________________________________
Name: William A. Stapel
Title: First Vice President
S-4
PNC BANK, NATIONAL ASSOCIATION
By:________________________________________
Name: Scott Carpenter
Title: Vice President
S-5
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc., its
Agent/Manager
By:________________________________________
Name: John P. Thacker
Title: Senior Vice President
S-6
COMERICA BANK
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-7
BANK POLSKA KASA OPIEKA S.A.
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-8
INTENTIONALLY OMITTED
S-9
THE CHASE MANHATTAN BANK
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-10
HELLER FINANCIAL, INC.
By:________________________________________
Name: Albert J. Forzano
Title: Vice President
S-11
The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers.
HF HOLDINGS, INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
JUMPKING, INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
ICON INTERNATIONAL HOLDINGS, INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
UNIVERSAL TECHNICAL SERVICES
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-12
ICON DU CANADA INC./ICON OF CANADA INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
510152 N.B. LTD.
By:________________________________________
Name:______________________________________
Title:_____________________________________
S-13
ANNEX A (Recitals)
to
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings and all references to Sections, Exhibits, Schedules or Annexes in the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes of
or to the Agreement:
"Account Debtor" means any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an Account.
"Accounting Changes" has the meaning ascribed thereto in Annex G.
"Accounts" means all "accounts," as such term is defined in the
Code, and all "claims," as such term is defined in the Quebec Civil Code, now
owned or hereafter acquired by any Credit Party and, in any event, including (a)
all accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments), whether arising out of goods sold or services
rendered by it or from any other transaction (including any such obligations
that may be characterized as an account or contract right under the Code), (b)
all of each Credit Party's rights in, to and under all purchase orders or
receipts for goods or services, (c) all of each Credit Party's rights to any
goods represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all monies due or to become due
to any Credit Party, under all purchase orders and contracts for the sale of
goods or the performance of services or both by such Credit Party or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Credit Party), including the right to receive the proceeds
of said purchase orders and contracts, and (e) all collateral security and
guaranties of any kind, now or hereafter in existence, given by any Person with
respect to any of the foregoing.
"Advance" means any Revolving Credit Advance or Swing Line Advance,
as the context may require.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the Stock having
ordinary voting power in the election of directors of such Person, (b) each
Person that controls, is controlled by or is under common control with such
Person, (c) each of such Person's officers, directors, joint venturers and
partners and (d) in the case of Borrower, the immediate family members, spouses
and lineal descendants of individuals who are Affiliates of Borrower. For the
purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or
A-1
otherwise; provided, however, that the term "Affiliate" shall specifically
exclude Agent and each Lender.
"Agent" means GE Capital in its capacity as Administrative Agent for
Lenders or its successor appointed pursuant to Section 9.7.
"Agents" means GE Capital and Fleet as Syndication Agent hereunder,
or their respective successors and assigns.
"Agreement" means the Credit Agreement by and among Borrower, the
other Credit Parties party thereto, GE Capital, as Agent and Lender, Fleet, as
Syndication Agent and Lender and the other Lenders from time to time party
thereto, as the same may be amended, supplemented, restated or otherwise
modified from time to time.
"Appendices" has the meaning ascribed to it in the recitals to the
Agreement.
Applicable IP Loan Index Margin" means the per annum interest rate
from time to time in effect and payable in addition to the Index Rate applicable
to the IP Loan, as set forth in Section 1.5(a).
"Applicable L/C Margin" means the per annum fee, from time to time
in effect, payable with respect to outstanding Letter of Credit Obligations as
determined by reference to Section 1.5(a).
"Applicable Margins" means collectively the Applicable L/C Margin,
the Applicable Unused Line Fee Margin, the Applicable Revolver Index Margin, the
Applicable Term Loan A Index Margin, the Applicable Term Loan B Index Margin,
the Applicable Term Loan C Index Margin, the Applicable Revolver LIBOR Margin,
the Applicable Term Loan A LIBOR Margin, the Applicable Term Loan B LIBOR
Margin, the Applicable Term Loan C LIBOR Margin and the Applicable IP Loan Index
Margin.
"Applicable Revolver Index Margin" means the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).
"Applicable Revolver LIBOR Margin" means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.5(a).
"Applicable Term Loan A Index Margin" means the per annum interest
rate from time to time in effect and payable in addition to the Index Rate
applicable to Term Loan A, as determined by reference to Section 1.5(a).
"Applicable Term Loan A LIBOR Margin" means the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to Term Loan A, as determined by reference to Section 1.5(a).
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"Applicable Term Loan B Index Margin" means the per annum interest
rate from time to time in effect and payable in addition to the Index Rate
applicable to Term Loan B, as set forth in Section 1.5(a).
"Applicable Term Loan B LIBOR Margin" means the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to Term Loan B, as set forth in Section 1.5(a).
"Applicable Term Loan C Index Margin" means the per annum interest
rate from time to time in effect and payable in addition to the Index Rate
applicable to Term Loan C, as set forth in Section 1.5(a).
"Applicable Term Loan C LIBOR Margin" means the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to Term Loan C, as determined by reference to Section 1.5(a).
"Applicable Unused Line Fee Margin" means the per annum fee, from
time to time in effect, payable in respect of Borrower's non-use of committed
funds pursuant to Section 1.9(b), which fee is determined by reference to
Section 1.5(a).
"Assignment Agreement" has the meaning ascribed to it in Section
9.1(a).
"Bain Entities" shall mean, collectively, Bain Capital Fund IV,
L.P., Bain Capital Fund IV-B, L.P., Bain Associates and BCIP Trust Associates,
L.P. and funds or trusts managed or controlled by Bain Capital, Inc.
"Bankruptcy Code" means the provisions of Title 11 of the United
States Code, 11 U.S.C.ss.ss. 101 et seq.
"Borrower" has the meaning ascribed thereto in the recitals to the
Agreement.
"Borrower Accounts" has the meaning ascribed to it in Annex C.
"Borrower Pledge Agreement" means the Pledge Agreement of even date
herewith executed by Borrower in favor of Agent, on behalf of itself and
Lenders, pledging all Stock of its domestic and Canadian Subsidiaries and all
Intercompany Notes owing to or held by it.
"Borrowing Availability" has the meaning ascribed to it in Section
1.1(a)(i).
"Borrowing Base" means, as of any date of determination by Agent,
from time to time, an amount equal to the sum at such time of:
(a) eighty-five percent (85%) of the book value of Borrower's and
its domestic and Canadian Subsidiaries' Eligible Accounts, less any
Reserves established by Agent at such time;
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(b) up to sixty percent (60%) (seventy percent (70%) during the
period of July 1 to November 30 of each year) of the book value of
Borrower's and its domestic and Canadian Subsidiaries' Eligible Inventory
valued on a first-in, first-out basis (at the lower of cost or market),
less any Reserves established by Agent at such time;
(c) eighty percent (80%) of the orderly liquidation value of
Borrower's and its domestic and Canadian Subsidiaries' owned Eligible
Equipment (excluding taxes, shipping, imbedded software, installation
charges, training fees and other soft costs);
(d) seventy-five percent (75%) of the fair market value of
Borrower's and its domestic Subsidiaries' owned Eligible Real Estate; less
(e) the principal balances of Term Loan A and Term Loan B from time
to time outstanding;
provided that the aggregate amount of Revolving Credit Advances against the
Collateral described in clauses (c) and (d) above shall not exceed Fifteen
Million Dollars ($15,000,000) (the "sublimit"); provided, further, that the
sublimit will be reduced by $3,000,000 on each anniversary of the Closing Date
and reduced to zero on the fifth anniversary of the Closing Date; and provided,
further, that Advances against assets of Borrower's Canadian Subsidiaries shall
not exceed Twenty Million Dollars ($20,000,000) in the aggregate at any one time
outstanding.
For the purpose of valuing the Collateral of each of Borrower's
Canadian Subsidiaries that is denominated in Canadian Dollars, such Collateral
shall be converted into the Equivalent Amount thereof in Dollars, in each case,
as determined as of the last day of each Fiscal Month unless Agent has notified
Borrower that, in light of recent or expected currency fluctuations, the
conversion shall be made on a more current basis.
"Borrowing Base Certificate" means a certificate to be executed and
delivered from time to time by Borrower in the form attached to the Agreement as
Exhibit 4.1(b).
"Business Day" means any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the States of
Illinois or New York and in reference to LIBOR Loans shall mean any such day
that is also a LIBOR Business Day.
"Canadian Benefit Plans" means all material employee benefit plans
of any nature or kind whatsoever that are not Canadian Pension Plans and are
maintained or contributed to by any Credit Party having employees in Canada.
"Canadian Dollars" and "C$" each mean lawful money of Canada.
"Canadian Pension Plans" means each plan which is considered to be a
pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to by
any Credit Party for its employees or former employees.
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"Canadian Security Agreements" means each of the Security Agreements
entered into by and between Agent, on behalf of itself and Lenders, and ICON of
Canada and ICON New Brunswick.
"Capital Expenditures" means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Lease" means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"Capital Lease Obligation" means, with respect to any Capital Lease
of any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
"Cash Collateral Account" has the meaning ascribed to it in Annex B.
"Cash Equivalents" has the meaning ascribed to it in Annex B.
"Cash Management Systems" has the meaning ascribed to it in Section
1.8.
"Change of Control" means any event, transaction or occurrence as a
result of which (a) the Bain Entities shall cease to constitute a Voting
Majority of HF Investment so long as the Bain Entities hold their investment in
New Holdings through HF Investment, (b) the Bain Entities shall cease to have or
exercise the right, directly or indirectly, to designate at least 5 of the 9
members of the Board of Directors of New Holdings, (c) the Bain Entities and
Credit Suisse First Boston Corporation and their Affiliates cease to own
(directly or indirectly) and control all of the economic and voting rights
associated with ownership of at least fifty-one percent (51%) of all classes of
the outstanding capital Stock of all classes of New Holdings on a fully diluted
basis, (d) New Holdings ceases to own and control all of the economic and voting
rights associated with all of the outstanding capital Stock of Borrower, (e)
Borrower ceases to own and control all of the economic and voting rights
associated with all of the outstanding capital Stock of each of its Subsidiaries
or (f) any "Change of Control" (as such term is defined in the Subordinated
Notes Documents) shall occur.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.
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"Chattel Paper" means any "chattel paper," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, wherever
located.
"Closing Date" means September 27, 1999.
"Closing Checklist" means the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as Annex D.
"Code" means the Uniform Commercial Code as the same may, from time
to time, be enacted and in effect in the State of Illinois; provided, that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Agent's or
any Lender's Lien on any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the State of Illinois or
by foreign personal property security laws as enacted and in effect in a foreign
jurisdiction, the term "Code" shall mean the Uniform Commercial Code or such
foreign personal property security laws as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.
"Collateral" means the property covered by the Security Agreement,
the Mortgages and the other Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a Lien granted by a Credit Party in favor of
Agent, on behalf of itself and Lenders, to secure the Obligations.
"Collateral Documents" means the Security Agreement, the Pledge
Agreements, the New Holdings Guarantee, the Mortgages, the Patent Security
Agreement, the Trademark Security Agreement, the Copyright Security Agreement,
the Canadian Security Agreements, the ICON of Canada Hypothec, the ICON of
Canada Debenture, the ICON of Canada Pledge Agreement, and all similar
agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.
"Collateral Reports" means the reports with respect to the
Collateral referred to in Annex F.
"Collection Account" means that certain account of Agent, account
number 502-328-54 in the name of Agent at Bankers Trust Company in New York, New
York ABA No. 021 001 033, or such other account as may be specified in writing
by Agent as the "Collection Account."
"Commitment Termination Date" means the earliest of (a) August 31,
2004, (b) the date of termination of Lenders' obligations to make Advances and
to incur Letter of Credit Obligations or permit existing Loans to remain
outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible
prepayment in full by Borrower of the Loans and the cancellation and
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return (or stand-by guarantee) of all Letters of Credit or the cash
collateralization of all Letter of Credit Obligations pursuant to Annex B, and
the permanent reduction of the Revolving Loan Commitment and the Swing Line
Commitment to zero dollars ($0).
"Commitments" means (a) as to any Lender, the aggregate of such
Lender's Revolving Loan Commitment (including without duplication the Swing Line
Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment), IP
Loan Commitment and Term Loan Commitment as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Lender and
(b) as to all Lenders, the aggregate of all Lenders' Revolving Loan Commitments
(including without duplication the Swing Line Lender's Swing Line Commitment as
a subset of its Revolving Loan Commitment), IP Loan Commitments and Term Loan
Commitments, which aggregate commitment shall be Three Hundred Million Dollars
($300,000,000) on the Closing Date, as to each of clauses (a) and (b), as such
Commitments may be reduced, amortized or adjusted from time to time in
accordance with the Agreement.
"Compliance Certificate" has the meaning ascribed to it in Annex E.
"Concentration Account" has the meaning ascribed to it in Annex C.
"Contracts" means all "contracts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.
"Control Letter" means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated, securities entitlements and
other financial assets held in a securities account in the name of any Credit
Party, (iii) a futures commission merchant, as applicable, or clearing house
with respect to commodity accounts and commodity contracts held by any Credit
Party, whereby, among other things, the issuer, securities intermediary or
futures commission merchant disclaims any security interest in the applicable
financial assets, acknowledges the Lien of Agent, on behalf of itself and
Lenders, on such financial assets, and agrees to follow the instructions or
entitlement orders of Agent without further consent by the affected Credit
Party.
"Copyright License" means any and all rights now owned or hereafter
acquired by any Credit Party under any written agreement granting any right to
use any Copyright or Copyright registration.
"Copyright Security Agreements" means the Copyright Security
Agreements made in favor of Agent, on behalf of itself and Lenders, by each
applicable Credit Party.
A-7
"Copyrights" means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all copyrights and General
Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or any political
subdivision thereof, and (b) all reissues, extensions or renewals thereof.
"Credit Parties" means New Holdings, Borrower and each of their
respective Subsidiaries.
"CS First Boston Debt" means Indebtedness of New Holdings issued to
Credit Suisse First Boston Corporation in the amount of $5,000,000 pursuant to a
Note Agreement dated as of the Closing Date.
"Current Assets" means, with respect to any Person, all current
assets of such Person as of any date of determination calculated in accordance
with GAAP, but excluding cash, cash equivalents and debts due from Affiliates.
"Current Liabilities" means, with respect to any Person, all
liabilities that should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Indebtedness payable on demand,
all accruals for federal or other taxes based on or measured by income and
payable within such year, but excluding, in the case of Borrower, the aggregate
outstanding principal balances of the Loans.
"Debt Service" means, with respect to any Person for any fiscal
period, an amount equal to the sum of (a) Interest Expense for such period
(excluding any original issue discount, interest paid in kind or amortized debt
discount, to the extent included in determining Interest Expense) and (b) the
scheduled amortization of the IP Loan and Term Loans during such period.
"Debt Service Coverage Ratio" means, with respect to any Person for
any period, the ratio of EBITDA to Debt Service.
"Default" means any event that, with the passage of time or notice
or both, would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning ascribed to it in Section 1.5(d).
"Design" means the following now owned or hereafter acquired by any
Credit Party: (a) all industrial designs, design patents and other designs now
owned or existing or hereafter adopted or acquired, all registrations and
recordings thereof and all applications in connection therewith, including all
registrations, recordings and applications in the Canadian Industrial Designs
Office or any similar office in any country and all records thereof and (b) all
reissues, extensions or renewals thereof.
"Design License" means rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right to use any Design.
A-8
"Disbursement Accounts" has the meaning ascribed to it in Annex C.
"Disclosure Schedules" means the Schedules prepared by Borrower and
denominated as Disclosure Schedules (1.4) through (6.7) in the Index to the
Agreement.
"Documents" means any "documents," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
"Dollars" or "$" means lawful currency of the United States of
America.
"EBITDA" means, with respect to any Person for any fiscal period,
without duplication, an amount equal to (a) consolidated net income of such
Person for such period, minus (b) the sum of (i) income tax credits, (ii)
interest income, (iii) gain from extraordinary items for such period, (iv) any
aggregate net gain (but not any aggregate net loss) during such period arising
from the sale, exchange or other disposition of capital assets by such Person
(including any fixed assets, whether tangible or intangible, all inventory sold
in conjunction with the disposition of fixed assets and all securities), and (v)
any other non-cash gains that have been added in determining consolidated net
income, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication, plus (c) the sum of (i) any provision for income taxes, (ii)
Interest Expense, (iii) loss from extraordinary items for such period, (iv) the
amount of non-cash charges (including depreciation and amortization) for such
period, (v) amortized debt discount for such period, and (vi) the amount of any
deduction to consolidated net income as the result of any grant to any members
of the management of such Person of any Stock, in each case to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP, but without duplication. For purposes of this
definition, the following items shall be excluded in determining consolidated
net income of a Person: (1) the income (or deficit) of any other Person accrued
prior to the date it became a Subsidiary of, or was merged or consolidated into,
such Person or any of such Person's Subsidiaries; (2) the income (or deficit) of
any other Person (other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary; (4) any restoration to income
of any extraordinary or contingency reserve, except to the extent that such
restoration is deemed to have occurred in the same Fiscal Quarter during which
the subject reserve was established; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any net
gain (but not any aggregate loss) arising from the acquisition of any
securities, or the extinguishment, under GAAP, of any Indebtedness, of such
Person; (8) in the case of a successor to such Person by consolidation or merger
or as a transferee of its assets, any earnings of such successor prior to such
consolidation, merger or transfer of assets; (9) any deferred credit
representing the excess of equity in any Subsidiary of such Person at the date
of acquisition of such Subsidiary over the cost to such Person of the investment
in such Subsidiary; (10) the impact of write-offs of Accounts owing by Service
Merchandise, Inc. during Fiscal Year 1999 to the extent deducted in the
determination of Borrower's consolidated net income for that period; and (11)
bonuses paid to
A-9
management employees of Borrower of up to $1,500,000 paid in cash or by
forgiveness of Indebtedness on or after the Closing Date, to the extent deducted
in the determination of Borrower's consolidated net income for Fiscal Year 2000.
"Eligible Accounts" has the meaning ascribed to it in Section 1.6 of
the Agreement.
"Eligible Equipment" means machinery, equipment (excluding software)
and rolling stock owned by Borrower or its domestic or Canadian Subsidiaries and
located in the United States or Canada, which machinery, equipment or rolling
stock shall satisfy each of the following requirements:
(i) Borrower or one of its domestic or Canadian Subsidiaries
holds good and marketable title to the machinery, equipment or rolling
stock;
(ii) the full purchase price for the machinery, equipment or
rolling stock has been paid by Borrower or one of its domestic or Canadian
Subsidiaries;
(iii) the Agent has a first priority Lien in such machinery,
equipment or rolling stock securing the obligations of the Credit Parties
under this Agreement, subject to Permitted Encumbrances and, without
duplication, Prior Claims (other than claims of unpaid suppliers (other
than another Credit Party)) under Section 81.1 of the Bankruptcy and
Insolvency Act (Canada);
(iv) the machinery, equipment or rolling stock is not subject
to any mortgage, lien, pledge, attachment, assignment, deposit
arrangement, charge, lease or other security interest or encumbrance of
any kind, except for the Lien of the Agent securing the obligations of the
Credit Parties under this Agreement and except for Permitted Encumbrances;
(v) the Agent has received an appraisal report with respect to
the machinery, equipment or rolling stock from an independent appraiser
reasonably satisfactory to the Agent setting forth the orderly liquidation
value of the machinery, equipment or rolling stock;
(vi) the machinery, equipment or rolling stock is located on
or stored at premises owned or leased by Borrower or one of its domestic
or Canadian Subsidiaries; provided that if such premises are leased by
Borrower or one of its domestic or Canadian Subsidiaries, the Agent has
received a landlord's agreement (satisfying the requirements of Section
5.10) duly executed by the owner of such premises;
(vii) the machinery, equipment or rolling stock is not subject
to any agreement which would restrict the Agent's ability to sell or
otherwise dispose of such machinery, equipment or rolling stock;
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(viii) the machinery, equipment or rolling stock is in good
repair and working order and is used by Borrower or one of its domestic or
Canadian Subsidiaries in the ordinary course of its business; and
(ix) the machinery or equipment does not constitute "fixtures"
under the applicable laws of the jurisdiction in which the machinery,
equipment or rolling stock is located;
provided, however, that, notwithstanding anything herein to the contrary,
the Agent may from time to time in its reasonable credit discretion (a)
exclude particular machinery, equipment or rolling stock from the
definition of Eligible Equipment and (b) establish, modify or eliminate
Reserves against Eligible Equipment; provided, further, that the orderly
liquidation value of Eligible Equipment shall be based upon appraisals as
of a date not more than forty-five (45) days prior to the Closing Date,
which shall be updated as frequently as once each year if requested by
Agent.
"Eligible Inventory" has the meaning ascribed to it in Section 1.7
of the Agreement.
"Eligible Real Estate" means the real property owned by any one or
more of Borrower and its domestic Subsidiaries that satisfies each of the
following requirements:
(i) one or more of Borrower and its domestic Subsidiaries is
the record owner of the fee title to such real property;
(ii) the Agent has a first priority mortgage Lien on such real
property securing the obligations of the Credit Parties under this
Agreement, subject to Permitted Encumbrances (other than Permitted
Encumbrances in clause (j) of the definition thereof);
(iii) such real property is not subject to any mortgage, lien,
pledge, attachment, assignment, deposit arrangement, charge, lease or
other security interest or encumbrance of any kind, except for the
mortgage Lien of the Agent securing obligations under this Agreement and
Permitted Encumbrances;
(iv) such real property is not subject to any agreement which
would restrict the Agent's ability to sell or otherwise dispose of such
real property;
(v) the Agent has received environmental reports reasonably
satisfactory to it with respect to such real property, which reports shall
be prepared by environmental engineering firms satisfactory to the Agent;
(vi) the Agent has received an appraisal report with respect
to such real property from an independent appraiser reasonably
satisfactory to the Agent setting forth the fair market value of such real
property;
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(vii) the Agent has received ALTA mortgagee's title insurance
policies with all endorsements reasonably requested by the Agent (or
commitments for the issuance of same) with respect to such real property
from insurers acceptable to the Agent;
(viii) the Agent has received evidence satisfactory to it that
such real property is not located in a flood plain (or if any such real
property is located in a flood plain, an acceptable flood hazard insurance
policy);
(ix) the Agent has received evidence satisfactory to it that
there are no outstanding real estate taxes which have been due and payable
for more than thirty (30) days; and
(x) the Agent has received opinions of local counsel to the
Credit Parties in each jurisdiction in which such real property is located
with respect to the validity and enforceability of the Agent's Lien on
such real property securing the obligations of the Credit Parties under
this Agreement, all in form and substance satisfactory to the Agent;
provided, however, that the Agent may from time to time in its reasonable
credit judgment (a) exclude particular parcels of real property from the
definition of Eligible Real Estate and (b) establish, modify or eliminate
Reserves against Eligible Real Estate; provided, further, that the orderly
liquidation value of Eligible Real Estate shall be based upon appraisals
as of a date not more than forty-five (45) days prior to the Closing Date,
which shall be updated as frequently as once each year if requested by
Agent.
"Eligible Service Merchandise Accounts" means post-petition Accounts
owing by Service Merchandise, Inc., as debtor-in-possession, with an aggregate
book value not to exceed $3,000,000 in the aggregate; provided that (i) no such
Account shall remain unpaid more than thirty (30) days after its original
invoice date, (ii) the debtor-in-possession credit facility provided to Service
Merchandise, Inc. shall not have been terminated or suspended or credit
availability thereunder restricted and (iii) the Chapter 11 proceeding in which
Service Merchandise, Inc. is the debtor shall not have been converted to a
liquidating Chapter 11 case or a Chapter 7 bankruptcy proceeding.
"Employment Agreements" means the Employment Agreement dated as of
the Closing Date among New Holdings, Borrower and Scott Watterson and the
Employment Agreement dated as of the Closing Date among New Holdings, Borrower
and Gary Stevenson.
"Environmental Laws" means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards, orders-in-council
and regulations, now or hereafter in effect, and any applicable judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing liability or
standards of conduct for or relating to the regulation and protection of human
health, safety, the environment and natural resources (including ambient air,
surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation).
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Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C.ss.ss.9601 et seq.)
("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49
U.S.C.ss.ss.5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C.ss.ss.136 et seq.); the Solid Waste Disposal Act (42 U.S.C.ss.ss.
6901 et seq.); the Toxic Substance Control Act (15 U.S.C.ss.ss.2601 et seq.);
the Clean Air Act (42 U.S.C.ss.ss. 7401 et seq.); the Federal Water Pollution
Control Act (33 U.S.C.ss.ss.1251 et seq.); the Occupational Safety and Health
Act (29 U.S.C.ss.ss.651 et seq.); and the Safe Drinking Water Act (42
U.S.C.ss.ss. 300(f) et seq.), and any and all regulations promulgated
thereunder, and all analogous state, local and foreign counterparts or
equivalents and any transfer of ownership notification or approval statutes.
"Environmental Liabilities" means, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
"Environmental Permits" means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
"Equipment" means all "equipment," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located and,
in any event, including all such Credit Party's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment with software and peripheral equipment and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures not
forming a part of real property, together with all additions and accessions
thereto, replacements therefor, all parts therefor, all substitutes for any of
the foregoing, fuel therefor, and all manuals, drawings, instructions,
warranties and rights with respect thereto, and all products and proceeds
thereof and condemnation awards and insurance proceeds with respect thereto.
"Equivalent Amount" means, on any date of determination, with
respect to obligations or valuations denominated in one currency (the "first
currency"), the amount of another currency (the "second currency") which would
result from the conversion of the relevant amount of the first currency into the
second currency at the 12:00 noon rate quoted on the Reuters Monitor Screen
(Page BOFC or such other Page as may replace such Page for the purpose of
displaying such exchange rates) on such date or, if such date is not a Business
Day, on
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the Business Day immediately preceding such date of determination, or at such
other rate as may have been agreed in writing between Borrower and Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" means, with respect to any Credit Party, any trade
or business (whether or not incorporated) that, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c), (m)
or (o) of the IRC.
"ERISA Event" means, with respect to any Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Credit Party or any ERISA Affiliate from
any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party
or ERISA Affiliate to make when due required contributions to a Multiemployer
Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other
event or condition that might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of
liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 of ERISA; (i) the loss of
a Qualified Plan's qualification or tax exempt status; or (j) the termination of
a Plan described in Section 4064 of ERISA.
"ESOP" means a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC.
"European Subsidiaries" means ICON Health & Fitness Ltd., ICON
Health & Fitness Italia SRL, ICON Fitness Lifestyle Limited, ICON Health &
Fitness France SARL, HealthRider International Limited, Weider Health & Fitness
France SA and HealthRider GmbH.
"Event of Default" has the meaning ascribed to it in Section 8.1.
"Exchange Offer" means the HF Holdings Inc. and ICON Health and
Fitness, Inc. Exchange Offer and Consent Solicitation Statement dated July 30,
1999, including all supplements, amendments, or modifications thereto, in each
case in form and substance satisfactory to the Agents.
"Excess Cash Flow" means, without duplication, with respect to any
Fiscal Year of Borrower and its Subsidiaries, consolidated net income plus (a)
depreciation, amortization and Interest Expense to the extent deducted in
determining consolidated net income, plus decreases or minus increases (as the
case may be) (b) in Working Capital, minus (c) Capital Expenditures
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during such Fiscal Year (excluding the financed portion thereof and excluding
any Capital Expenditures in such Fiscal Year to the extent in excess of the
amount permitted to be made in such Fiscal Year pursuant to clause (a) of Annex
G), minus (d) Interest Expense paid or accrued (excluding any original issue
discount, interest paid in kind or amortized debt discount, to the extent
included in determining Interest Expense) and scheduled principal payments paid
or payable in respect of Funded Debt, plus or minus (as the case may be), (e)
extraordinary gains or losses which are cash items not included in the
calculation of net income, minus (f) mandatory prepayments paid in cash pursuant
to Section 1.3 other than mandatory prepayments made pursuant to Sections
1.3(b)(i), 1.3(b)(iv) or 1.3(d), minus (g) voluntary prepayments made pursuant
to Section 1.3(a)(i), plus (h) taxes deducted in determining consolidated net
income to the extent not paid for in cash minus (i) taxes paid in cash during
such period and not deducted in determining consolidated net income for that
period. For purposes of this definition, "Working Capital" means Current Assets
minus Current Liabilities.
"Excess PIK Interest" means an amount equal to the excess, if any,
on a PIK Interest Catch-Up Date of (a) the amount of accrued and unpaid PIK
Interest (including capitalized interest) and all other accrued and unpaid
original issue discount outstanding on such PIK Interest Catch-Up Date with
respect to Term Loan C over (b) the product of (x) the issue price (as defined
in section 1273(b) of the IRC) of Term Loan C times (y) the yield to maturity
(interpreted in accordance with section 163(i) of the IRC) of Term Loan C.
"Fair Labor Standards Act" means the Fair Labor Standards Act, 29
U.S.C.ss.201 et seq.
"Federal Funds Rate" means, for any day, a floating rate equal to
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Fee Letter" means that certain letter, dated as of June 11, 1999
among GE Capital, Fleet and Borrower with respect to certain Fees to be paid
from time to time by Borrower to GE Capital and Fleet.
"Fees" means any and all fees payable to Agent or any Lender
pursuant to the Agreement or any of the other Loan Documents.
"Financial Covenants" means the financial covenants set forth in
Annex G.
"Financial Statements" means the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Borrower
delivered in accordance with Section 3.4 and Annex E.
"Fiscal Month" means any of the monthly accounting periods of
Borrower.
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"Fiscal Quarter" means any of the quarterly accounting periods of
Borrower, ending on August 31, November 30, February 28 and May 31 of each year;
provided, however, that the first three Fiscal Quarters of each Fiscal Year end
on the Saturday nearest the dates set forth in this definition.
"Fiscal Year" means any of the annual accounting periods of Borrower
ending on May 31 of each year.
"Fixtures" means all "fixtures" as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party.
"Fleet" means Fleet National Bank.
"Funded Debt" means, with respect to any Person, without
duplication, all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness and that by its terms matures
more than one year from, or is directly or indirectly renewable or extendible at
such Person's option under a revolving credit or similar agreement obligating
the lender or lenders to extend credit over a period of more than one year from
the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor, and also
including, in the case of Borrower, the Obligations and, without duplication,
Guaranteed Indebtedness consisting of guaranties of Funded Debt of other
Persons.
"GAAP" means generally accepted accounting principles in the United
States of America, consistently applied, as such term is further defined in
Annex G to the Agreement.
"GE Capital" means General Electric Capital Corporation, a New York
corporation.
"General Intangibles" means "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party, and,
in any event, including all right, title and interest that such Credit Party may
now or hereafter have in or under any Contract, all customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License), all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit, checking and other bank accounts, rights to receive
tax refunds and other payments, rights of indemnification, all books and
records, correspondence, credit files, invoices and other papers, including
without limitation all tapes, cards, computer
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runs and other papers and documents in the possession or under the control of
such Credit Party or any computer bureau or service company from time to time
acting for such Credit Party.
"Goods" means any "goods" as defined in the Code, now owned or
hereafter acquired by any Person.
"Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligation") of any other Person (the "primary
obligor") in any manner, including any obligation or arrangement of such Person
to (a) purchase or repurchase any such primary obligation, (b) advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) indemnify
the owner of such primary obligation against loss in respect thereof. The amount
of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal
to the lesser at such time of (x) the stated or determinable amount of the
primary obligation in respect of which such Guaranteed Indebtedness is incurred
and (y) the maximum amount for which such Person may be liable pursuant to the
terms of the instrument embodying such Guaranteed Indebtedness, or, if not
stated or determinable, the maximum reasonably anticipated liability (assuming
full performance) in respect thereof.
"Guaranties" means, collectively, the New Holdings Guaranty and any
other guaranty executed by any Guarantor in favor of Agent and Lenders in
respect of the Obligations.
"Guarantors" means New Holdings, ICON of Canada, ICON New Brunswick,
ICON International Holdings, Inc., Universal Technical Services and JumpKing and
each other Person, if any, that executes a guaranty or other similar agreement
in favor of Agent in connection with the transactions contemplated by the
Agreement and the other Loan Documents.
"Hazardous Material" means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
"hazardous waste," "hazardous material," "hazardous substance," "dangerous
good," "extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.
"HF Investment" means HF Investment Holdings, LLC, a Delaware
limited liability company.
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"HF Investment LLC Agreement" means the Limited Liability Company
Agreement of HF Investment as in effect on the Closing Date.
"Holdings" means IHF Holdings, Inc., a Delaware corporation.
"ICON New Brunswick" means 510152 N.B. Ltd., a New Brunswick
corporation.
"ICON of Canada" means ICON of Canada Inc./ICON du Canada Inc., a
Quebec company.
"ICON of Canada Debenture" means the Debenture in the principal
amount of C $600,000,000 issued by ICON of Canada to Agent pursuant to the ICON
of Canada Hypothec.
"ICON of Canada Hypothec" means the Deed of Hypothec entered into by
and among Agent, Lenders and ICON of Canada.
"ICON of Canada Pledge Agreement" means the Pledge Agreement between
ICON of Canada and Agent pursuant to which ICON of Canada pledges the ICON of
Canada Debenture to Agent and Lenders.
"Indebtedness" means, with respect to any Person, without
duplication (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property payment for which is deferred six (6) months
or more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are not overdue by more than six (6) months unless being
contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers' acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations and the present
value (discounted at the Index Rate as in effect on the Closing Date) of future
rental payments under all synthetic leases, (f) all obligations of such Person
under commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all net
obligations of such Person under any foreign exchange contract, currency swap
agreement, interest rate swap, cap or collar agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations.
"Indemnified Liabilities" has the meaning ascribed to it in Section
1.13.
"Indemnified Person" has the meaning ascribed to it in Section 1.13.
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"Index Rate" means, for any day, a floating rate equal to the higher
of (i) the rate publicly quoted from time to time by The Wall Street Journal as
the "base rate on corporate loans at large U.S. money center commercial banks"
(or, if The Wall Street Journal ceases quoting a base rate of the type
described, the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus fifty (50) basis points per annum. Each change
in any interest rate provided for in the Agreement based upon the Index Rate
shall take effect at the time of such change in the Index Rate.
"Index Rate Loan" means a Loan or portion thereof bearing interest
by reference to the Index Rate.
"Insolvency Laws" means any of the Bankruptcy Code, the Bankruptcy
and Insolvency Act (Canada) and the Companies' Creditors Arrangement Act
(Canada), each as now and hereafter in effect, any successors to such statutes
and any other applicable insolvency or other similar law of any jurisdiction
including, without limitation, any law of any jurisdiction permitting a debtor
to obtain a stay or a compromise of the claims of its creditors against it.
"Instruments" means any "instrument," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all notes and other, without limitation, evidences of indebtedness,
other than instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, Patents,
Designs, Copyrights, Trademarks, and the goodwill associated with such
Trademarks.
"Intercompany Note" has the meaning ascribed to it in Section 6.3.
"International Holdings" means ICON International Holdings, Inc., a
Delaware corporation.
"International Holdings Pledge Agreement" means a Pledge Agreement
dated as of the Closing Date, pledging to the Agent for the benefit of the
Lenders 100% of the stock of ICON of Canada and ICON New Brunswick and 65% of
the stock of all other Subsidiaries of International Holdings.
"Interest Expense" means, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including
interest expense with respect to any Funded Debt of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.
"Interest Payment Date" means (a) as to any Index Rate Loan (other
than Term Loan C) the first Business Day of each month to occur while such Loan
is outstanding, (b) as to that portion of Term Loan C that is an Index Rate
Loan, the first day of March, June, September
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and December of each year, commencing December 1, 1999, and (c) as to any LIBOR
Loan, the last day of the applicable LIBOR Period; provided, that in the case of
any LIBOR Period greater than three months in duration, interest shall be
payable at three month intervals and on the last day of such LIBOR Period; and
provided further that, in addition to the foregoing, each of (x) the date upon
which all of the Commitments have been terminated and the Loans have been paid
in full and (y) the Commitment Termination Date shall be deemed to be an
"Interest Payment Date" with respect to any interest that has then accrued under
the Agreement.
"Intermediate Holdings" means ICON Fitness Corporation, a Delaware
corporation.
"Inventory" means any "inventory," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located, and
in any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Credit Party for sale or lease or are
furnished or are to be furnished under a contract of service, or that constitute
raw materials, work in process or materials used or consumed or to be used or
consumed in such Credit Party's business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including other
supplies.
"Investment Property" means all "investment property" as such term
is defined in Section 9-115 of the Code in those jurisdictions in which such
definition has been adopted now owned or hereafter acquired by any Credit Party,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of such Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Credit Party;
(iv) all commodity contracts of any Credit Party; and (v) all commodity accounts
held by any Credit Party.
"IP Collateral" means all Patents, all Trademarks and all Proceeds
of the foregoing.
"IP Lender" means those Lenders having IP Loan Commitments.
"IP Loan" has the meaning ascribed to it in Section 1.1(d).
"IP Loan Commitment" means (a) as to any Lender with an IP Loan
Commitment, the commitment of such Lender to make its Pro Rata Share of the IP
Loan as set forth on Annex J to the Agreement or the most recent Assignment
Agreement executed by such Lender, and (b) as to all Lenders with an IP Loan
Commitment, the aggregate commitment of all Lenders to make the IP Loan, which
commitment shall be Fifteen Million Dollars ($15,000,000) on the Closing Date.
After advancing the IP Loan, each reference to a Lender's IP Loan Commitment
shall refer to that Lender's Pro Rata Share of the outstanding IP Loan.
"IP Note" has the meaning ascribed to it in Section 1.1(d).
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"IRC" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"ITA" means the Income Tax Act (Canada) as the same may, from time
to time, be in effect.
"JumpKing" means JumpKing, Inc., a Utah corporation.
"L/C Issuer" has the meaning ascribed to it in Annex B.
"L/C Sublimit" has the meaning ascribed to in it Annex B.
"Lenders" means GE Capital, Fleet, the other Lenders named on the
signature pages of the Agreement, and, if any such Lender shall decide to assign
all or any portion of the Obligations, such term shall include any assignee of
such Lender.
"Letter of Credit Fee" has the meaning ascribed to it in Annex B.
"Letter of Credit Obligations" means all outstanding obligations
incurred by Agent and Lenders at the request of Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of a reimbursement agreement or guaranty by Agent or purchase of a
participation as set forth in Annex B with respect to any Letter of Credit. The
amount of such Letter of Credit Obligations shall equal the maximum amount that
may be payable by Agent or Lenders thereupon or pursuant thereto.
"Letters of Credit" means commercial or standby letters of credit
issued for the account of Borrower by any L/C Issuer, and bankers' acceptances
issued by Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.
"Leverage Ratio" means, with respect to Borrower, on a consolidated
basis, the ratio of (a) Funded Debt as of any date of determination (including
the average outstanding principal balance of the Revolving Loan for the three
(3) months preceding that determination date) to (b) the sum of EBITDA less
Capital Expenditures for the twelve months ending on that date of determination.
"LIBOR Business Day" means a Business Day on which banks in the City
of London are generally open for interbank or foreign exchange transactions.
"LIBOR Loan" means a Loan or any portion thereof bearing interest by
reference to the LIBOR Rate.
"LIBOR Period" means, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two, three or six months thereafter, as selected by
Borrower's irrevocable notice to
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Agent as set forth in Section 1.5(e); provided, that the foregoing provision
relating to LIBOR Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be
to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days prior to
such date;
(c) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR Period)
shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such
Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be no
more than five (5) separate LIBOR Loans in existence at any one time.
"LIBOR Rate" means for each LIBOR Period, a rate of interest
determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00
a.m. (London time), on the second full LIBOR Business Day next preceding
the first day of such LIBOR Period (unless such date is not a Business
Day, in which event the next succeeding Business Day will be used);
divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic,
supplemental, marginal and emergency reserves under any regulations of the
Federal Reserve Board or other Governmental Authority having jurisdiction
with respect thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board which are required to be maintained by a
member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate
News Service, the LIBOR Rate shall be determined from such financial
reporting service or other information as shall be mutually acceptable to
Agent and Borrower.
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"License" means any Copyright License, Patent License, Trademark
License, Design License or other license of rights or interests now held or
hereafter acquired by any Credit Party.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Litigation" has the meaning ascribed to it in Section 3.13.
"Loan Account" has the meaning ascribed to it in Section 1.12.
"Loan Documents" means the Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates
identified in the Closing Checklist executed and delivered to, or in favor of,
Agent or any Lenders and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby. Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.
"Loans" means the Revolving Loan, the Swing Line Loan, the IP Loan
and the Term Loans.
"Lock Boxes" has the meaning ascribed to it in Annex C.
"Management Agreements" means each of the Management Agreements
dated as of the Closing Date among Borrower, New Holdings, and each of Scott
Watterson and Gary Stevenson, the Management Agreement dated as of the Closing
Date among Borrower, New Holdings and Bain Capital, Inc. and Section 7.1(b) of
Securities Purchase Agreement dated as of the Closing Date between New Holdings
and Credit Suisse First Boston.
"Margin Stock" has the meaning ascribed to it in Section 3.10.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations or financial or other condition of the Credit
Parties considered as a whole, (b) Borrower's ability to pay any of the Loans or
any of the other Obligations in accordance with the terms of the Agreement, (c)
the Collateral or Agent's Liens, on behalf of itself and Lenders, on the
Collateral or the priority of such Liens, or (d) Agent's or any Lender's rights
and remedies
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under the Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, any event or occurrence adverse to one or more
Credit Parties which results or could reasonably be expected to result in costs
and/or liabilities in excess of $5,000,000 shall constitute a Material Adverse
Effect.
"Maximum Amount" means, as of any date of determination, an amount
equal to the Revolving Loan Commitment of all Lenders as of that date.
"Mortgaged Properties" has the meaning assigned to it in Annex D.
"Mortgages" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Credit Party to Agent on behalf
of itself and Lenders with respect to the Mortgaged Properties, all in form and
substance satisfactory to Agent.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" means as of any date of determination,
the lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case
less the sum of the Revolving Loan and Swing Line Loan then outstanding.
"Net Worth" means, with respect to any Person as of any date of
determination, the book value of the assets of such Person, minus the sum of (a)
reserves applicable thereto, and (b) all of such Person's liabilities on a
consolidated basis (including accrued and deferred income taxes), all as
determined in accordance with GAAP.
"New Holdings" has the meaning ascribed to it in the recitals to the
Agreement.
"New Holdings Guaranty" means the guaranty of even date herewith
executed by New Holdings in favor of Agent and Lenders.
"New Holdings Pledge Agreement" means the Pledge Agreement of even
date herewith executed by New Holdings in favor of Agent, on behalf of itself
and Lenders, pledging all of the Stock of Borrower.
"Non-Funding Lender" has the meaning ascribed to it in Section
9.9(a)(ii).
"Notes" means the Revolving Notes, the Swing Line Note, the IP Notes
and the Term Notes.
"Notice of Conversion/Continuation" has the meaning ascribed to it
in Section 1.5(e).
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"Notice of Revolving Credit Advance" has the meaning ascribed to it
in Section 1.1(a).
"Obligations" means all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case of
proceeding), Fees, Charges, expenses, attorneys' fees and any other sum
chargeable to any Credit Party under the Agreement or any of the other Loan
Documents.
"Old Holdcos" shall mean collectively IHF Capital, Inc., IHF
Holdings, Inc., and ICON Fitness Corporation, each a Delaware corporation.
"Old Management Agreement" has the meaning ascribed to it in Section
6.14.
"Patent Security Agreements" means the Patent Security Agreements
made in favor of Agent, on behalf of itself and Lenders, by each applicable
Credit Party.
"Patent License" means rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right with respect to any
invention on which a Patent is in existence.
"Patents" means all of the following in which any Credit Party now
holds or hereafter acquires any interest: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means a Plan described in Section 3(2) of ERISA.
"Permitted Encumbrances" means the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or which are being contested in accordance with Section 5.2(b); (b) pledges or
deposits of money securing statutory obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics'
or similar liens arising in the ordinary course
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of business, so long as such Liens attach only to Equipment, Fixtures and/or
Real Estate; (e) carriers', warehousemen's or other similar possessory liens
arising in the ordinary course of business and securing liabilities in an
outstanding aggregate amount not in excess of $1,000,000 at any time, so long as
such Liens attach only to Inventory; (f) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Credit Party is a
party; (g) any attachment or judgment lien not constituting an Event of Default
under Section 8.1(j); (h) zoning restrictions, easements, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such Real Estate; (i) presently
existing or hereafter created Liens in favor of Agent, on behalf of Agent and
Lenders or in favor of Agent and Lenders, as applicable; (j) Liens expressly
permitted under clauses (b), (c) and (d) of Section 6.7 of the Agreement; and
(k) to the extent not included in clauses (a), (d) or (e) of this definition,
Prior Claims that are unregistered and that secure amounts that are not yet due
and payable.
"Permitted Subordinated Debt" means Subordinated Debt that (i) is
unsecured, (ii) is subordinated in right of payment to the Obligations on terms
satisfactory to the Agents, (iii) is in a principal amount not to exceed the sum
of (A) the principal balance of Term Loan C plus accrued interest thereon and
prepayment fees with respect thereto to the extent the proceeds of such
Permitted Subordinated Debt are used to pay the principal, interest and fees on
Term Loan C, plus (B) the amount necessary to repurchase or prepay the
Subordinated Notes in accordance with the Subordinated Notes Documents, but only
to the extent the proceeds of such Permitted Subordinated Debt are used to make
such repurchase or prepayment, (iv) amortizes in one or more installments
commencing on or after the sixth anniversary of the Closing Date, (v) bears
interest payable in cash at a rate less than the effective combined cash
interest rate applicable to Term Loan C and the Subordinated Notes, and (vi) if
applicable, bears PIK interest at a rate less than or equal to the PIK interest
applicable to Term Loan C, and (vii) is otherwise incurred on terms and
conditions reasonably satisfactory to Agents.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city, municipal, local, foreign,
or otherwise, including any instrumentality, division, agency, body or
department thereof).
"PIK Interest" has the meaning ascribed to it in Section 1.5(a).
"PIK Interest Catch-Up Date" means each Interest Payment Date and
any other date (if any) on which principal is paid with respect to Term Loan C,
in each case, occurring after the fifth anniversary of the Closing Date.
"Plan" means, at any time, an "employee benefit plan," as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any Credit Party.
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"Pledge Agreements" means the Borrower Pledge Agreement, the New
Holdings Pledge Agreement, and any other pledge agreement entered into after the
Closing Date by any Credit Party (as required by the Agreement or any other Loan
Document).
"Prior Claims" means all Liens created by applicable law (in
contrast with Liens voluntarily granted) which rank or are capable of ranking
prior or pari passu with Agent's security interests or Agent's and Lenders'
hypothecs (or the applicable equivalent of such Liens), as applicable, against
all or part of the Collateral, including for amounts owing for wages, employee
deductions, goods and services taxes, sales taxes, income taxes, employer health
taxes, municipal taxes, workers' compensation, pension fund obligations and
overdue rents.
"Prior Lenders" means collectively GE Capital and the lenders under
that Amended and Restated Credit Agreement dated as of November 14, 1994, as
amended, and General Electric Capital Canada Inc. under that Credit Agreement
dated as of November 18, 1997, as amended.
"Prior Lenders' Obligations" means, collectively, all Obligations as
such term is defined in each of the Amended and Restated Credit Agreement dated
as of November 14, 1994, as amended, among Agent, Borrower and the other parties
thereto and the Credit Agreement between General Electric Capital Canada, Inc.
and ICON of Canada dated as of November 18, 1997, as amended.
"Proceeds" means "proceeds," as such term is defined in the Code
and, in any event, shall include (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Credit Party from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Credit Party from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, (e) dividends, interest and distributions with respect to Investment
Property, and (f) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
"Pro Forma" means the unaudited consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as of May 31, 1999 after giving
pro forma effect to the Related Transactions.
"Pro Rata Share" means with respect to all matters relating to any
Lender (a) with respect to the Revolving Loan (including the Swing Line Loan as
a subset of the Swing Line Lender's Revolving Loan), the percentage obtained by
dividing (i) the Revolving Loan Commitment (including the Swing Line Commitment
as a subset of the Swing Line Lender's Revolving Loan Commitment) of that Lender
by (ii) the aggregate Revolving Loan
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Commitments of all Lenders, (b) with respect to each Term Loan, the percentage
obtained by dividing (i) the Term Loan Commitment of that Lender for Term Loans
of that type by (ii) the aggregate Term Loan Commitments of all Lenders for Term
Loans of that type, as any such percentages may be adjusted by assignments
permitted pursuant to Section 9.1, (c) with respect to the IP Loan, the
percentage obtained by dividing (i) the IP Loan Commitment of that Lender by the
aggregate IP Loan Commitments of all Lenders, (d) with respect to all Loans, the
percentage obtained by dividing (i) the aggregate Commitments of that Lender by
(ii) the aggregate Commitments of all Lenders, and (d) with respect to all Loans
on and after the Commitment Termination Date, the percentage obtained by
dividing (i) the aggregate outstanding principal balance of the Loans held by
that Lender, by (ii) the outstanding principal balance of the Loans held by all
Lenders.
"Projections" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; and (c) cash
flow statements, all prepared on a Subsidiary by Subsidiary or
division-by-division basis, if applicable, and otherwise consistent with the
historical Financial Statements of Borrower, together with appropriate
supporting details and a statement of underlying assumptions.
"Public Offering" means a firm underwritten public offering of
common stock registered on form S-1, S-2 or S-3 under the Securities Act of
1933, as amended, by a nationally recognized investment banking firm and after
giving effect to which the issuer shall be qualified for listing on the NASDAQ
National Market, the American Stock Exchange or the New York Stock Exchange.
"Qualified Assignee" means (i) (a) any Lender, any Affiliate of any
Lender and, with respect to any Lender that is an investment fund that invests
in commercial loans, any other investment fund that invests in commercial loans
and that is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor, and (b) any commercial bank, savings
and loan association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies; and
(ii) in addition to the criteria set forth in the foregoing clause (i), any such
Assignee shall be a Person which has and maintains a rating of BBB or higher
from S&P and a rating of Baa2 or higher from Moody's and which, through its
applicable lending office, is capable of lending to Borrower without the
imposition of any withholding or similar taxes; provided that (a) no Affiliate
of any Credit Party, (b) no Person determined by Agent to be acting in the
capacity of a vulture fund and (c) no Person who holds Subordinated Debt or is
an Affiliate of a holder of Subordinated Debt shall be a Qualified Assignee.
"Qualified Plan" means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.
"Ratable Share" has the meaning ascribed to it in Section 1.1(b).
"Real Estate" has the meaning ascribed to it in Section 3.6.
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"Recapitalization" means, collectively, the transactions described
in the Exchange Offer and all other transactions related thereto, including,
without limitation, (i) an exchange offer whereby the 14% senior discount notes
issued by Holdings will be exchanged for a portion of equity in New Holdings,
(ii) an exchange offer whereby the 15% senior discount notes issued by
Intermediate Holdings will be exchanged for a portion of equity in New Holdings,
(iii) a cash equity contribution of not less than $40,000,000 to Borrower by
Bain Capital, Inc., CS First Boston and others, (iv) an exchange offer whereby
the 13% senior subordinated notes issued by Borrower will be exchanged for
$40,000,000 of cash, $45,000,000 of Subordinated Notes and a portion of equity
in New Holdings, (v) the repayment in full of the Prior Lenders' Obligations and
(vi) the merger of HF Acquisition, Inc., a wholly-owned Subsidiary of New
Holdings with and into Borrower with Borrower as the surviving entity in that
merger.
"Recapitalization Documents" means the Exchange Offer, the
Subordinated Notes Documents and the documents listed on Annex K hereto.
"Refunded Swing Line Loan" has the meaning ascribed to it in Section
1.1(c)(iii).
"Related Transactions" means the initial borrowing under the
Revolving Loan, the IP Loan and the Term Loans on the Closing Date, the
Recapitalization, the payment of all fees, costs and expenses associated with
all of the foregoing and the execution and delivery of all of the Related
Transactions Documents.
"Related Transactions Documents" means the Loan Documents and the
Recapitalization Documents.
"Release" means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
"Requisite Lenders" means Lenders having (a) more than sixty-six and
two-thirds percent (66 2/3%) of the Commitments of all Lenders, or (b) if the
Commitments have been terminated, more than sixty-six and two-thirds percent (66
2/3%) of the aggregate outstanding amount of the Loans.
"Requisite Revolving Lenders" means Lenders having (a) more than
sixty-six and two-thirds percent (66 2/3%) of the Revolving Loan Commitments of
all Lenders, or (b) if the Revolving Loan Commitments have been terminated, more
than sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding
amount of the Revolving Loan.
"Reserves" means, with respect to the Borrowing Base (a) reserves
established by Agent from time to time against Eligible Inventory pursuant to
Section 5.10, (b) reserves established pursuant to Section 5.4(c), and (c) such
other reserves (including in respect of Prior Claims) against Eligible Accounts,
Eligible Inventory or Borrowing Availability that Agent may, in its reasonable
credit judgment, establish from time to time. Without limiting the generality of
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the foregoing, Reserves established to ensure the payment of accrued Interest
Expenses, Indebtedness or Prior Claims shall be deemed to be a reasonable
exercise of Agent's credit judgment.
"Residual 13% Subordinated Notes" means subordinated notes due 2002
in aggregate principal amount not to exceed $1,500,000 issued pursuant to an
Indenture between Borrower and Fleet Bank of Massachusetts, N.A. as trustee
dated as of November 14, 1994 as amended as of the Closing Date.
"Restricted Payment" means, with respect to any Credit Party (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Stock; (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Credit Party's Stock or any
other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Subordinated Debt; (d) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire Stock of such Credit
Party now or hereafter outstanding; (e) any payment of a claim for the
rescission of the purchase or sale of, or for material damages arising from the
purchase or sale of, any shares of such Credit Party's Stock or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission; (f) any payment, loan, contribution, or
other transfer of funds or other property to any Stockholder of such Credit
Party other than payment of compensation in the ordinary course to stockholders
who are employees of such Credit Party; and (g) any payment of management fees
(or other fees of a similar nature) by such Credit Party to any Stockholder of
such Credit Party or its Affiliates.
"Retiree Welfare Plan" means, at any time, a Welfare Plan that
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
"Revolving Credit Advance" has the meaning ascribed to it in Section
1.1(a)(i).
"Revolving Lenders" means, as of any date of determination, Lenders
having a Revolving Loan Commitment.
"Revolving Loan" means, at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to Borrower plus (ii) the
aggregate Letter of Credit Obligations incurred on behalf of Borrower. Unless
the context otherwise requires, references to the outstanding principal balance
of the Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.
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"Revolving Loan Commitment" means (a) as to any Revolving Lender,
the aggregate commitment of such Revolving Lender to make Revolving Credit
Advances (including without duplication Swing Line Advances as a subset of the
Swing Line Lender's Revolving Loan Commitment) or incur Letter of Credit
Obligations as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Revolving Lender and (b) as to all
Revolving Lenders, the aggregate commitment of all Revolving Lenders to make
Revolving Credit Advances (including without duplication Swing Line Advances as
a subset of the Swing Line Lender's Revolving Loan Commitment) or incur Letter
of Credit Obligations, which aggregate commitment shall be One Hundred Twenty
Million Dollars ($120,000,000) on the Closing Date, as such amount may be
adjusted, if at all, from time to time in accordance with the Agreement.
"Revolving Note" has the meaning ascribed to it in Section
1.1(a)(ii).
"Security Agreement" means the Security Agreement of even date
herewith entered into by and among Agent, on behalf of itself and Lenders, and
each Credit Party that is a signatory thereto.
"Senior Leverage Ratio" means, with respect to Borrower, on a
consolidated basis, the ratio of (a) the outstanding principal balance of the
Loans hereunder as of as of any date of determination (including the average
outstanding principal balance of the Revolving Loan for the most recent Fiscal
Quarter ending prior to that determination date), to (b) EBITDA for the twelve
months ending on that date of determination.
"Solvent" means (i) with respect to any Person on a particular date
that is subject to Insolvency Laws of the United States of America, that on such
date (a) the fair value of the property of such Person is greater than the total
amount of liabilities, including contingent liabilities, of such Person; (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured; (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person's property would constitute
an unreasonably small capital and (ii) with respect to any Person on a
particular date that is subject to Insolvency Laws of Canada, that on such date
(a) the property of such Person is sufficient, if disposed of at a fairly
conducted sale under legal process, to enable payment of all its obligations,
due and accruing due, (b) the property of such Person is, at a fair valuation,
greater than the total amount of liabilities, including contingent liabilities,
of such Person; (c) such Person has not ceased paying its current obligations in
the ordinary course of business as they generally become due. The amount of
contingent liabilities (such as litigation, guaranties and pension plan
liabilities) at any time shall be computed as the amount that, in light of all
the facts and circumstances existing at the time, represents the amount that can
be reasonably be expected to become an actual or matured liability.
"Stock" means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a
A-31
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including common stock, preferred stock or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).
"Stockholder" means, with respect to any Person, each holder of
Stock of such Person.
"Stockholders Agreement" means that certain Stockholders Agreement
among the stockholders of HF Holdings, Inc. dated as of the Closing Date.
"Subordinated Debt" means the Indebtedness of Borrower evidenced by
the Subordinated Notes and any other Indebtedness of any Credit Party
subordinated to the Obligations in a manner and form satisfactory to Agent and
Lenders in their sole discretion, as to right and time of payment and as to any
other rights and remedies thereunder.
"Subordinated Notes" means those certain 12% Subordinated Notes due
2005 issued by Borrower in an aggregate original principal amount of
$44,334,000.
"Subordinated Notes Documents" means the Subordinated Notes and the
Indenture between Borrower and IBJ Whitehall Bank & Trust Company dated as of
September 22, 1999, as from time to time amended.
"Subsidiary" means, with respect to any Person, (a) any corporation
of which an aggregate of more than fifty percent (50%) of the outstanding Stock
having ordinary voting power to elect a majority 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) is at the time, directly or indirectly,
owned legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of fifty percent (50%) or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%) or of which any such Person is a general partner or may exercise the
powers of a general partner. Unless the context otherwise requires, each
reference to a Subsidiary shall be a reference to a Subsidiary of the Borrower.
"Swing Line Advance" has the meaning ascribed to it in Section
1.1(c)(i).
"Swing Line Availability" has the meaning ascribed to it in Section
1.1(c)(i).
"Swing Line Commitment" means, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Advances as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of the
Revolving Loan Commitment of the Swing Line Lender.
"Swing Line Lender" means GE Capital.
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"Swing Line Loan" means at any time, the aggregate amount of Swing
Line Advances outstanding to Borrower.
"Swing Line Note" has the meaning ascribed to it in Section
1.1(c)(ii).
"Taxes" means taxes, levies, imposts, deductions, Charges and
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Agent or a Lender by the jurisdictions under
the laws of which Agent and Lenders are organized or any political subdivision
thereof.
"Termination Date" means the date on which (a) the Loans have been
indefeasibly repaid in full, (b) all other Obligations under the Agreement and
the other Loan Documents have been completely discharged, (c) all Letter of
Credit Obligations have been cash collateralized, cancelled or backed by
stand-by letters of credit in accordance with Annex B, and (d) Borrower shall
not have any further right to borrow any monies under the Agreement.
"Term Lenders" means those Lenders having Term Loan A Commitments,
Term Loan B Commitments and/or Term Loan C Commitments, as applicable.
"Term Loans" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term Loan A Commitment" means (a) as to any Lender with a Term Loan
A Commitment, the commitment of such Lender to make its Pro Rata Share of Term
Loan A as set forth on Annex J to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan A
Commitment, the aggregate commitment of all Lenders to make Term Loan A, which
aggregate commitment shall be Thirty Million Dollars ($30,000,000) on the
Closing Date. After advancing Term Loan A, each reference to a Lender's Term
Loan A Commitment shall refer to that Lender's Pro Rata Share of the outstanding
Term Loan A.
"Term Loan B Commitment" means (a) as to any Lender with a Term Loan
B Commitment, the commitment of such Lender to make its Pro Rata Share of Term
Loan B as set forth on Annex J to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan B
Commitment, the aggregate commitment of all Lenders to make Term Loan B, which
aggregate commitment shall be Eighty Million Dollars ($80,000,000) on the
Closing Date. After advancing Term Loan B, each reference to a Lender's Term
Loan B Commitment shall refer to that Lender's Pro Rata Share of the outstanding
Term Loan B.
"Term Loan C Commitment" means (a) as to any Lender with a Term Loan
C Commitment, the commitment of such Lender to make its Pro Rata Share of Term
Loan C as set forth on Annex J to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan C
Commitment, the aggregate commitment of all Lenders to make Term Loan C, which
aggregate commitment shall be Fifty-Five Million Dollars ($55,000,000) on the
Closing Date. After advancing Term Loan C, each
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reference to a Lender's Term Loan C Commitment shall refer to that Lender's Pro
Rata Share of the outstanding Term Loan C.
"Term Loan Commitments" means the aggregate of the Term Loan A
Commitment, Term Loan B and Term Loan C Commitment.
"Term Note" has the meaning assigned to it in Section 1.1(b)(i).
"Third Party Interactives" means all Persons with whom any Credit
Party exchanges data electronically in the ordinary course of business,
including, without limitation, customers, suppliers, third-party vendors,
subcontractors, processors-converters, shippers and warehousemen.
"Title IV Plan" means a Pension Plan (other than a Multiemployer
Plan), that is covered by Title IV of ERISA, and that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Trademark Security Agreements" means the Trademark Security
Agreements made in favor of Agent, on behalf of Lenders, by each applicable
Credit Party.
"Trademark License" means rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right to use any
Trademark.
"Trademarks" means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by any
of the foregoing.
"Unfunded Pension Liability" means, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
"Ultimate Holdings" means IHF Capital, Inc., a Delaware corporation.
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"Voting Majority" has the meaning ascribed to such term in the HF
Investment LLC Agreement.
"Welfare Plan" means a Plan described in Section 3(i) of ERISA.
"Year 2000 Assessment" means a comprehensive written assessment of
the nature and extent of each Credit Party's Year 2000 Problems and Year 2000
Date-Sensitive Systems/Components, including, without limitation, Year 2000
Problems regarding data exchanges with Third Party Interactives.
"Year 2000 Corrective Actions" means, as to each Credit Party, all
actions necessary to eliminate such Person's Year 2000 Problems, including,
without limitation, computer code enhancements and revisions, upgrades and
replacements of Year 2000 Date-Sensitive Systems/Components, and coordination of
such enhancements, revisions, upgrades and replacements with Third Party
Interactives.
"Year 2000 Corrective Plan" means, with respect to each Credit
Party, a comprehensive plan to eliminate all of its Year 2000 Problems on or
before October 31, 1999, including without limitation (i) computer code
enhancements or revisions, (ii) upgrades or replacements of Year 2000
Date-Sensitive Systems/Components, (iii) test and validation procedures, (iv) an
implementation time line and budget and (v) designation of specific employees
who will be responsible for planning, coordinating and implementing each phase
or subpart of the Year 2000 Corrective Plan.
"Year 2000 Date-Sensitive System/Component" means, as to any Person,
any system software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"Year 2000 Implementation Testing" means, as to each Credit Party,
(i) the performance of test and validation procedures regarding Year 2000
Corrective Actions on an applications basis; (ii) the performance of test and
validation procedures regarding data exchanges among the Credit Parties' Year
2000 Date-Sensitive Systems/Components and data exchanges with Third Party
Interactives, and (iii) the design and implementation of additional Corrective
Actions, the need for which has been demonstrated by test and validation
procedures.
"Year 2000 Problems" means, with respect to each Credit Party,
limitations on the capacity or readiness of any such Credit Party's Year 2000
Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including, without
limitation,
A-35
exchanges of information among Year 2000 Date-Sensitive Systems/Components of
the Credit Parties and exchanges of information among the Credit Parties and
Year 2000 Date-Sensitive Systems/Components of Third Party Interactives and
functionality of peripheral interfaces, firmware and embedded microchips.
Rules of construction with respect to accounting terms used in the
Agreement or the other Loan Documents shall be as set forth in Annex G. All
other undefined terms contained in any of the Loan Documents shall, unless the
context indicates otherwise, have the meanings provided for by the Code as in
effect in the State of Illinois to the extent the same are used or defined
therein. Unless otherwise specified, references in the Agreement or any of the
Appendices to a Section, subsection or clause refer to such Section, subsection
or clause as contained in the Agreement. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole,
including all Annexes, Exhibits and Schedules, as the same may from time to time
be amended, restated, modified or supplemented, and not to any particular
section, subsection or clause contained in the Agreement or any such Annex,
Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated
in either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan Document refers to
the knowledge (or an analogous phrase) of any Credit Party, such words are
intended to signify that such Credit Party has actual knowledge or awareness of
a particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.
A-36
ANNEX B (Section 1.2)
to
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the Agreement,
Agent and Revolving Lenders agree to incur, from time to time prior to the
Commitment Termination Date, upon the request of Borrower and for Borrower's
account, Letter of Credit Obligations by causing Letters of Credit to be issued
(by a bank or other legally authorized Person selected by or acceptable to Agent
in its sole discretion (each, an "L/C Issuer")) for Borrower's account and
guaranteed by Agent; provided, that if the L/C Issuer is a Revolving Lender,
then such Letters of Credit shall not be guaranteed by Agent but rather each
Revolving Lender shall, subject to the terms and conditions hereinafter set
forth, purchase (or be deemed to have purchased) risk participations in all such
Letters of Credit issued with the written consent of Agent, as more fully
described in paragraph (b)(ii) below. The aggregate amount of all such Letter of
Credit Obligations shall not at any time exceed the least of (i) Ten Million
Dollars ($10,000,000) (the "L/C Sublimit"), (ii) the Maximum Amount less the
aggregate outstanding principal balance of the Revolving Credit Advances and the
Swing Line Loan, and (iii) the Borrowing Base less the aggregate outstanding
principal balance of the Revolving Credit Advances and the Swing Line Loan. No
such Letter of Credit shall have an expiry date that is more than one year
following the date of issuance thereof, and neither Agent nor Revolving Lenders
shall be under any obligation to incur Letter of Credit Obligations in respect
of, or purchase risk participations in, any Letter of Credit having an expiry
date that is later than the Commitment Termination Date.
(b) (i) Advances Automatic; Participations. In the event that Agent
or any Revolving Lender shall make any payment on or pursuant to any Letter of
Credit Obligation, such payment shall then be deemed automatically to constitute
a Revolving Credit Advance under Section 1.1(a) of the Agreement regardless of
whether a Default or Event of Default has occurred and is continuing and
notwithstanding Borrower's failure to satisfy the conditions precedent set forth
in Section 2, and each Revolving Lender shall be obligated to pay its Pro Rata
Share thereof in accordance with the Agreement. The failure of any Revolving
Lender to make available to Agent for Agent's own account its Pro Rata Share of
any such Revolving Credit Advance or payment by Agent under or in respect of a
Letter of Credit shall not relieve any other Revolving Lender of its obligation
hereunder to make available to Agent its Pro Rata Share thereof, but no
Revolving Lender shall be responsible for the failure of any other Revolving
Lender to make available such other Revolving Lender's Pro Rata Share of any
such payment.
(ii) If it shall be illegal or unlawful for Borrower to incur
Revolving Credit Advances as contemplated by paragraph (b)(i) above because of
an Event of Default described in Sections 8.1(h) or (i) or otherwise or if it
shall be illegal or unlawful for any Revolving Lender to be deemed to have
assumed a ratable share of the reimbursement obligations owed to an L/C Issuer,
or if the L/C Issuer is a Revolving Lender, then (i) immediately and without
further action whatsoever, each Revolving Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the
case may
B-1
be) an undivided interest and participation equal to such Revolving Lender's Pro
Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and (ii)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation in such Revolving Lender's Pro Rata Share (based on the Revolving
Loan Commitments) of the Letter of Credit Obligations with respect to such
Letter of Credit on the date of such issuance. Each Revolving Lender shall fund
its participation in all payments or disbursements made under the Letters of
Credit in the same manner as provided in the Agreement with respect to Revolving
Credit Advances.
(c) Cash Collateral. (i) If Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, Borrower will pay to Agent for the ratable
benefit of itself and Revolving Lenders cash or cash equivalents acceptable to
Agent ("Cash Equivalents") in an amount equal to 105% of the maximum amount then
available to be drawn under each applicable Letter of Credit outstanding. Such
funds or Cash Equivalents shall be held by Agent in a cash collateral account
(the "Cash Collateral Account") maintained at a bank or financial institution
acceptable to Agent. The Cash Collateral Account shall be in the name of
Borrower and shall be pledged to, and subject to the control of, Agent, for the
benefit of Agent and Lenders, in a manner satisfactory to Agent. Borrower hereby
pledges and grants to Agent, on behalf of itself and Lenders, a security
interest in all such funds and Cash Equivalents held in the Cash Collateral
Account from time to time and all proceeds thereof, as security for the payment
of all amounts due in respect of the Letter of Credit Obligations and other
Obligations, whether or not then due. The Agreement, including this Annex B,
shall constitute a security agreement under applicable law.
(ii) If any Letter of Credit Obligations, whether or not then due
and payable, shall for any reason be outstanding on the Commitment Termination
Date, Borrower shall either (A) provide cash collateral therefor in the manner
described above, or (B) cause all such Letters of Credit and guaranties thereof
to be canceled and returned, or (C) deliver a stand-by letter (or letters) of
credit in guarantee of such Letter of Credit Obligations, which stand-by letter
(or letters) of credit shall be of like tenor and duration (plus thirty (30)
additional days) as, and in an amount equal to 105% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding Letter of Credit Obligations relate and shall be issued by a Person,
and shall be subject to such terms and conditions, as are satisfactory to Agent
in its sole discretion.
(iii) From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then held in
the Cash Collateral Account to the payment of any amounts, and in such order as
Agent may elect, as shall be or shall become due and payable by Borrower to
Agent and Lenders with respect to such Letter of Credit Obligations of Borrower
and, upon the satisfaction in full of all Letter of Credit Obligations of
Borrower, to any other Obligations then due and payable.
B-2
Neither Borrower nor any Person claiming on behalf of or through
Borrower shall have any right to withdraw any of the funds or Cash Equivalents
held in the Cash Collateral Account, except that upon the termination of all
Letter of Credit Obligations and the payment of all amounts payable by Borrower
to Agent and Lenders in respect thereof, any funds remaining in the Cash
Collateral Account shall be applied to other Obligations then due and owing and
upon payment in full of such Obligations, any remaining amount shall be paid to
Borrower or as otherwise required by law.
(d) Fees and Expenses. Borrower agrees to pay to Agent for the
benefit of Revolving Lenders, as compensation to such Lenders for Letter of
Credit Obligations incurred hereunder, (x) all costs and expenses incurred by
Agent or any Lender on account of such Letter of Credit Obligations, and (y) for
each month during which any Letter of Credit Obligation shall remain
outstanding, a fee (the "Letter of Credit Fee") in an amount equal to the
Applicable L/C Margin from time to time in effect multiplied by the maximum
amount available from time to time to be drawn under the applicable Letter of
Credit. Such fee shall be paid to Agent for the benefit of the Revolving Lenders
in arrears, on the first day of each month and on the Commitment Termination
Date. In addition, Borrower shall pay to any L/C Issuer, on demand, such fees
(including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.
(e) Request for Incurrence of Letter of Credit Obligations. Borrower
shall give Agent at least two (2) Business Days' prior written notice requesting
the incurrence of any Letter of Credit Obligation, specifying the date such
Letter of Credit Obligation is to be incurred, identifying the beneficiary to
which such Letter of Credit Obligation relates and describing the nature of the
transactions proposed to be supported thereby. The notice shall be accompanied
by the form of the Letter of Credit (which shall be acceptable to the L/C
Issuer) to be guaranteed and, to the extent not previously delivered to Agent,
copies of all agreements between Borrower and the L/C Issuer pertaining to the
issuance of Letters of Credit. Notwithstanding anything contained herein to the
contrary, Letter of Credit applications by Borrower and approvals by Agent and
the L/C Issuer may be made and transmitted pursuant to electronic codes and
security measures mutually agreed upon and established by and among Borrower,
Agent and the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrower to reimburse
Agent and Revolving Lenders for payments made with respect to any Letter of
Credit Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such obligations of
Borrower and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following:
(i) any lack of validity or enforceability of any Letter of Credit
or the Agreement or the other Loan Documents or any other agreement;
B-3
(ii) the existence of any claim, setoff, defense or other right that
Borrower or any of its Affiliates or any Lender may at any time have
against a beneficiary or any transferee of any Letter of Credit (or any
Persons or entities for whom any such transferee may be acting), Agent,
any Lender, or any other Person, whether in connection with the Agreement,
the Letter of Credit, the transactions contemplated herein or therein or
any unrelated transaction (including any underlying transaction between
Borrower or any of its Affiliates and the beneficiary for which the Letter
of Credit was procured);
(iii) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly provided in
paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit
or guaranty thereof against presentation of a demand, draft or certificate
or other document that does not comply with the terms of such Letter of
Credit or such guaranty;
(v) any other circumstance or event whatsoever, that is similar to
any of the foregoing; or
(vi) the fact that a Default or an Event of Default has occurred and
is continuing.
(g) Indemnification; Nature of Lenders' Duties. (i) In addition to
amounts payable as elsewhere provided in the Agreement, Borrower hereby agrees
to pay and to protect, indemnify, and save harmless Agent and each Lender from
and against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including attorneys' fees and allocated costs of internal
counsel) that Agent or any Lender may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of any Letter of Credit or guaranty
thereof, or (B) the failure of Agent or any Lender seeking indemnification or of
any L/C Issuer to honor a demand for payment under any Letter of Credit or
guaranty thereof as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent solely as a result
of the gross negligence or willful misconduct of Agent or such Lender (as
finally determined by a court of competent jurisdiction).
(ii) As between Agent and any Lender and Borrower, Borrower assumes
all risks of the acts and omissions of, or misuse of any Letter of Credit by
beneficiaries of any Letter of Credit. In furtherance and not in limitation of
the foregoing, to the fullest extent permitted by law neither Agent nor any
Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) failure of
the beneficiary of any Letter of Credit to
B-4
comply fully with conditions required in order to demand payment under such
Letter of Credit; provided, that in the case of any payment by L/C Issuer under
any Letter of Credit or guaranty thereof, L/C Issuer shall be liable to the
extent such payment was made primarily as a result of its gross negligence or
willful misconduct in determining that the demand for payment under such Letter
of Credit or guaranty thereof complies on its face with any applicable
requirements for a demand for payment under such Letter of Credit or guaranty
thereof; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they may be in cipher; (E) errors in interpretation of technical terms;
(F) any loss or delay in the transmission or otherwise of any document required
in order to make a payment under any Letter of Credit or guaranty thereof or of
the proceeds thereof; (G) the credit of the proceeds of any drawing under any
Letter of Credit or guaranty thereof; and (H) any consequences arising from
causes beyond the control of Agent or any Lender. None of the above shall
affect, impair, or prevent the vesting of any of Agent's or any Lender's rights
or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to expand
any waivers, covenants or indemnities made by Borrower in favor of any L/C
Issuer in any letter of credit application, reimbursement agreement or similar
document, instrument or agreement between Borrower and such L/C Issuer.
B-5
ANNEX C (Section 1.8)
to
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
Borrower shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:
(a) On or before the date that is ninety (90) days following the
Closing Date and until the Termination Date, Borrower shall (i) establish lock
boxes ("Lock Boxes") at one or more of the banks set forth in Disclosure
Schedule (3.19), and shall request in writing and otherwise take such reasonable
steps to ensure that all Account Debtors forward payment directly to such Lock
Boxes, and (ii) deposit and cause its Subsidiaries to deposit or cause to be
deposited promptly, and in any event no later than the first Business Day after
the date of receipt thereof, all cash, checks, drafts or other similar items of
payment relating to or constituting payments made in respect of any and all
Collateral (whether or not otherwise delivered to a Lock Box) into one or more
bank accounts in Borrower's name or any such Subsidiary's name (each a "Borrower
Account" and collectively, the "Borrower Accounts") at a bank identified in
Disclosure Schedule (3.19) (each, a "Relationship Bank"). On or before the date
that is ninety (90) days following the Closing Date, Borrower shall have
established a concentration account in its name (the "Concentration Account") at
the bank that shall be designated as the Concentration Account bank for Borrower
in Disclosure Schedule (3.19) (the "Concentration Account Bank") which bank
shall be satisfactory to Agent.
(b) Borrower may maintain, in its name, an account (each a
"Disbursement Account" and collectively, the "Disbursement Accounts") at a bank
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances and Swing Line Advances made to Borrower pursuant
to Section 1.1 for use by Borrower solely in accordance with the provisions of
Section 1.4.
(c) On or before the date that is ninety (90) days following the
Closing Date (or such later date as Agent shall consent to in writing), the
Concentration Account Bank, each bank where a Disbursement Account is maintained
and all other Relationship Banks, shall have entered into tri-party blocked
account agreements with Agent, for the benefit of itself and Lenders, and
Borrower and Subsidiaries thereof, as applicable, in form and substance
acceptable to Agent, which shall become operative on or prior to the date that
is ninety (90) days following the Closing Date. Each such blocked account
agreement shall provide, among other things, that (i) all items of payment
deposited in such account and proceeds thereof deposited in the Concentration
Account are held by such bank as agent or bailee-in-possession for Agent, on
behalf of itself and Lenders, (ii) the bank executing such agreement has no
rights of setoff or recoupment or any other claim against such account, as the
case may be, other than for payment of its service fees and other charges
directly related to the administration of such account, for returned checks or
other items of payment and for any required adjustments due to clerical errors
or calculation errors relating to such account and in accordance with any court
order, notice of
C-1
garnishment binding on such bank or any other applicable law binding on such
bank, and (iii) from and after the date that is ninety (90) days following the
Closing Date (A) with respect to banks at which a Borrower Account is
maintained, such bank agrees to forward immediately all amounts in each Borrower
Account to the Concentration Account Bank and to commence the process of daily
sweeps from such Borrower Account into the Concentration Account and (B) with
respect to the Concentration Account Bank, such bank agrees to immediately
forward all amounts received in the Concentration Account to the Collection
Account through daily sweeps from such Concentration Account into the Collection
Account. Borrower shall not, and shall not cause or permit any Subsidiary
thereof to, accumulate or maintain cash in Disbursement Accounts or payroll
accounts as of any date of determination in excess of checks outstanding against
such accounts as of that date and amounts necessary to meet minimum balance
requirements.
(d) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend Disclosure Schedule (3.19) to add or replace a
Relationship Bank, Lock Box or Borrower Account or to replace any Concentration
Account or any Disbursement Account; provided, that (i) Agent shall have
consented in writing in advance to the opening of such account or Lock Box with
the relevant bank and (ii) prior to the time of the opening of such account or
Lock Box, Borrower or its Subsidiaries, as applicable, and such bank shall have
executed and delivered to Agent a tri-party blocked account agreement, in form
and substance satisfactory to Agent. Borrower shall close any of its accounts
(and establish replacement accounts in accordance with the foregoing sentence)
promptly and in any event within thirty (30) days following notice from Agent
that the creditworthiness of any bank holding an account is no longer acceptable
in Agent's reasonable judgment, or as promptly as practicable and in any event
within sixty (60) days following notice from Agent that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts or Lock Boxes of the bank holding such accounts or Agent's
liability under any tri-party blocked account agreement with such bank is no
longer acceptable in Agent's reasonable judgment.
(e) The Lock Boxes, Borrower Accounts, Disbursement Accounts and the
Concentration Account shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Loans and all other Obligations, and in which Borrower and each Subsidiary
thereof shall have granted a Lien to Agent, on behalf of itself and Lenders,
pursuant to the Security Agreement.
(f) All amounts deposited in the Collection Account shall be deemed
received by Agent in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11 or 8.3 as applicable. In no
event shall any amount be so applied unless and until such amount shall have
been credited in immediately available funds to the Collection Account.
(g) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with
Borrower (each a "Related Person") to (i) hold in trust for Agent, for the
benefit of itself and Lenders, all checks, cash and other items of payment
received by Borrower or any such Related Person, and (ii) within one (1)
Business Day after receipt by Borrower or any such Related Person of any checks,
cash or other items of
C-2
payment, deposit the same into a Borrower Account. Borrower and each Related
Person thereof acknowledges and agrees that all cash, checks or other items of
payment constituting proceeds of Collateral are the property of Agent and
Lenders. All proceeds of the sale or other disposition of any Collateral, shall
be deposited directly into Borrower Accounts.
C-3
ANNEX D (Section 2.1(a))
to
CREDIT AGREEMENT
CLOSING CHECKLIST
In addition to, and not in limitation of, the conditions described
in Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items
must be received by Agent in form and substance satisfactory to Agent on or
prior to the Closing Date (each capitalized term used but not otherwise defined
herein shall have the meaning ascribed thereto in Annex A to the Agreement):
A. Appendices. All Appendices to the Agreement, in form and
substance satisfactory to Agent.
B. Revolving Notes, Swing Line Note and Term Notes. Duly executed
originals of the Revolving Notes, Swing Line Note, IP Notes and Term Notes for
each applicable Lender, dated the Closing Date.
C. Security Agreements. Duly executed originals of the Security
Agreement, dated as of the date hereof, and all instruments, documents and
agreements executed pursuant thereto.
D. Insurance. Satisfactory evidence that the insurance policies
required by Section 5.4 are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements,
as requested by Agent, in favor of Agent, on behalf of Lenders.
E. Security Interests, Hypothecs and Code Filings. (a) Evidence
satisfactory to Agents that Agent (for the benefit of itself and Lenders) has a
valid and perfected first priority security interest in the Collateral and that
Agent and Lenders have valid and registered first ranking hypothecs on the
Collateral, including (i) such documents duly executed by each Credit Party
(including financing statements under the Code and other applicable documents
under the laws of any jurisdiction with respect to the perfection of Liens) as
Agents may request in order to perfect the Agent's security interests in and
Agent's and Lenders' hypothecs on the Collateral and (ii) copies of Code search
reports listing all effective financing statements (or other applicable
equivalent) that name any Credit Party as debtor, together with copies of such
financing statements (or other applicable equivalent), none of which shall cover
the Collateral, except for those relating to the Prior Lenders' Obligations (all
of which shall be terminated on the Closing Date).
(b) Evidence satisfactory to Agents, including copies, of all
UCC-1 and other financing statements (or other applicable equivalent) filed in
favor of any Credit Party with respect to each location, if any, at which
Inventory may be consigned.
D-1
(c) Control Letters from (i) all issuers of uncertificated
securities and financial assets held by Borrower, (ii) all securities
intermediaries with respect to all securities accounts and securities
entitlements of Borrower, and (iii) all futures commission agents and clearing
houses with respect to all commodities contracts and commodities accounts held
by Borrower.
F. Payoff Letter; Termination Statements. Copies of a duly executed
payoff letter, in form and substance satisfactory to Agents, by and between all
parties to the Prior Lenders loan documents evidencing repayment in full of all
Prior Lenders' Obligations, together with (a) UCC-3 or other appropriate
termination statements, in form and substance satisfactory to Agents, manually
signed by the Prior Lenders releasing all liens of Prior Lenders upon any of the
personal property and real property of each Credit Party, and (b) termination of
all blocked account agreements, bank agency agreements or other similar
agreements or arrangements or arrangements in favor of Prior Lenders or relating
to the Prior Lenders' Obligations.
G. Intellectual Property Security Agreements. Duly executed
originals of Trademark Security Agreements, Copyright Security Agreements and
Patent Security Agreements, each dated as of the date hereof and signed by each
Credit Party which owns Trademarks, Copyrights and/or Patents, as applicable,
all in form and substance satisfactory to Agent, together with all instruments,
documents and agreements executed pursuant thereto.
H. New Holdings Guaranty. Duly executed originals of the New
Holdings Guaranty, dated as of the date hereof, and all documents, instruments
and agreements executed pursuant thereto.
I. Initial Borrowing Base Certificate. Duly executed originals of an
initial Borrowing Base Certificate from Borrower, dated as of the date hereof,
reflecting information concerning Eligible Accounts and Eligible Inventory of
Borrower as of a date not more than seven (7) days prior to the date hereof.
J. Initial Notice of Revolving Credit Advance. Duly executed
originals of a Notice of Revolving Credit Advance, dated September 24, 1999,
with respect to the initial Revolving Credit Advance to be requested by Borrower
on the Closing Date.
K. Letter of Direction. Duly executed originals of a letter of
direction from Borrower addressed to Agent, on behalf of itself and Lenders,
with respect to the disbursement on the Closing Date of the proceeds of the Term
Loan and the initial Revolving Credit Advance.
L. Charter and Good Standing. For each Credit Party, such Person's
(a) charter and all amendments thereto, (b) good standing certificates
(including verification of tax status) (or applicable equivalent) in its state
(or province) of incorporation and (c) good standing certificates (including
verification of tax status) and certificates of qualification (or applicable
equivalents) to conduct business in each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
each dated a recent date prior to the date hereof and certified by the
applicable Secretary of State or other authorized Governmental Authority.
D-2
M. Bylaws and Resolutions. For each Credit Party, (a) such Person's
bylaws, together with all amendments thereto and (b) resolutions of such
Person's Board of Directors and stockholders, approving and authorizing the
execution, delivery and performance of the Loan Documents to which such Person
is a party and the transactions to be consummated in connection therewith, each
certified as of the date hereof by such Person's corporate secretary or an
assistant secretary as being in full force and effect without any modification
or amendment.
N. Incumbency Certificates. For each Credit Party, signature and
incumbency certificates of the officers of each such Person executing any of the
Loan Documents, certified as of the date hereof by such Person's corporate
secretary or an assistant secretary as being true, accurate, correct and
complete.
O. Opinions of Counsel. Duly executed originals of opinions of Ropes
& Gray, counsel for the Credit Parties, together with any local counsel opinions
requested by Agent from counsel in Utah, Quebec, Ontario and New Brunswick, each
in form and substance satisfactory to Agent and its counsel, dated as of the
date hereof.
P. Pledge Agreements. Duly executed originals of each of the Pledge
Agreements accompanied by (as applicable) (a) (i) share certificates
representing all of the outstanding Stock of Borrower and each domestic and
Canadian Subsidiary of Borrower (registered in Agent's name in the case of each
such Canadian Subsidiary in order to better perfect Agent's security therein)
and 65% of the outstanding Stock of each other Subsidiary of Borrower and stock
powers for such share certificates executed in blank (except when such Stock
certificates are registered in Agent's name) and (ii) a photocopy of the share
register of each Canadian Subsidiary showing Agent as the registered owner of
all of the outstanding Stock of each Canadian Subsidiary certified to be true
and complete by the Secretary or Assistant Secretary of each such Canadian
Subsidiary and (b) the original Intercompany Note and other instruments
evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly
endorsed in blank.
Q. Accountants' Letters. A letter from the Credit Parties to their
independent auditors authorizing the independent certified public accountants of
the Credit Parties to communicate with Agent and Lenders in accordance with
Section 4.2, and a letter from such auditors acknowledging Lenders' reliance on
the auditor's certification of past and future Financial Statements.
R. Appointment of Agent for Service. An appointment of CT
Corporation as each Credit Party's agent for service of process.
S. Solvency Certificate. The Credit Parties shall deliver to Agent
for the benefit of Lenders a solvency certificate signed by the Chief Financial
Officer of Borrower in form and substance satisfactory to Agent.
T. Fee Letter. Duly executed originals of the Fee Letter.
D-3
U. Officer's Certificate. Agent shall have received duly executed
originals of a certificate of the Chief Operating Officer of Borrower, dated as
of the date hereof, stating that, except as set forth in the Credit Agreement,
since February 28, 1999 (a) no event or condition has occurred or is existing
which could reasonably be expected to have a Material Adverse Effect; (b) there
has been no material adverse change in the industry in which Borrower operates;
(c) no Litigation has been commenced which, if successful, would have a Material
Adverse Effect or could challenge any of the transactions contemplated by the
Agreement and the other Loan Documents; (d) there have been no Restricted
Payments made by any Credit Party; and (e) there has been no material increase
in liabilities, liquidated or contingent, and no material decrease in assets of
Borrower or any of its Subsidiaries.
V. Waivers. Agent, on behalf of Lenders, shall have received
landlord waivers and consents, bailee letters and mortgagee agreements in form
and substance satisfactory to Agent, in each case as required pursuant to
Section 5.9.
W. Mortgages. Mortgages or, in the case of Real Estate located in
the Province of Quebec, the ICON of Canada Hypothec, covering all of the Real
Estate (the "Mortgaged Properties") together with: (a) title insurance policies,
flood insurance policies (if applicable), current as-built surveys, zoning
letters, certificates of location, and certificates of occupancy, in each case
satisfactory in form and substance to Agent, in its sole discretion; (b)
evidence that counterparts of the Mortgages have been recorded in all places to
the extent necessary or desirable, in the judgment of Agent, to create a valid
and enforceable first priority lien (subject to Permitted Encumbrances) on each
Mortgaged Property in favor of Agent for the benefit of itself and Lenders (or
in favor of such other trustee as may be required or desired under local law);
and (c) an opinion of counsel in each state in which any Mortgaged Property is
located in form and substance and from counsel satisfactory to Agents.
X. Subordination and Intercreditor Agreements. Agent and Lenders
shall have received any and all subordination and/or intercreditor agreements,
all in form and substance reasonably satisfactory to Agent, in its sole
discretion, as Agent shall have deemed necessary or appropriate with respect to
any Indebtedness of any Credit Party.
Y. Environmental Reports. Agent shall have received Phase I
Environmental Site Assessment Reports, consistent with American Society of
Testing and Materials (ASTM) Standard E 1527-94, and applicable state
requirements, on all of the Real Estate, dated no more than 6 months prior to
the Closing Date, prepared by environmental engineers satisfactory to Agent, all
in form and substance satisfactory to Agent, in its sole discretion; and Agent
shall have further received such environmental review and audit reports,
including Phase II reports, with respect to the Real Estate of any Credit Party
as Agent shall have requested, and Agent shall be satisfied, in its sole
discretion, with the contents of all such environmental reports. Agent shall
have received letters executed by the environmental firms preparing such
environmental reports, in form and substance satisfactory to Agent, authorizing
Agent and Lenders to rely on such reports.
Z. Appraisals. Agents shall have received appraisals from MEI, Inc.
as to all Inventory, Fixtures, Equipment and as to each of the Mortgaged
Properties, each of which shall
D-4
be in form and substance satisfactory to Agents. Agents shall have received an
appraisal of Borrower's Trademarks and Patents in form and substance
satisfactory to Agents.
AA. Audited Financials; Financial Condition. Agent shall have
received Borrower's final Financial Statements for its Fiscal Year ended May 31,
1999, audited by PriceWaterhouseCoopers. Borrower shall have provided Agent with
its current operating statements, a consolidated and consolidating balance sheet
and statement of cash flows, the Pro Forma, Projections and a Borrowing Base
Certificate with respect to Borrower certified by its Chief Financial Officer,
in each case in form and substance satisfactory to Agent, and Agent shall be
satisfied, in its sole discretion, with all of the foregoing. Agent shall have
further received a certificate of the Chief Executive Officer and/or the Chief
Financial Officer of Borrower, based on such Pro Forma and Projections, to the
effect that (a) Borrower will be Solvent upon the consummation of the
transactions contemplated herein; (b) the Pro Forma fairly presents the
financial condition of Borrower as of the date thereof after giving effect to
the transactions contemplated by the Loan Documents; (c) the Projections are
based upon estimates and assumptions stated therein, all of which Borrower
believes to be reasonable and fair in light of current conditions and current
facts known to Borrower and, as of the date hereof, reflect Borrower's good
faith and reasonable estimates of its future financial performance and of the
other information projected therein for the period set forth therein; and (d)
containing such other statements with respect to the solvency of Borrower and
matters related thereto as Agent shall request.
BB. Licensing Arrangements. All documents governing Borrower's
licensing arrangement with Sears, Roebuck and Co. regarding Nordic Track
products and trademarks.
CC. Subsidiary Guaranties. Guaranties executed by the domestic and
Canadian Subsidiaries of Borrower.
DD. Management and Employment Agreements. Copies of all Management
Agreements and employment agreements to which Borrower is a party.
EE. Canadian Security Documents.
(a) ICON of Canada Hypothec. Duly executed original of the
ICON of Canada Hypothec, dated prior to the Closing Date, and all instruments,
documents and agreements executed pursuant thereto, including the ICON of Canada
Debenture and the ICON of Canada Pledge Agreement.
(b) Canadian Security Agreements. Duly executed originals of
the Canadian Security Agreements, dated as of the date hereof, and all
instruments, documents and agreements executed pursuant thereto.
FF. Recapitalization. Certificate from Borrower certifying as of the
Closing Date that the Recapitalization has been completed and that Borrower has
received not less than $40,000,000 in cash as an equity contribution from Bain
Capital, Inc., Credit Suisse First Boston and management.
D-5
GG. Recapitalization Documents. All other documents executed and
delivered with respect to the Recapitalization.
HH. Other Documents. Such other certificates, documents and
agreements respecting any Credit Party as Agent may, in its sole discretion,
request.
D-6
ANNEX E (Section 4.1(a))
to
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Agents or to
Agents and Lenders, as indicated, the following:
(a) Monthly Financials. To Agents and Lenders, within forty-five
(45) days after the end of each Fiscal Month, financial information regarding
Borrower and its Subsidiaries, certified by the Chief Financial Officer of
Borrower, consisting of consolidated and consolidating (i) unaudited balance
sheets as of the close of such Fiscal Month and the related statements of income
and cash flows for that portion of the Fiscal Year ending as of the close of
such Fiscal Month; (ii) unaudited statements of income and cash flows for such
Fiscal Month, setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a summary of the outstanding balance
of all Intercompany Note as of the last day of that Fiscal Month. Such financial
information shall be accompanied by the certification of the Chief Financial
Officer of Borrower that (i) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the financial
position and results of operations of Borrower and its Subsidiaries, on a
consolidated and consolidating basis, in each case as at the end of such Fiscal
Month and for that portion of the Fiscal Year then ended and (ii) any other
information presented is true, correct and complete in all material respects and
that there was no Default or Event of Default in existence as of such time or,
if a Default or Event of Default shall have occurred and be continuing,
describing the nature thereof and all efforts undertaken to cure such Default or
Event of Default.
(b) Quarterly Financials. To Agents and Lenders, within forty-five
(45) days after the end of each Fiscal Quarter, consolidated and consolidating
financial information regarding Borrower and its Subsidiaries, certified by the
Chief Financial Officer of Borrower, including (i) unaudited balance sheets as
of the close of such Fiscal Quarter and the related statements of income and
cash flow for that portion of the Fiscal Year ending as of the close of such
Fiscal Quarter and (ii) unaudited statements of income and cash flows for such
Fiscal Quarter, in each case setting forth in comparative form the figures for
the corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments). Such financial information shall be accompanied
by (A) a statement in reasonable detail (each, a "Compliance Certificate")
showing the calculations used in determining compliance with each of the
Financial Covenants that is tested on a quarterly basis and (B) the
certification of the Chief Financial Officer of Borrower that (i) such financial
information presents fairly in accordance with GAAP (subject to normal year-end
adjustments) the financial position, results of operations and statements of
cash flows of Borrower and its Subsidiaries, on both a consolidated and
consolidating basis, as at the end of such Fiscal Quarter and for that portion
of the Fiscal Year then ended, (ii) any other
E-1
information presented is true, correct and complete in all material respects and
that there was no Default or Event of Default in existence as of such time or,
if a Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default. In addition, Borrower shall deliver to Agents and Lenders, within
forty-five (45) days after the end of each Fiscal Quarter, a management
discussion and analysis that includes a comparison to budget for that Fiscal
Quarter and a comparison of performance for that Fiscal Quarter to the
corresponding period in the prior year.
(c) Operating Plan. To Agents and Lenders, as soon as available, but
not later than thirty (30) days after the end of each Fiscal Year, an annual
operating plan for Borrower, approved by the Board of Directors of Borrower, for
the following Fiscal Year, which will (i)include a statement of all of the
material assumptions on which such plan is based, (ii) include monthly balance
sheets and a monthly budget for the following year and (iii) integrate sales,
gross profits, operating expenses, operating profit, cash flow projections and
Borrowing Availability projections, all prepared on the same basis and in
similar detail as that on which operating results are reported (and in the case
of cash flow projections, representing management's good faith estimates of
future financial performance based on historical performance), and including
plans for personnel, Capital Expenditures and facilities.
(d) Annual Audited Financials. To Agents and Lenders, within ninety
(90) days after the end of each Fiscal Year, audited Financial Statements for
Borrower and its Subsidiaries on a consolidated and (unaudited) consolidating
basis, consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP and certified without qualification, by an
independent certified public accounting firm of national standing or otherwise
acceptable to Agent. Such Financial Statements shall be accompanied by (i) a
statement prepared in reasonable detail showing the calculations used in
determining compliance with each of the Financial Covenants, (ii) a report from
such accounting firm to the effect that, in connection with their audit
examination, nothing has come to their attention to cause them to believe that a
Default or Event of Default has occurred (or specifying those Defaults and
Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) a letter addressed to Agent, on behalf of itself and Lenders, in
form and substance reasonably satisfactory to Agent and subject to standard
qualifications required by nationally recognized accounting firms, signed by
such accounting firm acknowledging that Agent and Lenders are entitled to rely
upon such accounting firm's certification of such audited Financial Statements,
(iv) the annual letters to such accountants in connection with their audit
examination detailing contingent liabilities and material litigation matters,
and (v) the certification of the Chief Executive Officer or Chief Financial
Officer of Borrower that all such Financial Statements present fairly in
accordance with GAAP the financial position, results of operations and
statements of cash flows of Borrower and its Subsidiaries on a consolidated and
consolidating basis, as at the end of such Fiscal Year and for the period then
ended, and that there was no Default or Event of Default in existence as of such
time or, if a Default or Event of
E-2
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.
(e) Management Letters. To Agent and Lenders, within five (5)
Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants.
(f) Default Notices. To Agent and Lenders, as soon as practicable,
and in any event within five (5) Business Days after an executive officer of
Borrower has actual knowledge of the existence of any Default, Event of Default
or other event that has had a Material Adverse Effect, telephonic or telecopied
notice specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day.
(g) SEC Filings and Press Releases. To Agent and Lenders, promptly
upon their becoming available, copies of: (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.
(h) Subordinated Debt and Equity Notices. To Agent, as soon as
practicable, copies of all material written notices given or received by any
Credit Party with respect to any Subordinated Debt or Stock of such Person, and,
within two (2) Business Days after any Credit Party obtains knowledge of any
matured or unmatured event of default with respect to any Subordinated Debt,
notice of such event of default.
(i) Supplemental Schedules. To Agent, supplemental disclosures, if
any, required by Section 5.6.
(j) Litigation. To Agent in writing, promptly upon learning thereof,
notice of any Litigation commenced or threatened against any Credit Party that
(i) seeks damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its assets or
against any Credit Party or ERISA Affiliate in connection with any Plan, (iv)
alleges criminal misconduct by any Credit Party, (v) alleges the violation of
any law regarding, or seeks remedies in connection with, any Environmental
Liabilities; or (vi) involves any product recall;
(k) Insurance Notices. To Agent, disclosure of losses or casualties
required by Section 5.4.
(l) Lease Default Notices. To Agent, copies of (i) any and all
default notices received under or with respect to any leased location or public
warehouse where Collateral is
E-3
located, and (ii) such other notices or documents as Agent may request in its
reasonable discretion.
(m) Lease Amendments. To Agent, prompt written notice of any product
recall whether voluntary or otherwise.
(n) Other Documents. To Agent and Lenders, such other financial and
other information respecting any Credit Party's business or financial condition
as Agent or any Lender shall, from time to time, request.
E-4
ANNEX F (Section 4.1(b))
to
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Agents, upon Agent's request, and in any event no less
frequently than five (5) Business Days after the end of each Fiscal Month
(together with a copy of all or any part of the following reports requested by
any Lender in writing after the Closing Date), each of the following reports,
each of which shall be prepared by the Borrower as of the last day of the
immediately preceding Fiscal Month:
(i) a summary of Inventory by location and type with a supporting
perpetual Inventory report, in each case accompanied by such supporting
detail and documentation as shall be requested by Agent in its reasonable
discretion; and
(ii) a monthly trial balance showing Accounts outstanding aged from
invoice due date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days
and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion.
(b) To Lenders, upon Agent's request, and in any event no less
frequently than two (2) Business Days after the end of each bi-weekly period (as
of the last Business Day of each of those two week periods), a Borrowing Base
Certificate, accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion; provided that, so long as
Borrowing Availability is less than $15,000,000, the Borrowing Base and
accompanying information will be provided no less frequently than two (2)
Business Days after the end of each week; provided, further, that if Borrower
has remained in compliance at all times with the Financial Covenants through the
measuring period ending May 31, 2000, such Borrowing Base Certificates and
accompanying information will be delivered monthly concurrently with the
information set forth in clause (a) above.
(c) To Agents, on a weekly basis or at such more frequent intervals
as Agent may request from time to time (together with a copy of all or any part
of such delivery requested by any Lender in writing after the Closing Date),
collateral reports with respect to Borrower, including all additions and
reductions (cash and non-cash) with respect to Accounts of Borrower, in each
case accompanied by such supporting detail and documentation as shall be
requested by Agents in their reasonable discretion each of which shall be
prepared by Borrower as of the last day of the immediately preceding week;
(d) To Agents, at the time of delivery of each of the monthly
Financial Statements delivered pursuant to Annex E, a reconciliation of the
Accounts trial balance and month-end Inventory reports of Borrower to Borrower's
general ledger and monthly Financial
F-1
Statements delivered pursuant to such Annex E, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(e) To Agent, at the time of delivery of each of the annual
Financial Statements delivered pursuant to Annex E, (i) a listing of government
contracts of Borrower subject to the Federal Assignment of Claims Act of 1940,
the Financial Administrators Act (Canada) or any applicable state, provincial or
territorial statute or municipal ordinance of similar purpose and effect; and
(ii) a list of any applications for the registration of any Patent, Trademark or
Copyright filed by any Credit Party with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
(including in any foreign jurisdiction) in the prior Fiscal Quarter;
(f) Borrower, at its own expense, shall deliver to Agents the
results of each physical verification, if any, that Borrower or any of its
Subsidiaries may in their discretion have made, or caused any other Person to
have made on their behalf, of all or any portion of their Inventory (and, if a
Default or an Event of Default has occurred and be continuing, Borrower shall,
upon the request of Agent, conduct, and deliver the results of, such physical
verifications as Agent may require);
(g) Borrower, at its own expense, shall deliver to Agents (i) annual
appraisals of its Inventory and (ii) such appraisals of its inventory and other
assets as Agent may request at any time after the occurrence and during the
continuance of a Default or an Event of Default, such appraisals to be conducted
by an appraiser, and in form and substance, satisfactory to Agent; and
(h) Such other reports, statements and reconciliations with respect
to the Borrowing Base or Collateral of any or all Credit Parties as Agent shall
from time to time request in its reasonable discretion.
F-2
ANNEX G (Section 6.10)
to
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures in excess of $13,000,000
in the aggregate during any Fiscal Year; provided, however, that the amount of
permitted Capital Expenditures for each Fiscal Year after Fiscal Year 2000 may
be increased by an amount equal to the lesser of (x) $1,500,000 and (y)
$13,000,000 minus the actual amount of Capital Expenditures for the preceding
Fiscal Year (the "Carry Over Amount"). For purposes of determining compliance
with this covenant, the Carry Over Amount shall be deemed to be the last amount
spent on Capital Expenditures in the succeeding Fiscal Year.
(b) Minimum Debt Service Coverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter set forth
below, a Debt Service Coverage Ratio for the 12-month period then ended (or with
respect to the Fiscal Quarters ending on or before May 31, 2000, the period
commencing on June 1, 1999, and ending on the last day of such Fiscal Quarter)
of not less than the following:
1.2 to 1.0 for the Fiscal Quarter ending November 30, 1999;
1.7 to 1.0 for the Fiscal Quarter ending February 29, 2000;
1.5 to 1.0 for the Fiscal Quarters ending May 31, 2000 through
August 31, 2004;
and
1.0 to 1.0 for the Fiscal Quarter ending November 30, 2004 and
each Fiscal Quarter ending thereafter.
(c) Minimum EBITDA. Borrower and its Subsidiaries on a consolidated basis
shall have, at the end of each Fiscal Quarter set forth below, EBITDA for the
12-month period then ended of not less than the following:
$48,000,000 for the Fiscal Quarter ending November 30, 1999;
$52,500,000 for the Fiscal Quarter ending February 29, 2000;
$55,000,000 for the Fiscal Quarter ending May 31, 2000;
$55,000,000 for the Fiscal Quarter ending August 31, 2000;
$55,000,000 for the Fiscal Quarter ending November 30, 2000;
G-1
$55,000,000 for the Fiscal Quarter ending February 28, 2001;
$55,500,000 for each of the Fiscal Quarters ending May 31, 2001;
August 31, 2001; November 30, 2001; and February 28,
2002;
$56,500,000 for each of the Fiscal Quarters ending May 31, 2002;
August 31, 2002; November 30, 2002; and February 28,
2003;
$57,500,000 for each of the Fiscal Quarters ending May 31, 2003;
August 31, 2003; November 30, 2003; and February 29,
2004;
$58,500,000 for the Fiscal Quarter ending May 31, 2004, and each
Fiscal Quarter ending thereafter.
(d) Maximum Senior Leverage Ratio. Borrower and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, a Senior Leverage Ratio as of the last day of such Fiscal Quarter and for
the 12-month period then ended of not more than the following:
6.0 to 1.0 for the Fiscal Quarter ending November 30, 1999;
4.7 to 1.0 for the Fiscal Quarter ending February 29, 2000;
3.7 to 1.0 for the Fiscal Quarter ending May 31, 2000;
3.5 to 1.0 for the Fiscal Quarter ending August 31, 2000.
5.0 to 1.0 for the Fiscal Quarter ending November 30, 2000;
4.4 to 1.0 for the Fiscal Quarter ending February 28, 2001;
3.4 to 1.0 for the Fiscal Quarter ending May 31, 2001;
3.2 to 1.0 for the Fiscal Quarter ending August 31, 2001;
4.9 to 1.0 for the Fiscal Quarter ending November 30, 2001;
4.2 to 1.0 for the Fiscal Quarter ending February 28, 2002;
3.2 to 1.0 for the Fiscal Quarter ending May 31, 2002;
3.0 to 1.0 for the Fiscal Quarter ending August 31, 2002;
4.7 to 1.0 for the Fiscal Quarter ending November 30, 2002;
3.9 to 1.0 for the Fiscal Quarter ending February 28, 2003;
2.9 to 1.0 for the Fiscal Quarter ending May 31, 2003;
2.7 to 1.0 for the Fiscal Quarter ending August 31, 2003;
4.4 to 1.0 for the Fiscal Quarter ending November 30, 2003;
3.7 to 1.0 for the Fiscal Quarter ending February 29, 2004;
2.7 to 1.0 for the Fiscal Quarter ending May 31, 2004;
2.4 to 1.0 for the Fiscal Quarter ending August 31, 2004;
4.1 to 1.0 for the Fiscal Quarter ending November 30, 2004;
3.3 to 1.0 for the Fiscal Quarter ending February 28, 2005;
2.4 to 1.0 for the Fiscal Quarter ending May 31, 2005 and each
Fiscal Quarter thereafter.
(e) Revenue. Borrower and its Subsidiaries on a consolidated basis
shall have at the end of each Fiscal Quarter set forth below for the period
commencing on June 1, 1999 and ending on the last day of such Fiscal Quarter,
net revenue of not less than the following:
$288,000,000 for the Fiscal Quarter ending November 30, 1999;
G-2
$500,000,000 for the Fiscal Quarter ending February 29, 2000;
$600,000,000 for the Fiscal Quarter ending May 31, 2000.
References to the Fiscal Quarters ending August 31, November 30, and
February 28/29 shall be deemed to refer to the Fiscal Quarters ending on the
Saturday closest to those dates. Unless otherwise specifically provided herein,
any accounting term used in the Agreement shall have the meaning customarily
given such term in accordance with GAAP, and all financial computations
hereunder shall be computed in accordance with GAAP consistently applied. That
certain items or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing. If
any "Accounting Changes" (as defined below) occur and such changes result in a
change in the calculation of the financial covenants, standards or terms used in
the Agreement or any other Loan Document, then Borrower, Agent and Lenders agree
to enter into negotiations in order to amend such provisions of the Agreement so
as to equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Borrower's and its Subsidiaries' financial condition
shall be the same after such Accounting Changes as if such Accounting Changes
had not been made; provided, however, that the agreement of Requisite Lenders to
any required amendments of such provisions shall be sufficient to bind all
Lenders. "Accounting Changes" means (i) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (ii) changes in accounting principles concurred in by Borrower's
certified public accountants; (iii) purchase accounting adjustments under A.P.B.
16 or 17 and EITF 88-16, and the application of the accounting principles set
forth in FASB 109, including the establishment of reserves pursuant thereto and
any subsequent reversal (in whole or in part) of such reserves; and (iv) the
reversal of any reserves established as a result of purchase accounting
adjustments. All such adjustments resulting from expenditures made subsequent to
the Closing Date (including capitalization of costs and expenses or payment of
pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period. If Agent, Borrower and Requisite Lenders agree upon the required
amendments, then after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the extent of such Accounting Change, refer to GAAP, consistently
applied after giving effect to the implementation of such Accounting Change. If
Agent, Borrower and Requisite Lenders cannot agree upon the required amendments
within thirty (30) days following the date of implementation of any Accounting
Change, then all Financial Statements delivered and all calculations of
financial covenants and other standards and terms in accordance with the
Agreement and the other Loan Documents shall be prepared, delivered and made
without regard to the underlying Accounting Change. For purposes of Section 8.1,
a breach of a Financial Covenant contained in this Annex G shall be deemed to
have occurred as of any date of determination by Agent or as of the last day of
any specified measurement period, regardless of when the Financial Statements
reflecting such breach are delivered to Agent.
G-3
ANNEX H (Section 9.9(a))
to
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
General Electric Capital Corporation: Bankers Trust
New York, New York
ABA #021001033
Account #50232854
Account Name: GECC/CAF Depository
Reference: CFC4201 ICON
Fleet National Bank: Fleet National Bank
Boston, Massachusetts 02110
ABA # 011-000-138
Account #151-0351-03156
Reference: Commercial Loan Services
Incoming Wire Suspense
Account
R/E ICON Health & Fitness
Jackson National Life Insurance Company: Bank of America
Chicago, Illinois
ABA #071-000-039
Account #8188-9-03526
Reference: Jackson National Life
Insurance Company
By: PPM Finance, Inc., as
Attorney-In-Fact
Zions First National Bank: Zions First National Bank
1 South Main Street, Salt Lake City,
Utah 84111
ABA #124000054
Account #696600100187
Attention: Pat Youngren
LaSalle Business Credit, Inc.: LaSalle Bank
Chicago, Illinois
ABA #071000505
Account #2321122
Reference: LaSalle Business Credit,
Inc. for Benefit of ICON
H-1
PNC Bank, National Association: PNC Business Credit
East Brunswick, New Jersey
ABA #031207607
Account #196039957830
Reference: ICON Health & Fitness
First Source Financial LLP: LaSalle Bank National Association
Chicago, Illinois
ABA #071-000-505
Account #2358874
Reference: First Source Financial LLP
ICON Health & Fitness, Inc.
Comerica Bank: Comerica Bank
Detroit, Michigan
ABA #072 000 096
Account #new
Reference: ICON Health & Fitness, Inc.
Bank Polska Kasa Opieka S.A.: The Bank of New York
New York, New York
ABA #021000018
Account #8900051434
Reference: ICON
GMAC Business Credit, LLC: Bank One Michigan
Detroit, Michigan
ABA #072000326
Account #3613249-84
Reference: ICON Health & Fitness, Inc.
The Chase Manhattan Bank: The Chase Manhattan Bank
ABA #021000021
Account #801-005477 (first funding)
#801-903211 (thereafter)
Reference: ICON Health & Fitness, Inc.
Heller Financial, Inc.: Bank One, N.A.
Chicago, Illinois 60670
ABA #071000013
Account #5298695
Reference: Heller Financial
H-2
Pilgrim Prime Rate Trust: State Street Bank & Trust Co.
Boston, Massachusetts
ABA #011-00-0028
Account #5454-337-6
Reference: Pilgrim Prime Rate Trust
ICON Health & Fitness
H-3
ANNEX I (Section 11.10)
to
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
10 South LaSalle Street, Suite 2700
Chicago, Illinois 60603
Attention: ICON Health & Fitness, Account Manager
Telecopier No.: (312) 419-5992
Telephone No.: (312) 419-0985
with copies to:
Latham & Watkins
Sears Tower, Suite 5800
Chicago, Illinois 60606
Attention: David G. Crumbaugh
Telecopier No.: (312) 993-9767
Telephone No.: (312) 876-7700
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel-Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(B) If to Borrower, at
ICON Health & Fitness, Inc.
1500 South, 1000 West
Logan, Utah 84321
Attention: S. Fred Beck
Telecopier No.: (435) 750-3665
Telephone No.: (435) 750-4000
I-1
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: David McKay
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7000
(C) If to Lenders, at
Fleet National Bank
MA OF DO3L
1 Federal Street
Boston, Massachusetts 02110
Attention: Thomas Mahoney
Telecopier No.: (617) 346-4806
Jackson National Life Insurance Company
By: PPM Finance, Inc., as attorney-in-fact
225 W. Wacker Drive
Chicago, Illinois 60606
Attention: Michael J. Williams
Telecopier No.: (312) 634-1283
Zions First National Bank
1 South Main Street, Suite 200
Salt Lake City, Utah 84111
Attention: David J. Mathis
Telecopier No.: (801) 534-2136
LaSalle Business Credit, Inc.
Suite 400
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Credit Manager
Telecopier No.: (312) 904-0291
PNC Business Credit
Two Tower Center Blvd.
East Brunswick, New Jersey 08816
Attention: Wing C. Louie
Telecopier No.: (732) 220-4393
I-2
First Source Financial LLP
2850 W. Golf Road, 5th Floor
Rolling Meadows, Illinois 60008
Attention: Kelli Marti (Credit)
Telecopier No.: (847) 734-7911
Attention: Lauren Rolsing (Administration)
Telecopier No.: (847) 734-7912
Attention: Ed Szarkowicz (Legal)
Telecopier No.: (847) 723-7910
Comerica
999 18th Street
Denver, Colorado 80202
Attention: Kerry McGuire
Telecopier No.: (303) 298-8239
Bank Polska Kasa Opieka S.A.
470 Park Avenue South, 15th Floor
New York, New York 10016
Attention: Harvey Winter
Telecopier No.: (212) 251-1222
GMAC Business Credit, LLC
500 West Madison, Suite 3130
Chicago, Illinois 60661
Attention: Mary Bookman
Telecopier No.: (312) 775-6006
The Chase Manhattan Bank
Chase Business Credit Corp. (4th Floor)
600 Fifth Avenue
New York, New York 10020
Attention: Credit Deputy
Telecopier No.: (212) 332-4297
Heller Financial, Inc.
150 East 42nd Street
New York, New York 10017
Attention: Albert J. Forzano
Telecopier No.: (212) 880-7002
I-3
Pilgrim Prime Rate Trust
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4424
Attention: Jeffrey S. Schultz
Telecopier No.: (602) 417-8321
with a copy to:
State Street Bank and Trust Company
Alternative Structures Unit
Boston, Massachusetts
Attention: Rolando Albuja
Telecopier No.: (617) 664-5366/5367/5368
Reference: Pilgrim Prime Rate Trust
I-4
ANNEX J (from Annex A - Commitments definition)
to
CREDIT AGREEMENT
Lenders:
General Electric Capital Corporation
Revolving Loan Commitment
(including a Swing Line Commitment
of $10,000,000): $9,042,662.08
[After giving effect to post-closing transfer to GMAC]
Term Loan A Commitment: $2,260,665.71
[After giving effect to post-closing transfer to GMAC]
Term Loan B Commitment: $6,168,747.79
[After giving effect to post-closing transfer to GMAC
and Pilgrim]
Term Loan C Commitment: $25,000,000
[After giving effect to post-closing transfer to GMAC
and Pilgrim]
IP Loan Commitment: $4,979,591.76
Fleet National Bank
Revolving Loan Commitment: $9,228,855.08
[After giving effect to post-closing transfer to GMAC]
Term Loan A Commitment: $2,307,213.71
[After giving effect to post-closing transfer to GMAC]
Term Loan B Commitment: $9,012,264.55
[After giving effect to post-closing transfer to GMAC]
Term Loan C Commitment: $25,000,000
J-1
Jackson National Life Insurance Company
Revolving Loan Commitment: $26,086,956.52
Term Loan A Commitment: $6,521,739.13
Term Loan B Commitment: $17,391,304.35
Zions First National Bank
Revolving Loan Commitment: $8,000,000
Term Loan A Commitment: $2,000,000
Pilgrim America Prime Rate Trust
Term Loan B Commitment: $5,000,000
IP Loan Commitment: $5,000,000
Term Loan C Commitment: $5,000,000
[To be purchased post-closing]
LaSalle Business Credit, Inc.
Revolving Loan Commitment: $12,244,897.96
Term Loan A Commitment: $3,061,224.49
Term Loan B Commitment: $8,163,265.31
IP Loan Commitment: $1,530,612.24
PNC Business Credit, Inc.
Revolving Loan Commitment: $7,826,086.96
Term Loan A Commitment: $1,956,521.74
Term Loan B Commitment: $5,217,391.30
J-2
First Source Financial LLP
Revolving Loan Commitment: $5,877,551
Term Loan A Commitment: $1,469,388
Term Loan B Commitment: $3,918,367
IP Loan Commitment: $734,694
Comerica Bank
Revolving Loan Commitment: $7,826,087
Term Loan A Commitment: $1,956,522
Term Loan B Commitment: $5,217,391.30
Bank Polska Kasa OPIEKA S.A. - PEKAO S.A. Group, New York Branch
Revolving Loan Commitment: $4,000,000
Term Loan A Commitment: $1,000,000
Heller Financial, Inc.
Revolving Loan Commitment: $9,795,918
Term Loan A Commitment: $2,448,980
Term Loan B Commitment: $6,530,612.24
IP Loan Commitment: $1,224,489.80
J-3
GMAC Business Credit, LLC
Revolving Loan Commitment: $12,244,900
Term Loan A Commitment: $3,061,224
Term Loan B Commitment: $8,163,264
IP Loan Commitment: $1,530,612
[To be purchased post-closing]
The Chase Manhattan Bank
Revolving Loan Commitment: $7,826,086.96
Term Loan A Commitment: $1,956,521.74
Term Loan B Commitment: $5,217,391.30
J-4
ANNEX K (from Annex A - Recapitalization Documents definition)
to
CREDIT AGREEMENT
A. Equity Restructuring
1. Limited Liability Company Agreement of HF Investment Holdings, LLC
(the "LLC"), dated as of the Closing Date, among certain affiliates
of Bain Capital, Inc. ("Bain"), Scott Watterson and Gary Stevenson,
and [others] (collectively, the "Non-CSFB Investors").
2. Subscription and Stock Purchase Agreement, dated as of the Closing
Date, between HF Holdings, Inc. ("New Holdings") and the LLC.
3. Securities Purchase Agreement, dated as of the Closing Date, among
New Holdings and Credit Suisse First Boston ("CSFB").
4. Note Agreement, dated as of the Closing Date, between New Holdings
and CSFB.
5. Subordinated Note issued to CSFB in the aggregate principal amount
of $5,000,000.
6. Stockholders Agreement, dated as of the Closing Date, among New
Holdings, ICON Health & Fitness, Inc. ("Borrower"), the LLC,
participating old 13% holders, if any, Scott Watterson and Gary
Stevenson, other management stockholders and CSFB.
7. Restated Employment Agreements, dated as of the Closing Date,
between New Holdings, Borrower and each of Scott Watterson and Gary
Stevenson.
8. Termination Agreements, dated as of the Closing date, between IHF
Holdings, Inc., Borrower and each of Scott Watterson and Gary
Stevenson.
9. `Non-recourse notes ($2.2 million aggregate), dated as of the
Closing Date, issued to New Holdings by each of Scott Watterson and
Gary Stevenson.
10. Pledge and Security Agreements, dated as of the Closing Date,
between New Holdings and each of Scott Watterson and Gary Stevenson.
11. 1999 Junior Management Stock Option Plan.
12. Promissory Notes ($500,000 aggregate) of members of junior
management.
K-1
13. Option Certificates issued by New Holdings to members of junior
management on the Closing Date.
14. ICON Junior Management Deferred Bonus Plan.
15. Management Agreement, dated as of the Closing Date, among New
Holdings, Borrower and Bain.
16. Management Agreements among Borrower, New Holdings and each of Scott
Watterson and Gary Stevenson.
17. Agreements and Plan of Merger, dated as of the Closing Date, among
New Holdings, Borrower and Merger Sub.
B. Exchange Offer/Consent Solicitation
1. New 12% Notes
a. Indenture with IBJ Whitehall, as trustee
b. Global 12% Note (for deposit with DTC)
c. Subsidiary Guarantees (from each Domestic Subsidiary)
d. Exchange and Registration Rights Agreement
2. New Holdings Warrants
a. Warrant Agreement
b. Global Warrant
3. Supplemental Indenture to 13% Notes
a. Supplemental Indenture No. 1 and No. 2
b. Consents of majority to proposed amendments
4. Supplemental Indenture to 15% Notes
a. Supplemental Indenture
b. Consents of majority to proposed amendments
5. Supplemental Indenture to 14% Notes
a. Supplemental Indenture
b. Consents of majority to proposed amendments
K-2
6. Miscellaneous
a. Exchange and Tabulation Agent Agreement
b. Information Agent Agreement
K-3
SCHEDULE 1.1
AGENT'S REPRESENTATIVES
General Electric Capital Corporation
10 South LaSalle Street, Suite 2700
Chicago, Illinois 60603
Attention: ICON Health & Fitness, Account Manager
Telecopier No.: (312) 419-5992
Telephone No.: (312) 419-0985
Contact Persons: Scott Daum, Fran Krause
1.1 - 1