EXHIBIT 10.16
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is entered into as of November 24, 1997, among WEST
MARINE FINANCE COMPANY, INC., a California corporation (the "Company"), the
-------
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), BANK OF AMERICA NATIONAL
----- ----
TRUST AND SAVINGS ASSOCIATION, as a letter of credit issuing bank (in such
capacity, an "Issuing Bank"), and as agent for the Banks (in such capacity, the
------------
"Agent"), NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, as a letter of credit
-----
issuing bank (in such capacity, an "Issuing Bank"), and FLEET NATIONAL BANK, as
------------
a letter of credit issuing bank (in such capacity, an "Issuing Bank").
------------
RECITALS
--------
WHEREAS, The Banks have agreed to make available to the Company a revolving
credit facility with letter of credit subfacility upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.01 Certain Defined Terms. The following terms have the following
---------------------
meanings:
"Acquisition" means any transaction or series of related transactions
-----------
for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of
any business or division of a Person, (b) the acquisition of in excess of
50% of the capital stock, partnership interests, membership interests or
equity of any Person, or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any other combination with
another Person (other than a Person that is a Subsidiary) provided that the
Parent or the Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which, directly
---------
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of
the other Person, whether through the ownership of voting securities,
membership interests, by contract, or otherwise.
"Agent" means BofA in its capacity as agent for the Banks
-----
hereunder, and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor agent
---------------------
-1-
arising under Section 10.09, together with their respective Affiliates, and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set forth on
----------------------
Schedule 11.02 or such other address as the Agent may from time to time specify.
"Agreed Alternative Currency" has the meaning specified in Section
---------------------------
3.11(a).
"Agreement" means this Credit Agreement.
---------
"Applicable Margin" means
-----------------
(i) with respect to Base Rate Loans, zero
(ii) with respect to Offshore Rate Loans, the Applicable Offshore
Rate Margin.
"Applicable Offshore Rate Margin" means
-------------------------------
(i) on and after the date the Parent receives a rating on the
Parent or on the Parent's senior long term unsecured debt of "BBB-" or
better from S&P or "Baa3" or better from Moody's, and so long as the
Parent's senior long term unsecured debt continues to be rated by
either S&P or Moody's and such rating does not fall below "BBB-", in
the case of S&P, or "Baa3", in the case of Moody's, .40%; and
(ii) at all times that clause (i) is not applicable, commencing
on the fifteenth day following the day the Company is first required
to deliver financial statements to Banks and Agent under Section
7.01(a) or (b), the percentage determined as set forth below:
(A) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.70:1 for the
most recently concluded fiscal quarter, .45%;
(B) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.35:1, but not
higher than 2.70:1, for the most recently concluded fiscal
quarter, .55%;
(C) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.10:1, but not
higher than 2.35:1, for the most recently concluded
-2-
fiscal quarter, .75%;
(D) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is 2.10:1 or lower for the most
recently concluded fiscal quarter, .875%;
(E) on and after the fifteenth day following the Company's
failure to deliver to Banks and Agent the financial statements
required under Section 7.01(a) and (b) within the time periods
set forth therein, and until the fifteenth day following receipt
by Bank and Agent of such financial statements (at which time
subpart (A) (B), (C) or (D) above shall become applicable),
.875%.
"Assignee" has the meaning specified in Section 11.08(a).
--------
"Attorney Costs" means and includes all fees and disbursements of any
--------------
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
----
References to the "Banks" shall include BofA, Fleet, and NationsBank in
their respective capacities as Issuing Banks; for purposes of clarification
only, to the extent that any of BofA, NationsBank or Fleet may have any
rights or obligations in addition to those of the Banks due to its status
as Issuing Bank, its status as such will be specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
---------------
U.S.C. (S)101, et seq.).
-------
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
---------
above the latest Federal Funds Rate; and (b) the rate of interest in effect
for such day as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate." (The "reference rate" is a
rate set by BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above,
or below such announced rate. Any change in the reference rate announced
by BofA shall take effect at the opening of business on the day specified
in the public announcement of such change.)
"Base Rate Loan" means a Revolving Loan, or an L/C Advance, that bears
--------------
interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
----
national banking association.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans
---------
of the same Type made to the Company on the same
-3-
day by the Banks under Article II, and, other than in the case of Base Rate
Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
--------------
Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in New York City or San Francisco are
authorized or required by law to close and, if the applicable Business Day
relates to any Offshore Rate Loan, means such a day on which dealings are
carried on in the applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
---------------------------
directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
"Cash Collateralize" means to pledge and deposit with or deliver to
------------------
the Agent, for the benefit of the Agent, the Issuing Banks and the Banks,
as collateral for the L/C Obligations, cash or deposit account balances
pursuant to documentation in form and substance satisfactory to the Agent
and the Issuing Banks (which documents are hereby consented to by the
Banks). Derivatives of such term shall have corresponding meaning. The
Company hereby grants the Agent, for the benefit of the Agent, the Issuing
Banks and the Banks, a security interest in all such cash and deposit
account balances. Cash collateral shall be maintained in blocked, interest
bearing deposit accounts at BofA.
"Cash Flow for Debt Service" has the meaning specified in Section
--------------------------
7.13(b).
"Closing Date" means the date on which all conditions precedent set
------------
forth in Section 5.01 are satisfied or waived by all Banks (or, in the case
of Section 5.01(f), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations
----
promulgated thereunder.
"Commercial Letter of Credit Fee" means
-------------------------------
(i) on and after the date the Parent receives a rating on the
Parent or on the Parent's senior long term unsecured debt of "BBB-" or
better from S&P or "Baa3" or better from Moody's, and so long as the
Company's senior long term unsecured debt continues to be rated by
either S&P or Moody's and such rating does not fall below "BBB-", in
the case of S&P, or "Baa3", in the case of Moody's, .125%; and
(ii) at all times that clause (i) is not applicable, commencing
on the fifteenth day following the day the Company is first required
to deliver financial statements to Banks and Agent under Section
7.01(a) or (b), the
-4-
percentage determined as set forth below:
(A) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.70:1 for the
most recently concluded fiscal quarter, .15%;
(B) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.35:1, but not
higher than 2.70:1, for the most recently concluded fiscal
quarter, .1875%;
(C) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.10:1, but not
higher than 2.35:1, for the most recently concluded fiscal
quarter, .20%;
(D) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is 2.10:1 or lower for the most
recently concluded fiscal quarter, .25%;
(E) on and after the fifteenth day following the Company's
failure to deliver to Banks and Agent the financial statements
required under Section 7.01(a) and (b) within the time periods
set forth therein, and until the fifteenth day following receipt
by Bank and Agent of such financial statements (at which time
subpart (A) (B), (C) or (D) above shall become applicable), .25%.
"Commitment", as to each Bank, has the meaning specified in
----------
Section 2.01.
"Compliance Certificate" means a certificate substantially in the form
----------------------
of Exhibit C.
---------
"Computation Date" has the meaning specified in Section 3.11(b).
----------------
"Contingent Obligation" means, without duplication as to any Person,
---------------------
any direct or indirect liability of that Person, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or
other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person (i) to
purchase, repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide
-5-
funds for the payment or discharge of any such primary obligation, or to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item,
level of income or financial condition of the primary obligor, (iii) to
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 (iv)
otherwise to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof (each, a "Guaranty Obligation");
-------------------
(b) with respect to any Surety Instrument issued for the account of that
Person or as to which that Person is otherwise liable for reimbursement of
drawings or payments; (c) to purchase any materials, supplies or other
property from, or to obtain the services of, another Person if the relevant
contract or other related document or obligation requires that payment for
such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or other
property is ever made or tendered, or such services are ever performed or
tendered, or (d) in respect of any Swap Contract. The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations, be deemed
equal to the stated or determinable amount of the primary obligation in
respect of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the reasonably anticipated liability in respect thereof,
and in the case of other Contingent Obligations other than in respect of
Swap Contracts, shall be equal to the reasonably anticipated liability in
respect thereof and, in the case of Contingent Obligations in respect of
Swap Contracts, shall be equal to the Swap Termination Value.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its
property is bound.
"Conversion/Continuation Date" means any date on which, under Section
----------------------------
2.04, the Company (a) converts Loans of one Type to another Type, or (b)
continues as Loans of the same Type, but with a new Interest Period, Loans
having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Revolving
----------------
Loans hereunder (including the Existing Offshore Rate Loans), and (b) the
Issuance of any Letters of Credit hereunder (including the Existing Letters
of Credit).
"Default" means any event or circumstance which, with the giving of
-------
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United
-------- ------- -
States.
-6-
"Effective Amount" means (i) with respect to any Revolving Loans on
----------------
any date, the aggregate outstanding principal amount thereof after giving
effect to any Borrowings and prepayments or repayments of Revolving Loans
occurring on such date; and (ii) with respect to any outstanding L/C
Obligations on any date, the Equivalent Amount of such L/C Obligations on
such date after giving effect to any Issuances of Letters of Credit
occurring on such date and any other changes in the aggregate Equivalent
Amount of the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of Credit
or any reductions in the maximum amount available for drawing under Letters
of Credit taking effect on such date.
"Eligible Assignee" means (a) a commercial bank organized under the
-----------------
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the United States; and (c) a Person
that is primarily engaged in the business of commercial banking and that is
(i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank
is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and
land use matters.
"Equivalent Amount" means (a) whenever this Agreement requires or
-----------------
permits a determination on any date of the equivalent in Dollars of an
amount expressed in an Offshore Currency, the equivalent amount in Dollars
of an amount expressed in an Offshore Currency as determined by the Agent
on such date on the basis of the Spot Rate for the purchase of Dollars with
such Offshore Currency on the relevant Computation Date provided for
hereunder; or (b) whenever this Agreement requires or permits a
determination on any date of the equivalent in an Offshore Currency of an
amount expressed in Dollars, the equivalent amount in an Offshore Currency
of an amount expressed in Dollars as determined by the Agent on such date
on the basis of the Spot Rate for the purchase of such Offshore Currency
with Dollars on the relevant Computation Date provided for hereunder.
"ERISA" means the Employee Retirement Income Security Act
-----
-7-
of 1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
-----------
Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings by
the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the
-----------------------------
definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances specified
----------------
in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
------------
regulations promulgated thereunder.
"Existing Credit Agreement" means that certain Credit Agreement dated
-------------------------
June 14, 1996, as amended to date, among the Parent, BofA, as a bank and
issuing bank thereunder, NationsBank, as a bank and issuing bank
thereunder, and BofA, as agent for such banks.
"Existing Letters of Credit" means the letters of credit issued
--------------------------
pursuant to the Existing Credit Agreement and more particularly described
in Schedule 3.03.
-------------
"Existing Offshore Rate Loans" means the Offshore Rate Loans
----------------------------
outstanding under (and as defined in) the Existing Credit Agreement.
"FDIC" means the Federal Deposit Insurance Corporation, and any
----
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
------------------
weekly statistical release designated as H.15(519),
-8-
or any successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding Business
Day opposite the caption "Federal Funds (Effective)"; or, if for any
relevant day such rate is not so published on any such preceding Business
Day, the rate for such day will be the arithmetic mean as determined by the
Agent of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (San Francisco time) on that day by each of
three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" has the meaning specified in Section 2.10(a).
----------
"Fixed Charge Coverage Ratio" has the meaning specified in Section
---------------------------
7.13(b).
"Fleet" means Fleet National Bank, a national banking association.
-----
"FRB" means the Board of Governors of the Federal Reserve System, and
---
any Governmental Authority succeeding to any of its principal functions.
"Further Taxes" means any and all present or future taxes, levies,
-------------
assessments, imposts, duties, deductions, fees, withholdings or similar
charges (including, without limitation, net income taxes and franchise
taxes), and all liabilities with respect thereto, imposed by any
jurisdiction on account of amounts payable or paid pursuant to Section
4.01.
"GAAP" means generally accepted accounting principles set forth from
----
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), which are applicable to
the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Guarantors" means the Parent, West Marine Products, Inc., a
----------
California corporation, E&B Marine Inc., a Delaware corporation, E&B Marine
Supply, Inc., a Maryland corporation, E&B Marine Supply, Inc., a New Jersey
corporation, E&B Marine Supply (Florida), Inc., a Delaware corporation,
Goldbergs' Marine Distributors, Inc., a Delaware corporation, James Bliss &
Co., Inc., a Massachusetts corporation, Sea Ranger Marine Inc., a Delaware
corporation, Krista Corporation, a Delaware corporation, Central Marine
Supply, Inc., a New Jersey corporation, Central Marine Supply (Florida),
Inc., a Delaware
-9-
corporation, West Marine LBC, Inc., a California corporation, West Marine
IHC I, Inc., a California corporation, West Marine IHC II, Inc., a
California corporation, E&B Marine LBC, Inc., a California corporation, E&B
Marine IHC I, Inc., a California corporation, E&B Marine IHC II, Inc., a
California corporation, W Marine Management Company, Inc., a California
corporation, and any other Person who becomes a Guarantor from time to time
in accordance with Section 7.14 (individually, a "Guarantors").
"Guaranty" means a guaranty in the form of Exhibit F executed by
--------
Guarantors in support of the Obligations.
"Guaranty Obligation" has the meaning specified in the definition of
-------------------
"Contingent Obligation."
"Honor Date" has the meaning specified in Section 3.03(c).
----------
"Indebtedness" of any Person means, without duplication, (a) all
------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables and accrued expenses entered into in the ordinary course of
business on ordinary terms); (c) all non-contingent reimbursement or
payment obligations with respect to Surety Instruments; (d) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred
as financing, in either case with respect to property acquired by the
Person (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale
of such property); (f) all obligations with respect to capital leases; (g)
all indebtedness referred to in clauses (a) through (f) 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
(including accounts and contracts rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness; and (h) all Guaranty Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (a) through
(g) above. For all purposes of this Agreement, the Indebtedness of any
Person shall include all recourse Indebtedness of any partnership or joint
venture or limited liability company in which such Person is a general
partner or a joint venturer or a member, provided such Person is liable for
such recourse Indebtedness.
"Indemnified Liabilities" has the meaning specified in Section 11.05.
-----------------------
"Indemnified Person" has the meaning specified in Section 11.05.
------------------
"Independent Auditor" has the meaning specified in Section 7.01(a).
-------------------
"Insolvency Proceeding" means, with respect to any Person,
---------------------
-10-
(a) any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of, its creditors; undertaken under U.S. Federal, state
or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a Base Rate
---------------------
Loan, the last day of each Interest Period applicable to such Loan and, as
to any Base Rate Loan, the last Business Day of each calendar quarter,
provided, however, that if any Interest Period for an Offshore Rate Loan
-------- -------
exceeds three months, the date that falls three months after the beginning
of such Interest Period and after each Interest Payment Date thereafter is
also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the period
---------------
commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date 7, 14 or 21 days
or one, two, three or six months thereafter (and any other period that is
12 months or less and is consented to by all Banks in the given instance)
as selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that:
--------
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, that Interest Period shall be extended to the
following Business Day unless, in the case of an Offshore Rate Loan,
the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall
end on the preceding Business Day;
(ii) any Interest Period pertaining to an Offshore Rate Loan
that begins on the last 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 Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period;
and
(iii) no Interest Period for any Loan shall extend beyond the
Revolving Termination Date.
"IRS" means the Internal Revenue Service, and any Governmental
---
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in Section 3.01(a).
-------------
"Issue" means, with respect to any Letter of Credit, to incorporate
-----
the Existing Letters of Credit into this Agreement, or to issue or to
extend the expiry of, or to renew or increase
-11-
the amount of, such Letter of Credit; and the terms "Issued," if "Issuing"
------ -------
and "Issuance" have corresponding meanings.
--------
"Issuing Bank" means BofA , NationsBank, or Fleet, each in its
------------
respective capacity as issuer of one or more Letters of Credit hereunder,
together with any replacement letter of credit issuer arising under Section
10.01(b) or Section 10.09. The Issuing Bank with respect to any Letter of
Credit shall be selected by the Company at the time the Company requests
Issuance of such Letter of Credit.
"Joint Venture" means a partnership, limited liability company, joint
-------------
venture or other similar legal arrangement (whether created by contract or
conducted through a separate legal entity) now or hereafter formed by the
Company, the Parent or any Subsidiary with another Person in order to
conduct a common venture or enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C Borrowing in
-----------
accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for amendment of
-------------------------
outstanding standby or commercial documentary letters of credit as shall at
any time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of standby
---------------
or commercial documentary letters of credit as shall at any time be in use
at the Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing
-------------
under any Letter of Credit which shall not have been reimbursed on the date
when made nor converted into a Borrowing of Revolving Loans under Section
3.03(c).
"L/C Commitment" means the commitment of the Issuing Banks to Issue,
--------------
and the commitment of the Banks severally to participate in, Letters of
Credit (including the Existing Letters of Credit) from time to time Issued
or outstanding under Article III, in an aggregate amount not to exceed on
any date the amount of $20,000,000 (of which up to $15,000,000 shall be
available for the issuance of commercial documentary Letters of Credit and
up to $5,000,000 shall be available for the issuance of standby Letters of
Credit), as the same shall be reduced as a result of a reduction in the L/C
Commitment pursuant to Section 2.05; provided that the L/C Commitment is a
--------
part of the combined Commitments, rather than a separate, independent
commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate
---------------
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit, including
all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
---------------------
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the
-12-
Issuing Bank's standard form documents for letter of credit issuances.
"Lending Office" means, as to any Bank, the office or offices of such
--------------
Bank specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on Schedule 11.02, or such
--------------
other office or offices as such Bank may from time to time notify the
Company and the Agent.
"Letters of Credit" means the Existing Letters of Credit and any
-----------------
letters of credit (whether standby letters of credit or commercial
documentary letters of credit) Issued by any Issuing Bank pursuant to
Article III.
"Lien" means any security interest, mortgage, deed of trust, pledge,
----
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease, any financing
lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the Uniform Commercial
Code or any comparable law), but not including the interest of a lessor
under an operating lease.
"Loan" means an extension of credit by a Bank to the Company under
----
Article II or Article III in the form of a Revolving Loan or L/C Advance.
"Loan Documents" means this Agreement, the Fee Letter, the L/C-Related
--------------
Documents, and all other documents delivered to the Agent or any Bank in
connection herewith.
"Majority Banks" means (a) as of any date of determination if the
--------------
Commitments are then in effect, at least two Banks having in the aggregate
66-2/3% or more of the combined Commitments then in effect and (b) as of
any date of determination if the Commitments have then been terminated and
there are Loans or Letters of Credit outstanding, Banks holding Loans and
L/C Obligations aggregating 66-2/3% or more of the aggregate outstanding
amount of such Loans and L/C Obligations.
"Margin Stock" means "margin stock" as such term is defined in
------------
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
-----------------------
material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Company or the
Parent or the Parent and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Company or any Guarantor to perform under
any Loan Document and to avoid any Event of Default; or (c) a material
adverse effect upon the legality, validity, binding effect or
enforceability against the Company or any Guarantor of
-13-
any Loan Document.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a "multiemployer plan", within the meaning
------------------
of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate
makes, is making, or is obligated to make contributions or, during the
preceding three calendar years, has made, or been obligated to make,
contributions.
"NationsBank" means NationsBank of Texas, National Association, a
-----------
national banking association.
"Net Interest Expense" means, for any period of determination,
--------------------
interest expense less interest income; provided, that in no event shall Net
--------
Interest Expense be less than zero.
"Notice of Borrowing" means a notice in substantially the form of
-------------------
Exhibit A.
---------
"Notice of Conversion/Continuation" means a notice in substantially
---------------------------------
the form of Exhibit B.
---------
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document owing by the Company
to any Bank, any Issuing Bank, the Agent, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter
arising.
"Offshore Business Day" means a day on which dealings in deposits
---------------------
denominated in Dollars or the applicable Offshore Currency are carried out
by BofA's Grand Cayman branch (or such other office as may be designated
for such purpose by BofA or the Agent), and which is also a Business Day.
"Offshore Currency" means any Agreed Alternative Currency.
-----------------
"Offshore Rate" means, for any Interest Period, with respect to
-------------
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/32th of 1%) determined by
the Agent as follows:
Offshore Rate = LIBOR
-------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
-----------------------------
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect on such
day (whether or not applicable to any Bank) under regulations issued
from time to time by the FRB for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as
-14-
"Eurocurrency liabilities"); and
"LIBOR" means (i) the rate of interest per annum that appears on
-----
page 3750 of the Dow Jones Telerate Screen (or any successor page) for
U.S. dollar deposits with a maturity comparable to the Interest Period
of the applicable Offshore Rate Loan, determined as of 11:00 a.m.
(London time) on the date which is two Business Days prior to the
commencement of such Interest Period; or (ii) if such rate does not
appear on page 3750 of the Dow Jones Telerate Screen (or any successor
page), the rate of interest per annum determined by the Agent in good
faith as the rate at which U.S. dollar deposits in the approximate
amount of the Offshore Rate Loan, and having a maturity comparable to
such Interest Period, would be offered by BofA to major banks in the
London eurocurrency market at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on the
------------------
Offshore Rate.
"Organization Documents" means, for any corporation, the certificate
----------------------
or articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of preferred shareholders of such
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation.
"Other Taxes" means any present or future stamp, court or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise with
respect to, this Agreement or any other Loan Documents.
"Parent" means West Marine, Inc., a Delaware corporation.
------
"Participant" has the meaning specified in Section 11.08(d).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
------------
ERISA) subject to Title IV of ERISA which the Company or the Parent or any
Subsidiary sponsors, maintains, or to which it makes, is making, or is
obligated to make contributions, or in the case of a multiple employer plan
(as described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
-15-
"Permitted Liens" has the meaning specified in Section 8.01.
---------------
"Permitted Swap Obligations" means all obligations (contingent or
--------------------------
otherwise) of the Company , the Parent or any Subsidiary existing or
arising under Swap Contracts, provided that each of the following criteria
is satisfied: (a) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets held by
such Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;"
and (b) such Swap Contracts do not contain any provision ("walk-away"
provision) exonerating the non-defaulting party from its obligation to make
payments on outstanding transactions to the defaulting party.
"Person" means an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
----
ERISA) which the Company or the Parent or any Subsidiary sponsors or
maintains or to which the Company or the Parent or any Subsidiary makes, is
making, or is obligated to make contributions and includes any Pension
Plan.
"Pro Rata Share" means, as to any Bank at any time, the percentage
--------------
equivalent (expressed as a decimal, rounded to the ninth decimal place) at
such time of such Bank's Commitment divided by the combined Commitments of
all Banks.
"Reportable Event" means, any of the events set forth in Section
----------------
4043(c) of ERISA or the regulations thereunder, other than any such event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of
a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property
is subject.
"Responsible Officer" means the chief executive officer or the
-------------------
president of the Company or the Parent, or any other officer having
substantially the same authority and responsibility; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of the Company or the Parent, or any other officer having
substantially the same authority and responsibility.
"Revolving Loan" has the meaning specified in Section 2.01, and may be
--------------
a Base Rate Loan or an Offshore Rate Loan
-16-
(each, a "Type" of Revolving Loan).
"Revolving Termination Date" means the earlier to occur of:
--------------------------
(a) October 4, 2000; and
(b) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
"S&P" means Standard & Poor's Ratings Services.
---
"SEC" means the Securities and Exchange Commission, or any
---
Governmental Authority succeeding to any of its principal functions.
"Spot Rate" for a currency means the rate quoted by BofA as the spot
---------
rate for the purchase by BofA of such currency with another currency
through its FX Trading Office at approximately 9:00 a.m. (San Francisco
time) on the date two Offshore Business Days prior to the date as of which
the foreign exchange computation is made.
"Standby Letter of Credit Fee" means
----------------------------
(i) on and after the date the Parent receives a rating on the
Parent or on the Parent's senior long term unsecured debt of "BBB-" or
better from S&P or "Baa3" or better from Moody's, and so long as the
Company's senior long term unsecured debt continues to be rated by
either S&P or Moody's and such rating does not fall below "BBB-", in
the case of S&P, or "Baa3", in the case of Moody's, .40%; and
(ii) at all times that clause (i) is not applicable, commencing
on the fifteenth day following the day the Company is first required
to deliver financial statements to Banks and Agent under Section
7.01(a) or (b), the percentage determined as set forth below:
(A) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.70:1 for the
most recently concluded fiscal quarter, .45;
(B) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is higher than 2.35:1, but not
higher than 2.70:1, for the most recently concluded fiscal
quarter, .55%;
(C) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b),
-17-
which financial statements reflect a Fixed Charge Coverage Ratio
which is higher than 2.10:1, but not higher than 2.35:1, for the
most recently concluded fiscal quarter, .75%;
(D) on and after the fifteenth day following receipt by
Banks and Agent of the financial statements required under
Section 7.01(a) and (b), which financial statements reflect a
Fixed Charge Coverage Ratio which is 2.10:1 or lower for the most
recently concluded fiscal quarter, .875%;
(E) on and after the fifteenth day following the Company's
failure to deliver to Banks and Agent the financial statements
required under Section 7.01(a) and (b) within the time periods
set forth therein, and until the fifteenth day following receipt
by Bank and Agent of such financial statements (at which time
subpart (A) (B), (C) or (D) above shall become applicable),
.875%.
"Subsidiary" of a Person means any corporation, association,
----------
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests or
other equity interests (in the case of Persons other than corporations), is
owned or controlled directly or indirectly by the Person, or one or more of
the Subsidiaries of the Person, or a combination thereof. Unless the
context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Parent (including the Company).
"Surety Instruments" means all letters of credit (including standby
------------------
and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or
any combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
----------------------
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or
after the date such Swap Contracts have been closed out and termination
value(s) determined in accordance therewith, such termination value(s), and
(b) for any date prior to the date referenced in clause (a) the amount(s)
determined as the mark-to-market value(s) for such Swap Contracts, as
determined based upon one or more mid-market
-18-
or other readily available quotations provided by any recognized dealer in
such Swap Contracts (which may include any Bank).
"Tangible Net Worth" has the meaning specified in Section 7.13(d).
------------------
"Taxes" means any and all present or future taxes, levies,
-----
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Agent, respectively, taxes imposed on or measured by
its net income by the jurisdiction (or any political subdivision thereof)
under the laws of which such Bank or the Agent, as the case may be, is
organized or maintains a lending office.
"Type" has the meaning specified in the definition of "Revolving
----
Loan."
"Unfunded Pension Liability" means the excess of a Plan's benefit
--------------------------
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
"United States" and "U.S." each means the United States of America.
------------- ----
"Wholly-Owned Subsidiary" means any corporation in which (other than
-----------------------
directors' qualifying shares required by law) 100% of the capital stock of
each class having ordinary voting power, and 100% of the capital stock of
every other class, in each case, at the time as of which any determination
is being made, is owned, beneficially and of record, by the Parent, or by
one or more of the other Wholly-Owned Subsidiaries of the Parent, or both.
"Year 2000 Problem" has the meaning specified in Section 6.19.
-----------------
1.02 Other Interpretive Provisions.
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Section, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means
-19-
"from and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided,
any reference to any action of the Agent or the Banks by way of consent,
approval or waiver shall be deemed modified by the phrase "in its/their sole
discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles.
---------------------
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company or the Parent, as applicable.
1.04 Currency Equivalents Generally. For all purposes of this Agreement
------------------------------
(but not for purposes of the preparation of any financial statements delivered
pursuant hereto), the equivalent in any Offshore Currency or other currency of
an amount in Dollars, and the equivalent in Dollars of an amount in any Offshore
Currency or other currency, shall be determined at the Spot Rate.
ARTICLE II
THE CREDITS
-----------
2.01 Amounts and Terms of Commitments. Each Bank severally agrees, on the
--------------------------------
terms and conditions set forth herein, to make loans
-20-
to the Company (each such loan, a "Revolving Loan") from time to time on any
--------------
Business Day during the period from the Closing Date to the Revolving
Termination Date, in an aggregate amount not to exceed at any time outstanding
the amount set forth on Schedule 2.01 (such amount as the same may be reduced
-------------
under Section 2.05 or as a result of one or more assignments under Section
11.08, the Bank's "Commitment"); provided, however, that, after giving effect to
---------- -------- -------
any Borrowing of Revolving Loans, the Effective Amount of all outstanding
Revolving Loans and the Effective Amount of all L/C Obligations, shall not at
any time exceed the combined Commitments; and provided further, that the
--- -------- -------
Effective Amount of the Revolving Loans of any Bank plus the participation of
such Bank in the Effective Amount of all L/C Obligations shall not at any time
exceed such Bank's Commitment. Within the limits of each Bank's Commitment, and
subject to the other terms and conditions hereof, the Company may borrow under
this section 2.01, prepay under Section 2.06 and reborrow under this section
2.01.
2.02 Loan Accounts. The Loans made by each Bank and the Letters of Credit
-------------
Issued by the Issuing Bank shall be evidenced by one or more accounts or records
maintained by such Bank or Issuing Bank, as the case may be, in the ordinary
course of business. The accounts or records maintained by the Agent, the
Issuing Bank and each Bank shall be rebuttably presumptive evidence of the
amount of the Loans made by the Banks to the Company and the Letters of Credit
Issued for the account of the Company, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount owing
with respect to the Loans or any Letter of Credit.
2.03 Procedure for Borrowing.
-----------------------
(a) Each Borrowing of Revolving Loans shall be made upon the Company's
irrevocable written notice delivered to the Agent in the manner provided in
Section 11.02 and in the form of a Notice of Borrowing (which notice must be
received by the Agent prior to 10:00 a.m. (San Francisco time) (i) at least
three Business Days prior to the requested Borrowing Date, in the case of
Offshore Rate Loans; and (ii) on or before the requested Borrowing Date, in the
case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in an
aggregate minimum amount of (1) $1,000,000, in the case of Base Rate
Loans, or (2) $1,000,000 or any multiple of $100,000 in excess
thereof, in the case of Offshore Rate Loans;
(B) the requested Borrowing Date, which shall
be a Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to such
Loans included in such notice. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing
comprised of Offshore
-21-
Rate Loans, such Interest Period shall be one month.
(b) The Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office by 12:00 noon (San Francisco time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting the account of the Company on the books of
BofA with the aggregate of the amounts made available to the Agent by the Banks
and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, unless the Agent shall
otherwise consent, there may not be more than twelve different Interest Periods
in effect.
2.04 Conversion and Continuation Elections.
-------------------------------------
(a) The Company may, upon irrevocable written notice to the Agent in
accordance with Section 2.04(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the case
of any other Type of Revolving Loans, to convert any such Loans (or any
part thereof in an amount not less than (1) $1,000,000, in the case of Base
Rate Loans, or (2) $1,000,000 or any multiple of $100,000 in excess
thereof, in the case of Offshore Rate Loans into Loans of any other Type;
or
(ii) elect as of the last day of the applicable Interest Period,
to continue any Revolving Loans having Interest Periods expiring on such
day (or any part thereof in an amount not less than $1,000,000, or that is
in an integral multiple of $100,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
- --------
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Company to continue such Loans as, and convert such Loans into, Offshore
Rate Loans shall terminate. The Company may aggregate Base Rate Loans to be
converted into Offshore Rate Loans.
(b) The Company shall deliver a Notice of Conversion/ Continuation to
be received by the Agent not later than 10:00 a.m. (San Francisco time) (i) at
least three Business Days in advance of the Conversion/Continuation Date, if the
Loans are to be converted into or continued as Offshore Rate Loans; and (ii) on
or before the Conversion/ Continuation Date, if the Loans are to be converted
into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
-22-
(B) the aggregate amount of Loans to be converted or
continued;
(C) the Type of Loans resulting from the proposed conversion
or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans, or if any Default or Event
of Default then exists, the Company shall be deemed to have elected to convert
such Offshore Rate Loans into Base Rate Loans effective as of the expiration
date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the existence
of a Default or Event of Default, the Company may not elect to have a Loan
converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
unless the Agent shall otherwise consent, there may not be more than twelve
different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitments. The Company may,
-------------------------------------------------
upon not less than five Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
amount of $1,000,000 or any multiple of $1,000,000 in excess thereof; unless,
------
after giving effect thereto and to any prepayments of Loans made on the
effective date thereof, (a) the Effective Amount of all Revolving Loans, and L/C
Obligations together would exceed the amount of the combined Commitments then in
effect, or (b) the Effective Amount of all L/C Obligations then outstanding
would exceed the L/C Commitment. A voluntary reduction in the Commitments shall
not reduce the L/C Commitment to the extent the remaining Commitments, as so
reduced, equal or exceed the L/C Commitment. Once reduced in accordance with
this Section, the Commitments may not be increased. Any reduction of the
Commitments shall be applied to each Bank according to its Pro Rata Share. If
and to the extent specified by the Company in the notice to the Agent, some or
all of the reduction in the combined Commitments shall be applied to reduce the
L/C Commitment. All accrued commitment and letter of credit fees to, but not
including, the effective date of any reduction or termination of Commitments,
shall be paid on the effective date of such reduction or termination.
-23-
2.06 Optional Prepayments. Subject to Section 4.04, the Company may, at
--------------------
any time or from time to time, upon not less than 4 Business Days' irrevocable
notice to the Agent, ratably prepay Loans in minimum amounts of $100,000 or
multiples thereof. Such notice of prepayment shall specify the date and amount
of such prepayment and the Type(s) of Loans to be prepaid. The Agent will
promptly notify each Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to each such date on the amount of each Offshore Rate Loan
prepaid and any amounts required pursuant to Section 4.04.
2.07 Cash Collateralization of L/Cs; Mandatory Prepayments of Loans. If on
--------------------------------------------------------------
any date (including any Computation Date) the Effective Amount of L/C
Obligations exceeds the L/C Commitment, upon notice from the Agent the Company
shall Cash Collateralize on such date the outstanding Letters of Credit
denominated in Dollars in an amount equal to the excess of the maximum amount
then available to be drawn under the Letters of Credit over the L/C Commitment.
Subject to Section 4.04, if on any date after giving effect to any Cash
Collateralization made on such date pursuant to the preceding sentence, the
Effective Amount of all Revolving Loans then outstanding plus the Effective
Amount of all L/C Obligations exceeds the combined Commitments, the Company
shall immediately, and without notice or demand, prepay the outstanding
principal amount of the Revolving Loans and L/C Advances by an amount equal to
the applicable excess. At such time as the L/C Obligations no longer exceeds
the L/C Commitment, any excess Cash Collateral required to be provided under
this Section 2.07 shall be released to the Company.
2.08 Repayment. The Company shall repay to the Banks on the Revolving
---------
Termination Date the aggregate principal amount of Loans outstanding on such
date.
2.09 Interest.
--------
(a) Each Revolving Loan shall bear interest on the outstanding
principal amount thereof from the Borrowing Date or Conversion/Continuation
Date, as applicable, at a rate per annum equal to the Offshore Rate or the Base
Rate, as the case may be (and subject to the Company's right to convert to other
Types of Loans under Section 2.04), plus the Applicable Margin in effect from
----
time to time.
(b) Interest on each Revolving Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any
prepayment of Loans under Section 2.06 or 2.07 for the portion of the Loans so
prepaid and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the Agent
at the request or with the consent of the Majority Banks.
(c) Notwithstanding Section (a) of this Section, while any Event of
Default exists or after acceleration, the Company shall pay interest (after as
well as before entry of judgment thereon to the extent permitted by law) on the
principal amount of all
-24-
outstanding Loans, at a rate per annum which is determined by adding 2% per
annum to the Applicable Margin then in effect for such Loans; provided, however,
-------- -------
that, on and after the expiration of any Interest Period applicable to any
Offshore Rate Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall, during the
continuation of such Event of Default or after acceleration, bear interest at a
rate per annum equal to the Base Rate plus 2%.
(d) Notwithstanding Section (a) of this Section, if any amount of
principal of or interest on any Loan, or any other amount payable hereunder or
under any other Loan Document is not paid in full when due (whether at stated
maturity, by acceleration, demand or otherwise), and after giving effect to any
grace period applicable thereto, the Company agrees to pay interest on such
unpaid principal or other amount, from the date such amount becomes due or the
expiration of any grace period applicable thereto, whichever is later, until the
date such amount is paid in full, and after as well as before any entry of
judgment thereon to the extent permitted by law, payable on demand, at a
fluctuating rate per annum equal to the Base Rate plus 2%.
(e) Anything herein to the contrary notwithstanding, the obligations
of the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Company shall pay such Bank interest at the highest rate permitted by
applicable law.
2.10 Fees. In addition to certain fees described in Section 3.08:
----
(a) Agency Fees. The Company shall pay an agency fee to the Agent for
-----------
the Agent's own account, as required by the letter agreement ("Fee Letter")
----------
between the Company and the Agent dated November 20, 1997.
(b) Commitment Fees. The Company shall pay to the Agent for the
---------------
ratable account of each Bank a commitment fee on the average daily unused
portion of such Bank's Commitment, computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon the daily utilization
for that quarter as calculated by the Agent. The commitment fee shall be
calculated at the rate of .25% unless, as of the last Business Day of each
calendar quarter for which the commitment fee is calculated:
(i) the Parent has received a rating on the Parent or on the
Parent's senior long term unsecured debt of "BBB-" or better from S&P or
"Baa3" or better from Moody's, in which case the commitment fee shall be
calculated at the rate of .125% per annum; and
(ii) at all times that clause (i) is not applicable, the
Company's Fixed Charge Coverage Ratio as of the most recent
-25-
fiscal quarter for which the financial statements required under Section
7.01(a) and (b) have been delivered to Agent and Banks (and provided such
financial statements have been delivered to Agent and Banks within the time
periods set forth in Section 7.01(a) and (b)) is:
(A) greater than 2.70:1, in which case the commitment fee
shall be calculated at the rate of .15% per annum;
(B) greater than 2.35:1, but not exceeding than 2.70:1, in
which case the commitment fee shall be calculated at the rate of .1875
% per annum; or
(C) greater than 2.10:1, but not exceeding 2.35:1, in which
case the commitment fee shall be calculated at the rate of .20% per
annum;
For purposes of calculating utilization under this Section, the Commitments
shall be deemed used to the extent of the Effective Amount of Revolving Loans
then outstanding, plus the Effective Amount of L/C Obligations then outstanding.
Such commitment fee shall accrue from the Closing Date to the Revolving
Termination Date and shall be due and payable quarterly in arrears on the last
Business Day of each fiscal quarter commencing on December 31, 1997, through the
Revolving Termination Date, with the final payment to be made on the Revolving
Termination Date; provided that, in connection with any reduction or termination
--------
of Commitments under Section 2.05, the accrued commitment fee calculated for the
period ending on such date shall also be paid on the date of such reduction or
termination, with the following quarterly payment being calculated on the basis
of the period from such reduction or termination date to such quarterly payment
date. The commitment fees provided in this Section shall accrue at all times
after the above-mentioned commencement date, including at any time during which
one or more conditions in Article V are not met.
2.11 Computation of Fees and Interest.
--------------------------------
(a) All computations of interest for Offshore Rate Loans shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). All other
computations of interest and fees shall be made on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed. Interest and fees shall
accrue during each period during which interest or such fees are computed from
the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
rebuttably presumptive evidence of such interest rate.
2.12 Payments by the Company.
-----------------------
(a) All payments to be made by the Company shall be made without set-
off, recoupment or counterclaim. Except as otherwise expressly provided herein,
all payments by the Company shall be made to the Agent for the account of the
Banks at the Agent's Payment Office, and shall be made in dollars and in
immediately available
-26-
funds, no later than 11:00 a.m. (San Francisco time) on the date specified
herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Any payment received by the Agent later than 11:00 a.m. (San
Francisco time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such Bank
until the date repaid.
2.13 Payments by the Banks to the Agent.
----------------------------------
(a) Unless the Agent receives notice from a Bank on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date, at least
one Business Day prior to the date of such Borrowing, that such Bank will not
make available as and when required hereunder to the Agent for the account of
the Company the amount of that Bank's Pro Rata Share of the Borrowing, the Agent
may assume that each Bank has made such amount available to the Agent in
immediately available funds on the Borrowing Date and the Agent may (but shall
not be so required), in reliance upon such assumption, make available to the
Company on such date a corresponding amount. If and to the extent any Bank
shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
Company such amount, that Bank shall on the Business Day following such
Borrowing Date make such amount available to the Agent, together with interest
at the Federal Funds Rate for each day during such period. A notice of the
Agent submitted to any Bank with respect to amounts owing under this Section (a)
shall be conclusive, absent manifest error. If such amount is so made
available, such payment to the Agent shall constitute such Bank's Loan on the
date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the Borrowing Date,
the Agent will notify the Company of such failure to fund and, upon demand by
the Agent, the Company shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loans comprising such Borrowing.
-27-
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.14 Sharing of Payments, Etc. If, other than as expressly provided
-------------------------
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all or
-------- -------
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.11) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
2.15 Existing Offshore Rate Loans; Risk Participations.
-------------------------------------------------
(a) On and after the Closing Date, the Existing Offshore Rate Loans
shall be deemed Offshore Rate Loans outstanding under this Agreement with the
same Offshore Rates and Interest Periods applicable under the Existing Credit
Agreement, but with the Applicable Offshore Rate Margin determined pursuant to
this Agreement, and all interest, fees, expenses and other amounts owing under
the Existing Agreement with respect to such Existing Offshore Rate Loans shall
be deemed continued as owing hereunder. On the Closing Date, Fleet shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
BofA and NationsBank, as lending banks under the Existing Credit Agreement
("Existing Lenders"), for Fleet's own account and risk an undivided interest
- ------------------
equal to Fleet's Pro Rata Share in such Existing Offshore Rate Loans. Fleet
unconditionally and irrevocably agrees with each Existing Lender that, if any
amount in respect of the principal, interest or fees owing to such Existing
Lender is not paid on its due date, Fleet shall promptly pay to the Agent for
the account of each Existing Lender an amount equal to Fleet's Pro Rata Share of
such unpaid amount. Fleet's obligation to make the payment referred to in the
immediately preceding sentence shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or
-28-
other right which Fleet or the Company or the Parent may have against any
Existing Lender or any other Person for any reason whatsoever, (ii) the
occurrence or continuance of a Default or an Event of Default, (iii) the
occurrence of any Material Adverse Effect, or (iv) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
For purposes of Section 2.01 and Section 2.10(b), the Existing Offshore Rate
Loans shall be deemed to utilize pro rata the Commitment of each Bank.
(b) If any amount required to be paid to the Existing Lenders by Fleet
pursuant to Section 2.15(a) is not paid by 12:00 noon (San Francisco time) on
the date such payment is due, then interest shall accrue on Fleet's obligation
to make such payment, from the date due until Fleet makes such payment, at a
rate per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Agent shall promptly give notice of the Company's
failure to pay principal or interest of an Existing Offshore Rate Loan on its
due date, but failure of the Agent to give any such notice on the due date or in
sufficient time to enable Fleet to effect such payment on such due date shall
not relieve Fleet from its obligations under this Section 2.15(b).
(c) Each Existing Lender shall pay to Fleet a risk participation fee
with respect to Fleet's Pro Rata Share of the Existing Offshore Rate Loans for
the period from the Closing Date until the date of repayment of each such
Existing Offshore Rate Loan. The risk participation fee shall be equal to 80%
of the Applicable Offshore Rate Margin applicable to Fleet's Pro Rata Share of
each such Existing Offshore Rate Loan. Such risk participation fee shall be
paid to Fleet in arrears on the date the Agent receives payment of interest from
the Company on the Existing Offshore Rate Loans. The Existing Lenders hereby
authorize the Agent to deduct from each interest payment made by the Company to
the Agent with respect to the Existing Offshore Rate Loans an amount equal to
the risk participation fee payable to Fleet pursuant to this Section 2.15(b) and
to remit said fee to Fleet promptly following the Agent's receipt thereof.
(d) Whenever, at any time after any Existing Lender has received from
Fleet the full amount owing by Fleet pursuant to and in accordance with Section
2.15(a) in respect of any Existing Offshore Rate Loan, such Existing Lender
receives any payment related to such Existing Offshore Rate Loan (whether
directly from the Company or otherwise), or any payment of interest on account
thereof, such Existing Lender will distribute to Fleet its Pro Rata Share
thereof.
(e) If any payment received by any Existing Lender pursuant to Section
2.15(d) with respect to any Existing Offshore Rate Loan made by it shall be
required to be returned by such Existing Lender, Fleet shall pay to such
Existing Lender its Pro Rata Share thereof.
ARTICLE III
THE LETTERS OF CREDIT
---------------------
3.01 The Letter of Credit Subfacility.
--------------------------------
-29-
(a) On the terms and conditions set forth herein (i) each Issuing Bank
agrees, (A) from time to time on any Business Day during the period from the
Closing Date to the Revolving Termination Date to issue Letters of Credit for
the account of the Company, the Parent, or any Subsidiary (provided such
Subsidiary is also a Guarantor), and to amend or renew Letters of Credit
previously issued by it, in accordance with Sections 3.02(c) and 3.02(d), and
(B) to honor drafts under the Letters of Credit previously issued by it; and
(ii) the Banks severally agree to participate in Letters of Credit Issued for
the account of the Company, the Parent, and its Subsidiaries; provided, that no
--------
Issuing Bank shall be obligated to Issue, and no Bank shall be obligated to
participate in, any Letter of Credit if as of the date of Issuance of such
Letter of Credit (the "Issuance Date") (1) the Effective Amount of all L/C
-------------
Obligations plus the Effective Amount of all Revolving Loans exceeds the
combined Commitments, (2) the participation of any Bank in the Effective Amount
of all L/C Obligations plus the Effective Amount of the Revolving Loans of such
Bank exceeds such Bank's Commitment, or (3) the Effective Amount of L/C
Obligations exceeds the L/C Commitment. Within the foregoing limits, and
subject to the other terms and conditions hereof, the Company's ability to
obtain Letters of Credit shall be fully revolving, and, accordingly, the Company
may, during the foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and reimbursed.
(b) No Issuing Bank is under any obligation to Issue, and no Bank
shall be obligated to participate in, any Letter of Credit if:
(i) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing
Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction
over the Issuing Bank shall prohibit, or request that the Issuing Bank
refrain from, the Issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the Issuing Bank with respect to
such Letter of Credit any restriction, reserve or capital requirement (for
which the Issuing Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which the Issuing Bank in good faith deems material to it;
(ii) the Issuing Bank has received written notice from any Bank,
the Agent or the Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested commercial documentary
Letter of Credit is (A) more than 364 days after the date of Issuance,
unless the Majority Banks have approved such expiry date in writing, or (B)
more than 90 days after the
-30-
Revolving Termination Date, unless all of the Banks have approved such
expiry date in writing;
(iv) the expiry date of any requested standby Letter of Credit
is (A) more than 364 days after the date of Issuance, unless the Majority
Banks have approved such expiry date in writing, or (B) more than 90 days
after the Revolving Termination Date, unless all of the Banks have approved
such expiry date in writing;
(v) any requested Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to the Issuing Bank,
or the Issuance of a Letter of Credit shall violate any applicable policies
of the Issuing Bank;
(vi) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person;
(vii) any such Letter of Credit (other than standby Letters of
Credit supporting the Company's, the Parent's, or any Subsidiary's
obligations under space leases) is in a face amount less than the
Equivalent Amount of $10,000;
(viii) the Effective Amount of all commercial documentary
Letters of Credit exceeds $15,000,000 or the Effective Amount of all
standby Letters of Credit exceeds $5,000,000; or
(ix) in the case of Letters of Credit denominated in an Offshore
Currency, the Company has not effectively hedged its exposure thereunder by
means of a Swap Contract.
If Issuing Bank declines to issue a Letter of Credit for the reasons specified
in Section (i), (ii) or (v) above, Issuing Bank shall provide written notice to
Company.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
----------------------------------------------------
(a) Each Letter of Credit shall be issued upon the irrevocable written
request of the Company received by the Issuing Bank (with a copy sent by the
Issuing Bank to the Agent) at least three Business Days (or such shorter time as
the Issuing Bank may agree in a particular instance in its sole discretion)
prior to the proposed date of issuance. Each such request for issuance of a
Letter of Credit shall be by facsimile, confirmed immediately in an original
writing, in the form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the proposed date of issuance of the
Letter of Credit (which shall be a Business Day); (ii) the face amount and
currency (which shall be Dollars or an Agreed Alternative Currency) of the
Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name
and address of the beneficiary thereof; (v) the documents to be presented by the
beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the
full text of any certificate to be presented by the beneficiary in case of any
drawing thereunder; (vii) the Person for whose account the Letter of Credit is
to be Issued (which shall
-31-
be the Company, the Parent, or any of its Subsidiaries); and (viii) such other
matters as the Issuing Bank may require.
(b) At least two Business Days prior to the Issuance of any Letter of
Credit, the Issuing Bank will confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (A) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under Section 3.01(a) as a result of the limitations set forth in
clauses (1) through (3) thereof or Section 3.01(b)(ii); or (B) that one or more
conditions specified in Article V are not then satisfied; then, subject to the
terms and conditions hereof, the Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Company, the Parent, or a
Subsidiary, as applicable, in accordance with the Issuing Bank's usual and
customary business practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Issuing Bank will, upon the written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least five Business Days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of amendment, amend any Letter of Credit issued by it. Each
such request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall be under no obligation to amend any
Letter of Credit, and no Bank shall be obligated to participate in any Letter of
Credit in its amended form, if: (A) the Issuing Bank would have no obligation at
such time to issue such Letter of Credit in its amended form under the terms of
this Agreement; or (B) the beneficiary of any such letter of Credit does not
accept the proposed amendment to the Letter of Credit. The Agent will promptly
notify the Banks of the receipt by it of any L/C Application or L/C Amendment
Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the option
of the Company and upon the written request of the Company received by the
Issuing Bank (with a copy sent by the Company to the Agent) at least five
Business Days (or such shorter time as the Issuing Bank may agree in a
particular instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Bank shall be entitled to authorize the
automatic renewal of any Letter of Credit issued by it. Each such request for
renewal of a Letter of Credit shall be made by facsimile, confirmed immediately
in an original writing, in the form of an L/C Amendment Application, and shall
specify in form and detail satisfactory to the Issuing Bank: (i) the Letter of
Credit to be
-32-
renewed; (ii) the proposed date of notification of renewal of the Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as the Issuing Bank may require.
The Issuing Bank shall be under no obligation to so renew any Letter of Credit,
and no Bank shall be obligated to participate in any Letter of Credit in its
renewed form, if: (A) the Issuing Bank would have no obligation at such time to
issue or amend such Letter of Credit in its renewed form under the terms of this
Agreement; or (B) the beneficiary of any such Letter of Credit does not accept
the proposed renewal of the Letter of Credit. If any outstanding Letter of
Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Bank
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this Section 3.02(d) upon the request of the Company but the
Issuing Bank shall not have received any L/C Amendment Application from the
Company with respect to such renewal or other written direction by the Company
with respect thereto, the Issuing Bank shall nonetheless be permitted to allow
such Letter of Credit to renew, and the Company and the Banks hereby authorize
such renewal, and, accordingly, the Issuing Bank shall be deemed to have
received an L/C Amendment Application from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the Agent
at the direction of the Majority Banks), deliver any notices of termination or
other communications to any Letter of Credit beneficiary or transferee, and take
any other action as necessary or appropriate, at any time and from time to time,
in order to cause the expiry date of such Letter of Credit to be a date not
later than 90 days after the Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict with any
L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
3.03 Existing Letters of Credit; Risk Participations, Drawings and
----------------------------------------------- ------------
Reimbursements.
- --------------
(a) On and after the Closing Date, the Existing Letters of Credit
shall be deemed for all purposes, including for purposes of the fees to be
collected pursuant to Sections 3.08(a)(i) and 3.08(a)(ii) (without duplication),
and reimbursement of costs and expenses to the extent provided herein, Letters
of Credit outstanding under this Agreement and entitled to the benefits of this
Agreement and the other Loan Documents, and shall be governed by the
applications and agreements pertaining thereto and by this Agreement. Each Bank
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank on the Closing Date a participation in each such
Letter of Credit and each drawing thereunder in an amount equal to the product
of (i) such
-33-
Bank's Pro Rata Share times (ii) the maximum amount available to be drawn under
such Letter of Credit and the amount of such drawing, respectively. For purposes
of Section 2.01 and Section 2.10(b), the Existing Letters of Credit shall be
deemed to utilize pro rata the Commitment of each Bank.
(b) Immediately upon the Issuance of each Letter of Credit
in addition to those described in Section 3.03(a), each Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Bank a participation in such Letter of Credit and each drawing thereunder in an
amount equal to the product of (i) the Pro Rata Share of such Bank, times (ii)
the maximum amount available to be drawn under such Letter of Credit and the
amount of such drawing, respectively. For purposes of Section 2.01 and Section
2.10(b), each Issuance of a Letter of Credit shall be deemed to utilize the
Commitment of each Bank by an amount equal to the Equivalent Amount of such
participation.
(c) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Issuing Bank will promptly notify
the Company. The Company shall reimburse the Issuing Bank prior to 10:00 a.m.
(San Francisco time), on each date that any amount is paid by the Issuing Bank
under any Letter of Credit (each such date, an "Honor Date"), in the currency
----------
thereof and in an amount equal to the amount so paid by the Issuing Bank. In
the event the Company fails to reimburse the Issuing Bank for the full amount of
any drawing under any Letter of Credit by 10:00 a.m. (San Francisco time) on the
Honor Date, the Issuing Bank will promptly notify the Agent and the Agent will
promptly notify each Bank thereof, and the Company shall be deemed to have
requested that Base Rate Loans in Dollars be made by the Banks to be disbursed
on the Honor Date under such Letter of Credit in an amount equal to the
Equivalent Amount of such drawing, subject to the amount of the unutilized
portion of the Revolving Commitment and subject to the conditions set forth in
Section 5.02. Any notice given by the Issuing Bank or the Agent pursuant to
this Section 3.03(c) may be oral if immediately confirmed in writing (including
by facsimile); provided that the lack of such an immediate confirmation shall
not affect the conclusiveness or binding effect of such notice. If the Banks
have made Base Rate Loans pursuant to this subsection, any subsequent
reimbursement by the Company for such unreimbursed drawing in respect of which
such Base Rate Loans were made shall be deemed a payment on such Base Rate Loans
and shall be made in Dollars only in an amount equal to such Base Rate Loans.
(d) Each Bank shall upon any notice pursuant to Section 3.03(c) make
available to the Agent for the account of the relevant Issuing Bank an amount in
Dollars and in immediately available funds equal to its Pro Rata Share of the
Equivalent Amount of the drawing, whereupon the participating Banks shall
(subject to Section 3.03(e)) each be deemed to have made a Revolving Loan
consisting of a Base Rate Loan in Dollars to the Company in that amount. If any
Bank so notified fails to make available to the Agent for the account of the
Issuing Bank the amount of such Bank's Pro Rata Share of the Equivalent Amount
of the drawing by no later than 12:00 noon (San Francisco time) on the Honor
Date, then interest shall accrue on such Bank's obligation to make such payment,
from the Honor Date to the date such Bank makes such payment, at a rate per
annum equal to the
-34-
Federal Funds Rate in effect from time to time during such period. The Agent
will promptly give notice of the occurrence of the Honor Date, but failure of
the Agent to give any such notice on the Honor Date or in sufficient time to
enable any Bank to effect such payment on such date shall not relieve such Bank
from its obligations under this Section 3.03.
(e) With respect to any unreimbursed drawing that is not converted
into Revolving Loans consisting of Base Rate Loans to the Company in whole or in
part, because of the Company's failure to satisfy the conditions set forth in
Section 5.02 or for any other reason, the Company shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the Equivalent Amount of such
drawing, which L/C Borrowing shall be due and payable on demand (together with
interest) and shall bear interest at a rate per annum equal to the Base Rate
plus 2% per annum, and each Bank's payment to the Issuing Bank pursuant to
Section 3.03(d) shall be deemed payment in respect of its participation in such
L/C Borrowing and shall constitute an L/C Advance from such Bank in satisfaction
of its participation obligation under this Section 3.03. If the Company has
incurred an L/C Borrowing pursuant to this subsection, any subsequent
reimbursement by the Company for such unreimbursed drawing in respect of which
such L/C Borrowing was incurred shall be deemed a payment on such Base Rate
Loans and shall be made in Dollars only in an amount equal to such L/C
Borrowing.
(f) Each Bank's obligation in accordance with this Agreement to make
the Revolving Loans or L/C Advances, as contemplated by this Section 3.03, as a
result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be affected
by any circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Issuing Bank, the
Company or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, however, that each Bank's obligation
-------- -------
to make Revolving Loans under this Section 3.03 is subject to the conditions set
forth in Section 5.02.
3.04 Repayment of Participations.
---------------------------
(a) Upon (and only upon) receipt by the Agent for the account of the
Issuing Bank of immediately available funds from the Company (i) in
reimbursement of any payment made by the Issuing Bank under the Letter of Credit
with respect to which any Bank has paid the Agent for the account of the Issuing
Bank for such Bank's participation in the Letter of Credit pursuant to Section
3.03 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in
the same funds as those received by the Agent for the account of the Issuing
Bank, the amount of such Bank's Pro Rata Share of such funds, and the Issuing
Bank shall receive the amount of the Pro Rata Share of such funds of any Bank
that did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to return
to the Company, or to a trustee, receiver, liquidator,
-35-
custodian, or any official in any Insolvency Proceeding, any portion of the
payments made by the Company to the Agent for the account of the Issuing Bank
pursuant to Section 3.04(a) in reimbursement of a payment made under the Letter
of Credit or interest or fee thereon, each Bank shall, on demand of the Agent,
forthwith return to the Agent or the Issuing Bank the amount of its Pro Rata
Share of any amounts so returned by the Agent or the Issuing Bank plus interest
thereon from the date such demand is made to the date such amounts are returned
by such Bank to the Agent or the Issuing Bank, at a rate per annum equal to the
Federal Funds Rate in effect from time to time.
3.05 Role of the Issuing Bank.
------------------------
(a) Except as otherwise provided in this Agreement and in any Letter
of Credit, each Bank and the Company agree that, in paying any drawing under a
Letter of Credit, the Issuing Bank shall not have any responsibility to obtain
any document (other than any sight draft, certificates, and/or other documents
expressly required by the Letter of Credit) or to ascertain or inquire as to the
validity or accuracy of any such document or the authority of the Person
executing or delivering any such document.
(b) No Agent-Related Person nor the Issuing Bank or any of the
respective correspondents, participants or assignees of the Issuing Bank shall
be liable to any Bank for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Banks (including the
Majority Banks, as applicable); (ii) any action taken or omitted in the absence
of gross negligence or willful misconduct; or (iii) the due execution,
effectiveness, validity or enforceability of any L/C-Related Document.
(c) Except as otherwise provided in this Agreement and in any Letter
of Credit, the Company hereby assumes all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
- -------- -------
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No Agent-
Related Person, nor the Issuing Bank or any of the respective correspondents,
participants or assignees of the Issuing Bank, shall be liable or responsible
for any of the matters described in clauses (i) through (vii) of Section 3.06;
provided, however, anything in such clauses to the contrary notwithstanding,
- -------- -------
that the Company may have a claim against the Issuing Bank, and the Issuing Bank
may be liable to the Company, to the extent, but only to the extent, of any
direct, as opposed to consequential or exemplary, damages suffered by the
Company which the Company proves were caused by the Issuing Bank's willful
misconduct or gross negligence or the Issuing Bank's willful failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of a
sight draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit. In furtherance and not in limitation of the foregoing:
(i) the Issuing Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) the Issuing Bank shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning
-36-
or purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
3.06 Obligations Absolute. The obligations of the Company under this
--------------------
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(i) any lack of validity or enforceability of this Agreement or
any L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Company in
respect of any Letter of Credit or any other amendment or waiver of or any
consent to departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Company may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the L/C-Related Documents or any unrelated
transaction;
(iv) subject to the provisions of this Agreement, any draft,
demand, certificate or 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; or any
loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any Letter of Credit;
(v) subject to the provisions of this Agreement, any payment by
the Issuing Bank under any Letter of Credit against presentation of a draft
or certificate that does not strictly or substantially comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank
under any Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from any
other guarantee, for all or any of the obligations of the Company in
respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
-37-
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Company or a guarantor.
3.07 Cash Collateral Pledge. Upon the request of the Agent, if, as of the
----------------------
Revolving Termination Date, any Letters of Credit for any reason remain
outstanding and partially or wholly undrawn, then the Company shall immediately
Cash Collateralize the L/C Obligations in an amount and in the currency equal to
such L/C Obligations in the currency of the Letter of Credit and the Company
hereby grants to the Agent for the ratable benefit of the Banks and the Issuing
Banks a security interest in such cash collateral for the purpose of securing
the Company's obligations under this Agreement.
3.08 Letter of Credit Fees.
---------------------
(a) The Company shall pay to the Agent for the ratable account of each
of the Banks the following fees for Letters of Credit issued by each Issuing
Bank:
(i) For each standby Letter of Credit issued by an Issuing Bank,
the Company shall pay a fee at a rate per annum equal to the Standby Letter
of Credit Fee in effect on the date of Issuance of the standby Letter of
Credit. Such Standby Letter of Credit Fee shall be computed on a quarterly
basis in arrears on the last Business Day of each calendar quarter based
upon the average daily maximum Equivalent Amount available to be drawn
under the standby Letter of Credit during that quarter as calculated by the
Agent. The Standby Letter of Credit Fee shall be due and payable quarterly
in arrears on the last Business Day of each calendar quarter during which
standby Letters of Credit are outstanding, commencing on the first such
quarterly date to occur after the Closing Date, through the Revolving
Termination Date (or such later date upon which the outstanding Letters of
Credit shall expire), with the final payment to be made on the Revolving
Termination Date (or such later expiration date). Notwithstanding the
foregoing, while any Event of Default exists, the Company shall pay a
Standby Letter of Credit Fee at a rate per annum which is determined by
adding 2% per annum to the applicable Standby Letter of Credit Fee then in
effect for each such standby Letter of Credit.
(ii) For each commercial documentary Letter of Credit issued by
an Issuing Bank, the Company shall pay an issuance fee at a rate per annum
equal to the Commercial documentary Letter of Credit Fee in effect on the
date of Issuance of the commercial documentary Letter of Credit. Such
Commercial Letter of Credit Fee shall be computed on the maximum Equivalent
Amount available to be drawn under the commercial documentary Letter of
Credit. Such issuance fee shall be due and payable on each date of Issuance
of a commercial documentary Letter of Credit, or, in the case of an
additional issuance fee payable as a result of an amendment to increase the
amount or extend the maturity of a commercial documentary Letter of Credit,
on the date of such amendment. The Company shall not be entitled to any
refund of the issuance fee if the amount of a commercial documentary Letter
of Credit is reduced by amendment, or the commercial documentary Letter of
Credit is cancelled. Notwithstanding the
-38-
foregoing, while any Event of Default exists, the Company shall pay an
issuance fee for each commercial documentary Letter of Credit issued by an
Issuing Bank after the occurrence of such Event of Default, or amended by
the Issuing Bank after the occurrence of such Event of Default to increase
the amount or extend the maturity date of such commercial documentary
Letter of Credit, at a rate per annum which is determined by adding 1/2%
per annum to the applicable Commercial Letter of Credit Fee in effect on
the date of such Issuance or amendment.
(b) The Company shall pay to the Agent for the account of each Issuing
Bank a Letter of Credit fronting fee for each standby Letter of Credit Issued by
the Issuing Bank equal to .125% (or such lesser amount as may be agreed upon
between the Company and such Issuing Bank at the time any standby Letter of
Credit is Issued by such Issuing Bank) of the face amount (or increased face
amount, as the case may be) of such standby Letter of Credit. Such Letter of
Credit fronting fee shall be due and payable on each date of Issuance of a
standby Letter of Credit and shall be calculated on the Equivalent Amount of the
face amount of such Letter of Credit.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to letters of
credit as from time to time in effect.
3.09 Uniform Customs and Practice. The Uniform Customs and Practice for
----------------------------
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
3.10 Reports to Agent. Each Issuing Bank shall deliver to Agent, no later
----------------
than 10 days after the end of each calendar month, a summary of all outstanding
Letters of Credit issued by the Issuing Bank. Said summary shall include the
date of issuance, the expiry date and the amount (in the applicable currency and
the Equivalent Amount thereof) available to be drawn under each Letter of
Credit. Upon receipt of said summary by Agent from the Issuing Banks, Agent
shall provide a copy to the Company.
3.11 Issuance of Letters of Credit in Offshore Currencies.
----------------------------------------------------
(a) The Company shall be entitled to request that Letters of Credit
hereunder be Issued in any other lawful currency (other than Dollars) that in
the opinion of the Majority Banks is at such time freely traded in the offshore
interbank foreign exchange markets and is freely transferable and freely
convertible into Dollars (an "Agreed Alternative Currency"). The Company
---------------------------
shall deliver to the Issuing Bank and the Agent a written request for
designation of an Agreed Alternate Currency to be received by the Agent not
later than 10:00 a.m. (San Francisco time) at least six Business Days in advance
of the date of any Letter of Credit proposed to be Issued in such Agreed
Alternate Currency. The Issuing Bank will promptly notify the Company and the
Agent of the acceptance or rejection of any such request. The Issuing Bank
shall be under no obligation to Issue any Letter of Credit denominated in an
Offshore Currency if the Issuing
-39-
Bank has determined in its sole discretion that it cannot, for whatever reason,
Issue such Letter of Credit in the requested Offshore Currency, in which event
the Issuing Bank will give notice to the Company no later than 9:00 a.m. (San
Francisco time) on the fourth Business Day prior to the requested date of such
Issuance that the Issuance in the requested Offshore Currency is not then
available. If the Issuing Bank shall have so notified the Company, the request
for such Letter of Credit shall be deemed withdrawn.
(b) The Agent will determine the Equivalent Amount with respect to any
(i) Letter of Credit denominated in an Offshore Currency as of the Issuance Date
and any date any drawing is made thereunder, (ii) drawing under any Letter of
Credit denominated in an Offshore Currency as of the date any Base Rate Loan or
L/C Borrowing is made to reimburse such drawing in accordance with Section
3.03(c) or (e), and (iii) outstanding L/C Obligations as of the last Offshore
Business Day of each month (each such date under clauses (i) through (iii) a
"Computation Date").
- -----------------
(c) The Company shall not be entitled to request that Revolving Loans
hereunder also be permitted to be made in any currency other than Dollars.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.01 Taxes.
-----
(a) Any and all payments by the Company to each Bank or the Agent
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for, any Taxes. In addition, the
Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section),
such Bank or the Agent, as the case may be, receives and retains an amount
equal to the sum it would have received and retained had no such deductions
or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Company shall also pay to each Bank or the Agent for the
account of such Bank, at the time interest is paid, Further Taxes in the
amount that the respective Bank specifies as necessary to preserve the
after-tax yield the Bank
-40-
would have received if such Taxes, Other Taxes or Further Taxes had not
been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank and
the Agent for the full amount of i) Taxes, ii) Other Taxes, and iii) Further
Taxes in the amount that the respective Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or
the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank or the
Agent pursuant to Section (b) or (c) of this Section, then such Bank shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Company which may thereafter accrue, if such change in the sole
judgment of such Bank is not otherwise disadvantageous to such Bank.
4.02 Illegality.
----------
(a) If any Bank determines that the introduction of any Requirement of
Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its applicable Lending Office to make Offshore Rate Loans, then,
on notice thereof by the Bank to the Company through the Agent, any obligation
of that Bank to make Offshore Rate Loans shall be suspended until the Bank
notifies the Agent and the Company that the circumstances giving rise to such
determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any Offshore
Rate Loan, the Company shall, upon its receipt of notice of such fact and demand
from such Bank (with a copy to the Agent), prepay in full such Offshore Rate
Loans of that Bank then outstanding, together with interest accrued thereon and
amounts required under Section 4.04, either on the last day of the Interest
Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan. If the Company is required to so prepay any
Offshore Rate Loan, then concurrently with such prepayment, the Company shall
borrow from the affected Bank, in the amount of such repayment, a Base Rate
Loan.
4.03 Increased Costs and Reduction of Return.
---------------------------------------
(a) If any Bank determines that, due to either (i) the
-41-
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the Offshore
Rate) in or in the interpretation of any law or regulation or (ii) the
compliance by that Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans or participating in Letters of
Credit, or, in the case of an Issuing Bank, any increase in the cost to the
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the Company shall be liable for, and shall from
time to time, upon demand (with a copy of such demand to be sent to the Agent),
pay to the Agent for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation controlling the Bank
and (taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations under this Agreement, then, upon
demand of such Bank to the Company through the Agent, the Company shall pay to
the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.
4.04 Funding Losses. The Company shall reimburse each Bank and hold each
--------------
Bank harmless from any loss or expense which the Bank may sustain or incur as a
result of:
(a) the failure of the Company to make on a timely basis any payment
of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.06;
(d) the prepayment or other payment of an Offshore Rate Loan on a day
that is not the last day of the relevant Interest Period (including mandatory
prepayments required pursuant to Section 2.07 and payments after acceleration
thereof); or
(e) the automatic conversion under Section 2.04 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
-42-
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained, but excluding any
consequential or exemplary damages. For purposes of calculating amounts payable
by the Company to the Banks under this Section and under Section 4.03(a), each
Offshore Rate Loan made by a Bank (and each related reserve, special deposit or
similar requirement) shall be conclusively deemed to have been funded at the
LIBOR used in determining the Offshore Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
4.05 Inability to Determine Rates. If any Bank determines that for any
----------------------------
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or that the Offshore Rate applicable pursuant to Section 2.09(a) for any
requested Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to such Bank of funding such Loan, the
Agent will promptly so notify the Company and each Bank. Thereafter, the
obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall
be suspended until the Agent revokes such notice in writing. Upon receipt of
such notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of Offshore Rate Loans.
4.06 Certificates of Banks. Any Bank claiming reimbursement or
---------------------
compensation under this Article IV shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the calculation of
the amount payable to the Bank hereunder and such certificate shall be
conclusive and binding on the Company in the absence of manifest error.
4.07 Substitution of Banks. If any Bank makes a claim for compensation
---------------------
under Section 4.02 or 4.03 (an "Affected Bank"), the Company may: (a) request
one more of the other Banks to acquire and assume all or part of such Affected
Bank's Loans and Commitments, or (b) designate a new Bank acceptable to the
Agent and the other Banks (except the Affected Bank) to acquire and assume all
or part of such Affected Bank's Loans and Commitments.
4.08 Survival. The agreements and obligations of the Company in this
--------
Article IV shall survive the payment of all other Obligations.
-43-
ARTICLE V
CONDITIONS PRECEDENT
--------------------
5.01 Conditions of Initial Credit Extensions. The obligation of each Bank
---------------------------------------
to make its initial Credit Extension hereunder is subject to the condition that
the Agent shall have received on or before the date of the initial Credit
Extension all of the following, in form and substance satisfactory to the Agent
and each Bank, and in sufficient copies for each Bank:
(a) Credit Agreement. This Agreement executed by each party thereto;
----------------
(b) Resolutions; Incumbency.
-----------------------
(i) Copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the Company;
and
(ii) A certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers of the
Company authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the following
-------------------------------------
documents:
(i) the articles or certificate of incorporation and
the bylaws of the Company and the Guarantors as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of the Company and
each Guarantor, as applicable, as of the Closing Date; and
(ii) a good standing and tax good standing certificate for the
Company and the Guarantors from the Secretary of State (or similar,
applicable Governmental Authority) of its state of incorporation; provided,
--------
however, that such certificates as they relate to Guarantors incorporated
-------
in Delaware, New Jersey, Maryland and Massachusetts may be delivered within
45 days of the Closing Date (and the failure to deliver such certificates
by such time shall constitute an immediate Event of Default hereunder).
(d) Guaranty. The Guaranty executed by the Guarantors, together with
--------
a copy of the resolution of the board of directors of the Guarantors authorizing
the Guaranty, certified as of the Closing Date by the Secretary or an Assistant
Secretary of the Guarantors and a certificate of the Secretary or Assistant
Secretary of the Guarantors certifying the names and true signatures of the
officers of the Guarantors authorized to execute the Guaranty;
(e) Legal Opinion. One or more opinions of counsel to the Company and
-------------
the Guarantors and addressed to the Agent and the Banks, substantially in the
form of Exhibit D; provided, however, that such opinions as they relate to
--------- -------- -------
Guarantors incorporated in
-44-
Delaware, New Jersey, Maryland and Massachusetts may be delivered within 45 days
of the Closing Date (and the failure to deliver such opinions by such time shall
constitute an immediate Event of Default hereunder).
(f) Payment of Fees. Evidence of payment by the Company of all
---------------
accrued and unpaid fees, costs and expenses to the extent then due and payable
to Agent or any Bank, as the case may be, on the Closing Date, together with
Attorney Costs of BofA to the extent invoiced prior to or on the Closing Date,
plus such additional amounts of Attorney Costs as shall constitute BofA's
reasonable estimate of Attorney Costs incurred or to be incurred by it through
the closing proceedings (provided that such estimate shall not thereafter
preclude final settling of accounts between the Company and BofA); including any
such costs, fees and expenses arising under or referenced in Sections 2.10 and
11.04;
(g) Payment of Existing Indebtedness. Payment by the Parent of (i)
--------------------------------
all Indebtedness owing under the Existing Credit Agreement on the Closing Date,
other than the Existing Offshore Rate Loans and the Existing Letters of Credit,
and (ii) all Indebtedness owing to BofA on the Closing Date under a promissory
note dated November 7, 1997, in the original principal amount of $5,000,000.
(h) Officer's Certificate. A certificate signed by a Responsible
---------------------
Officer of the Company, dated as of the Closing Date, certifying that:
(i) the representations and warranties contained in Article VI
are true and correct on and as of the Closing Date; and
(ii) no Default or Event of Default exists or would result from
the execution and delivery of this Agreement;
(i) Compliance Certificate. A Compliance Certificate signed by a
----------------------
Responsible Officer of the Company and the Parent dated as of the Closing Date
and based on the Parent's financial statements dated as of September 27, 1997,
for the purpose of determining pricing hereunder; and
(j) Other Documents. Such other approvals, opinions, documents or
---------------
materials as the Agent or any Bank may request.
5.02 Conditions to All Credit Extensions. The obligation of each Bank to
-----------------------------------
make any Revolving Loan to be made by it (including its initial Revolving Loan)
or to continue or convert any Revolving Loan under Section 2.04, the obligation
of the Issuing Bank to Issue any Letter of Credit (including the initial Letter
of Credit), and the obligation of any Bank to participate in any Letter of
Credit is subject to the satisfaction of the following conditions precedent on
the relevant Borrowing Date, Conversion/Continuation Date or Issuance Date:
(a) Notice, Application. The Agent shall have received (with, in the
-------------------
case of the initial Revolving Loan only, a copy for each Bank) a Notice of
Borrowing or a Notice of Conversion/Continuation, as applicable or in the case
of any Issuance
-45-
of any Letter of Credit, the Issuing Bank and the Agent shall have received an
L/C Application or L/C Amendment Application, as required under Section 3.02;
(b) Continuation of Representations and Warranties. The
----------------------------------------------
representations and warranties in Article VI shall be true and correct on and as
of such Borrowing Date or Conversion/Continuation Date or Issuance Date with the
same effect as if made on and as of such Borrowing Date or
Conversion/Continuation Date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist
-------------------
or shall result from such Borrowing or continuation or conversion or Issuance.
Each Notice of Borrowing, Notice of Conversion/Continuation and L/C Application
or L/C Amendment Application submitted by the Company hereunder shall constitute
a representation and warranty by the Company hereunder, as of the date of each
such notice and as of each Borrowing Date, Conversion/Continuation Date, or
Issuance Date, as applicable, that the conditions in this Section 5.02 are
satisfied.
5.03 Condition Subsequent. Within 45 days after the Closing Date, the
--------------------
Company shall deliver to the Agent, in sufficient copies for each Bank, a
revised Schedule 8.01 setting forth all Liens existing on property of the Parent
-------------
and each Subsidiary as of the Closing Date and evidencing that, as of the
Closing Date, there were no Liens existing on the accounts receivable or
inventory of the Parent or any Subsidiary. The failure to deliver such revised
Schedule 8.01 by such time shall constitute an immediate Event of Default
hereunder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Agent and each Bank that:
6.01 Corporate Existence and Power. The Company:
-----------------------------
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license; and
(d) is in compliance with all Requirements of Law; except, in each
case referred to in clause (c) or clause (d), to the extent that the failure to
do so could not reasonably be expected to
-46-
have a Material Adverse Effect.
6.02 Corporate Authorization; No Contravention. The execution, delivery
-----------------------------------------
and performance by the Company of this Agreement and each other Loan Document to
which the Company is party, have been duly authorized by all necessary corporate
action, and do not and will not:
(a) contravene the terms of any of the Company's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual Obligation
to which the Company is a party or any order, injunction, writ or decree of any
Governmental Authority to which the Company or its property is subject; or
(c) violate any Requirement of Law.
6.03 Governmental Authorization. No approval, consent, exemption,
--------------------------
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
6.04 Binding Effect. This Agreement and each other Loan Document to which
--------------
the Company is a party constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
6.05 Litigation. There are no actions, suits, proceedings, claims or
----------
disputes pending, or to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company or any of its properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Company, would reasonably be
expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.06 No Default. No Default or Event of Default exists or would result
----------
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could
-47-
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Closing Date, create an Event of Default under
Section 9.01(e).
6.07 ERISA Compliance.
----------------
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such qualification.
The Company and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction
or violation of the fiduciary responsibility rules with respect to any Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability in excess of
$3,000,000; (iii) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to
-----------------------------------
be used solely for the purposes set forth in and permitted by Section 7.12 and
Section 8.07. The Company is not generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.
6.09 Title to Properties. The Company has good record and marketable title
-------------------
in fee simple to, or valid leasehold interests in, all real property necessary
or used in the ordinary conduct of its business, except for such defects in
title as could not, individually or in the aggregate, have a Material Adverse
Effect. As of the Closing Date, the property of the Company is subject to no
Liens, other than Permitted Liens.
6.10 Taxes. The Company has filed all Federal and other material tax
-----
returns and reports required to be filed, and has paid
-48-
all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon it or its properties, income or assets otherwise
due and payable, except those which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company
that would, if made, have a Material Adverse Effect.
6.11 Environmental Matters. The Company conducts in the ordinary course of
---------------------
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6.12 Regulated Entities. Neither the Company nor any Person controlling
------------------
the Company is an "Investment Company" within the meaning of the Investment
Company Act of 1940. The Company is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code, or any other Federal or state
statute or regulation limiting its ability to incur Indebtedness.
6.13 No Burdensome Restrictions. The Company is not a party to or bound by
--------------------------
any Contractual Obligation, or subject to any restriction in any Organization
Document, or any Requirement of Law, which could reasonably be expected to have
a Material Adverse Effect.
6.14 Copyrights, Patents, Trademarks and Licenses, etc. The Company owns
--------------------------------------------------
or is licensed or otherwise has the right to use all of the patents, trademarks,
service marks, trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation of its
business, without conflict with the rights of any other Person. To the best
knowledge of the Company, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Company infringes upon any rights held by
any other Person. No claim or litigation regarding any of the foregoing is
pending or threatened, and no patent, invention, device, application, principle
or any statute, law, rule, regulation, standard or code is pending or, to the
knowledge of the Company, proposed, which, in either case, could reasonably be
expected to have a Material Adverse Effect.
6.15 Subsidiaries. The Company has no Subsidiaries and has no equity
------------
investments in any other corporation or entity. The Parent has no Subsidiaries
and has no equity investments in any other corporation or entity other than the
Subsidiaries listed on Schedule 6.15.
-------------
6.16 Insurance. The properties of the Company are insured with financially
---------
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Company operates.
-49-
6.17 Swap Obligations. The Company has not incurred any outstanding
----------------
obligations under any Swap Contracts, other than Permitted Swap Obligations.
The Company has undertaken its own independent assessment of its consolidated
assets, liabilities and commitments and has considered appropriate means of
mitigating and managing risks associated with such matters and has not relied on
any swap counterparty or any Affiliate of any swap counterparty in determining
whether to enter into any Swap Contract.
6.18 Full Disclosure. None of the representations or warranties made by
---------------
the Company in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Company in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of the Company to the Banks prior
to the Closing Date), contains any untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
6.19 Year 2000 Compliance. The Company has undertaken a detailed review
--------------------
and assessment of all areas within its business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
-----------------
applications used by the Company may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999) and reasonably anticipates that all computer applications
that are material to its business and operations will on a timely basis be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks (and all Banks in the case
of Section 7.13) waive compliance in writing:
7.01 Financial Statements. The Company and the Parent, as applicable,
--------------------
shall deliver to the Agent and each Bank, in form and detail satisfactory to the
Agent and the Majority Banks:
(a) as soon as available, but not later than 90 days after the end of
each fiscal year, a copy of the audited consolidated balance sheet of the Parent
and its Subsidiaries as at the end of such year and the related consolidated
statement of income or operations, shareholders' equity and cash flows for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, and accompanied by the opinion of Deloitte & Touche LLP or
another nationally-recognized independent public accounting firm ("Independent
-----------
Auditor") which report shall state that such consolidated financial statements
- -------
present fairly the financial position for the periods indicated in conformity
with GAAP applied on
-50-
a basis consistent with prior years;
(b) as soon as available, but not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year, a copy of the
unaudited consolidated balance sheet of the Parent and its Subsidiaries as of
the end of such quarter and the related consolidated statement of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, certified by a Responsible Officer
of the Company and the Parent as fairly presenting, in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the financial
position and the results of operations of the Parent and the Subsidiaries;
(c) as soon as available, but not later than 90 days after the end of
each fiscal year, a copy of the unaudited consolidating schedules for the
Subsidiaries which, in the aggregate, hold 90% of the assets and generate 90% of
the cash flow of the Parent and its Subsidiaries, and including, at a minimum,
the consolidating schedules for West Marine Products, Inc., E&B Marine Inc., and
the Company; and
(d) as soon as available, but not later than 30 days after the end of
each fiscal year, the Parent's projected consolidated balance sheet, income
statement, and cash flow statement for the next fiscal year. Such projections
shall be prepared on a monthly basis.
7.02 Certificates; Other Information. The Company and the Parent, as
-------------------------------
applicable, shall furnish to the Agent and each Bank:
(a) concurrently with the delivery of the financial statements
referred to in Sections 7.01(a) and (b), a Compliance Certificate executed by a
Responsible Officer of the Company and the Parent;
(b) concurrently with the delivery of the financial statements
referred to in Sections 7.01(a) and (b), store operating data of the Parent and
its Subsidiaries on a year-to-date basis in form and substance satisfactory to
the Agent and the Banks;
(c) promptly, copies of all financial statements and reports that the
Parent sends to its shareholders, and, within five days of filing, copies of all
financial statements and regular, periodical or special reports (including Forms
10K, 10Q and 8K) that the Parent or any Subsidiary may make to, or file with,
the SEC;
(d) promptly, any notification from Moody's or S&P regarding the
establishment of, or any change in, the rating for the Parent or the Parent's
long term senior unsecured debt;
(e) promptly upon receipt, copies of any and all final management
letters received by the Parent or any Subsidiary from the Independent Auditor;
and
(f) promptly, such additional information regarding the
business, financial or corporate affairs of the Company, the Parent, or any
Subsidiary as the Agent, at the request of any Bank, may from
-51-
time to time request.
7.03 Notices. The Company and the Parent, as applicable, shall promptly
-------
notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) of any matter that has resulted or could reasonably be expected to
result in a Material Adverse Effect, including (i) breach or non-performance of,
or any default under, a Contractual Obligation of the Company, the Parent, or
any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or
suspension between the Company, the Parent, or any Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the Company, the Parent,
or any Subsidiary; including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any of the following events affecting the
Company, the Parent, or any ERISA Affiliate (but in no event more than 10 days
after such event), and deliver to the Agent and each Bank a copy of any notice
with respect to such event that is filed with a Governmental Authority and any
notice delivered by a Governmental Authority to the Company, the Parent, or any
ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability of
any Pension Plan;
(iii) the adoption of, or the commencement of contributions to,
any Plan subject to Section 412 of the Code by the Company, the Parent, or
any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to Section
412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability.
(d) of any material change in accounting policies or financial
reporting practices by the Parent or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written statement
by a Responsible Officer setting forth details of the occurrence referred to
therein, and stating what action the Company, the Parent, or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under Section 7.03(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
7.04 Preservation of Corporate Existence, Etc. The Company and the Parent
-----------------------------------------
shall, and the Parent shall cause each Subsidiary to:
-52-
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
transactions permitted by Section 8.03 and sales of assets permitted by Section
8.02;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.05 Maintenance of Property. The Company and the Parent shall maintain,
-----------------------
and the Parent shall cause each Subsidiary to maintain, and preserve all its
property which is used or useful in its business in good working order and
condition, ordinary wear and tear excepted and make all necessary repairs
thereto and renewals and replacements thereof except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect. The
Company, the Parent, and each Subsidiary shall use the standard of care typical
in the industry in the operation and maintenance of its facilities.
7.06 Insurance. The Company and the Parent shall maintain, and the Parent
---------
shall cause each Subsidiary to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons.
7.07 Payment of Obligations. The Company and the Parent shall, and the
----------------------
Parent shall cause each Subsidiary to, pay and discharge as the same shall
become due and payable, all their respective obligations and liabilities,
including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property (other than Permitted Liens), unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary; and
(c) all Indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
7.08 Compliance with Laws. The Company and the Parent shall comply, and
--------------------
the Parent shall cause each Subsidiary to comply, in all
-53-
material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act) to the extent that failure to comply would have a Material
Adverse Effect, except such as may be contested in good faith or as to which a
bona fide dispute may exist.
7.09 Compliance with ERISA. The Company and the Parent shall, and shall
---------------------
cause each ERISA Affiliate to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records. The Company and the
--------------------------------------------
Parent shall maintain, and the Parent shall cause each Subsidiary which
maintains books and records to maintain, proper books of record and account, in
which full, true and correct entries in conformity with GAAP consistently
applied shall be made of all financial transactions and matters involving the
assets and business of the Company, the Parent, and such Subsidiary. The
Company and the Parent shall permit, and the Parent shall cause each Subsidiary
to permit, representatives and independent contractors of the Agent or any Bank
to visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers, and independent public accountants, all
at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Company or the Parent,
as applicable; provided, however, that the Agent or any Bank may inspect and
-------- -------
examine the books and records of the Company, the Parent, and each Subsidiary
not more than once every 12 months, unless an Event of Default exists, in which
case the Agent and any Bank may do any of the foregoing any number of times at
the expense of the Company.
7.11 Environmental Laws. The Company and the Parent shall, and the Parent
------------------
shall cause each Subsidiary to, conduct its operations and keep and maintain its
property in compliance with all Environmental Laws to the extent that failure to
comply would have a Material Adverse Effect.
7.12 Use of Proceeds. The Company shall use the proceeds of the Loans to
---------------
provide financing to the Guarantors for working capital purposes, refinancing of
existing funded debt, Acquisitions, Joint Ventures, and other general corporate
purposes not in contravention of any Requirement of Law or of any Loan Document.
The Company shall not use the proceeds of the Loans to provide financing to any
Person which is not a Guarantor.
7.13 Financial Covenants. The Parent shall, on a consolidated basis:
-------------------
(a) not permit the ratio of Adjusted Debt to Total Capitalization to
exceed the ratio indicated below as of the end of each fiscal quarter set forth
below:
-54-
Fiscal Quarters Ratio
--------------- ------
3rd Qtr 1997 - 1st Qtr 1999 .65 to 1.0
2nd Qtr 1999 - 1st Qtr 2000 .60 to 1.0
2nd Qtr 2000 and thereafter .55 to 1.0
"Adjusted Debt" means, without duplication, all Indebtedness permitted under
-------------
subsections (f), (g), (i), (j), (k), and (m) of Section 8.05 outstanding as of
the date of calculation, all Loans outstanding hereunder as of the date of
calculation, a multiple of six times the sum of Adjusted Operating Lease Expense
incurred in the most recently concluded fiscal quarter and each of the three
immediately preceding fiscal quarters, the undrawn amount of all standby letters
of credit issued for the benefit of the Company, the Parent and its Subsidiaries
and outstanding as of the date of calculation, and the amount of all outstanding
guaranties as of the date of calculation (excluding guaranties of the Parent or
any of its Subsidiaries of the obligations of any Subsidiary or the Parent under
operating leases).
"Adjusted Operating Lease Expense" means total operating lease expense exclusive
--------------------------------
of the following: (i) all common area maintenance payments required under store
leases, (ii) all supplemental payments required under store leases based on a
percentage of sales generated from the leased premises, (iii) all payments under
operating leases with an original term of three years or less, and (iv) all
sublease revenue.
"Total Capitalization" means the gross book value of the assets of the Parent
--------------------
and its Subsidiaries, less all liabilities (including accrued and deferred
income taxes), plus Adjusted Debt.
(b) achieve a Fixed Charge Coverage Ratio of at least the ratio
indicated below as of the end of each fiscal quarter set forth below:
Fiscal Quarters Ratio
--------------- ------
3rd Qtr 1997 - 4th Qtr 1998 1.9 to 1.0
1st Qtr 1999 and thereafter 2.0 to 1.0
This ratio shall be calculated quarterly using the results of the most recently
concluded fiscal quarter and each of the three immediately preceding fiscal
quarters.
"Fixed Charge Coverage Ratio" means the ratio obtained by dividing Cash Flow for
---------------------------
Debt Service by the sum of Net Interest Expense and operating lease expense (net
of all sublease revenue).
"Cash Flow for Debt Service" means the sum of net income before taxes, Net
--------------------------
Interest Expense, operating lease expense (net of all sublease revenue),
depreciation, amortization, other non-cash extraordinary charges, and losses on
asset sales, minus gains on asset sales.
-----
-55-
(c) maintain current assets in excess of current liabilities by at
least the amount indicated as of the end of each fiscal quarter set forth below:
Fiscal Quarter Amount
- -------------- ------
3rd Qtr 1997 - 4th Qtr 1997 $45,000,000
1st Qtr 1998 $70,000,000
2nd Qtr 1998 - 1st Qtr 1999 $85,000,000
2nd Qtr 1999 and thereafter $90,000,000
For purposes of the foregoing calculation, all Loans outstanding under this
Agreement and all Indebtedness under any other line of credit obtained by the
Company with a termination date which is the same as, or later than, the
Revolving Termination Date shall be deemed to be a current liability.
(d) maintain Tangible Net Worth at least equal to the sum of the
following: (i) 80% of Tangible Net Worth as of June 28, 1997; plus (ii) the sum
of 75% of net income after taxes (without subtracting losses) earned in each
fiscal quarter commencing after June 28, 1997; plus (iii) the net proceeds from
any equity securities issued after the date of this Agreement.
"Tangible Net Worth" means the gross book value of the assets of the Parent
------------------
(exclusive of goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred charges and
other like intangibles) less (a) reserves applicable thereto, and (b) all
liabilities (including accrued and deferred income taxes).
7.14 New Guarantors. Upon any Person becoming a direct or indirect
--------------
domestic Subsidiary of the Parent, the Parent shall cause such Person to become
a Guarantor by executing and delivering to the Agent an amendment or supplement
to the Guaranty in the form of Exhibit B thereto adding such Person as a
guarantor thereunder, executed by all Guarantors party thereto. In connection
therewith, the Company shall deliver, or cause to be delivered, documents of the
type described in Section 5.01(b) and (c) relating to such Person.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in writing:
8.01 Limitation on Liens. The Company and the Parent shall not, and the
-------------------
Parent shall not suffer or permit any Subsidiary to, directly or indirectly,
make, create, incur, assume or suffer to exist any Lien upon or with respect to
any part of its property, whether now owned or hereafter acquired, other than
the following
-56-
("Permitted Liens"):
---------------
(a) any Lien existing on property of the Parent or any Subsidiary set
forth in Schedule 8.01 securing Indebtedness outstanding on the date of such
-------------
Schedule;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.07, provided that no notice
of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Parent or its Subsidiaries securing
(i) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, (ii) contingent obligations on
surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business, provided all
such Liens in the aggregate would not (even if enforced) cause a Material
Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all such
liens in the aggregate at any time outstanding for the Parent and its
Subsidiaries do not exceed $10,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Parent and its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries after
the date of this Agreement, provided that (i) such Liens existed at the time the
--------
respective corporations became Subsidiaries and were not created in anticipation
thereof, and (ii) any such Liens attach only to assets other than accounts
receivable or inventory;
(j) purchase money security interests on any property acquired or held
by the Parent or its Subsidiaries in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such
-57-
property; provided that (i) any such Lien attaches to such property
--------
concurrently with or within 20 days after the acquisition thereof, (ii) such
Lien attaches solely to the property so acquired in such transaction, and (iii)
the principal amount of the debt secured thereby does not exceed 100% of the
cost of such property;
(k) Liens securing obligations in respect of capital leases on assets
subject to such leases, provided that such capital leases are otherwise
permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
--------
dedicated cash collateral account and is not subject to restrictions against
access by the Parent or any Subsidiary in excess of those set forth by
regulations promulgated by the FRB, and (ii) such deposit account is not
intended by the Parent or any Subsidiary to provide collateral to the depository
institution;
(m) Liens consisting of pledges of cash collateral or government
securities to secure on a mark-to-market basis Permitted Swap Obligations only,
provided that (i) the counterparty to any Swap Contract relating to such
Permitted Swap Obligation is under a similar requirement to deliver similar
collateral from time to time to the Parent or the Subsidiary party thereto on a
mark-to-market basis; and (ii) the aggregate value of such collateral so pledged
by the Parent and the Subsidiaries together in favor of any counterparty does
not at any time exceed $1,000,000;
(n) Liens securing Indebtedness payable to the seller in connection
with permitted Acquisitions after the date of this Agreement, provided that any
--------
such Liens attach only to assets (other than accounts receivable or inventory)
acquired in such Acquisition; and
(o) Liens arising from security deposits and prepaid obligations in
connection with operating leases.
8.02 Disposition of Assets. The Company and the Parent shall not, and the
---------------------
Parent shall not suffer or permit any Subsidiary to, directly or indirectly,
sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or
a series of transactions) any property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus equipment,
all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) dispositions of inventory, equipment, trademarks,
-58-
accounts receivable, operating space leases, and other assets by the Parent or
any Subsidiary to the Parent or any Subsidiary (provided such Subsidiary is also
a Guarantor) pursuant to reasonable business requirements;
(d) dispositions of assets acquired in a permitted Acquisition which
are made for fair market value; provided, that (i) the aggregate sales price
--------
from such disposition shall be paid in cash or pursuant to a note receivable
with a maturity date not exceeding one year, and (ii) the disposition shall
occur within one year from the date of the permitted Acquisition (it being
understood that the term of any leases or subleases of such assets, and any
renewals of such leases or subleases, may be for a period longer than one year
so long as such leases or subleases were originally entered into within one year
from the date of the permitted Acquisition);
(e) dispositions (including in connection with a sale-leaseback) not
otherwise permitted hereunder which are made for fair market value; provided,
--------
that (i) at the time of any disposition, no Event of Default shall exist or
shall result from such disposition, (ii) the aggregate sales price from such
disposition shall be paid in cash or pursuant to a note receivable with a
maturity date not exceeding one year, and (iii) the aggregate value of all
assets so sold by the Parent and its Subsidiaries, together, pursuant to this
Section 8.02(e) shall not exceed in any fiscal year $5,000,000; and
(f) assignments of accounts receivable for collection purposes, but
not for financing, provided that the aggregate amount of all such accounts
--------
receivable assigned at any one time does not exceed $1,000,000.
8.03 Consolidations and Mergers. The Company and the Parent shall not, and
--------------------------
the Parent shall not suffer or permit any Subsidiary to, merge, consolidate with
or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except:
(a) any Subsidiary may merge with the Parent, provided that the Parent
shall be the continuing or surviving corporation, or with any one or more
Subsidiaries, provided that the continuing or surviving corporation shall also
--------
be a Guarantor, and further provided that if any transaction shall be between a
----------------
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to the Parent or another Wholly-Owned
Subsidiary, provided that such Wholly-Owned Subsidiary is also a Guarantor.
--------
8.04 Loans, Investments and Acquisitions. The Company and the Parent shall
-----------------------------------
not purchase or acquire, and the Parent shall not suffer or permit any
Subsidiary to purchase or acquire, or make any commitment therefor, any capital
stock, equity interest, or any obligations or other securities of, or any
interest in, any Person, or make or commit to make any Acquisitions, or make or
commit to make any advance, loan, extension of credit or capital contribution to
or
-59-
any other investment in, any Person including any Affiliate of the Company
(together, "Investments"), except for:
-----------
(a) Investments held by the Parent or any Subsidiary in the form of
cash equivalents or short term marketable securities;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business; provided that no such extensions of credit shall be made by
--------
the Company to any Person which is not a Guarantor;
(c) extensions of credit by the Parent to any Subsidiary or by any
Subsidiary to any other Subsidiary or to the Parent, provided that no such
--------
extensions of credit shall be made by the Company to any Person which is not a
Guarantor;
(d) Investments incurred in order to consummate Acquisitions otherwise
permitted herein, provided that (i) the aggregate consideration paid for each
--------
such Acquisition, including assumption of existing obligations but excluding
consideration in the form of capital stock of the Parent, and less cash received
as a result of the Acquisition, (A) does not exceed $10,000,000 with respect to
any single Acquisition, and (B) when added to the aggregate consideration paid
for all prior Acquisitions undertaken by the Parent and its Subsidiaries after
the Closing Date, does not exceed $25,000,000, (ii) such Acquisitions are
undertaken in accordance with all applicable Requirements of Law; (iii) the
prior, effective written consent or approval to such Acquisition of the board of
directors or equivalent governing body of the acquiree is obtained; (iv) the
acquiree is in a line of business related to or substantially similar to the
lines of business carried on by the Parent and its Subsidiaries on the date
hereof; (v) such Acquisition will not cause the Parent, on a projected basis, to
violate any of the financial covenants set forth in this Agreement; and (vi)
such Acquisition is not made by the Company;
(e) Investments in Subsidiaries operating substantially in the
Parent's line of business (or businesses supportive thereof) outside the United
States in an aggregate amount not exceeding the amount indicated below in each
fiscal year set forth below, provided that no such investments shall be made by
--------
the Company:
Fiscal Year Amount
- ----------- ------
1998 $ 8,000,000
1999 $10,000,000
2000 $15,000,000
(f) Investments constituting Permitted Swap Obligations or payments or
advances under Swap Contracts relating to Permitted Swap Obligations; and
(g) extensions of credit by the Parent or any Subsidiary to its
executives, officers, directors or shareholders, provided that the aggregate
--------
outstanding amount of such extensions of credit does not exceed $1,000,000 at
any one time.
-60-
8.05 Limitation on Indebtedness. The Company and the Parent shall not, and
--------------------------
the Parent shall not suffer or permit any Subsidiary to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.08;
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 8.05, including any refinancing of such existing Indebtedness on terms
- -------------
substantially similar to the terms in effect as of the Closing Date;
(d) Indebtedness incurred in connection with the acquisition of goods,
supplies or merchandise on normal trade credit;
(e) Indebtedness secured by Liens permitted by Section 8.01(m);
(f) Indebtedness assumed in connection with permitted Acquisitions
after the date of this Agreement and which is unsecured or secured by Liens
permitted by Section 8.01(i), including any refinancing of such Indebtedness on
terms substantially similar to the terms in effect as of the date of the
Acquisition; provided that (i) such Indebtedness existed at the time of such
--------
Acquisition and was not created in anticipation thereof, and (ii) the aggregate
outstanding amount of such Indebtedness does not exceed $10,000,000 at any one
time;
(g) unsecured Indebtedness for business purposes, provided that the
--------
aggregate outstanding amount of such Indebtedness does not exceed $5,000,000 at
any one time;
(h) Indebtedness incurred in connection with financing the acquisition
of fixed or capital assets by the Parent and its Subsidiaries, including all
such Indebtedness secured by Liens permitted by Section 8.01(j), and further
including any refinancing of such Indebtedness on terms substantially similar to
the terms in effect as of the date of the Indebtedness was initially incurred,
provided that the aggregate outstanding amount of such Indebtedness does not
- --------
exceed $15,000,000 at any one time;
(i) Indebtedness incurred in connection with capital leases;
(j) unsecured Indebtedness incurred in connection with permitted
Acquisitions after the date of this Agreement which is represented by a note
payable to the seller, including any refinancing of such Indebtedness on terms
substantially similar to the terms in effect as of the date of the Acquisition;
provided that (i) such Indebtedness is not subject to terms, covenants and
- --------
conditions more restrictive than those contained in this Agreement and (ii) the
aggregate outstanding amount of such Indebtedness does not exceed $10,000,000 at
any one time;
-61-
(k) Indebtedness incurred in connection with permitted Acquisitions
after the date of this Agreement which is represented by a note payable to the
seller and secured by Liens permitted by Section 8.01(n), including any
refinancing of such Indebtedness on terms substantially similar to the terms in
effect as of the date of the Acquisition; provided that (i) such Indebtedness is
--------
not subject to terms, covenants and conditions more restrictive than those
contained in this Agreement, and (ii) the aggregate outstanding amount of such
Indebtedness does not exceed $10,000,000 at any one time;
(l) Indebtedness permitted under Section 8.04(c);
(m) Indebtedness incurred pursuant to a private placement of the
Company's debt obligations, provided that (i) such Indebtedness is subject to
--------
terms, covenants, and conditions which are reasonably acceptable to the Banks,
and (ii) the aggregate outstanding principal amount of all such Indebtedness
does not exceed $40,000,000 at any one time;
provided that, without duplication, (1) the aggregate outstanding amount of all
- --------
additional Indebtedness permitted under subsections (f), (g), (h), (i), (j), and
(k) above does not exceed $25,000,000 at any one time, and (2) the aggregate
outstanding amount of all additional Indebtedness permitted under subsections
(f), (j), and (k) above does not exceed $10,000,000 at any one time.
8.06 Transactions with Non-Guarantor Subsidiaries. The Company and the
--------------------------------------------
Parent shall not, and the Parent shall not suffer or permit any Subsidiary to,
enter into any transaction with any other Subsidiary which is not a Guarantor
except upon fair and reasonable terms no less favorable than would obtain in a
comparable arm's-length transaction with a Person not a Subsidiary.
8.07 Use of Proceeds. The Company shall not use any portion of the Loan
---------------
proceeds or any Letter of Credit, directly or indirectly, (i) to purchase or
carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the
Company or others incurred to purchase or carry Margin Stock, (iii) to extend
credit for the purpose of purchasing or carrying any Margin Stock, (iv) to
acquire any security in any transaction that is subject to Section 13 or 14 of
the Exchange Act, or (v) to purchase, redeem or otherwise acquire from the
Parent's shareholders any of the Parent's outstanding capital stock.
8.08 Contingent Obligations. The Company and the Parent shall not, and the
----------------------
Parent shall not suffer or permit any Subsidiary to, create, incur, assume or
suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Parent and its Subsidiaries existing
as of the Closing Date and listed in Schedule 8.08;
-------------
-62-
(d) Contingent Obligations with respect to Surety Instruments or
leases incurred in the ordinary course of business; and
(e) guaranties by the Parent or any of its Subsidiaries of the
obligations of any Subsidiary or the Parent under space leases for stores or
capitalized or equipment leases.
8.09 Joint Ventures. The Company and the Parent shall not, and the Parent
--------------
shall not suffer or permit any Subsidiary to, enter into any Joint Venture,
except for marketing agreements and other joint ventures where the financial
risk to, and capital contributions by, the Parent and its Subsidiaries are less
than $3,000,000 in the aggregate.
8.10 [Intentionally Omitted]
8.11 Restricted Payments. The Company and the Parent shall not, and the
-------------------
Parent shall not suffer or permit any Subsidiary to, declare or make any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock, or purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding; except that:
(a) the Parent or any Subsidiary may declare and make dividend
payments or other distributions payable solely in its common or preferred stock;
(b) the Parent or any Subsidiary may purchase, redeem or otherwise
acquire shares of its common stock or warrants or options to acquire any such
shares with the proceeds received from the substantially concurrent issue of new
shares of its common stock;
(c) any Wholly-Owned Subsidiary may declare and make dividend payments
to any other Wholly-Owned Subsidiary; and
(d) the Parent may cause its Subsidiaries to dividend money to the
Parent to enable the Parent to make payments not otherwise prohibited hereunder.
8.12 ERISA. The Company and the Parent shall not, and the Parent shall not
-----
suffer or permit any of its ERISA Affiliates to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in
liability of the Parent in an aggregate amount in excess of $1,000,000; or (b)
engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
8.13 Change in Business. The Company and the Parent shall not, and the
------------------
Parent shall not suffer or permit any Subsidiary to, engage in any material line
of business substantially different from those lines of business carried on by
the Parent and its Subsidiaries on the date hereof.
-63-
8.14 Accounting Changes. The Company and the Parent shall not, and the
------------------
Parent shall not suffer or permit any Subsidiary to, make any significant change
in accounting treatment or reporting practices, except as permitted by GAAP, or
change the fiscal year of the Parent or of any Subsidiary.
8.15 Capital Expenditures. The Company and the Parent shall not, and the
--------------------
Parent shall not suffer or permit any Subsidiary to, make expenditures for the
acquisition of fixed or capital assets in excess of the amount indicated below
(on an aggregate basis for the Company and its Subsidiaries) for each fiscal
year set forth below:
-64-
Fiscal Year Amount
----------- ------
1997 $27,500,000
1998 $30,000,000
1999 $35,000,000
2000 (1st and 2nd Qtr) $18,000,000
ARTICLE IX
EVENTS OF DEFAULT
-----------------
9.01 Event of Default. Any of the following shall constitute an "Event of
---------------- --------
Default":
- -------
(a) Non-Payment. The Company fails to pay, (i) when and as required
-----------
to be paid herein, any amount of principal of any Loan or of any L/C Obligation,
or (ii) within five days after the same becomes due, any interest, fee or any
other amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by the
--------------------------
Company, the Parent, or any Subsidiary made or deemed made herein, in any other
Loan Document, or which is contained in any certificate, document or financial
or other statement by the Company, the Parent, any Subsidiary, or any
Responsible Officer, furnished at any time under this Agreement, or in or under
any other Loan Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Specific Defaults. The Company or the Parent fails to perform or
-----------------
observe any term, covenant or agreement contained in any of Section 7.03 or 7.13
or in Article VIII; or
(d) Other Defaults. The Company or the Parent (i) fails to deliver to
--------------
Agent and Banks the financial statements and other information required under
Sections 7.01 and 7.02 within 15 days after same are required to be delivered,
or (ii) fails to perform or observe any other term or covenant contained in this
Agreement or any other Loan Document, and such default shall continue unremedied
for a period of 30 days after the earlier of (A) the date upon which a
Responsible Officer knew or reasonably should have known of such failure or (B)
the date upon which written notice thereof is given to the Company by the Agent
or any Bank; or
(e) Cross-Default. (i) The Company, the Parent, or any Subsidiary
-------------
fails to make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness
(other than the Indebtedness described in Section 9.01(a)) or any Contingent
Obligation if the aggregate outstanding principal amount of such Indebtedness or
Contingent Obligation is owed to any Bank or exceeds $5,000,000 and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or
(ii) fails to perform or observe any other condition or covenant, or any other
event shall occur or condition exist, under any agreement or instrument relating
to any Indebtedness or Contingent Obligation owing to any Bank or exceeding
$5,000,000, and such failure continues
-65-
after the applicable grace or notice period, if any, specified in the relevant
document on the date of such failure if the effect of such failure, event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause such
Indebtedness to be declared to be due and payable prior to its stated maturity,
or such Contingent Obligation to become payable or cash collateral in respect
thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Company, the Parent, or
---------------------------------
any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
-----------------------
Proceeding is commenced or filed against the Company, the Parent, or any
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or the
Parent's or any Subsidiary's properties, and any such proceeding or petition
shall not be dismissed, or such writ, judgment, warrant of attachment, execution
or similar process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Company or the Parent or any
Subsidiary admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under non-U.S.
law) is ordered in any Insolvency Proceeding; or (iii) the Company or the Parent
or any Subsidiary acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its property or
business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
-----
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company or the Parent under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$5,000,000; or (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $5,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments, non-
------------------
interlocutory orders, decrees or arbitration awards is entered against the
Company or the Parent or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $5,000,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 10
days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
----------------------
decree is entered against the Company or the Parent or any Subsidiary which does
or would reasonably be expected to have a
-66-
Material Adverse Effect, and there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(k) Adverse Change. There occurs a Material Adverse Effect; or
--------------
(l) Change of Control. The Parent ceases to own directly or
-----------------
indirectly 100% of the outstanding capital stock of the Company or any
Guarantor; or
(m) Guarantor Defaults. Any Guarantor fails in any material respect
------------------
to perform or observe any term, covenant or agreement in the Guaranty; or the
Guaranty is for any reason partially (including with respect to future advances)
or wholly revoked or invalidated, or otherwise ceases to be in full force and
effect, or any Guarantor or any other Person contests in any manner the validity
or enforceability thereof or denies that it has any further liability or
obligation thereunder; or any event described at Sections (f) or (g) of this
Section occurs with respect to the Guarantor.
9.02 Remedies. If any Event of Default occurs, the Agent shall, at the
--------
request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans and any
obligation of each Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is or
at any time thereafter may become available for drawing under any outstanding
Letters of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letters of Credit) to be immediately due and payable, and
declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in Section
- -------- -------
(f) or (g) of Section 9.01 (in the case of clause (i) of Section (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Agent, the Issuing Bank or any Bank.
-67-
9.03 Rights Not Exclusive. The rights provided for in this Agreement and
--------------------
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
---------
10.01 Appointment and Authorization; "Agent".
--------------------------------------
(a) Each Bank hereby irrevocably (subject to Section 10.09) appoints,
designates and authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) Each Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit Issued by it and the documents associated therewith until
such time and except for so long as the Agent may agree at the request of the
Majority Lenders to act for such Issuing Bank with respect thereto; provided,
--------
however, that the Issuing Bank shall have all of the benefits and immunities (i)
- -------
provided to the Agent in this Article X with respect to any acts taken or
omissions suffered by the Issuing Bank in connection with Letters of Credit
Issued by it or proposed to be Issued by it and the application and agreements
for letters of credit pertaining to the Letters of Credit as fully as if the
term "Agent", as used in this Article X, included the Issuing Bank with respect
to such acts or omissions, and (ii) as additionally provided in this Agreement
with respect to the Issuing Bank.
10.02 Delegation of Duties. The Agent may execute any of its duties under
--------------------
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
-68-
10.03 Liability of Agent. None of the Agent-Related Persons shall (i) be
------------------
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No Agent-
Related Person shall be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Majority Banks (or with the unanimous consent of all Banks when required
under Section 11.01) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
10.05 Notice of Default. The Agent shall not be deemed to have knowledge
-----------------
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Agent for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to this Agreement,
describing such
-69-
Default or Event of Default and stating that such notice is a "notice of
default". The Agent will notify the Banks of its receipt of any such notice. The
Agent shall take such action with respect to such Default or Event of Default as
may be requested by the Majority Banks in accordance with Article IX; provided,
--------
however, that unless and until the Agent has received any such request, the
- -------
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable or in the best interest of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the Agent-
---------------
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Company which may come into the possession of any of the Agent-Related Persons.
10.07 Indemnification of Agent. Whether or not the transactions
------------------------
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
-------- -------
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of
-70-
the Company. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.
10.08 Agent in Individual Capacity. BofA and its Affiliates may make
----------------------------
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent or the Issuing
Bank hereunder and without notice to or consent of the Banks. The Banks
acknowledge that, pursuant to such activities, BofA or its Affiliates may
receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, BofA
shall have the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent or the Issuing Bank.
10.09 Successor Agent. The Agent may, and at the request of the Majority
---------------
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Majority Banks shall appoint from among the
Banks a successor agent for the Banks, which successor agent shall be subject to
approval by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Banks and the Company, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above.
10.10 Withholding Tax.
---------------
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form 1001 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under this
Agreement;
-71-
(ii) if such Bank claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and in each
succeeding taxable year of such Bank during which interest may be paid
under this Agreement; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Company to such Bank, such Bank agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
Section (a) of this Section are not delivered to the Agent, then the Agent may
withhold from any interest payment to such Bank not providing such forms or
other documentation an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered or was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this
-72-
Section, together with all costs and expenses (including Attorney Costs). The
obligation of the Banks under this Section shall survive the payment of all
Obligations and the resignation or replacement of the Agent.
ARTICLE XI
MISCELLANEOUS
-------------
11.01 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks (or by the Agent at the written
request of the Majority Banks) and the Company and acknowledged by the Agent,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
-------- -------
no such waiver, amendment, or consent shall, unless in writing and signed by all
the Banks and the Company and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 9.02);
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (iii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder; or
(e) release any Guarantor;
(f) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Banks;
(g) amend or waive Section 7.13;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by all Issuing Banks in addition to the Majority Banks or all
the Banks, as the case may be, affect the rights or duties of the Issuing Banks
under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by any Issuing Bank, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights or duties
of the Agent under this Agreement or any other Loan Document, and (iii) the Fee
Letter may be amended, or rights or privileges thereunder waived, in a writing
executed by the parties thereto.
-73-
11.02 Notices.
-------
(a) All notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by the Company by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on Schedule 11.02, and
--------------
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 11.02; or, as directed to the Company or the Agent, to such
--------------
other address as shall be designated by such party in a written notice to the
other parties, and as directed to any other party, at such other address as
shall be designated by such party in a written notice to the Company and the
Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X to the Agent shall not be effective
until actually received by the Agent, and notices pursuant to Article III to the
Issuing Bank shall not be effective until actually received by the Issuing Bank
at the address specified for the "Issuing Bank" on the applicable signature page
hereof.
(c) Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Agent and the Banks shall not have any liability to
the Company or other Person on account of any action taken or not taken by the
Agent or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of any party hereto, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
11.04 Costs and Expenses. The Company shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) within 30 Business Days after demand (subject
-74-
to Section 5.01(e)) for all costs and expenses incurred by BofA (including in
its capacity as Agent and Issuing Bank) in connection with the development,
preparation, delivery and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement, any
Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including reasonable Attorney Costs incurred by BofA (including in its
capacity as Agent and Issuing Bank) with respect thereto; provided, however,
-------- -------
that the maximum amount the Company will be required to pay or reimburse BofA in
connection with the preparation of this Agreement and the related Loan Documents
shall be limited to $25,000; and
(b) pay or reimburse the Agent and each Bank within five Business Days
after demand (subject to Section 5.01(e)) for all costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, or
preservation of any rights or remedies under this Agreement or any other Loan
Document during the existence of an Event of Default or after acceleration of
the Loans (including in connection with any "workout" or restructuring regarding
the Loans, and including in any Insolvency Proceeding or appellate proceeding).
11.05 Company Indemnification. Whether or not the transactions
-----------------------
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each,
an "Indemnified Person") harmless from and against any and all liabilities,
------------------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of the Agent or replacement of any Bank)
be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, or any action taken
or omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any Insolvency Proceeding or appellate proceeding) related to or arising out of
this Agreement or the Loans or Letters of Credit or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, that the
----------------------- --------
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations.
11.06 Payments Set Aside. To the extent that the Company makes a payment
------------------
to the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or
-75-
any other party, in connection with any Insolvency Proceeding or otherwise, then
(a) to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its Pro Rata Share of
any amount so recovered from or repaid by the Agent.
11.07 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
11.08 Assignments, Participations, etc.
---------------------------------
(a) Any Bank may, with the written consent of the Company at all times
other than during the existence of an Event of Default and the Agent and the
Issuing Bank, which consents shall not be unreasonably withheld, at any time
assign and delegate to one or more Eligible Assignees (provided that no written
consent of the Company, the Agent or the Issuing Bank shall be required in
connection with any assignment and delegation by a Bank to an Eligible Assignee
that is an Affiliate of such Bank) (each an "Assignee") all, or any ratable part
--------
of all, of the Loans, the Commitments, the L/C Obligations and the other rights
and obligations of such Bank hereunder, in a minimum amount of $10,000,000;
provided, however, that the Company and the Agent may continue to deal solely
- -------- -------
and directly with such Bank in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and the Agent by such Bank and the
Assignee; (ii) such Bank and its Assignee shall have delivered to the Company
and the Agent an Assignment and Acceptance in the form of Exhibit E ("Assignment
--------- ----------
and Acceptance") and (iii) the assignor Bank or Assignee has paid to the Agent a
- --------------
processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the assignor Bank
that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments
-76-
of the assigning Bank pro tanto.
--- -----
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
-----------
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
- -------- -------
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company, the
Issuing Bank and the Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to Section 11.01. In the case of any such
-------
participation, the Participant shall not have any rights under this Agreement,
or any of the other Loan Documents, and all amounts payable by the Company
hereunder shall be determined as if such Bank had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31
CFR (S)203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
11.09 Reallocation of Commitments in Event of Merger, Etc. If after the
----------------------------------------------------
Closing Date any Bank merges or consolidates with or into one or more other
Banks, the surviving entity of such merger or consolidation (the "Surviving
---------
Bank") shall at the request of the Company, if no Default or Event of Default
- ----
then exists, assign all or a portion of its Resulting Increased Commitment (as
defined below) to one or more entities selected by the Company that are Eligible
Assignees (each an "Acquiring Entity"); provided that (i) each Acquiring Entity
----------------
shall unconditionally offer in writing (with a copy to the Agent) to purchase a
portion of such Surviving Bank's Resulting Increased Commitment and the portion
of the Revolving Loans and L/C Borrowings owing to such Surviving Bank and the
Surviving Bank's obligation to participate in Letters of Credit allocable to the
Resulting Increased Commitment to be acquired; (ii) the portion of the Resulting
Increased Commitment of the Surviving Bank acquired by each Acquiring Entity
shall be in integral multiples of $1,000,000; (iii) the purchase price to be
paid by the Acquiring Entity shall be the outstanding principal amount of the
Revolving Loans and L/C Borrowings owing to such Surviving Bank on the date of
-77-
purchase (plus interest and fees accrued thereon) that are allocable to the
amount of the Resulting Increased Commitment being acquired; and (iv) each
Acquiring Entity, if it is not already a Bank, shall be reasonably acceptable to
the Agent. Each Assignment hereunder shall be accomplished in accordance with
clauses (i), (ii) and (iii) of Section 11.08(a), and to the extent of any such
assignment, the Surviving Bank shall be relieved of its obligations hereunder
with respect to its assigned Commitment. The amounts owed by the Company to the
Surviving Bank under the Agreement that are allocable to the amount of the
Resulting Increased Commitment being acquired pursuant to this Section 11.09
shall be the product of (a) all amounts owed by the Company to the Surviving
Bank hereunder on the date of acquisition (including the outstanding principal
amount of the Revolving Loans and L/C Borrowings owed to the Surviving Bank and
interest and fees accrued thereon), and (b) a fraction having as it numerator
the amount of the Resulting Increased Commitment being acquired and having as
its denominator the total amount of the Surviving Bank's Commitment without
giving effect to such acquisition. For the purposes of this Section 11.09,
"Resulting Increased Commitment" shall mean (a) the total combined Commitment
------------------------------
of the Surviving Bank immediately following a merger or consolidation
contemplated by this Section 11.09, minus (b) the amount of the largest
Commitment (immediately prior to such merger or consolidation) of any Bank that
was a party to such merger or consolidation.
11.10 Confidentiality. Each Bank agrees to take and to cause its
---------------
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under this Agreement
or any other Loan Document, and neither it nor any of its Affiliates shall use
any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
-------- -------
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process (and the affected Bank or Agent shall use reasonable efforts
to notify the Company thereof, provided that the failure to provide such notice
shall not subject the affected Person to liability to the Company or prevent the
affected Person from complying with therewith); (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the Agent, any Bank or their respective Affiliates may be party; (E) to
the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Bank's independent
auditors and other professional advisors; (G) to any Participant or
-78-
Assignee, actual or potential, provided that such Person agrees in writing to
keep such information confidential to the same extent required of the Banks
hereunder; (H) as to any Bank or its Affiliate, as expressly permitted under the
terms of any other document or agreement regarding confidentiality to which the
Company or any Subsidiary is party or is deemed party with such Bank or such
Affiliate; and (I) to its Affiliates.
11.11 Set-off. In addition to any rights and remedies of the Banks
-------
provided by law, if an Event of Default exists, each Bank is authorized at any
time and from time to time, without prior notice to the Company, any such notice
being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Bank; provided, however, that the failure to give such notice shall not
-------- -------
affect the validity of such set-off and application.
11.12 Automatic Debits of Fees. With respect to any interest, commitment
------------------------
fee, letter of credit fee or agency fee due and payable to the Agent, any
Issuing Bank or BofA under the Loan Documents, the Company hereby authorizes
BofA to debit any deposit account of the Company with BofA in an amount such
that the aggregate amount debited from all such deposit accounts does not exceed
such fee or other cost or expense with notice, if agreed to by such Person in
accordance with its procedures. If there are insufficient funds in such deposit
accounts to cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in BofA's sole discretion) and
such amount not debited shall be deemed to be unpaid. No such debit under this
Section shall be deemed a setoff.
11.13 Notification of Addresses, Lending Offices, Etc. Each Bank and each
------------------------------------------------
Issuing Bank shall notify the Agent in writing of any changes in the address to
which notices to such Bank or Issuing Bank should be directed, of addresses of
any Lending Office, of payment instructions in respect of all payments to be
made to it hereunder and of such other administrative information as the Agent
shall reasonably request.
11.14 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.15 Severability. The illegality or unenforceability of any provision
------------
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
-79-
11.16 No Third Parties Benefited. This Agreement is made and entered into
--------------------------
for the sole protection and legal benefit of the Company, the Banks, the Agent
and the Agent-Related Persons, and their permitted successors and assigns, and
no other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.
11.17 Governing Law and Jurisdiction.
------------------------------
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA
OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE
BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
--------------------
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND
THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
11.18 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
--------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.19 Entire Agreement. This Agreement, together with the other Loan
----------------
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
11.20 Termination of Existing Credit Agreement. On the Closing Date, the
----------------------------------------
Existing Credit Agreement will be cancelled and terminated, any Existing
Offshore Rate Loans and Existing Letters of Credit
-80-
outstanding thereunder will be deemed Offshore Rate Loans and Letters of Credit
outstanding hereunder, and the account party on such Existing Letters of Credit
shall be deemed to be the Company. The Company hereby assumes and agrees to
perform all Obligations arising from or related to the Existing Offshore Rate
Loans and the Existing Letters of Credit.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in California by their proper and duly authorized
officers as of the day and year first above written.
WEST MARINE FINANCE COMPANY, INC.
By /s/ John C. Zott
----------------------------------
John C. Zott
Senior Vice President,
Finance; Chief Financial
Officer; Secretary; and
Treasurer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent
By /s/ Gary Flieger
----------------------------------
Gary Flieger
Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Bank and an Issuing Bank
By /s/ Kenneth E. Jones
----------------------------------
Kenneth E. Jones
Vice President
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION,
as a Bank and an Issuing Bank
By /s/ Charles Lilygren
----------------------------------
Charles Lilygren
Vice President
FLEET NATIONAL BANK, as a Bank and an
Issuing Bank
By /s/ Jeff Kinney
----------------------------------
Jeff Kinney
Vice President
-81-
SCHEDULE 2.01
-------------
COMMITMENTS
-----------
AND PRO RATA SHARES
-------------------
Pro Rata
Bank Commitment Share
---- ---------- -----
Bank of America National
Trust and Savings
Association $ 40,000,000 44.444444444%
NationsBank of Texas,
National Association $ 35,000,000 38.888888889%
Fleet National Bank $ 15,000,000 16.666666667%
TOTAL $ 90,000,000 100.000000000%
SCHEDULE 3.03
-------------
EXISTING LETTERS OF CREDIT
--------------------------
Standby Letters of Credit
-------------------------
Issuer: Bank of America National Trust and Savings Association
L/C Number Beneficiary Amount Expiry Date
- ---------- ----------- ------ -----------
0225945 Confederation Life $100,000 October 9, 1998
Issuer: NationsBank of Texas, National Association
L/C Number Beneficiary Amount Expiry Date
- ---------- ----------- ------ -----------
919221 Zodiac $500,000 December 31, 1997
919222 Ziang Kong $250,000 December 20, 1997
Garment Mfg.
Commercial Letters of Credit
----------------------------
None
SCHEDULE 6.15
-------------
SUBSIDIARIES OF WEST MARINE, INC.
---------------------------------
State of
Name of Subsidiary Incorporation Operations
- ------------------ ------------- ----------
West Marine Products, Inc.* California Operating
Subsidiary
West Marine FSC, Inc.* Barbados Foreign
Sales Co.
West Marine Finance Company, Inc.* California Finance Co.
W Marine Management Company, Inc.* California Management
Company
West Marine LBC, Inc.*** California Holding Co.
West Marine IHC I, Inc.*** California Holding Co.
West Marine IHC II, Inc.*** California Holding Co.
E&B Marine Inc.* Delaware Holding Co.
E&B Marine LBC, Inc.** California Holding Co.
E&B Marine IHC I, Inc.** California Holding Co.
E&B Marine IHC II, Inc.** California Holding Co.
E&B Marine Supply (Florida) Inc.** Delaware Operating
Subsidiary
E&B Marine Supply, Inc. (NJ)** New Jersey Operating
Subsidiary
E&B Marine Supply, Inc. (MD)** Maryland Operating
Subsidiary
James Bliss & Co., Inc.** Massachusetts Operating
Subsidiary
Goldbergs' Marine Distributors, Inc.** Delaware Operating
Subsidiary
Central Marine Supply Inc.** New Jersey Inactive
Central Marine Supply (Florida), Inc.** Delaware Inactive
Krista Corporation** Delaware Inactive
Sea Ranger Marine Inc.** Delaware Inactive
*Wholly owned subsidiaries of West Marine, Inc.
**Wholly owned subsidiaries of E&B Marine Inc.
***Wholly owned subsidiaries of West Marine Products, Inc.
SCHEDULE 8.01
PERMITTED LIENS
AS OF NOVEMBER 24, 1996
WEST MARINE
California UCC
Secured Party Lien Filing No/Date
------------- ---- --------------
EKCC Purchase money secured 9436361468
interest in Kodak copier 12/24/94
IBM Corporation Computer equipment referenced on 9607360162
IBM SUP #Y73481 dated 2/20/96 3/08/96
QTY-TYPE 1-9406
IBM Corporation Computer equipment referenced on 9607460900
IBM SUP #Y72889 dated 2/09/96 3/11/96
QTY-TYPE 1-9406
IBM Corporation Monitors 9634460187
12/06/96
IBM Corporation Servers 9634460176
12/06/96
IBM Corporation Desktops 9634460195
12/06/96
IBM Corporation Hubs 9636260881
12/26/96
IBM Corporation AS400 "Hobie" 9610860588
4/16/96
IBM Corporation Additional "Hobie" AS400 equipment 9610860588
4/16/96
IBM Corporation Power supply for AS400 "Hobie" 9619060984
7/03/96
IBM Corporation Software upgrade "Hobie" 9632360658
11/14/96
IBM Corporation Additional AS400 equipment 9518460088
6/28/95
IBM Corporation Additional AS400 equipment 95229C0456
8/16/95
Metlife Capital, Limited Point of Sale System, DC equipment, 92222813
Partnership computer and telephone equipment 10/16/92
SCHEDULE 8.05
-------------
PERMITTED INDEBTEDNESS
----------------------
AS OF THE CLOSING DATE
----------------------
Amount
Description of Indebtedness in Thousands
- --------------------------- ------------
Current portion of long term debt $ 1,412
owed to IBM and EKCC under capital leases
Line of credit from Bank of
America/NationsBank $ 65,500
Deferred rent $ 1,017
Long term debt owed to IBM and $ 1,601
EKCC under capital leases
SCHEDULE 8.08
-------------
CONTINGENT LIABILITIES
----------------------
AS OF THE CLOSING DATE
----------------------
Letters of Credit as described in Schedule 3.03.
SCHEDULE 11.02
--------------
ADDRESSES FOR NOTICES
---------------------
BORROWER
- --------
WEST MARINE FINANCE COMPANY, INC.
500 Westridge Drive
Watsonville, CA 95076
Attention: Chief Financial Officer
With a copy to: Director of Cash Management
Telephone: (408) 761-4229
Facsimile: (408) 761-4406
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as Agent
For administrative notices regarding borrowings, payments, conversions,
continuations, letters of credit, fees and interest:
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1850 Gateway Blvd.
Concord, CA 94520
Attention: John Sun
Telephone: (510) 675-8368
Facsimile: (510) 675-8500
For notices regarding waivers, amendments, financial statements, assignments and
all other notices:
Bank of America National Trust
and Savings Association
Agency Management Services #10831
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Gary Flieger
Vice President
Telephone: (415) 436-3484
Facsimile: (415) 436-3425
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as a Bank
Bank of America National Trust
and Savings Association
101 Park Center Plaza
San Jose, CA 95113
Attention: Kenneth E. Jones
Vice President
Telephone: (408) 277-7644
Facsimile: (408) 277-7087
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as an Issuing Bank
Bank of America National Trust
and Savings Association
International Trade
Banking Division #5655
333 S. Beaudry Ave., 19th Floor
Los Angeles, CA 90017
NATIONSBANK OF TEXAS,
- ---------------------
NATIONAL ASSOCIATION, as a Bank
- --------------------
and Issuing Bank
NationsBank of Texas,
National Association
901 Main Street
TX1-492-14-06
Dallas, Texas 75202
Attn: Kay Hibbs
Telephone: (214) 508-3089
Facsimile: (214) 508-0944
With a Copy to:
Charles Lilygren
Vice President
NationsBank of Texas,
National Association
444 S. Flower St, Suite 4100
Los Angeles, CA 90071
Telephone: (213) 236-4927
Facsimile: (213) 624-5812
FLEET NATIONAL BANK, as a Bank
- -------------------
and Issuing Bank
Fleet National Bank
777 Main Street
CT MO 0237
Hartford, CT 06115
Attn: Jeff Kinney
Vice President
Telephone: (890) 986-2158
Facsimile: (890) 986-3450