Exhibit 1
CONFORMED COPY
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
among
AUDIOVOX CORPORATION,
as Borrower
CHEMICAL BANK
NATWEST BANK N.A.
THE CHASE MANHATTAN BANK, N.A.
EUROPEAN AMERICAN BANK
THE FIRST NATIONAL BANK OF BOSTON,
as Lenders
and
CHEMICAL BANK,
as Administrative and Collateral Agent,
Dated as of May 5, 1995
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TABLE OF CONTENTS
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Page
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . 21
SECTION 2. AMOUNT AND TERMS OF LOANS . . . . . . . . . . . . . . 22
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . 22
2.2 Notes . . . . . . . . . . . . . . . . . . . . . . . . 22
2.3 Procedure for Revolving Credit Borrowing . . . . . . . 23
SECTION 3. AMOUNT AND TERMS OF LETTERS OF CREDIT . . . . . . . . 23
3.1 Letters of Credit . . . . . . . . . . . . . . . . . . 23
3.2 Procedure for Issuance, Extension or Amendment of
Letters of Credit . . . . . . . . . . . . . . . . . . 25
3.3 Fees, Commissions and Other Charges . . . . . . . . . 26
3.4 L/C Participations . . . . . . . . . . . . . . . . . . 27
3.5 Obligations Absolute . . . . . . . . . . . . . . . . . 28
3.6 Letter of Credit Payments . . . . . . . . . . . . . . 29
3.7 Application . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4. AMOUNT AND TERMS OF ACCEPTANCES . . . . . . . . . . . 29
4.1 Acceptances . . . . . . . . . . . . . . . . . . . . . 29
4.2 Procedure for Creation of Acceptances . . . . . . . . 30
4.3 Acceptance Participations . . . . . . . . . . . . . . 31
4.4 Discount of Acceptances . . . . . . . . . . . . . . . 32
4.5 Mandatory Prepayment . . . . . . . . . . . . . . . . . 33
4.6 Obligations Absolute . . . . . . . . . . . . . . . . . 33
4.7 Supply of Drafts . . . . . . . . . . . . . . . . . . . 34
4.8 Delivery of Certain Documentation . . . . . . . . . . 34
4.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . 34
4.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . 34
SECTION 5. GENERAL PROVISIONS APPLICABLE TO THE
LOANS, LETTERS OF CREDIT AND ACCEPTANCES. . . . 35
5.1 Termination or Reduction of Commitments . . . . . . . 35
5.2 Optional Prepayments . . . . . . . . . . . . . . . . . 35
5.3 Mandatory Prepayments . . . . . . . . . . . . . . . . 35
5.4 Commitment Fee . . . . . . . . . . . . . . . . . . . . 36
5.5 Reimbursement Obligations of the Borrower . . . . . . 37
5.6 Interest Rates and Payment Dates . . . . . . . . . . . 38
5.7 Computation of Interest and Fees . . . . . . . . . . . 38
5.8 Conversion and Continuation Options . . . . . . . . . 39
5.9 Minimum Amounts and Number of Tranches . . . . . . . . 39
5.10 Inability to Determine Interest Rate . . . . . . . . 40
5.11 Pro Rata Treatment and Payments . . . . . . . . . . . 40
5.12 Illegality . . . . . . . . . . . . . . . . . . . . . 41
5.13 Indemnity . . . . . . . . . . . . . . . . . . . . . . 42
5.14 Requirements of Law . . . . . . . . . . . . . . . . . 42
5.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 43
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5.16 Foreign Exchange Contracts . . . . . . . . . . . . . 45
SECTION 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 45
6.1 Financial Condition . . . . . . . . . . . . . . . . . 45
6.2 No Change . . . . . . . . . . . . . . . . . . . . . . 46
6.3 Corporate Existence; Compliance with Law . . . . . . . 46
6.4 Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . . . 46
6.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . 47
6.6 No Material Litigation . . . . . . . . . . . . . . . . 47
6.7 No Default . . . . . . . . . . . . . . . . . . . . . . 48
6.8 Ownership of Property; Liens . . . . . . . . . . . . . 48
6.9 Intellectual Property . . . . . . . . . . . . . . . . 48
6.10 No Burdensome Restrictions . . . . . . . . . . . . . 48
6.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 48
6.12 Federal Regulations . . . . . . . . . . . . . . . . . 49
6.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 49
6.14 Investment Company Act; Other Regulations . . . . . . 50
6.15 Subsidiaries and Joint Ventures . . . . . . . . . . . 50
6.16 Purpose of Loans . . . . . . . . . . . . . . . . . . 50
6.17 Environmental Matters . . . . . . . . . . . . . . . . 50
6.18 Security Documents . . . . . . . . . . . . . . . . . 51
6.19 Insurance . . . . . . . . . . . . . . . . . . . . . . 51
6.20 No Change in Credit Criteria or Collection
Policies . . . . . . . . . . . . . . . . . . . . . . 51
6.21 Government Contracts . . . . . . . . . . . . . . . . 52
6.22 Existing Extensions of Credit . . . . . . . . . . . . 52
6.23 Licensing. . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7. CONDITIONS . . . . . . . . . . . . . . . . . . . . . 52
7.1 Conditions to Effectiveness of Agreement . . . . . . . 52
7.2 Conditions to Each Loan, Letter of Credit and
Acceptance . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . 55
8.1 Financial Statements . . . . . . . . . . . . . . . . . 56
8.2 Certificates; Other Information . . . . . . . . . . . 56
8.3 Payment of Obligations . . . . . . . . . . . . . . . . 58
8.4 Conduct of Business and Maintenance of Existence . . . 58
8.5 Maintenance of Property; Insurance . . . . . . . . . . 59
8.6 Inspection of Property; Books and Records;
Discussions; Audits . . . . . . . . . . . . . . . . . 59
8.7 New Subsidiaries . . . . . . . . . . . . . . . . . . . 59
8.8 Consignment of Title Documents . . . . . . . . . . . . 60
8.9 Notices . . . . . . . . . . . . . . . . . . . . . . . 60
8.10 Environmental Laws. . . . . . . . . . . . . . . . . . 61
8.11 Further Assurances . . . . . . . . . . . . . . . . . 62
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SECTION 9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . 62
9.1 Financial Condition Covenants . . . . . . . . . . . . 62
9.2 Limitation on Indebtedness . . . . . . . . . . . . . . 63
9.3 Limitation on Liens . . . . . . . . . . . . . . . . . 64
9.4 Limitation on Guarantee Obligations . . . . . . . . . 65
9.5 Limitations on Fundamental Changes . . . . . . . . . . 66
9.6 Limitation on Sale of Assets . . . . . . . . . . . . . 66
9.7 Limitation on Dividends; Stock Repurchases . . . . . . 67
9.8 Limitation on Capital Expenditures . . . . . . . . . . 67
9.9 Limitation on Investments, Loans and Advances . . . . 67
9.10 Limitation on Payments on the Subordinated
Debentures, the Talk Note and the Exchange
Debentures . . . . . . . . . . . . . . . . . . . . . 68
9.11 Limitation on Modifications to Subordinated
Debenture Indenture and the Talk Note . . . . . . . . 68
9.12 Transactions with Affiliates . . . . . . . . . . . . 68
9.13 Sale and Leaseback . . . . . . . . . . . . . . . . . 69
9.14 Fiscal Year . . . . . . . . . . . . . . . . . . . . . 69
9.15 Limitation on Negative Pledge Clauses . . . . . . . . 69
9.16 Compromise of Receivables . . . . . . . . . . . . . . 69
9.17 Accounting Policies and Procedures . . . . . . . . . 70
9.18 Consignment of Title Documents . . . . . . . . . . . 70
9.19 Limitation on Restrictions on Intercompany
Payments . . . . . . . . . . . . . . . . . . . . . . 70
9.20 Limitation on Foreign Exchange Contracts . . . . . . 70
SECTION 10. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . 70
SECTION 11. THE AGENT . . . . . . . . . . . . . . . . . . . . . 74
11.1 Appointment . . . . . . . . . . . . . . . . . . . . . 74
11.2 Delegation of Duties . . . . . . . . . . . . . . . . 74
11.3 Exculpatory Provisions . . . . . . . . . . . . . . . 74
11.4 Reliance by Agent . . . . . . . . . . . . . . . . . . 75
11.5 Notice of Default . . . . . . . . . . . . . . . . . . 75
11.6 Non-Reliance on Agent and Other Lenders . . . . . . . 76
11.7 Indemnification . . . . . . . . . . . . . . . . . . . 76
11.8 Agent in Its Individual Capacity . . . . . . . . . . 77
11.9 Successor Agent . . . . . . . . . . . . . . . . . . . 77
11.10 Issuing Bank and Accepting Bank . . . . . . . . . . 77
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 78
12.1 Amendments and Waivers . . . . . . . . . . . . . . . 78
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 78
12.3 No Waiver; Cumulative Remedies . . . . . . . . . . . 79
12.4 Survival of Representations and Warranties . . . . . 79
12.5 Payment of Expenses and Taxes . . . . . . . . . . . . 79
12.6 Successors and Assigns; Participations; Purchasing
Lenders . . . . . . . . . . . . . . . . . . . . . . . 80
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12.7 Adjustments; Set-off . . . . . . . . . . . . . . . . 84
12.8 Confidentiality . . . . . . . . . . . . . . . . . . . 85
12.9 Return of CellStar Stock . . . . . . . . . . . . . . 85
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . 85
12.11 Severability . . . . . . . . . . . . . . . . . . . . 85
12.12 Integration . . . . . . . . . . . . . . . . . . . . 85
12.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . 86
12.14 Submission To Jurisdiction; Waivers . . . . . . . . 86
12.15 Acknowledgements . . . . . . . . . . . . . . . . . . 87
12.16 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . 87
Schedules
Schedule I Commitments
Schedule 6.1 Changes of Events
Schedule 6.2 Terms of Private Placement Warrant Offering
Schedule 6.6 Litigation
Schedule 6.8 Leases and Warehouse Contracts
Schedule 6.13 ERISA Matters
Schedule 6.15 Subsidiaries and Joint Ventures
Schedule 6.17 Environmental Matters
Schedule 6.18(b) Filing Jurisdictions
Schedule 6.21 Government Contracts
Schedule 9.9(e) Investments in Joint Ventures and Foreign
Subsidiaries
Schedule 9.12 Transactions with Affiliates
Schedule 9.17 Changes in Accounting Policies and Procedures
Schedule 12.2 Addresses of Banks and Subsidiaries
Exhibits
Exhibit A
Form of Note
Exhibit B
Form of Borrowing Certificate
Exhibit C-1
Form of Borrowing Base Certificate
Exhibit C-2
Form of Borrowing Base Notice
Exhibit C-3
Form of Certification of Inventory
Exhibit D
Form of Commitment Transfer Supplement
Exhibit E
Form of Acceptance Request
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Exhibit F
Form of Draft
Exhibit G-1
Form of Opinion of Counsel to the Borrower and the
Subsidiaries
Exhibit G-2
Form of Opinion of Simpson Thacher & Bartlett
Exhibit H
Form of Landlord's Consent
Exhibit I Form of Consent of Guarantors
Exhibit J Borrower Security Agreement
Exhibit K Subsidiaries Guarantee
Exhibit L Subsidiaries Security Agreement
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 5, 1995,
among AUDIOVOX CORPORATION, a Delaware corporation (the "Borrower"), the several
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banks and other financial institutions from time to time parties to this
Agreement (collectively, the "Lenders"; individually, a "Lender") and CHEMICAL
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BANK, a New York banking corporation, as administrative and collateral agent for
the Lenders hereunder (in such capacity, the "Agent").
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W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders and the Agent are parties to the
Amended and Restated Credit Agreement, dated as of March 15, 1994 (as amended
prior to the date hereof, the "Existing Credit Agreement");
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WHEREAS, pursuant to the Existing Credit Agreement, the Lenders have
over time made loans to, and have issued letters of credit, steamship guarantees
and airway releases and created bankers' acceptances for or for the account of,
the Borrower (collectively, the "Existing Extensions of Credit") which are
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secured pursuant to the Security Documents (as hereinafter defined);
WHEREAS, the Borrower has requested that the Existing Credit Agreement
be amended and restated in the manner provided for herein; and
WHEREAS, the security interests granted and guarantees issued pursuant
to the Security Documents will continue to provide collateral security for the
obligations of the Borrower under this Agreement:
ACCORDINGLY, the parties hereto hereby agree that upon the
satisfaction of the conditions hereto the Existing Credit Agreement is hereby
amended and restated as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
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shall have the following meanings:
"Acceptance Obligations": at any time, an amount equal to the sum of
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(a) the aggregate face amount of unmatured Acceptances (including Existing
Acceptances) at such time and (b) the aggregate amount of all unpaid
Acceptance Reimbursement Obligations at such time.
"Acceptance Participants": with respect to each Acceptance (including
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each Existing Acceptance), collectively, all the Lenders other than the
Accepting Bank.
2
"Acceptance Rate": the rate equal to 2% per annum plus the discount
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rate, as determined from time to time by the Accepting Bank, in its sole
and absolute discretion, as generally available as the discount rate to
other customers of the Accepting Bank for bankers' acceptances for up to
and including 90-day tenor.
"Acceptance Reimbursement Obligations": the obligation of the
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Borrower to reimburse the Accepting Bank pursuant to subsection 5.5(b) for
the face amount of Acceptances (including any Existing Acceptances).
"Acceptance Request": an Acceptance Request, substantially in the
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form of Exhibit E hereto, with appropriate insertions, or in such other
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form as the Accepting Bank shall reasonably request, including any such
Acceptance Request issued in connection with any Existing Acceptance.
"Acceptances": as defined in subsection 4.1(a).
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"Accepting Bank": Chemical, or its successor pursuant to subsections
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11.9 and 11.10, in its capacity as creator of Acceptances pursuant to
subsection 4.1(a).
"Account Debtor": as to any Account, any Person who is or may become
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obligated to any other Person under, with respect to, or on account of,
such Account.
"Accounts": as to any Person at any time, all accounts, accounts
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receivable and other receivables of such Person at such time.
"Affiliate": as to any Person, (a) any other Person (other than a
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Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person, including, without
limitation, any Joint Venture of such Person, or (b) any Person who is a
director, officer, shareholder or partner (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described in the preceding
clause (a). For purposes of this definition, "control" of a Person means
the power, directly or indirectly, either to (i) vote 10% or more of the
securities having ordinary voting power for the election of directors of
such Person or (ii) direct or cause the direction of the management and
policies of such Person whether by contract or otherwise. "Affiliates" of
the Borrower shall be deemed (a) not to include any or all of the Existing
Noteholders or any transferee of Common Stock of any Existing Noteholder
and (b) to include CellStar for so long as the Borrower owns any capital
stock of CellStar.
"Aggregate Outstanding Direct Extensions of Credit": as to any Lender
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at any time, an amount equal to the sum of
3
(a) the aggregate principal amount of all Loans made by such Lender then
outstanding and (b) such Lender's Commitment Percentage of the Acceptance
Obligations then outstanding.
"Aggregate Outstanding Extensions of Credit": as to any Lender at any
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time, an amount equal to the sum of (a) the aggregate principal amount of
all Loans made by such Lender then outstanding, (b) such Lender's
Commitment Percentage of the L/C Obligations then outstanding and (c) such
Lender's Commitment Percentage of the Acceptance Obligations then
outstanding.
"Agreement": this Amended and Restated Credit Agreement, as the same
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may be amended, supplemented or otherwise modified from time to time.
"Airway Release": as defined in subsection 3.1(b).
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"Applicable Margin": for each Type of Loan, the rate per annum set
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forth under the relevant column heading below:
Chemical Rate Loans Eurodollar Loans
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0.25% 2.00%
"Application": an application, in such form as the Issuing Bank may
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specify from time to time, requesting the Issuing Bank to open a Letter of
Credit, including any such application issued in connection with any
Existing Letter of Credit.
"Available Commitment": as to any Lender at any time, an amount equal
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to the excess, if any, of (a) the amount of such Lender's Commitment over
(b) the aggregate principal amount of the Aggregate Outstanding Extensions
of Credit of such Lender then outstanding.
"Borrower Security Agreement": the Amended and Restated Security
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Agreement, dated as of March 15, 1994, made by the Borrower in favor of the
Collateral Agent, a copy of which is attached hereto as Exhibit J.
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"Borrowing Base": on any date of determination thereof, the sum of
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(a) 75% of the aggregate amount of Eligible Accounts of the Borrower and
its consolidated Domestic and Canadian Subsidiaries on such date of
determination and (b) the lesser of (i) 30% of the aggregate amount of
Eligible Inventory of the Borrower and its consolidated Domestic and
Canadian Subsidiaries on such date of determination and (ii) at any time
prior to the date on which the Borrower shall have sold 1,000,000 shares of
common stock of CellStar in the aggregate after the Closing Date,
$30,000,000 and, at any time thereafter, $25,000,000. The Borrowing Base
shall be reduced from time to time by an
4
amount equal to the Foreign Exchange Liabilities of the Borrower as most
recently determined prior to such time by the Agent pursuant to subsection
5.16. The Borrowing Base shall be determined by the Agent in its sole
discretion exercising reasonable judgment from time to time by reference to
the most recent monthly Borrowing Base Certificate delivered to the Agent
pursuant to subsection 8.2(g). The Agent shall determine the Borrowing
Base in effect on the first Business Day of each month during the
Commitment Period and shall send a Borrowing Base Notice on such Business
Day to the Borrower and each Lender setting forth the Borrowing Base as so
determined. The Agent shall also send a Borrowing Base Notice to the
Borrower and each Lender on each Business Day on which the Borrowing Base
is changed other than pursuant to the immediately preceding sentence
setting forth the Borrowing Base as so changed.
"Borrowing Base Certificate": a certificate, substantially in the
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form of Exhibit C-1, or in such other form as the Agent shall from time to
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time request.
"Borrowing Base Notice": a notice, substantially in the form of
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Exhibit C-2, or in such other form as the Agent shall from time to time
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specify.
"Borrowing Date": any Business Day specified in a notice pursuant to
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subsection 2.3 as a date on which the Borrower requests the Lenders to make
Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on
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which commercial banks in New York City are authorized or required by law
to close.
"Canadian Subsidiary": Audiovox Canada Limited, an Ontario
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corporation.
"Capital Stock": any and all shares, interests, participations or
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other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing, provided that the Exchange Debentures and Subordinated
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Debentures shall not, prior to the conversion thereof, be deemed to be
Capital Stock of the Borrower.
"Cash Equivalents": (i) securities issued or directly and fully
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guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than 180 days from
the date of acquisition, (ii) time deposits and certificates of deposit
having maturities of not more than 180 days from the date of acquisition of
any Lender or of any domestic commercial bank the long-term debt of which
is rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or a-2
5
or the equivalent thereof by Moody's Investors Service, Inc. and having
capital and surplus in excess of $500,000,000, (iii) repurchase obligations
with a term of not more than seven days for underlying securities of the
types described in clauses (i) and (ii) entered into with any bank meeting
the qualifications specified in clause (ii) above, (iv) commercial paper
rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or a-2 or the equivalent thereof by Moody's Investors Service,
Inc. and in either case maturing within 180 days after the date of
acquisition and (v) securities issued by any municipality in the United
States rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or a-2 or the equivalent thereof by Moody's Investors Service,
Inc. and in either case maturing within 180 days after the date of
acquisition.
"CellStar": CellStar Corporation, a Delaware corporation.
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"CellStar Option Agreements": the collective reference to the Option
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Agreement - I, dated as of December 3, 1993, between the Borrower and Alan
H. Goldfield and the Option Agreement - II, dated as of December 3, 1993,
between the Borrower and Alan H. Goldfield.
"Cellular Inventory": at a particular date, all cellular telephones
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and other cellular Inventory of the Borrower and its Subsidiaries on hand
at such date.
"Chemical": Chemical Bank, a New York banking corporation.
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"Chemical Rate": the rate of interest per annum publicly announced by
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Chemical as its prime rate in effect at its principal office in New York,
New York. The prime rate is not intended to be the lowest rate of interest
charged by Chemical in connection with extensions of credit to debtors.
"Chemical Rate Loans": Loans the rate of interest applicable to which
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is based upon the Chemical Rate.
"Chemical Standby Letters of Credit": the collective reference to the
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Irrevocable Standby Letters of Credit from time to time issued by Chemical
to secure payment of the Exchange Debentures on the terms provided therein
in an aggregate face amount not exceeding $6,802,971.30.
"Closing Date": the date on which all the conditions set forth in
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Section 7 shall first have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
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time.
6
"Collateral Agent": Chemical,in its capacity as
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collateral agent under the Security Documents.
"Commitment": as to any Lender at any time, the obligation of such
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Lender to make Loans and/or issue or participate in Letters of Credit
issued on behalf of the Borrower and/or create or participate in
Acceptances created for the Borrower in an aggregate principal amount
and/or face amount at any one time outstanding not to exceed the amount set
forth opposite such Lender's name on Schedule I hereto, as the same may be
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reduced from time to time in accordance with the terms of this Agreement;
collectively as to all the Lenders, the "Commitments".
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"Commitment Percentage": as to any Lender at any time, the
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percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding).
"Commitment Period": the period from and including the date hereof to
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but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commonly Controlled Entity": an entity, whether or not incorporated,
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which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"Consent of Guarantors": the Consent of Guarantors, dated as of May
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5, 1995, executed by the Subsidiaries parties to the Subsidiaries
Guarantee, the form of which Consent of Guarantors is attached hereto as
Exhibit I.
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"Consolidated Current Assets": at a particular date, all amounts
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which would, in conformity with GAAP, be included under current assets on a
consolidated balance sheet of the Borrower and its Subsidiaries as at such
date.
"Consolidated Current Liabilities": at a particular date, all amounts
--------------------------------
which would, in conformity with GAAP, be included under current liabilities
on a consolidated balance sheet of the Borrower and its Subsidiaries as at
such date.
"Consolidated Net Income": for any period, the consolidated net
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income (or deficit) of the Borrower and its Subsidiaries for such period
(taken as a cumulative whole), determined in conformity with GAAP (but
excluding gains or losses from sale of securities of any Person (other than
a Subsidiary)).
7
"Consolidated Net Worth": at a particular date, all amounts which
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would, in conformity with GAAP, be included under stockholders' equity on a
consolidated balance sheet of the Borrower and its Subsidiaries as at such
date, excluding any treasury stock and any Foreign Translation Adjustments.
"Consolidated Total Liabilities": at a particular date, all amounts
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which would, in conformity with GAAP, be included under liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries as at such
date, and including in any event the Aggregate Outstanding Direct
Extensions of Credit of the Lenders on such date, and excluding in any
event the Talk Note, the Subordinated Debentures and any Standby Letter of
Credit issued to support the Borrower's obligation under the Subordinated
Debentures.
"Consolidated Working Capital": at a particular date, the excess of
----------------------------
Consolidated Current Assets over Consolidated Current Liabilities at such
date.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Debenture Exchange Agreement": the Debenture Exchange Agreement
----------------------------
dated as of March 8, 1994, among the Borrower and the Existing Noteholders,
as the same may be amended, supplemented or otherwise modified from time to
time in accordance with the terms of this Agreement.
"Default": any of the events specified in Section 10, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States of
------- -
America.
"Domestic Subsidiary": any Subsidiary incorporated under the laws of
-------------------
the United States of America or a State thereof.
"Draft": a draft, substantially in the form of Exhibit F hereto, or
----- ---------
in such other form as the Accepting Bank shall reasonably request.
"Eligible Accounts": as to any Person, at a particular date, the
-----------------
total outstanding balance of Accounts of such Person:
8
(a) which are bona fide, valid and legally enforceable obligations of
the Account Debtor in respect thereof and arise from the actual sale
and delivery of goods or rendition and acceptance of services in the
ordinary course of business to such Account Debtor;
(b) which do not contravene, or arise from sales which contravene, any
Requirement of Law applicable thereto;
(c) which are payable in full not later than 60 days after the date of
the creation of original invoices related thereto unless (i) the
payment of such Accounts are supported by letters of credit issued by
a bank and on terms reasonably acceptable to the Agent or (ii) (A) the
Account Debtors on such Accounts have Dun & Bradstreet ratings of 5A1
or higher and (B) such Accounts are payable in full not later than 90
days after the date of the creation of original invoices related
thereto;
(d) which are not subject to any offset, net-out, set-off, deduction,
dispute, counterclaim or defense, and with respect to which no return,
rejection or repossession has occurred;
(e) which do not represent a consignment sale, guaranteed sale, sale
or return or other similar arrangement;
(f) which are not Accounts relating to sales to employees or
representatives;
(g) which are reduced by any amounts then owing by such Person to the
Account Debtor or obligor in respect of such Accounts, including,
without limitation, any amounts credited or charged back to such
Accounts;
(h) which have been invoiced by such Person and which have not been
past due for more than 60 days after the payment dates specified in
the invoices related to such Accounts;
(i) with respect to which, the Agent is, and continues to be,
reasonably satisfied with the credit standing of the Account Debtor or
obligor;
(j) which are not owed by an Account Debtor or obligor which is an
Affiliate (other than CellStar) or Subsidiary of such Person;
(k) which are not owed by an Account Debtor or obligor which has taken
any of the actions or suffered any of the events of the kind described
in paragraph (g) of Section 10, except to the extent any such Accounts
are
9
entitled to an administrative expense priority under the Bankruptcy
Code;
(l) with respect to which, together with its Affiliates, more than 50%
of the aggregate amount of Accounts owed by any Account Debtor or
obligor to such Person are not more than 60 days past due after the
payment dates specified in the invoices related to such Accounts;
(m) which are (i) with respect to Accounts owed to the Borrower or any
Domestic Subsidiary, denominated in Dollars and payable only in
Dollars and only in the United States of America and (ii) with respect
to Accounts owed to the Canadian Subsidiary, are denominated in
Dollars or Canadian dollars and payable only in Dollars or Canadian
dollars and only in the United States of America or Canada;
(n) which are owned solely by such Person free and clear of all Liens
or other rights or claims of any other Person (except in favor of the
Collateral Agent for the benefit of the Lenders) and arise from sales
in respect of which all sales, excise or similar taxes have been paid
in full;
(o) which are subject to a perfected first priority security interest
in favor of the Collateral Agent for the benefit of the Lenders
pursuant to the Borrower Security Agreement or the Subsidiaries
Security Agreement, as the case may be;
(p) with respect to which all consents, licenses, approvals or
authorizations of, or registrations or declarations with, any
Governmental Authority, required to be obtained, effected or given in
connection with the execution, delivery and performance of such
Accounts have been duly obtained, effected or given, and are in full
force and effect;
(q) which are not Accounts owed by any Governmental Authority other
than such Accounts as to which all required filings to perfect the
security interest in such Accounts in favor of the Collateral Agent
pursuant to the Borrower Security Agreement or the Subsidiaries
Security Agreement, as the case may be, have been made, including,
without limitation, any filings and/or assignments required under the
Assignment of Claims Act of 1940, as amended;
(r) which, with respect to Accounts owed to the Canadian Subsidiary,
may be reduced by an amount, as determined by the Agent in its
reasonable discretion, equal to any costs, taxes or other amounts that
might
10
be payable in the event the security interest in such Accounts in
favor of the Collateral Agent was to be enforced;
(s) which constitute "accounts" within the meaning of the Uniform
Commercial Code of the state in which the chief executive office of
such Person is located; and
(t) which conform in all other respects to the representations and
warranties contained in the Borrower Security Agreement or the
Subsidiaries Security Agreement, as the case may be.
Standards of eligibility may be fixed and revised from time to time solely
by the Agent in the Agent's reasonable judgment, provided that the Agent
--------
shall not revise the standards of eligibility in a manner which would
increase the outstanding balance of Eligible Accounts at the time of such
revision without the prior written consent of the Required Lenders. Unless
a Default or Event of Default has occurred and is continuing, the Agent
shall give five days prior written notice to the Borrower of any change in
the standards of eligibility set forth above, except for changes relating
to the credit standing of the Account Debtor or obligor on any Account.
"Eligible Inventory": as to any Person, at a particular date, the
------------------
aggregate amount of Inventory of such Person:
(a) which is owned solely by such Person free and clear of all Liens
or other rights or claims of any other Person (except in favor of the
Collateral Agent for the benefit of the Lenders);
(b) which (i) is subject to a perfected first priority security
interest in favor of the Collateral Agent for the benefit of the
Lenders pursuant to the Borrower Security Agreement or the
Subsidiaries Security Agreement, as the case may be, and is located at
a storage, manufacturing or public facility owned or leased by such
Person in the United States of America or, with respect to the
Inventory of the Canadian Subsidiary, in Canada, and, in either case,
as to which, if such storage, manufacturing or public facility is
leased, a Landlord's Consent has been received by the Collateral
Agent, or (ii) is being shipped to the United States of America or
Canada under a Letter of Credit issued, or Acceptance created, under
this Agreement, if, upon arrival of such Inventory in the United
States of America or Canada, such Inventory will immediately be
subject to a first priority security interest in favor of the
Collateral Agent for the benefit of the Lenders pursuant to the
Borrower
11
Security Agreement or the Subsidiaries Security Agreement, as the case
may be, provided that, if any such Letter of Credit is not denominated
--------
in Dollars, the value of such Inventory is reduced from time to time
to account for currency fluctuations;
(c) which is readily marketable for sale;
(d) which is not damaged;
(e) which has not been returned or rejected by any prospective buyer
thereof, unless, if such Inventory is returned, such Inventory is
readily marketable for sale upon return;
(f) which are not display goods;
(g) which is not in the form of books or other literature;
(h) which, in the case of Cellular Inventory, has a turnover of 6
months or less and, in the case of other Inventory, has a turnover of
9 months or less;
(i) which is not owned by an Affiliate or Subsidiary of such Person;
(j) with respect to which, no Account has been created;
(k) which, with respect to Inventory located at a storage,
manufacturing or public facility in Canada, may be reduced by an
amount, as determined by the Agent in its sole discretion, equal to
any costs, taxes or other amounts that would be payable in the event
the security interest in favor of the Collateral Agent was to be
enforced;
(l) which is not work in progress, raw materials, supplies or
capitalized fees; and
(m) which conforms in all other respects to the representations and
warranties contained in the Borrower Security Agreement or the
Subsidiaries Security Agreement, as the case may be.
Eligible Inventory shall be increased by an amount equal to the
undrawn face amount of any Letter of Credit against which goods are to be
shipped to the Borrower or any of its Subsidiaries, provided that if any
--------
such Letter of Credit is not denominated in Dollars, the amount by which
Eligible Inventory is increased pursuant to this sentence shall be adjusted
from time to time by the Agent to account for currency fluctuations.
Standards of eligibility may be fixed and revised from time to time solely
by the Agent in
12
the Agent's reasonable judgment, provided that the Agent shall not revise
--------
the standards of eligibility in a manner which would increase the
outstanding amount of Eligible Inventory at the time of such revision
without the prior written consent of the Required Lenders. Unless a
Default or Event of Default has occurred and is continuing, the Agent shall
give five days prior written notice to the Borrower of any change in the
standards of eligibility set forth above.
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability
or standards of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each Interest
--------------------
Period pertaining to a Eurodollar Loan, the rate per annum equal to the
rate at which Chemical is offered Dollar deposits at or about 10:00 A.M.,
New York City time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar Loans
are then being conducted for delivery on the first day of such Interest
Period for the number of days comprised therein and in an amount comparable
to the amount of its Eurodollar Loan to be outstanding during such Interest
Period.
"Eurodollar Loans": Loans the rate of interest applicable to which is
----------------
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the
13
following formula (rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
------------------
whose Interest Periods each begin on the same day and end on the same other
day.
"Event of Default": any of the events specified in Section 10,
----------------
provided that any requirement for the giving of notice, the lapse of time,
--------
or both, or any other condition, has been satisfied.
"Exchange Debentures": collectively, the Series AA 10.80% Convertible
-------------------
Debentures due February 9, 1996 and the Series BB 11.00% Convertible
Debentures due February 9, 1996 issued pursuant to the Debenture Exchange
Agreement.
"Existing Acceptances": such bankers' acceptances as are part of the
--------------------
Existing Extensions of Credit and are outstanding and/or unreimbursed on
the Closing Date.
"Existing Credit Agreement": as defined in the recitals to this
-------------------------
Agreement.
"Existing Extensions of Credit": as defined in the recitals to this
-----------------------------
Agreement.
"Existing Letters of Credit": such letters of credit, steamship
--------------------------
guarantees and airway releases as are part of the Existing Extensions of
Credit and are outstanding and/or unreimbursed on the Closing Date.
"Existing Noteholders": the financial institutions which are parties
--------------------
to the Debenture Exchange Agreement.
"Financing Lease": any lease of property, real or personal, the
---------------
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"Foreign Exchange Contracts": as defined in subsection 5.16.
--------------------------
"Foreign Exchange Liabilities": as defined in subsection 5.16.
----------------------------
"Foreign Translation Adjustment": as defined under GAAP.
------------------------------
"GAAP": generally accepted accounting principles in the United States
----
of America in effect from time to time.
14
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Government Contracts": as defined in subsection 6.21.
--------------------
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
-------------------- -------------------
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit or
bankers' acceptance) to induce the creation of which the guaranteeing
person has issued a reimbursement, counter indemnity or similar obligation,
in either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of any
-------------------
other third Person (the "primary obligor") in any manner, whether directly
---------------
or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor if such purchase of property is 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, (ii) to advance
or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency 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 owner
of any such primary obligation against loss in respect thereof; provided,
--------
however, that the term Guarantee Obligation shall not include endorsements
-------
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Required
Lenders in good faith.
15
"Guarantors": collectively, the Domestic Subsidiaries, the Canadian
----------
Subsidiary and any other Subsidiaries required to execute a guarantee,
security agreement or other Security Document pursuant to subsection 8.7.
"Indebtedness": of any Person at any date, (a) all indebtedness of
------------
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities, accrued
expenses and documentary acceptances incurred in the ordinary course of
business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of such Person under Financing Leases, (c) all obligations of
such Person in respect of letters of credit or acceptances issued or
created for or for the account of such Person, (d) all obligations of such
Person under Foreign Exchange Contracts and (e) all liabilities secured by
any Lien on any property owned by such Person even though such Person has
not assumed or otherwise become liable for the payment thereof.
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Interest Payment Date": with respect to any Loan, the last day of
---------------------
each month to occur while such Loan is outstanding, provided that (a) with
--------
respect to any Chemical Rate Loan, the date upon which such Loan is
converted to another Type of Loan shall also be an Interest Payment Date
for such Loan and (b) with respect to any Eurodollar Loan, the last day of
the Interest Period with respect to such Loan shall also be an Interest
Payment Date for such Loan.
"Interest Period": with respect to any Eurodollar Loan:
---------------
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Agent not less than three
Business Days prior to the last day of the then current Interest
Period with respect thereto;
16
provided that all of the foregoing provisions relating to Interest Periods
--------
are subject to the following:
(i) if any Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless 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 immediately preceding
Business Day;
(ii) no Interest Period shall extend beyond the Termination Date;
(iii) if the Borrower shall fail to give notice as provided above,
the Borrower shall be deemed to have selected a Chemical Rate Loan to
replace the affected Eurodollar Loan; and
(iv) any Interest Period 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 a calendar month.
"Inventory": as defined in the UCC and including, without limitation,
---------
all Cellular Inventory.
"Issuing Bank": Chemical, or its successor pursuant to subsections
------------
11.9 and 11.10, in its capacity as issuer of Letters of Credit pursuant to
subsection 3.1(a).
"Joint Venture": as to any Person, a corporation, partnership or
-------------
other entity (other than a Subsidiary) of which 50% or less (but more than
10%) of the shares of stock or other ownership interests are at the time
owned, directly or indirectly, through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Joint
Venture " or "Joint Ventures" in this Agreement shall refer to a Joint
Venture or Joint Ventures of the Borrower, including, without limitation,
the entities listed in Schedule 6.15 under the heading "Joint Ventures".
------------- --------------
"Landlord's Consent": a consent substantially in the form of Exhibit
------------------ -------
H hereto.
-
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit (including Existing Letters of Credit) and (b) the aggregate
amount of unpaid L/C Reimbursement Obligations at such time, provided that,
--------
solely for purposes of the definition of Aggregate Outstanding Extensions
of Credit and for purposes of subsections 2.1, 3.1 and 4.1, L/C Obligations
shall not
17
include the aggregate undrawn and unexpired amount of any then outstanding
Steamship Guarantees and Airway Releases which have not been outstanding
for a period in excess of 30 days after the date of issuance thereof,
provided further that, notwithstanding the immediately preceding proviso,
-------- -------
the amount excluded from L/C Obligations pursuant to such proviso shall
never exceed $2,000,000 in the aggregate.
"L/C Reimbursement Obligations": the obligation of the Borrower to
-----------------------------
reimburse the Issuing Bank pursuant to subsection 5.5(a) for amounts drawn
under Letters of Credit (including Existing Letters of Credit).
"L/C Participants": with respect to each Letter of Credit (including
----------------
each Existing Letter of Credit), collectively, all the Lenders other than
the Issuing Bank.
"Letters of Credit": as defined in subsection 3.1(a).
-----------------
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any Financing Lease having
substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing).
"Loans": as defined in subsection 2.1.
-----
"Loan Documents": this Agreement, the Notes, the Security Documents,
--------------
the Consent of Guarantors, any Application, any Acceptance Request, and all
other documents executed and delivered in connection herewith or therewith,
including any amendments, supplements or other modifications to any of the
foregoing.
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
business, operations, property or financial condition of the Borrower and
its Subsidiaries taken as a whole, (b) the ability of the Borrower to
perform its obligations under this Agreement, the Notes or any of the other
Loan Documents, or (c) the validity or enforceability of this Agreement,
the Notes or any of the other Loan Documents or the rights or remedies of
the Agent, the Collateral Agent or the Lenders hereunder or thereunder.
"Material Foreign Subsidiary": any Subsidiary, other than a Domestic
---------------------------
Subsidiary, which (a) has total assets of $5,000,000 (or the equivalent
thereof in any foreign currency) or greater or (b) has net income in
Dollars (or
18
the equivalent thereof in any foreign currency) in any year equal to or in
excess of an amount equal to 10% of Consolidated Net Income for such year,
in either such case as determined in accordance with GAAP or the comparable
principles of any foreign country used in the preparation of the financial
statements of such Subsidiary.
"Materials of Environmental Concern": any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
"Non-Excluded Taxes": as defined in subsection 5.15.
------------------
"Note": the collective reference to the promissory notes,
----
substantially in the form of Exhibit A hereto, issued pursuant to this
---------
Agreement, including, without limitation, the promissory notes issued
pursuant to subsection 2.2.
"Participant": as defined in subsection 12.6(b).
-----------
"Participating Lender": any Lender (other than the Issuing Bank or
--------------------
the Accepting Bank, as the case may be) with respect to its Participating
Interest in each Letter of Credit (including each Existing Letter of
Credit) and Acceptance (including each Existing Acceptance).
"Participating Interest": with respect to each Letter of Credit
----------------------
(including each Existing Letter of Credit) or Acceptance (including each
Existing Acceptance), (i) in the case of the Issuing Bank or the Accepting
Bank, as the case may be, its interest (a) in such Letter of Credit and any
Application relating thereto or (b) in such Acceptance and any Acceptance
Request relating thereto, as the case may be, in either case after giving
effect to the granting of any participating interests therein pursuant to
this Agreement and (ii) in the case of each Participating Lender, its
undivided participating interest (a) in such Letter of Credit and any
Application relating thereto or (b) in such Acceptance and any Acceptance
Request relating thereto, as the case may be.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business trust,
------
joint stock company, limited liability company, trust, unincorporated
association, joint venture,
19
Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
----
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Proceeds": as defined in the UCC.
--------
"Purchasing Lenders": as defined in subsection 12.6(c).
------------------
"Reimbursement and Cash Collateral Agreement": the Reimbursement and
-------------------------------------------
Cash Collateral Agreement, dated as of March 15, 1994, between the Borrower
and Chemical, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms of this Agreement.
"Registration Rights Agreement": the Registration Rights Agreement
-----------------------------
made and entered into as of May 6, 1992, by and between the Borrower and
the Existing Noteholders.
"Regulation U": Regulation U of the Board of Governors of the Federal
------------
Reserve System.
"Reimbursement Obligations": collectively, the L/C Reimbursement
-------------------------
Obligations and the Acceptance Reimbursement Obligations.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Sec.2615.
"Required Lenders": at any time, Lenders the Commitment Percentages
----------------
of which then aggregate at least 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its material property is subject.
20
"Responsible Officer": the chief executive officer, the president or
-------------------
the chief financial officer of the Borrower.
"Security Documents": collectively, the Borrower Security Agreement,
------------------
the Subsidiaries Guarantee and the Subsidiaries Security Agreement and any
other agreement or document executed in connection with this Agreement or
any other Security Document which is intended to provide security for the
obligations of the Borrower and the Subsidiaries under or in respect of
this Agreement, including, without limitation, any security agreement or
document executed pursuant to subsection 8.7.
"Single Employer Plan": any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
"Standby L/C Commitment": $5,000,000.
----------------------
"Standby Letters of Credit": as defined in subsection 3.1(b).
-------------------------
"Standby L/C Obligations": at any time, an amount equal to the sum of
-----------------------
(a) the aggregate then undrawn and unexpired amount of the then outstanding
Standby Letters of Credit and (b) the aggregate amount of unpaid Standby
L/C Reimbursement Obligations at such time.
"Steamship Guarantee": as defined in subsection 3.1(b).
-------------------
"Subordinated Debenture Indenture": the Indenture dated as of March
--------------------------------
15, 1994, among the Borrower and Continental Stock Transfer & Trust
Company, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of this Agreement.
"Subordinated Debentures": the 6-1/4% Convertible Subordinated
-----------------------
Debentures due 2001 issued by the Borrower pursuant to the Subordinated
Debenture Indenture.
"Subsidiaries Guarantee": the Amended and Restated Subsidiaries
----------------------
Guarantee, dated as of March 15, 1994, made by the Subsidiaries parties
thereto in favor of the Collateral Agent, a copy of which is attached
hereto as Exhibit K.
---------
"Subsidiaries Security Agreement": the Amended and Restated Security
-------------------------------
Agreement, dated as of March 15, 1994, made by the Subsidiaries parties
thereto in favor of the Collateral Agent, a copy of which is attached
hereto as Exhibit L.
---------
"Subsidiary": as to any Person, a corporation, partnership or other
----------
entity of which more than 50% of the
21
shares of stock, or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation, partnership or
other entity, are at the time owned, directly or indirectly, through one or
more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or "Subsidiaries" shall refer to a
Subsidiary or Subsidiaries of the Borrower and shall include, without
limitation, the corporations listed in Schedule 6.15 under the headings
-------------
"Domestic Subsidiaries", "Canadian Subsidiaries" and "Material Foreign
--------------------- --------------------- ----------------
Subsidiaries".
------------
"Talk Corporation": as defined in subsection 9.9(f).
----------------
"Talk Note": the note issued by the Borrower to General Leasing USA
---------
in the aggregate principal amount of Yen500,000,000.
"Termination Date": February 28, 1997.
----------------
"Trade Letters of Credit": as defined in subsection 3.1(b).
-----------------------
"Transferee": as defined in subsection 12.6(f).
----------
"Type": as to any Loan, its nature as a Chemical Rate Loan or a
----
Eurodollar Loan.
"UCC": the Uniform Commercial Code as from time to time in effect in
---
the State of New York.
"Uniform Customs": the Uniform Customs and Practice for Documentary
---------------
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision
22
of this Agreement, and Section, subsection, Schedule and Exhibit references are
to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 Commitments. (a) Subject to the terms and conditions hereof,
-----------
each Lender severally agrees to make revolving credit loans ("Loans") to the
-----
Borrower from time to time during the Commitment Period in an aggregate
principal amount at any one time outstanding, when added to such Lender's
Commitment Percentage of the then outstanding L/C Obligations and Acceptance
Obligations, not to exceed the lesser of (A) the amount of such Lender's
Commitment and (B) such Lender's Commitment Percentage share of the Borrowing
Base then in effect. During the Commitment Period the Borrower may use the
Commitments by borrowing, prepaying the Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii)
Chemical Rate Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Agent in accordance with subsections 2.3 and 5.8,
provided that no Loan shall be made or continued as or converted to a Eurodollar
- --------
Loan after the day that is one month prior to the Termination Date.
2.2 Notes. The Loans made by each Lender shall be evidenced by a
-----
Note, substantially in the form of Exhibit A hereto, with appropriate insertions
---------
as to payee, date and principal amount, payable to the order of such Lender and
in a principal amount equal to the lesser of (a) the amount set forth opposite
such Lender's name on Schedule I hereto under the heading "Commitment" and (b)
---------- ----------
the aggregate unpaid principal amount of all Loans made by such Lender. Each
Lender is hereby authorized to record the date, Type and amount of each Loan
made by such Lender, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans, the
Eurodollar Rate and the length of each Interest Period with respect thereto, on
the schedule annexed to and constituting a part of its Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
----- -----
information so recorded; provided that the failure by any Lender to make any
--------
such recordation on its Note (or any error therein) shall not affect any of the
obligations of the Borrower under such Note or this Agreement. Each Note shall
(x) be dated the Closing Date, (y) be stated to mature on the Termination Date
and (z) provide for the payment of interest in accordance with subsection 5.6.
23
2.3 Procedure for Revolving Credit Borrowing. The Borrower may
----------------------------------------
borrow under the Commitments during the Commitment Period on any Business Day,
provided that the Borrower shall give the Agent irrevocable notice (which notice
- --------
must be received by the Agent prior to 11:30 A.M., New York City time, (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Loans are to be initially Eurodollar Loans or (b) on the requested
Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the
requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar
Loans, Chemical Rate Loans or a combination thereof and (iv) if the borrowing is
to be entirely or partly of Eurodollar Loans, the amount of such Eurodollar
Loans and the respective lengths of the initial Interest Periods therefor. Each
borrowing under the Commitments shall be in an amount equal to (x) in the case
of Chemical Rate Loans, $500,000 or a whole multiple thereof (or, if the then
Available Commitments are less than $500,000, such lesser amount) and (y) in the
case of Eurodollar Loans, an amount equal to $1,500,000 or a whole multiple of
$500,000 in excess thereof. Upon receipt of any such notice from the Borrower,
the Agent shall (a) in the case of a notice requesting a borrowing of Eurodollar
Loans, promptly notify each Lender thereof and (b) in the case of a notice
requesting a borrowing of Chemical Rate Loans, notify each Lender thereof prior
to 1:00 P.M. on the requested Borrowing Date. Each Lender will make the amount
of its pro rata share of each borrowing available to the Agent for the account
of the Borrower at the office of the Agent specified in subsection 12.2 prior to
2:00 P.M., New York City time, on the Borrowing Date requested by the Borrower
in funds immediately available to the Agent. Such borrowing will then be made
available to the Borrower by the Agent crediting the account of the Borrower on
the books of such office with the aggregate of the amounts made available to the
Agent by the Lenders and in like funds as received by the Agent.
SECTION 3. AMOUNT AND TERMS OF LETTERS OF CREDIT
3.1 Letters of Credit. (a) Subject to the terms and conditions
-----------------
hereof, the Issuing Bank, in reliance on the agreements of the other Lenders set
forth in subsection 3.4(a), agrees to issue letters of credit, steamship
guarantees and airway releases (collectively, "Letters of Credit") for the
-----------------
account of the Borrower on any Business Day during the Commitment Period in such
form as may be approved from time to time by the Issuing Bank; provided that the
--------
Issuing Bank shall not issue any Letter of Credit if, after giving effect to
such issuance, the Aggregate Outstanding Extensions of Credit of the Lenders
would exceed the lesser of (i) the Commitments and (ii) the Borrowing Base then
in effect; and provided, further, that the Issuing Bank shall not issue any
-------- -------
Standby Letter of Credit if, after giving effect to such issuance, the Standby
L/C Obligations would exceed the Standby L/C Commitment. On the Closing Date,
the Existing Letters of Credit outstanding on the Closing Date shall be deemed
24
to be Letters of Credit issued and outstanding under this Agreement.
(b) Each Letter of Credit shall (i) (A) be denominated in Dollars,
Japanese Yen or any other currency reasonably acceptable to the Issuing Bank and
shall be either (x) a documentary letter of credit in respect of the purchase of
goods or services by the Borrower in the ordinary course of business (a "Trade
-----
Letter of Credit") or (y) a standby letter of credit issued to support
- ----------------
obligations of the Borrower, contingent or otherwise, in favor of such
beneficiaries as the Borrower may specify from time to time (which shall be
reasonably satisfactory to the Issuing Bank) (a "Standby Letter of Credit"), (B)
------------------------
subject to the subsection 3.1(e) hereof, expire no later than, in the case of
Trade Letters of Credit, 90 days after the date of issuance and, in the case of
Standby Letters of Credit, 360 days after the date of issuance, and in any event
no later than the Termination Date and (C) be payable at sight or (ii) be a
steamship guarantee (a "Steamship Guarantee") or airway release (an "Airway
------------------- ------
Release") denominated in Dollars and issued in a form satisfactory to the
- -------
Issuing Bank for the benefit of a shipper of goods the purchase of which has
been financed through the issuance of a Trade Letter of Credit.
(c) Each Letter of Credit shall be subject to the Uniform Customs
(except to the extent that any Existing Letter of Credit continues to be subject
to the Uniform Customs and Practice for Documentary Credits (1983 Revision),
International Chamber of Commerce Publication No. 400, in accordance with its
terms), and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) The Issuing Bank shall not at any time issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Bank or any
L/C Participant to exceed any limits imposed by, any applicable Requirement of
Law.
(e) Subject to the terms and conditions hereof, the Borrower may
request the extension or amendment of any Trade Letter of Credit (including any
Existing Letter of Credit) issued hereunder by giving written notice to the
Issuing Bank with respect thereto at least five Business Days prior to the then
current expiration date of such Letter of Credit, and the Issuing Bank may, in
its discretion, grant such extension or amendment and, if such extension or
amendment is granted, shall furnish the Agent with a copy of such extended or
amended Trade Letter of Credit, provided that no extension or amendment of any
--------
Trade Letter of Credit (including any Existing Letter of Credit) shall be
granted if (i) such extension or amendment would be for a period of more than 90
days, (ii) prior to such extension or amendment, such Trade Letter of Credit
shall have been extended or amended five times, (iii) after giving effect to
such extension or amendment, such Letter of Credit would expire later than 360
days after the date of issuance of such Letter of Credit
25
or later than the Termination Date, (iv) after giving effect to such extension
or amendment, the Aggregate Outstanding Extensions of Credit of the Lenders
would exceed the lesser of (A) the Commitments or (B) the Borrowing Base then in
effect or (v) any Default or Event of Default has occurred and is continuing;
provided, further, that (i) after giving effect to such extension or amendment,
- -------- -------
the Standby L/C Obligations would not exceed the Standby L/C Commitment and (ii)
if such amendment (A) increases the face amount of the affected Trade Letter of
Credit, the Borrower shall pay to the Agent, for the account of the Issuing Bank
and the L/C Participants, a letter of credit commission or fee on the amount of
such increase in the face amount of such Letter of Credit determined in
accordance with subsection 3.3 as if the affected Trade Letter of Credit was
issued on the date of such increase to be shared ratably among the Issuing Bank
and the L/C Participants in accordance with their respective Commitment
Percentages or (B) extends the maturity of the affected Trade Letter of Credit,
the Borrower shall pay to the Agent, for the account of the Issuing Bank and the
L/C Participants, a letter of credit commission or fee on the face amount of
such Letter of Credit determined in accordance with subsection 3.3 as if the
affected Trade Letter of Credit was issued on the date such extension becomes
effective to be shared ratably among the Issuing Bank and the L/C Participants
in accordance with their respective Commitment Percentages. It is understood
and agreed that the Issuing Bank shall be under no obligation to issue any
extension or amendment of a Letter of Credit.
(f) The Issuing Bank shall notify each Lender on a monthly basis of
the issuance, extension or amendment of Letters of Credit, and any drawings or
other payments under Letters of Credit, during such month, provided that the
--------
failure to give such notice shall not affect such Lender's obligations in
respect of such Letter of Credit.
3.2 Procedure for Issuance, Extension or Amendment of Letters of
------------------------------------------------------------
Credit. The Borrower may from time to time request that the Issuing Bank issue
- ------
a Letter of Credit by delivering to the Issuing Bank at its address for notices
specified herein an Application therefor, including by electronic transmission,
completed to the reasonable satisfaction of the Issuing Bank, and such other
certificates, documents and other papers and information as the Issuing Bank may
reasonably request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit earlier than three Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and
the Borrower. The Borrower may
26
request the extension or amendment of a Trade Letter of Credit in accordance
with the provisions of subsection 3.1(e). If the Borrower requests such an
extension or amendment, the Issuing Bank shall promptly notify the Borrower as
to whether such extension or amendment will be granted (but in no event shall
the Issuing Bank be required to give such notice to the Borrower earlier than
two Business Days after its receipt of a request therefor). If such extension
or amendment is granted, the Issuing Bank shall promptly issue such extension or
amendment (but in no event shall the Issuing Bank be required to issue such
extension or amendment earlier than three Business Days after its receipt of a
request therefor) by issuing the original of such extended or amended Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Bank and the Borrower.
3.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay
-----------------------------------
to the Agent, for the account of the Issuing Bank and the L/C Participants, a
letter of credit commission with respect to each Trade Letter of Credit in an
amount equal to .25% of the face amount of such Trade Letter of Credit to be
shared ratably among the Issuing Bank and the L/C Participants in accordance
with their respective Commitment Percentages. Such commission shall be payable
in advance on the date of issuance of each Trade Letter of Credit and shall be
nonrefundable.
(b) The Borrower shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a letter of credit fee with respect to
each Standby Letter of Credit, computed for the period from the date of issuance
to the date of expiration at the rate of 0.875% per annum (or as otherwise
agreed from time to time among the Borrower and the Lenders), calculated on the
basis of a 360 day year, of the aggregate amount available to be drawn under
such Standby Letter of Credit on the date of issuance to be shared ratably among
the Issuing Bank and the L/C Participants in accordance with their respective
Commitment Percentages. Such commissions shall be payable in advance on the
date of issuance of each Standby Letter of Credit and shall be nonrefundable.
(c) The Borrower shall pay to the Issuing Bank, for its own account,
on the date of issuance of a Steamship Guarantee or Airway Release such
processing fees as shall customarily be charged by the Issuing Bank in
connection with issuance of a Steamship Guarantee or Airway Release.
(d) In addition to the foregoing commissions, the Borrower shall pay
or reimburse the Issuing Bank for such normal and customary costs and expenses
as are incurred or charged by the Issuing Bank in issuing, effecting payment
under, amending or otherwise administering any Letter of Credit.
(e) The Agent shall, at the end of each month, distribute to the
Issuing Bank and the L/C Participants all
27
commissions received by the Agent for their respective accounts pursuant to this
subsection.
(f) No fees or other commissions shall be payable by any Issuing Bank
to any L/C Participant with respect to any Existing Letter of Credit.
3.4 L/C Participations. (a) The Issuing Bank irrevocably agrees to
------------------
grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank
to issue Letters of Credit (including Existing Letters of Credit) hereunder,
each L/C Participant irrevocably agrees to accept and purchase and hereby
accepts and purchases from the Issuing Bank, on the terms and conditions
hereinafter stated, for such L/C Participant's own account and risk, an
undivided interest equal to such L/C Participant's Commitment Percentage in the
Issuing Bank's obligations and rights under each Letter of Credit issued
hereunder and the amount of each draft paid or other payment made by the Issuing
Bank thereunder. Each L/C Participant unconditionally and irrevocably agrees
with the Issuing Bank that, if a draft is paid or any payment is otherwise made
under any Letter of Credit (including any Existing Letter of Credit) for which
the Issuing Bank is not reimbursed in full by the Borrower in accordance with
the terms of this Agreement or the Application, as the case may be, such L/C
Participant shall pay to the Issuing Bank upon demand at the Issuing Bank's
address for notices specified herein an amount equal to such L/C Participant's
Commitment Percentage of the amount of such draft or payment, or any part
thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit
(including any Existing Letter of Credit) is paid to the Issuing Bank within
three Business Days after the date such payment is due, such L/C Participant
shall pay to the Issuing Bank on demand an amount equal to the product of (i)
such amount, times (ii) the daily average Federal funds rate, as quoted by the
Issuing Bank, during the period from and including the date such payment is
required to the date on which such payment is immediately available to the
Issuing Bank, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to subsection
3.4(a) is not in fact made available to the Issuing Bank by such L/C Participant
within three Business Days after the date such payment is due, the Issuing Bank
shall be entitled to recover from such L/C Participant, on demand, such amount
with interest thereon calculated from such due date at the rate per annum
applicable to Chemical Rate Loans which are not overdue hereunder. A
certificate of the Issuing Bank submitted to any L/C Participant with respect to
any amounts owing under this subsection shall be conclusive in the absence of
manifest error.
28
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit (including any Existing Letter of Credit) and has
received from any L/C Participant its pro rata share of such payment in
--- ----
accordance with subsection 3.4(a), the Issuing Bank receives any payment related
to such Letter of Credit (whether directly from the Borrower or otherwise,
including proceeds of collateral applied thereto by the Issuing Bank), or any
payment of interest on account thereof, the Issuing Bank will, within three
Business Days after receipt thereof, distribute to such L/C Participant its pro
---
rata share thereof; provided, however, that in the event that any such payment
- ---- -------- -------
received by the Issuing Bank shall be required to be returned by the Issuing
Bank, such L/C Participant shall, within three Business Days, return to the
Issuing Bank the portion thereof previously distributed by the Issuing Bank to
it. If any amount payable under this paragraph is paid within three Business
Days after such payment is due, the Lender which owes such amount shall pay to
the Lender to which such amount is owed on demand an amount equal to the product
of (i) such amount, times (ii) the daily average Federal funds rate, as quoted
by such Lender, during the period from and including the date such payment is
required to the date on which such payment is made available to such Lender,
times (iii) a fraction the numerator of which is the number of days that elapse
during such period and the denominator of which is 360. If any amount required
to be paid under this paragraph is not in fact made available to the Lender to
which such amount is owed within three Business Days after the date such payment
is due, such Lender shall be entitled to recover from the Lender which owes such
amount, on demand, such amount with interest thereon calculated from such due
date at the rate per annum applicable to Chemical Rate Loans which are not
overdue hereunder.
3.5 Obligations Absolute. The Borrower's obligations under this
--------------------
Section 3 and subsection 5.5(a) shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or defense
to payment which the Borrower may have or have had against the Issuing Bank or
any beneficiary of a Letter of Credit (including any Existing Letter of Credit).
The Borrower also agrees with the Issuing Bank that the Issuing Bank shall not
be responsible for, and the Borrower's L/C Reimbursement Obligations under
subsection 5.5(a) shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Borrower and any beneficiary of any Letter of
Credit (including any Existing Letter of Credit) or any other party to which
such Letter of Credit may be transferred or any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee. The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit (including
any Existing
29
Letter of Credit), except for errors or omissions caused by the Issuing Bank's
gross negligence or willful misconduct. The Borrower agrees that any action
taken or omitted by the Issuing Bank under or in connection with any Letter of
Credit (including any Existing Letter of Credit) or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the UCC, shall be binding
on the Borrower and shall not result in any liability of the Issuing Bank to the
Borrower.
3.6 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment or any payment is otherwise demanded under any Letter of Credit
(including any Existing Letter of Credit), the Issuing Bank shall promptly
notify the Borrower of the date and amount thereof. The responsibility of the
Issuing Bank to the Borrower in connection with any draft presented for payment
or other payment demanded under any Letter of Credit (including any Existing
Letter of Credit) shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
3.7 Application. To the extent that any provision of any Application
-----------
related to any Letter of Credit (including any Existing Letter of Credit) is
inconsistent with any provisions of this Agreement, such provisions of this
Agreement shall apply. The Borrower acknowledges and agrees that all rights of
the Issuing Bank under any Application shall inure to the benefit of each
Participating Bank to the extent of its Commitment Percentage as fully as if
such Participating Bank was a party to such Application.
SECTION 4. AMOUNT AND TERMS OF ACCEPTANCES
4.1 Acceptances. (a) Subject to the terms and conditions hereof,
-----------
the Accepting Bank, in reliance on the agreements of the other Lenders set forth
in subsection 4.3(a), agrees to create acceptances ("Acceptances") in respect of
-----------
Drafts drawn on the Accepting Bank by the Borrower and discounted by the
Accepting Bank for the account of the Borrower on any Business Day during the
Commitment Period; provided that the Accepting Bank shall not create any
--------
Acceptance, if after giving effect to such creation, the Aggregate Outstanding
Extensions of Credit of the Lenders would exceed the lesser of (x) the
Commitments and (y) the Borrowing Base then in effect; provided, further, that
-------- -------
concurrently therewith, the Borrower requests that such Bank discount such Draft
pursuant to subsection 4.4. On the Closing Date, the Existing Acceptances
outstanding on the Closing Date shall be deemed to be Acceptances created and
outstanding under this Agreement.
30
(b) The Accepting Bank shall not at any time create an Acceptance
hereunder if such creation would conflict with, or cause the Accepting Bank or
any Acceptance Participant to exceed any limits imposed by, any applicable
Requirement of Law or if, for reasons beyond the control of the Accepting Bank,
such Acceptance does not comply with applicable requirements of Section 13 of
the Federal Reserve Act or the regulations of the Board of Governors of the
Federal Reserve System of the United States of America governing the creation
and discounting of, and the maintenance of reserves with respect to, bankers'
acceptances.
(c) The Accepting Bank shall notify each Lender on a monthly basis of
the creation of Acceptances during such month, provided that the failure to give
--------
such notice shall not affect such Lender's obligations in respect of such
Acceptance.
4.2 Procedure for Creation of Acceptances. (a) The Borrower may
-------------------------------------
from time to time request the creation of Acceptances hereunder by delivering to
the Accepting Bank at its address for notices specified herein on the date a
draft presented under any Letter of Credit is paid, (i) an Acceptance Request,
completed to the reasonable satisfaction of the Accepting Bank and specifying,
among other things, the date (which must be a Business Day), maturity and amount
of the Draft to be accepted, (ii) to the extent not theretofore supplied to the
Accepting Bank in accordance with subsection 4.7, a Draft to be drawn on the
Accepting Bank, appropriately completed in accordance with this subsection 4.2
and (iii) such other certificates, documents and other papers and information as
the Accepting Bank may reasonably request.
(b) Each Draft submitted by the Borrower for acceptance hereunder
shall be denominated in Dollars, shall be dated the date specified in the
Acceptance Request with respect thereto and shall be stated to mature on a
Business Day which is 30, 60 or 90 days after the date thereof and, in any
event, not more than 90 days after the anticipated date of shipment specified in
the relevant Acceptance Request. No Acceptance created hereunder shall (i) be
created more than 30 days after the date of any shipments of goods to which such
Acceptance relates, (ii) have a tenor in excess of the period of time which is
usual and reasonably necessary to finance transactions of a similar character,
(iii) be in a face amount of less than $250,000 or (iv) be in a face amount
which, when taken together with all other Acceptances and other financings
relating to the shipment of goods to which such Acceptance relates, exceeds the
fair market value of such shipment.
(c) Subject to subsection 4.2(d), not later than the close of
business at its address for notices specified herein on the Business Day
specified in an Acceptance Request, and upon fulfillment of the applicable
conditions set forth in Section 7, the Accepting Bank shall, in accordance with
such Acceptance
31
Request, (i) complete the date, amount and maturity of each Draft presented for
acceptance (to the extent not completed by the Borrower), (ii) accept such
Drafts and (iii) upon such acceptance, discount such Acceptances in accordance
with subsection 4.4.
(d) The acceptance and discounting of Drafts by the Accepting Bank
hereunder shall at all times be in the discretion of the Accepting Bank.
4.3 Acceptance Participations. (a) The Accepting Bank irrevocably
-------------------------
agrees to grant and hereby grants to each Acceptance Participant, and, to induce
the Accepting Bank to create Acceptances (including Existing Acceptances)
hereunder, each Acceptance Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Accepting Bank, on the terms and
conditions hereinafter stated, for such Acceptance Participant's own account and
risk, an undivided interest equal to such Acceptance Participant's Commitment
Percentage in the Accepting Bank's obligations and rights under each Acceptance
created hereunder and the face amount of each Acceptance created by the
Accepting Bank. Each Acceptance Participant unconditionally and irrevocably
agrees with the Accepting Bank that, if the Accepting Bank is not reimbursed in
full by the Borrower for the face amount of any Acceptance in accordance with
the terms of this Agreement, such Acceptance Participant shall pay to the
Accepting Bank upon demand at the Accepting Bank's address for notices specified
herein an amount equal to such Acceptance Participant's Commitment Percentage of
the face amount of such Acceptance, or any part thereof, which is not so
reimbursed.
(b) If any amount required to be paid by any Acceptance Participant
to the Accepting Bank pursuant to subsection 4.3(a) in respect of any
unreimbursed portion of any payment made by the Accepting Bank under any
Acceptance is paid to the Accepting Bank within three Business Days after the
date such payment is due, such Acceptance Participant shall pay to the Accepting
Bank on demand an amount equal to the product of (1) such amount, times (2) the
daily average Federal funds rate, as quoted by the Accepting Bank, during the
period from and including the date such payment is required to the date on which
such payment is immediately available to the Accepting Bank, times (3) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. If any such amount required to be
paid by any Acceptance Participant pursuant to subsection 4.3(a) is not in fact
made available to the Accepting Bank by such Acceptance Participant within three
Business Days after the date such payment is due, the Accepting Bank shall be
entitled to recover from such Acceptance Participant, on demand, such amount
with interest thereon calculated from such due date at the rate per annum
applicable to Chemical Rate Loans which are not overdue hereunder. A
certificate of the Accepting Bank submitted to any
32
Acceptance Participant with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Accepting Bank has made payment
under any Acceptance and has received from any Acceptance Participant its pro
---
rata share of such payment in accordance with subsection 4.3(a), the Accepting
- ----
Bank receives any payment related to such Acceptance (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Accepting Bank), or any payment of interest on account thereof, the Accepting
Bank will, within three Business Days after receipt thereof, distribute to such
Acceptance Participant its pro rata share thereof; provided, however, that in
--- ---- -------- -------
the event that any such payment received by the Accepting Bank shall be required
to be returned by the Accepting Bank, such Acceptance Participant shall, within
three Business Days, return to the Accepting Bank the portion thereof previously
distributed by the Accepting Bank to it. If any amount payable under this
paragraph is paid within three Business Days after such payment is due, the
Lender which owes such amount shall pay to the Lender to which such amount is
owed on demand an amount equal to the product of (i) such amount, times (ii) the
daily average Federal funds rate, as quoted by such Lender, during the period
from and including the date such payment is required to the date on which such
payment is made available to such Lender, times (iii) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. If any amount required to be paid under this
paragraph is not in fact made available to the Lender to which such amount is
owed within three Business Days after the date such payment is due, such Lender
shall be entitled to recover from the Lender which owes such amount, on demand,
such amount with interest thereon calculated from such due date at the rate per
annum applicable to Chemical Rate Loans which are not overdue hereunder.
4.4 Discount of Acceptances. (a) The Accepting Bank agrees, on the
-----------------------
terms and conditions of this Agreement, that on any date on which it creates an
Acceptance hereunder, the Accepting Bank will discount such Acceptance at the
Acceptance Rate, by making available to the Borrower an amount in immediately
available funds equal to the face amount of each Acceptance created by the
Accepting Bank on such date less such discount and notify the Agent that such
Draft has been accepted and discounted by the Accepting Bank. The Accepting
Bank will then pay to the Agent for the account of the Borrower an amount equal
to the proceeds of such discount.
(b) On the date that any Acceptance is discounted pursuant to
subsection 4.4(a), the Accepting Bank shall pay to each Acceptance Participant
an amount equal to 2% of such Acceptance Participant's Commitment Percentage of
the face amount of such Acceptance.
33
4.5 Mandatory Prepayment. (a) In the event that (i) there is a
--------------------
determination made by any regulatory body or instrumentality thereof (including,
without limitation, any Federal Reserve Bank or any bank examiner), or there is
a change in, or change in interpretation of, any applicable law, rule or
regulation (such determination or such change, a "Reserve Determination"), in
---------------------
either case to the effect that any bankers' acceptance created hereunder or in
connection with a substantially similar facility (whether or not the Borrower or
any Bank is directly involved as a party) will be ineligible for reserve-free
treatment (or, if already discounted, should have been ineligible for reserve-
free treatment) under Section 13 of the Federal Reserve Act or any other
regulation or rule of the Board of Governors of the Federal Reserve System of
the United States of America, and as a result any Lender is required to
maintain, or determines as a matter of prudent banking practice that it is
appropriate for it to maintain, additional reserves, or (ii) any restriction is
imposed on any Lender (including, without limitation, any change in acceptance
limits imposed on any Lender) which would prevent such Lender from creating or
participating in bankers' acceptances or otherwise performing its obligations in
respect of the Acceptances, then, with the consent of the Required Lenders, the
Agent may, or upon the direction of the Required Lenders, the Agent shall, by
notice to the Borrower in accordance with subsection 12.2, demand prepayment of
all outstanding Acceptances (if such prepayment is required), and the Accepting
Bank shall have no further obligation to accept or discount Drafts hereunder.
The Borrower agrees that it shall, within two Business Days of its receipt of a
notice of mandatory prepayment of the Acceptances, prepay all Acceptance
Obligations in accordance with the provisions of subsection 4.5(b) hereof.
(b) Any prepayment of any Acceptance Obligation made pursuant hereto
shall be made to the Accepting Bank and shall be in an amount equal to the face
amount of such Acceptance minus a prepayment discount calculated by the
-----
Accepting Bank in accordance with its customary practice for similar Acceptances
and communicated to the Borrower; provided that, in the event that the Borrower
--------
fails to make such prepayment as provided in this subsection 4.5(b), such
Acceptance Obligation shall be automatically converted into Chemical Rate Loans
in the amount of such prepayment. The Borrowing Date with respect to such
borrowing shall be the date of such prepayment.
(c) Except as otherwise provided herein, Acceptances may not be
prepaid prior to maturity.
4.6 Obligations Absolute. The Borrower's obligations under this
--------------------
Section 4 and subsection 5.5(b) shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or defense
to payment which the Borrower may have or have had against the Accepting Bank.
The Borrower also agrees with the Accepting Bank that the Accepting Bank shall
not be responsible for, and the Borrower's Acceptance
34
Reimbursement Obligations under subsection 5.5(b) shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower or
any other party to which such Acceptance may be transferred or any claims
whatsoever of the Borrower or any such transferee. The Borrower agrees that any
action taken or omitted by the Accepting Bank under or in connection with any
Acceptance or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the UCC, shall be binding on the Borrower and shall not result in
any liability of the Accepting Bank to the Borrower.
4.7 Supply of Drafts. To enable the Accepting Bank to create
----------------
Acceptances in the manner specified in this Section 4, the Borrower may provide
to the Accepting Bank, on the Closing Date and thereafter from time to time upon
request of the Agent or the Accepting Bank, such number of blank Drafts
conforming to the requirements hereof as the Agent or the Accepting Bank may
reasonably request, each duly executed on behalf of the Borrower, and the
Accepting Bank shall hold any such documents in safekeeping. The Borrower and
the Accepting Bank hereby agree that in the event that any authorized signatory
of the Borrower whose signature shall appear on any Draft shall cease to have
such authority at the time that an Acceptance is to be created with respect
thereto, such signature shall nevertheless be valid and sufficient for all
purposes as if such authority had remained in full force and effect at the time
of such creation.
4.8 Delivery of Certain Documentation. Upon request by the Agent or
---------------------------------
the Accepting Bank, the Borrower shall furnish to the Agent or the Accepting
Bank (a) a copy of the contract of sale or any bill of lading, warehouse
receipt, policy or certificate of insurance or other document covering or
otherwise relating to each shipment of goods specified in the Acceptance Request
relating to such Acceptance and (b) such other documents or information as the
Accepting Bank or the Agent shall reasonably request with respect to the
creation of such Acceptance.
4.9 Notice. The Agent shall notify the Federal Reserve Bank of New
------
York of the terms under which Acceptances may be made if requested or required
to do so by such institution.
4.10 Use of Proceeds. The proceeds of the Acceptances shall be used
---------------
solely to finance the payment of an L/C Obligation with respect to any Letter of
Credit which relates to the purchase of Inventory of the Borrower in
transactions which fulfill the requirements of Section 13 of the Federal Reserve
Act or the regulations of the Board of Governors of the Federal Reserve System
of the United States of America governing the
35
creation and discounting of, and the maintenance of reserves with respect to,
bankers' acceptances.
SECTION 5. GENERAL PROVISIONS APPLICABLE TO THE
LOANS, LETTERS OF CREDIT AND ACCEPTANCES.
5.1 Termination or Reduction of Commitments. (a) The Borrower shall
---------------------------------------
have the right, upon not less than five Business Days' notice to the Agent, to
terminate the Commitments or, from time to time, reduce the amount of the
Commitments to an amount not less than the sum of (i) the aggregate principal
amount of the Loans then outstanding after giving effect to any contemporaneous
prepayment thereof, and (ii) the then outstanding L/C Obligations and Acceptance
Obligations. Any termination of the Commitments shall be accompanied by the
prepayment in full of the Loans, together with accrued interest thereon to the
date of such prepayment, the collateralization of the then outstanding L/C
Obligations and Acceptance Obligations in accordance with subsection 5.3(a), and
the payment of any unpaid commitment fee and any other fees and commissions then
accrued hereunder with respect to the Commitments and any other amounts payable
hereunder. Any such reduction shall be in an amount of $1,000,000 or a whole
multiple of $500,000 in excess thereof and shall reduce permanently pro rata in
--- ----
accordance with subsection 5.11 the amount of the Commitments then in effect.
5.2 Optional Prepayments. The Borrower may on the last day of any
--------------------
Interest Period with respect thereto, in the case of Eurodollar Loans, or at any
time and from time to time, in the case of Chemical Rate Loans, prepay the
Loans, in whole or in part, without premium or penalty, upon at least four
Business Days' irrevocable notice to the Agent, specifying the date and amount
of prepayment and whether the prepayment is of Eurodollar Loans, Chemical Rate
Loans or a combination thereof, and, if of a combination thereof, the amount
allocable to each. Upon receipt of any such notice the Agent shall promptly
notify each Lender thereof. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein, together
with any amounts payable pursuant to subsection 5.13. Partial prepayments shall
be in an aggregate principal amount of $1,000,000 or a whole multiple thereof.
5.3 Mandatory Prepayments. (a) The Borrower, without notice or
---------------------
demand, shall immediately prepay the Loans to the extent, if any, that at any
time the Aggregate Outstanding Extensions of Credit at such time exceeds the
Commitments of all the Lenders then in effect. To the extent that after giving
effect to any prepayment of the Loans required by the immediately preceding
sentence, the Aggregate Outstanding Extensions of Credit of the Lenders exceed
the Commitments of all the Lenders then in effect, the Borrower shall, without
notice or demand, immediately deposit in a cash collateral account with the
Agent, having terms and conditions substantially the same as the
36
relevant provisions contained in the Reimbursement and Cash Collateral Agreement
and otherwise satisfactory in form and substance to the Agent, as cash
collateral security for the liability of the Issuing Bank (whether direct or
contingent) under any Letters of Credit (including any Existing Letters of
Credit) then outstanding or of the Accepting Bank (whether direct or contingent)
under any Acceptances (including any Existing Acceptances) then outstanding, an
aggregate amount equal to the amount by which the Aggregate Outstanding
Extensions of Credit of the Lenders exceed the Commitments of all the Lenders
then in effect.
(b) If, at any time during the Commitment Period, the Aggregate
Outstanding Extensions of Credit of the Lenders exceed the Borrowing Base then
in effect, the Borrower shall, without notice or demand, immediately prepay the
Loans in an aggregate principal amount equal to such excess, together with
commitment fees and letter of credit fees accrued to the date of such payment or
prepayment. To the extent that after giving effect to any prepayment of the
Loans required by the immediately preceding sentence, the Aggregate Outstanding
Extensions of Credit of the Lenders exceed the Borrowing Base then in effect,
the Borrower shall, without notice or demand, immediately deposit in a cash
collateral account with the Agent, having terms and conditions substantially the
same as the relevant provisions contained in the Reimbursement and Cash
Collateral Agreement and otherwise satisfactory in form and substance to the
Agent, as cash collateral security for the liability of the Issuing Bank
(whether direct or contingent) under any Letters of Credit (including any
Existing Letters of Credit) then outstanding or of the Accepting Bank (whether
direct or contingent) under any Acceptances (including any Existing Acceptances)
then outstanding, an aggregate amount equal to the amount by which the Aggregate
Outstanding Extensions of Credit of the Lenders exceed the Borrowing Base then
in effect.
(c) Interest accrued on any Loans prepaid pursuant to this subsection
5.3 to and including the date of such prepayment shall be payable on the next
succeeding Interest Payment Date following the date on which such prepayment is
made. All prepayments pursuant to this subsection 5.3 shall be subject to the
provisions of subsection 5.13.
5.4 Commitment Fee. (a) The Borrower agrees to pay to the Agent for
--------------
the account of the Lenders a commitment fee for the period from and including
the first day of the Commitment Period to and including the Termination Date or
such earlier date as the Commitments shall terminate as provided herein,
computed at the rate of 0.25% per annum on the Available Commitments during the
period for which payment is made, payable quarterly in arrears on the last day
of each February, May, August and November and on the Termination Date or such
earlier date as the Commitments shall terminate as provided herein, commencing
on the first of such dates to occur after the date hereof.
37
(b) The Borrower agrees to pay to the Agent for the account of the
Lenders the fees required to be paid pursuant to the Fee Letter, dated as of May
5, 1995, from the Borrower to the Agent.
(c) The Borrower agrees to pay to the Agent during the period from
the first day of the Commitment Period to the Termination Date or such earlier
date as the Commitments shall terminate as provided herein, as compensation for
its services as Agent hereunder, an administrative fee of $36,000 per year,
payable in advance on the Closing Date and on each anniversary of the Closing
Date.
5.5 Reimbursement Obligations of the Borrower. (a) The Borrower
-----------------------------------------
agrees to reimburse the Issuing Bank on demand on each date on which the Issuing
Bank notifies the Borrower of the date and amount of a draft presented or other
payment demanded under any Letter of Credit (including any Existing Letter of
Credit) and paid by the Issuing Bank for the amount of (i) such draft so paid or
payment so made and (ii) any taxes, reasonable fees, charges or other costs or
expenses incurred by the Issuing Bank in connection with such payment. Each
such payment shall be made to the Issuing Bank at its address for notices
specified herein in Dollars and in immediately available funds. Each drawing or
other payment under any Letter of Credit shall constitute a request by the
Borrower to the Agent for a borrowing pursuant to subsection 2.1 of a Chemical
Rate Loan in the amount of such drawing or payment. The Borrowing Date with
respect to such borrowing shall be the date of such drawing or other payment if
such drawing or payment is made prior to 10:00 A.M. on such date and otherwise
the first Business Day following the date of such drawing or payment.
(b) The Borrower shall be obligated, and hereby unconditionally
agrees to reimburse the Accepting Bank on demand on the maturity date thereof or
on such earlier date as the Acceptance Obligations shall become or shall have
been declared due and payable in an amount equal to the face amount of each
Acceptance created by the Accepting Bank hereunder (including each Existing
Acceptance). Each such payment shall be made to the Accepting Bank at its
address for notices specified herein in Dollars and in immediately available
funds. Each payment under any Acceptance shall constitute a request by the
Borrower to the Agent for a borrowing pursuant to subsection 2.1 of a Chemical
Rate Loan in the amount of such payment. The Borrowing Date with respect to
such borrowing shall be the date of such payment if such payment is made prior
to 10:00 A.M. on such date and otherwise on the first Business Day following the
date of such payment.
(c) To the extent that a drawing or payment is not reimbursed
pursuant to this subsection on the date such drawing or payment is made,
interest shall be payable on such amounts for the Business Day for which such
amounts remain unpaid at the rate
38
applicable to Chemical Rate Loans hereunder. Interest shall be payable on any
and all amounts remaining unpaid by the Borrower under this subsection from the
date such amounts become payable until payment in full at the rate which would
be payable on any outstanding Chemical Rate Loans which were then overdue.
5.6 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
--------------------------------
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each Chemical Rate Loan shall bear interest at a rate per annum
equal to the Chemical Rate plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum which is (x) in the case of overdue principal, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% or (y) in the case of overdue interest, commitment fee or
other amount, the rate described in paragraph (b) of this subsection plus 2%, in
each case from the date of such non-payment until such amount is paid in full
(as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this
--------
subsection shall be payable from time to time on demand.
5.7 Computation of Interest and Fees. (a) Interest on Loans,
--------------------------------
commitment fees and letter of credit fees shall be calculated on the basis of a
360 day year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Chemical Rate or the Eurocurrency Reserve Requirement shall become
effective as of the opening of business on the day on which such change in the
Chemical Rate or the Eurocurrency Reserve Requirement becomes effective. The
Agent shall as soon as practicable notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrower
and the Lenders in the absence of manifest error.
39
5.8 Conversion and Continuation Options. (a) The Borrower may elect
-----------------------------------
from time to time to convert Eurodollar Loans to Chemical Rate Loans by giving
the Agent at least two Business Days' prior irrevocable notice of such election,
provided that any such conversion of Eurodollar Loans may only be made on the
- --------
last day of an Interest Period with respect thereto. The Borrower may elect
from time to time to convert Chemical Rate Loans to Eurodollar Loans by giving
the Agent at least three Business Days' prior irrevocable notice of such
election. Any such notice of conversion to Eurodollar Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such notice the Agent shall promptly notify each Lender thereof.
All or any part of outstanding Eurodollar Loans and Chemical Rate Loans may be
converted as provided herein, provided that (i) no Loan may be converted into a
--------
Eurodollar Loan when any Event of Default has occurred and is continuing and the
Agent has or the Required Lenders have determined that such a conversion is not
appropriate, (ii) partial conversions to Chemical Rate Loans (except pursuant to
paragraph (b) of this subsection) shall be in an aggregate principal amount of
$1,000,000 or a whole multiple of $100,000 in excess thereof and partial
conversions to Eurodollar Loans shall be in an amount equal to $1,500,000 or a
whole multiple of $500,000 in excess thereof and (iii) no Loan may be converted
into a Eurodollar Loan after the date that is one month prior to the Termination
Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Agent, in accordance with the applicable provisions contained in
the definition of the term "Interest Period" set forth in subsection 1.1, of the
length of the next Interest Period to be applicable to such Loans, provided that
--------
no Eurodollar Loan may be continued as such (i) when any Event of Default has
occurred and is continuing and the Agent has or the Required Lenders have
determined that such a continuation is not appropriate or (ii) after the date
that is one month prior to the Termination Date and provided, further, that if
-------- -------
the Borrower shall fail to give any required notice as described above in this
paragraph or if such continuation is not permitted pursuant to the preceding
proviso such Loans shall be automatically converted to Chemical Rate Loans on
the last day of such then expiring Interest Period.
5.9 Minimum Amounts and Number of Tranches. All borrowings,
--------------------------------------
conversions, payments, prepayments and selection of Interest Periods hereunder
in respect of the Loans shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, (a) the aggregate principal
amount of any one Eurodollar Tranche shall not be less than $1,500,000 and (b)
there are no more than 3 Eurodollar Tranches outstanding at any time.
40
5.10 Inability to Determine Interest Rate. If prior to the first day
------------------------------------
of any Interest Period with respect to (i) Loans that the Borrower has requested
be made as Eurodollar Loans, (ii) Eurodollar Loans that will result from the
requested conversion of Chemical Rate Loans into Eurodollar Loans or (iii) the
continuation of Eurodollar Loans beyond the expiration of the then current
Interest Period with respect thereto:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for any requested Interest
Period; or
(b) the Agent shall have received notice prior to the first day of
such Interest Period from Lenders constituting the Required Lenders that
the interest rate determined pursuant to subsection 5.6 for such Interest
Period does not accurately reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as Chemical Rate Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
converted to or continued as Chemical Rate Loans and (z) any outstanding
Eurodollar Loans shall be converted, on the first day of such Interest Period,
to Chemical Rate Loans. Until such notice has been withdrawn by the Agent, no
further Eurodollar Loans shall be made or continued as such, nor shall the
Borrower have the right to convert Loans to Eurodollar Loans.
5.11 Pro Rata Treatment and Payments. (a) Each borrowing by the
-------------------------------
Borrower from the Lenders hereunder, each conversion or continuation of a Loan,
each payment by the Borrower on account of any commitment fee and letter of
credit fees hereunder and any reduction of the Commitments of the Lenders shall
be made pro rata according to the respective Commitment Percentages of the
--- ----
Lenders. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans shall be made pro rata according to the
--- ----
respective outstanding principal amounts of the Loans then held by the Lenders,
subject to Section 5 of the Commitment Transfer Supplement, dated as of the date
hereof, among the Transferor Lenders thereto, the Purchasing Lenders thereto and
the Agent. All payments (including prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set-off or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to the Agent,
for the account of
41
the Lenders, at the Agent's office specified in subsection 12.2, in Dollars and
in immediately available funds. The Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
(b) Unless the Agent shall have been notified in writing by any
Lender at least two days prior to a Borrowing Date that such Lender will not
make the amount that would constitute its Commitment Percentage of any borrowing
on such date available to the Agent, the Agent may assume that such Lender has
made such amount available to the Agent on such Borrowing Date, and the Agent
may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is made available to the Agent on a date
after such Borrowing Date, such Lender shall pay to the Agent on demand an
amount equal to the product of (i) the daily average Federal funds rate during
such period as quoted by the Agent, times (ii) the amount of such Lender's
Commitment Percentage of such borrowing, times (iii) a fraction the numerator of
which is the number of days that elapse from and including such Borrowing Date
to the date on which such Lender's Commitment Percentage of such borrowing shall
have become immediately available to the Agent and the denominator of which is
360. A certificate of the Agent submitted to any Lender with respect to any
amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's Commitment Percentage of such borrowing is not
in fact made available to the Agent by such Lender within three Business Days of
such Borrowing Date, the Agent shall be entitled to recover from the Borrower,
on demand, such amount with interest thereon at the rate per annum applicable to
Chemical Rate Loans which are not overdue hereunder.
5.12 Illegality. Notwithstanding any other provisions herein, if any
----------
Requirement of Law or any change therein or in the interpretation or application
thereof shall make it unlawful for any Lender to make or maintain Eurodollar
Loans as contemplated by this Agreement, (a) the commitment of such Lender
hereunder to make Eurodollar Loans or convert Chemical Rate Loans to Eurodollar
Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding
as Eurodollar Loans, if any, shall be converted automatically to Chemical Rate
Loans on the respective last days of the then current Interest Periods for such
Loans or within such earlier period as required by law. If any such prepayment
or conversion of a Eurodollar Loan occurs on a day which is not the last day of
the current Interest Period with respect thereto, the Borrower shall pay to such
Lender such amounts, if any, as may be required pursuant to subsection 5.13.
42
5.13 Indemnity. The Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in payment when due of
the principal amount of or interest on any Eurodollar Loans of such Lender, (b)
default by the Borrower in making a borrowing or conversion after the Borrower
has given a notice of borrowing or a notice of conversion in accordance with
provisions of this Agreement, (c) default by the Borrower in making any
prepayment after the Borrower has given a notice in accordance with provisions
of this Agreement or (d) the making of a prepayment of a Eurodollar Loan on a
day which is not the last day of an Interest Period with respect thereto,
including, without limitation, in each case, any such loss or expense arising
from the reemployment of funds obtained by it to maintain its Eurodollar Loans
hereunder or from fees payable to terminate the deposits from which such funds
were obtained. This covenant shall survive termination of this Agreement,
payment of the outstanding Notes and all other amounts payable hereunder.
5.14 Requirements of Law. (a) If the adoption of or any change in
-------------------
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note or any Eurodollar Loan made by it, or
change the basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by subsection 5.15 and changes in
the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable. If
any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly
43
notify the Borrower, through the Agent, of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable pursuant
to this subsection submitted by such Lender, through the Agent, to the Borrower
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, after submission by such Lender to the Borrower (with a
copy to the Agent) of a written request therefore, the Borrower shall pay to
such Lender such additional amount or amounts as will compensate such Lender for
such reduction.
5.15 Taxes. (a) All payments made by the Borrower under this
-----
Agreement and the Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Agent or any Lender as a result of a
present or former connection between the Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or the Notes). If any such non-excluded taxes, levies, imposts,
duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are
------------------
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under the Notes, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement and
the Notes, provided, however, that the Borrower shall not be required to
-------- -------
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such
44
Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any such failure.
The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrower and the Agent two further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 12.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall
45
furnish all such required forms and statements to the Lender from which the
related participation shall have been purchased.
5.16 Foreign Exchange Contracts. The Borrower may enter into foreign
--------------------------
exchange contracts ("Foreign Exchange Contracts") which are acceptable in form
--------------------------
and substance to the Agent and which are designed to limit the risk and/or
exposure of the Borrower to fluctuations in currency exchange rates; provided
--------
that the Borrower may only enter into Foreign Exchange Contracts with a Lender
or an Affiliate of any Lender; and provided, further, that (a) the Borrower may
-------- -------
only enter into Foreign Exchange Contracts in connection with the risk and/or
exposure of the Borrower under Letters of Credit denominated in a currency other
than Dollars; and (b) the aggregate face or notional amount of all such Foreign
Exchange Contracts shall at no time exceed $25,000,000 and the Borrower shall at
no time be obligated or have the right to (i) purchase an aggregate amount of
the relevant foreign currency greater than the relevant foreign currency
equivalent of $25,000,000 or (ii) receive payments with respect to fluctuations
in the relevant foreign currency to Dollar exchange rate in respect of an
aggregate Dollar amount in excess of $25,000,000. The Borrower and the relevant
Lender each agrees to promptly provide to the Agent a copy of any Foreign
Exchange Contract to which it may be a party. The Agent shall determine the
liabilities (the "Foreign Exchange Liabilities") of the Borrower under all
----------------------------
outstanding Foreign Exchange Contracts on a "mark to market" basis at least once
during each month and at such other times as the Agent shall determine in its
discretion. The Agent shall upon request notify the Borrower and the Lenders of
any determination made by it pursuant to the immediately preceding sentence.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans, to issue or participate in the Letters of Credit (including Existing
Letters of Credit) and to create or participate in the Acceptances (including
Existing Acceptances), the Borrower hereby represents and warrants to the Agent
and each Lender that:
6.1 Financial Condition. The audited consolidated balance sheets of
-------------------
the Borrower and its Subsidiaries as at November 30, 1993 and November 30, 1994
and the related audited consolidated statements of operations, stockholders'
equity and cash flows for the fiscal year ended on such date, reported on by
KPMG Peat Marwick, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the consolidated financial
condition and results of operations of the Borrower and its Subsidiaries as at
such dates. All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved
46
by such accountants or Responsible Officer, as the case may be, and as disclosed
therein). Other than the Foreign Exchange Contracts set forth in Schedule 6.1,
------------
neither the Borrower nor any of its Subsidiaries had, at the date of the most
recent balance sheet referred to above, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not reflected in
the foregoing statements or in the notes thereto. Except as set forth in
Schedule 6.1, during the period from November 30, 1994 to and including the date
- ------------
hereof there has been no sale, transfer or other disposition by the Borrower or
any of its Subsidiaries of any material part of its business or property and no
purchase or other acquisition of any business or property (including any capital
stock of any other Person) material in relation to the consolidated financial
condition of the Borrower and its Subsidiaries at November 30, 1994.
6.2 No Change. Except as set forth in Schedule 6.2 or as set forth
--------- ------------
in the financial statements referred to in subsection 6.1, since November 30,
1994 (a) there has been no development or event which has had or could
reasonably be expected to have a Material Adverse Effect and (b) no dividends or
other distributions have been declared, paid or made upon the Capital Stock of
the Borrower nor has any of the Capital Stock of the Borrower been redeemed,
retired, purchased or otherwise acquired for value by the Borrower or any of its
Subsidiaries.
6.3 Corporate Existence; Compliance with Law. Each of the Borrower
----------------------------------------
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation 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
except to the extent that the failure to be so qualified could not, in the
aggregate, have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.
6.4 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
Borrower has the corporate power and authority to make, deliver and perform this
Agreement, the Notes, the Security Documents to which it is a party, any
Application and any Acceptance Request and to borrow hereunder and has taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement and the Notes and to authorize the execution,
delivery and performance of this Agreement, the Notes, the Security Documents to
which it is a
47
party, any Application and any Acceptance Request. Each Guarantor has the
corporate power and authority, and the legal right to make, deliver and perform
the Security Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Security Documents to which it is a party. No consent or authorization of,
filing with or other act by or in respect of, any Governmental Authority or any
other Person is or will be required in respect of the Borrower or any Guarantor
in connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement, the Notes, the
Security Documents, the other Loan Documents, any Application or any Acceptance
Request. This Agreement has been, each Note will be, and each Security Document
to which it is a party has been or will be, duly executed and delivered on
behalf of the Borrower. The Security Documents have been or will be duly
executed and delivered on behalf of each Guarantor that is a party thereto.
This Agreement constitutes, each Note to which it is a party when executed and
delivered, will constitute, and each Security Document to which it is a party
constitutes or, when executed and delivered, will constitute, legal, valid and
binding obligations of the Borrower, and the Security Documents constitute or,
when executed and delivered, will constitute, legal, valid and binding
obligations of each Guarantor that is a party thereto, in each case enforceable
against the Borrower or such Guarantor, as the case may be, in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement, the Notes, the Security Documents, the other Loan Documents, any
Application and any Acceptance Request, the borrowings hereunder and the use of
the proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of the Borrower or of any of its Subsidiaries that is a party to any
such document and will not result in, or require, the creation or imposition of
any Lien on any of its or their respective properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation.
6.6 No Material Litigation. Except as set forth in Schedule 6.6, no
---------------------- ------------
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any of its Subsidiaries or against any
of its or their respective properties or revenues (a) with respect to this
Agreement, the Notes, the Security Documents or any of the other Loan Documents
or any of the transactions contemplated hereby or thereby, or (b) which could
reasonably be expected to have a Material Adverse Effect.
48
6.7 No Default. Neither the Borrower nor any of its Subsidiaries is
----------
in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect.
No Default or Event of Default has occurred and is continuing.
6.8 Ownership of Property; Liens. Each of the Borrower and its
----------------------------
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to all its other
property, and none of such property is subject to any Lien except as permitted
by subsection 9.3. Schedule 6.8 (as the same may be updated pursuant to
------------
subsection 8.2(g)) sets forth a true and complete list of all leases and
warehouse contracts relating to real property upon which any Inventory of the
Borrower or any of its Subsidiaries is kept or to which the Borrower or any of
its Subsidiaries is a party, in each case identifying the lessor or
warehouseman, as the case may be, describing the location of the real property,
the size of the real property, the rent and the expiration of such lease or
warehouse contract, as the case may be. Schedule 6.8 (as the same may be
------------
updated pursuant to subsection 8.2(g)) also sets forth a true and complete list
of all leases with Affiliates.
6.9 Intellectual Property. The Company and each of its Subsidiaries
---------------------
owns, or is licensed to use, all trademarks, tradenames, copyrights and patents
necessary for the conduct of its business as currently conducted except for
those the failure to own or license which could not have a Material Adverse
Effect (the "Intellectual Property"). No claim has been asserted and is pending
---------------------
by any Person challenging or questioning the use of any such Intellectual
Property or the validity or effectiveness of any such Intellectual Property, nor
does the Borrower know of any valid basis for any such claim. The use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, do not have a Material Adverse Effect.
6.10 No Burdensome Restrictions. No Requirement of Law or
--------------------------
Contractual Obligation of the Borrower or any of its Subsidiaries has a Material
Adverse Effect.
6.11 Taxes. Each of the Borrower and its Subsidiaries has filed or
-----
caused to be filed all tax returns which, to the knowledge of the Borrower, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the
49
Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed,
and, to the knowledge of the Borrower, no claim is being asserted, with respect
to any such tax, fee or other charge.
6.12 Federal Regulations. No part of the proceeds of any Loans,
-------------------
Letters of Credit or Acceptances will be used for "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of such Board of Governors. If requested by any
Lender or the Agent, the Borrower will furnish to the Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
U-1 referred to in said Regulation U.
6.13 ERISA. Except as set forth in Schedule 6.13, neither a
----- -------------
Reportable Event nor an "accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred during the
five-year period prior to the date on which this representation is made or
deemed made with respect to any Plan, and each Plan has complied in all material
respects with the applicable provisions of ERISA and the Code. No termination
of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a
Plan has arisen, during such five-year period with respect to which any
liability or encumbrance remains outstanding or in effect. The present value of
all accrued benefits under each Single Employer Plan, if any, (based on those
assumptions used to fund such Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made,
exceed the value of the assets of such Plan allocable to such accrued benefits.
Neither the Borrower nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan, and to the best knowledge of the
Borrower, neither the Borrower nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Borrower or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. To the best knowledge of the Borrower, no such
Multiemployer Plan is in Reorganization or Insolvent. The present value
(determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of the Borrower and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, as of the valuation date most closely preceding the date on which this
representation is made or deemed made, in the aggregate, exceed the value of the
assets of all such Plans allocable to such benefits.
50
6.14 Investment Company Act; Other Regulations. The Borrower is not
-----------------------------------------
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness.
6.15 Subsidiaries and Joint Ventures. Schedule 6.15 sets forth a
------------------------------- -------------
true and complete list of all Subsidiaries of the Borrower and the Joint
Ventures of the Borrower, in each case setting forth the nature and percentage
of the capital stock or other ownership interests which is directly or
indirectly owned by the Borrower, the respective jurisdictions of organization
of such Subsidiaries and Joint Ventures and whether such Subsidiary is a
Material Foreign Subsidiary.
6.16 Purpose of Loans. The proceeds of the Loans, Letters of Credit
----------------
and Acceptances shall be used by the Borrower for working capital purposes in
the ordinary course of business and to pay fees and expenses incurred in
connection with transactions contemplated under this Agreement and the other
Loan Documents.
6.17 Environmental Matters. Except as set forth in Schedule 6.17:
--------------------- -------------
(a) None of the properties of the Borrower or any of its Subsidiaries
contain, and have not previously contained, any Materials of Environmental
Concern in amounts or concentrations which (i) constitute or constituted a
violation of, or (ii) could reasonably give rise to liability under,
Environmental Laws.
(b) The properties of the Borrower and its Subsidiaries and all
operations at such properties are in compliance, and have in the last 5
years been in compliance, with all applicable Environmental Laws, and there
is no contamination at, under or about such properties, or violation of any
Environmental Law with respect to such properties which could interfere
with the continued operation of such properties or impair the fair saleable
value thereof.
(c) Neither the Borrower nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of their respective properties or
businesses, nor does the Borrower have knowledge or reason to believe that
any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from any property of the Borrower
51
or any of its Subsidiaries in violation of, or in a manner or to a location
which could reasonably give rise to liability under, Environmental Laws,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of such properties in violation
of, or in a manner that could reasonably give rise to liability under, any
applicable Environmental Laws.
(e) No judicial proceedings or governmental or administrative action
is pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower is or will be named as a party with
respect to any of the properties of the Borrower or any of its Subsidiaries
nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to such
properties.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from any of the properties of the Borrower or
any of its Subsidiaries, or arising from or related to the operations of
the Borrower in connection with such properties, in violation of or in
amounts or in a manner that could reasonably give rise to liability under
Environmental Laws.
6.18 Security Documents. (a) The Security Documents remain in full
------------------
force and effect and are enforceable in accordance with their terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(b) Except as expressly stated therein, each security interest that
is purported to be granted under the Security Documents constitutes a perfected
first priority security interest in favor of the Collateral Agent for the
benefit of the Lenders in the collateral subject thereto and such security
interests are continuing, valid and enforceable and are not subject to any
defense, counterclaim or setoff.
6.19 Insurance. The Borrower and its Subsidiaries maintain insurance
---------
with financially sound and reputable insurance companies on all their properties
in such amounts and against such risks (but, including in any event, public
liability and product liability) as are usually insured against by companies
engaged in the same or a similar business.
6.20 No Change in Credit Criteria or Collection Policies. There has
---------------------------------------------------
been no material relaxation in credit criteria or collection policies concerning
accounts receivable of the Borrower or any of its Subsidiaries since November
30, 1991.
52
All Accounts from time to time designated as Eligible Accounts of the Borrower
and its Subsidiaries satisfy (for so long as such Accounts continue to be
designated as Eligible Accounts) all the eligibility criteria set forth in the
definition of Eligible Accounts and are not subject to any claims, defenses or
set-offs. All Accounts of the Borrower and its Subsidiaries are valid, binding
and enforceable obligations of the Account Debtors or obligors on such Accounts,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.21 Government Contracts. Schedule 6.21 (as the same may be updated
-------------------- -------------
pursuant to subsection 8.2(l)) sets forth a true and complete list of all
contracts (the "Government Contracts") between the Borrower or any of its
--------------------
Subsidiaries and any Governmental Authority or other government agency.
6.22 Existing Extensions of Credit. The Borrower hereby
-----------------------------
acknowledges, confirms and agrees that the Existing Extensions of Credit (a)
constitute legal, valid, binding and enforceable obligations of the Borrower,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) and (b) are subject to
no defense, offset or counterclaim of any kind whatsoever.
6.23 Licensing. All export and import licenses and exchange control
---------
and other approvals required under applicable laws and regulations with respect
to the importation of goods or Inventory by the Borrower and its Subsidiaries
and the payment of the purchase price and costs related thereto have been
obtained and are in full force and effect, except to the extent that the failure
to so obtain could not, in the aggregate, have a Material Adverse Effect.
SECTION 7. CONDITIONS
7.1 Conditions to Effectiveness of Agreement. The effectiveness of
----------------------------------------
this Agreement is subject to the satisfaction on or prior to the Closing Date,
of the following conditions precedent:
(a) Loan Documents. The Agent shall have received (i) this Agreement
--------------
duly executed and delivered by a Responsible Officer of the Borrower with a
counterpart for each Lender, (ii) for the account of each Lender, a Note
conforming to the requirements hereof and executed by a Responsible Officer
of the Borrower and (iii) the Consent of Guarantors
53
duly executed and delivered by each Loan Party party thereto, with a
counterpart for the Agent and each Lender.
(b) Corporate Proceedings of the Borrower and each Subsidiary. The
---------------------------------------------------------
Agent shall have received, with a counterpart for each Lender, a copy of
the resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of the Borrower and each Subsidiary that is a party to
any Loan Document authorizing (i) in the case of the Borrower, (A) the
execution, delivery and performance of this Agreement, the Notes, the
Security Documents to which it is a party, any Application, any Acceptance
Request and any other Loan Document to which it is a party, and (B) the
borrowings contemplated hereunder, and (ii) in the case of each such
Subsidiary, the execution, delivery and performance of the Security
Documents and any other Loan Document to which it is a party, in each case
certified by the Secretary or an Assistant Secretary of the Borrower or
such Subsidiary, as the case may be, as of the Closing Date, which
certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded and shall be in form and
substance satisfactory to the Agent.
(c) Borrowing Certificate. The Agent shall have received, with an
---------------------
executed counterpart for each Lender, a Borrowing Certificate of the
Borrower dated the Closing Date, substantially in the form of Exhibit B
---------
hereto, executed by a Responsible Officer of the Borrower.
(d) Incumbency Certificate. The Agent shall have received, with an
----------------------
executed counterpart for each Lender, a certificate of the Secretary or an
Assistant Secretary of the Borrower and each Subsidiary that is a party to
any Loan Document, dated the Closing Date, as to the incumbency and
signatures of the officers thereof executing the Loan Documents to which it
is a party including, in the case of the Borrower, this Agreement and the
Notes, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(e) Corporate Documents. The Agent shall have received, (i) with an
-------------------
executed counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of the Borrower and each
Subsidiary that is a party to any Loan Document, certified as of the
Closing Date as complete and correct copies thereof by the Secretary or an
Assistant Secretary of the Borrower or such Subsidiary, as the case may be,
and (ii) good standing certificates for the Borrower and each of its
Subsidiaries that is a party to any Loan Document from their respective
jurisdictions of organization.
54
(f) No Violation. The consummation of the transactions contemplated
------------
hereby shall not contravene, violate or conflict in any material respect
with, nor involve the Agent or any Lender in any violation of, any
Requirement of Law.
(g) Consents, Licenses and Approvals. The Agent shall have received,
--------------------------------
with an executed counterpart for each Lender, a certificate of a
Responsible Officer of the Borrower (i) attaching copies of all consents,
authorizations and filings if any, referred to in subsection 6.4, and (ii)
stating that such consents, licenses and filings are in full force and
effect, and each such consent, authorization and filing shall be in form
and substance reasonably satisfactory to the Agent.
(h) Filings, Registrations and Recordings. Any documents (including,
-------------------------------------
without limitation, financing statements and filings under the Assignment
of Claims Act of 1940) required to be filed, and any other actions required
to be taken, under or in connection with any of the Security Documents in
order to create or confirm, in favor of the Collateral Agent, a perfected
security interest in the collateral thereunder shall have been properly
filed or taken, as the case may be, and the Collateral Agent shall have
received evidence satisfactory to it of each such filing, registration,
recordation or other action and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto.
(i) Fees. The Agent shall have received the fees to be received on
----
the Closing Date referred to in subsection 5.4.
(j) Legal Opinions. The Agent shall have received, with a
--------------
counterpart for each Lender, the executed legal opinion of (i) Levy &
Stopol, special counsel to the Borrower and certain of its Subsidiaries,
substantially in the form of Exhibit G-1 hereto and (ii) Simpson Thacher &
-----------
Bartlett, special counsel to the Agent and the Lenders, substantially in
the form of Exhibit G-2 hereto. Such legal opinion shall cover such other
-----------
matters incident to the transactions contemplated by this Agreement as the
Agent may reasonably require.
(k) Borrowing Base Certificate. The Agent shall have received a
--------------------------
Borrowing Base Certificate dated the Closing Date executed and delivered by
a Responsible Officer of the Borrower setting forth the Borrowing Base as
of the Closing Date.
(l) Commitment Transfer Supplement. On the Closing Date, the Lenders
------------------------------
shall have entered into a commitment transfer supplement among the Lenders
such that each
55
Lender's share of the Aggregate Outstanding Extensions of Credit on the
Closing Date corresponds with such Lender's Commitment Percentage
hereunder.
7.2 Conditions to Each Loan, Letter of Credit and Acceptance. The
--------------------------------------------------------
agreement of each Lender to make any Loan requested to be made by it, the
agreement of the Issuing Bank to issue any Letter of Credit and the agreement of
the Accepting Lender to create any Acceptance, on any date is subject to the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Borrower or its Subsidiaries in or pursuant to the
Loan Documents shall be true and correct in all material respects on and as
of such date as if made on and as of such date, except for representations
and warranties expressly stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct as
of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the Loans and/or
Letters of Credit and/or Acceptances requested to be made, issued or
created, as the case may be, on such date.
(c) Borrowing Base. After giving effect to the Loans and/or Letters
--------------
of Credit and/or Acceptances requested to be made, issued or created, as
the case may be, on such date, the Aggregate Outstanding Extensions of
Credit of the Lenders shall not exceed the Borrowing Base then in effect.
Each borrowing by, Letter of Credit issued on behalf of, and Acceptance created
by or on behalf of, the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such borrowing, of the issuance of
such Letter of Credit or of the creation of such Acceptance that the conditions
contained in this subsection 7.2 have been satisfied.
SECTION 8. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note, Letter of Credit (including any Existing Letter of Credit) or
Acceptance (including any Existing Acceptance) remains outstanding and unpaid or
any other amount is owing to any Lender or the Agent hereunder, the Borrower
shall and shall cause each of its Subsidiaries to:
56
8.1 Financial Statements. Furnish to the Agent and each Lender:
--------------------
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such year and
the related consolidated statements of operations, stockholders' equity and
cash flows for such year, setting forth in each case in comparative form
the figures for the previous year, reported on without a "going concern" or
like qualification or exception, or qualification arising out of the scope
of the audit, by KPMG Peat Marwick, or other independent certified public
accountants of nationally recognized standing acceptable to the Required
Lenders; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of operations, stockholders' equity and
cash flows of the Borrower and its Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects when considered in relation to the consolidated financial
statements of the Borrower and its Subsidiaries;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
8.2 Certificates; Other Information. Furnish to the Agent and each
-------------------------------
Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default under subsection 9.1 hereof, except as
specified in such certificate;
(b) concurrently with the delivery of (i) the financial statements
referred to in subsections 8.1(a) and 8.1(b), a certificate of a
Responsible Officer (A) stating that, to the best of such Responsible
Officer's knowledge, the Borrower and each of its Subsidiaries during such
period
57
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and in the Notes and
the other Loan Documents to which it is a party to be observed, performed
or satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate and (B) showing in detail calculations supporting such
statement in respect of subsections 9.1, 9.8, 9.9 and 9.10 and (ii) the
financial statements referred to in subsections 8.1(a), a certificate of a
Responsible Officer showing in detail the calculations required to
determine if any Subsidiary is a Material Foreign Subsidiary;
(c) not later than 45 days after the end of each fiscal year of the
Borrower, a copy of the projections by the Borrower of the operating budget
and cash flow budget of the Borrower and its Subsidiaries for the next
fiscal year;
(d) within ten days after the same are sent, copies of all financial
statements and reports which the Borrower sends to its stockholders, and
within five days after the same are filed, copies of all financial
statements and reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(e) concurrently with the delivery of any financial statements and
business plans required to be delivered to the Existing Noteholders under
the Debenture Exchange Agreement or to the holders of the Subordinated
Debentures under the Subordinated Debenture Indenture, a copy of such
financial statements or business plans;
(f) at any time at the request of the Agent and at the Borrower's
expense, an audit of the Accounts, Inventory and books and records of the
Borrower and its Subsidiaries by the Agent, in form and substance
satisfactory to the Agent;
(g) within 15 days after the last day of each calendar month, a
Borrowing Base Certificate setting forth the Borrowing Base as of such last
day, which shall contain among other things a list of any lease or
warehouse contract entered into by the Borrower or any of its Subsidiaries
and a list of each contract entered into by the Borrower or any of its
Subsidiaries with any Governmental Authority or other government agency
after the date hereof and in each case still in effect at such time;
Schedule 6.8 and Schedule 6.21 shall be deemed to be amended to include any
------------ -------------
such lease, warehouse contract or government contract on the date such list
is provided;
(h) within 15 days after the last day of each month, monthly
schedules, in form and substance satisfactory to the
58
Agent, current as of the close of business on the last Business Day of such
month, certified by a Responsible Officer, (i) of all Accounts of the
Borrower and its Subsidiaries, showing separately those which are more than
30 days, 60 days, 90 days and 120 days old together with a reconciliation
of such Accounts and (ii) setting forth such information as to accounts
payable as the Agent shall request;
(i) within 15 days after the last day of each month, a certification
of Inventory, in the form of Exhibit C-3 or such other form as the Agent
-----------
shall from time to time request, setting forth a breakdown of the type and
nature of Inventory of the Borrower and its Subsidiaries and the location
thereof;
(j) promptly after receipt thereof, a copy of all management letters
from the Borrower's independent certified public accountants;
(k) a copy of any notice received from the trustee or any holder of
Subordinated Debentures under the Subordinated Debt Indenture; and
(l) promptly, such additional financial and other information and
copies of such documents and instruments as the Agent or any Lender may
from time to time reasonably request, including, without limitation, a copy
of any material debt instrument, security agreement or other material
contract to which the Borrower or any Subsidiary may be a party.
8.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith, including by appropriate
proceedings, if any are required in the good faith judgment of the Borrower, and
reserves in conformity with GAAP with respect thereto have been provided on the
books of the Borrower or its Subsidiaries, as the case may be.
8.4 Conduct of Business and Maintenance of Existence. Continue to
------------------------------------------------
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 9.5; and comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, have a Material Adverse Effect.
59
8.5 Maintenance of Property; Insurance. Keep all material property
----------------------------------
useful and necessary in its business in good working order and condition;
maintain with financially sound and reputable insurance companies insurance on
all its property in such amounts and against such risks (but including in any
event public liability and product liability) as are usually insured against in
the same general area by companies engaged in the same or a similar business;
and furnish to each Lender, upon written request, full information as to the
insurance carried.
8.6 Inspection of Property; Books and Records; Discussions; Audits.
--------------------------------------------------------------
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made in all
material respects of all dealings and transactions in relation to its business
and activities; permit representatives of the Agent and any Lender to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
required, including, without limitation, any such visit, inspection or
examination by the Agent and any Lender in connection with any audit conducted
by the Agent, and at which a representative of any Lender may be present, of the
Accounts, Inventory and books and records of the Borrower and its Subsidiaries
from time to time at the Agent's discretion, and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants. Without limiting the
Agent's rights under this subsection and without creating any obligations on the
part of the Agent, the Agent currently intends that audits of the Borrower will
be conducted on an approximately yearly basis.
8.7 New Subsidiaries. Within 30 days after the creation of any
----------------
direct or indirect Domestic Subsidiary or any Subsidiary which is a Material
Foreign Subsidiary or within 30 days after any Subsidiary becomes a Material
Foreign Subsidiary after the date hereof, at its own cost and expense, (a) in
the case of a Domestic Subsidiary, cause such Subsidiary to grant a security
interest in its assets (to the same extent that it would grant such a security
interest if it were a party to the Subsidiaries Security Agreement) to the
Collateral Agent, for the benefit of the Lenders, as collateral security for the
Obligations (as defined in the Subsidiaries Guarantee) and to guarantee such
Obligations, in each case pursuant to security
60
documents which are in form and substance reasonably satisfactory to the
Collateral Agent and (b) in the case of any Material Foreign Subsidiary, (i)
cause such Material Foreign Subsidiary to grant a security interest in its
assets (to the same extent that it would grant such a security interest if it
were a party to the Subsidiaries Security Agreement) to the Collateral Agent,
for the benefit of the Lenders, as collateral security for the Obligations (as
defined in the Subsidiaries Guarantee) and to guarantee such Obligations, in
each case pursuant to security documents which are in form and substance
reasonably satisfactory to the Collateral Agent or (ii) pledge the stock of such
Material Foreign Subsidiary or provide such other collateral security as shall
be satisfactory to the Collateral Agent and pursuant to such documents as shall
be in form and substance reasonably satisfactory to the Collateral Agent.
Schedule 6.15 shall be deemed to be amended to include any Subsidiary created
- -------------
after the date hereof, provided that the terms and provisions of this subsection
--------
8.7, subsection 9.9 and any other applicable subsections of this Agreement are
complied with in connection with the creation of any such Subsidiary.
8.8 Consignment of Title Documents. At any time at the request of
------------------------------
the Agent or the Required Lenders, deliver or cause to be delivered to the
Collateral Agent for the benefit of the Lenders any title or similar documents
(including, without limitation, warehouse receipts) in respect of goods covered
or originally covered by a Letter of Credit (including any Existing Letter of
Credit) or Acceptance (including any Existing Acceptance).
8.9 Notices. Promptly give notice to the Agent and each Lender of:
-------
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority, which
in either case, if not cured or if adversely determined, as the case may
be, could have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries in which the amount involved is $500,000 or more and which is
not covered by insurance or in which injunctive or similar relief is sought
which, if granted, could have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, or any withdrawal from, or the termination, Reorganization or
Insolvency of any Multiemployer Plan or (ii) the institution of proceedings
or the taking of any other action by the PBGC or the Borrower or any
Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any
Plan;
61
(e) the occurrence of a default under the Debenture Exchange
Agreement or the Subordinated Debenture Indenture; and
(f) the occurrence of a development or event which has had or could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower or any of its Subsidiaries proposes to take
with respect thereto.
8.10 Environmental Laws. (a) Comply with, and ensure compliance by
------------------
all tenants and subtenants of any real property owned or leased by the Borrower,
if any, with, all applicable Environmental Laws and obtain and comply with and
maintain, and ensure that all such tenants and subtenants obtain and comply with
and maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental Laws except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to have a
Material Adverse Effect.
(c) Defend, indemnify and hold harmless the Agent and the Lenders,
and their respective parents, subsidiaries, affiliates, employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature
known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under any
Environmental Laws applicable to the operations or properties of the Borrower or
any of its Subsidiaries, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, attorney's and
consultant's fees, investigation and laboratory fees, response costs, court
costs and litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. If any claim, action or other proceeding is brought
against the Agent or any Lender or their respective parents, subsidiaries,
affiliates, employees, agents, officers or directors with respect to which the
Agent or such Lender would be entitled to seek indemnification under this
62
paragraph, the Borrower shall be entitled to assume the defense thereof with
counsel satisfactory to the Agent or such Lender, as the case may be. The Agent
or such Lender, as the case may be, shall be entitled, at the Borrower's
expense, to retain counsel in connection with any such claim, action or other
proceeding, provided, that the Agent and the Lenders shall agree upon and retain
--------
one counsel to represent them in connection with any single claim, action or
other proceeding unless, the retention of one counsel would be prejudicial to
the interests of the Agent or any Lender in their sole discretion. The Borrower
shall not without the prior written consent of the Agent or any affected Lender
effect any settlement of any pending or threatened proceeding, claim or action
against the Agent or such Lender in respect of which the Agent or such Lender or
their respective parents, subsidiaries, affiliates, employees, agents, officers
or directors is a party or would be entitled to seek indemnification under this
paragraph, unless such settlement includes an unconditional release of the Agent
or such Lender and their respective parents, subsidiaries, affiliates,
employees, agents, officers or directors from all liability on claims that are
the subject matter of such claim, action or other proceeding and is otherwise
acceptable to the Agent or such Lender and their respective counsel, in their
sole discretion. This indemnity shall continue in full force and effect
regardless of the termination of this Agreement.
8.11 Further Assurances. Execute any and all further documents, and
------------------
take all further action which the Required Lenders or the Agent may reasonably
request in order to effectuate the transactions contemplated by the Loan
Documents. Without limiting the generality of the foregoing, such further
documents and actions shall include the execution of agreements and instruments,
and filing Uniform Commercial Code financing statements, in order to effectuate
the transactions contemplated by this Agreement and in order to grant, preserve,
protect and perfect the validity and priority of the security interests created
or intended to be created by the Security Documents.
SECTION 9. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note, Letter of Credit (including any Existing Letter of Credit) or
Acceptance (including any Existing Acceptance) remains outstanding and unpaid or
any other amount is owing to any Lender, the Agent or the Collateral Agent
hereunder or under any other Loan Document, the Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly:
9.1 Financial Condition Covenants.
-----------------------------
(a) Maintenance of Net Income. Permit Consolidated Net Income for
-------------------------
any fiscal year to be less than $2,500,000.
63
(b) Maintenance of Net Worth. Permit Consolidated Net Worth at the
------------------------
end of any fiscal quarter ending on any date set forth below to be less
than the sum of (a) one-half of the aggregate pre-tax gain recognized in
respect of sales of securities of a Person (other than a Subsidiary) since
the Closing Date and (b) the amount set forth opposite such date below:
Period Amount
------ ------
Closing Date through and
including 11/29/95 $90,000,000
11/30/95 through and $92,500,000
including 11/29/96
11/30/96 and thereafter $95,000,000
(c) Total Liabilities to Net Worth Ratio. Permit the ratio of
------------------------------------
Consolidated Total Liabilities to Consolidated Net Worth at the end of any
fiscal quarter to be greater than 2.0 to 1.
(d) Maintenance of Working Capital. Permit Consolidated Working
------------------------------
Capital at the end of any fiscal quarter to be less than $125,000,000.
9.2 Limitation on Indebtedness. Create, incur, assume or suffer to
--------------------------
exist any Indebtedness, except:
(a) Indebtedness in respect of the Loans, the Notes, the Letters of
Credit (including Existing Letters of Credit), the Acceptances (including
Existing Acceptances) and other obligations of the Borrower under this
Agreement;
(b) Indebtedness of the Borrower to any Subsidiary and any Domestic
Subsidiary to the Borrower or any other Subsidiary;
(c) Indebtedness of any Subsidiary (other than a Domestic Subsidiary)
to finance the working capital requirements of such Subsidiary not to
exceed, taken together with all Indebtedness of all other Subsidiaries
(other than Domestic Subsidiaries) outstanding under this paragraph,
$5,000,000 in the aggregate at any time;
(d) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition of fixed or capital assets (whether pursuant to a
loan, a Financing Lease or otherwise) permitted under subsection 9.8;
(e) Indebtedness of the Borrower under (i) the Subordinated Debenture
Indenture and the Subordinated
64
Debentures and (ii) the Debenture Exchange Agreement and the Exchange
Debentures;
(f) Indebtedness of the Borrower in respect of Foreign Exchange
Contracts permitted under subsection 5.16;
(g) Indebtedness of the Borrower which is subordinated and junior in
right of payment to the Obligations (as defined in the Borrower Security
Agreement) on terms and conditions satisfactory to the Agent and the
Lenders (including, without limitation, Indebtedness of the Borrower under
the Talk Note);
(h) Indebtedness of the Borrower in respect of the Chemical Standby
Letters of Credit; and
(i) other Indebtedness in an aggregate principal amount not to exceed
$500,000 at any one time outstanding, provided that such Indebtedness shall
--------
not represent Indebtedness for money borrowed but shall only represent
liabilities, other than Indebtedness for money borrowed, secured by a Lien
on the property of the Borrower or any of its Subsidiaries permitted under
subsection 9.3(j).
9.3 Limitation on Liens. Create, incur, assume or suffer to exist
-------------------
any Lien upon any of its property, assets (including, without limitation, the
capital stock of any Subsidiary) or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, if any are required in the good faith
judgment of the Borrower, provided that adequate reserves with respect
---------
thereto are maintained on the books of the Borrower or its Subsidiaries, as
the case may be, in conformity with GAAP (or, in the case of Subsidiaries
organized under the laws of a foreign country, generally accepted
accounting principles in effect from time to time in their respective
jurisdictions of organization);
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and
65
other obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances 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 materially interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(f) Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted by subsection 9.2(d) incurred to finance the acquisition of fixed
or capital assets, provided that (i) such Liens shall be created
--------
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness, (iii) the amount of
Indebtedness secured thereby is not increased at any time and (iv) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed 100% of the original purchase price of such property at the time it
was acquired;
(g) Liens in favor of the Collateral Agent created pursuant to the
Security Documents and any liens created pursuant to subsection 8.7;
(h) Liens securing the Borrower's obligations in respect of the
Chemical Standby Letters of Credit granted pursuant to the Reimbursement
and Cash Collateral Agreement;
(i) Liens on the Capital Stock of Talk Corporation owned by the
Borrower to secure repayment of Indebtedness under the Talk Note; and
(j) Liens securing any Indebtedness permitted under subsection
9.2(i), provided that any such Liens shall not cover any Accounts (as
--------
defined in the Borrower Security Agreement) or Inventory of the Borrower or
any of its Subsidiaries.
In no event shall the Borrower create, incur, assume or suffer to exist any Lien
upon the Capital Stock of CellStar now owned or hereafter acquired by the
Borrower, other than Liens in favor of the Collateral Agent created pursuant to
clause (g) above.
9.4 Limitation on Guarantee Obligations. Create, incur, assume or
-----------------------------------
suffer to exist any Guarantee Obligation except (a) Guarantee Obligations under
the Subsidiaries Guarantee, (b) any Guarantee Obligations created pursuant to
subsection 8.7, (c) any Guarantee Obligations in respect of the Chemical Standby
Letters of Credit and (d) Guarantee Obligations of the Borrower in respect of
obligations of any wholly-owned Guarantor in an aggregate amount not to exceed
$5,000,000 at any time.
66
9.5 Limitations on Fundamental Changes. Enter into any merger,
----------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except that any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (provided that (i) the Borrower shall be the
--------
continuing or surviving corporation and (ii) the security interests created
under the Security Documents in favor of the Collateral Agent, and the rights
and remedies under such Security Documents, are not otherwise adversely
affected) or with or into any one or more Domestic Subsidiaries (provided that
--------
(i) a Domestic Subsidiary shall be the continuing or surviving corporation and
(ii) the security interests created under the Security Documents in favor of the
Collateral Agent, and the rights and remedies under such Security Documents, are
not otherwise adversely affected) and any Domestic Subsidiary of the Borrower
may sell or distribute all or substantially all of its assets to the Borrower or
any other Domestic Subsidiary.
9.6 Limitation on Sale of Assets. Except as required hereunder,
----------------------------
convey, sell, lease, assign, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation, receivables and
leasehold interests), whether now owned or hereafter acquired, except:
(a) obsolete or worn out property disposed of in the ordinary course
of business or other items of property (other than Accounts (as defined in
the Borrower Security Agreement) or Inventory) disposed of in the ordinary
course of business which, individually or in the aggregate, are of
nonmaterial economic value to the Borrower or any of its Subsidiaries
disposing of such item of property;
(b) the sale of Inventory in the ordinary course of business;
(c) the liquidation of investments in Cash Equivalents permitted
under subsection 9.9(b);
(d) the transfer of the stock or other ownership interests in any
Joint Venture by the Borrower or any of its Subsidiaries to Audiovox
Holding Corp., provided that Audiovox Holding Corp. (i) does not engage in
--------
any business other than the ownership of such stock or other ownership
interests, (ii) does not incur any indebtedness for borrowed money or issue
any Guarantee Obligation or (iii) does not acquire or own any assets other
than such stock or other ownership interests;
(e) the sale of any CellStar stock owned by the Borrower or Audiovox
Holding Corp. pursuant to the CellStar Option Agreements or otherwise,
provided that, with respect to sales other than pursuant to the CellStar
--------
Option
67
Agreements, no Event of Default has occurred and is continuing at the time
of such sale;
(f) the sale of assets (other than Accounts (as defined in the
Borrower Security Agreement) or Inventory) in an aggregate amount not
exceeding $500,000 in the aggregate after the date hereof;
(g) the disposition of all or a portion of the Capital Stock of Talk
Corporation owned by the Borrower in satisfaction of all of the
Indebtedness under the Talk Note; and
(h) as permitted by subsection 9.5.
9.7 Limitation on Dividends; Stock Repurchases. Declare or pay any
------------------------------------------
dividend (other than dividends payable solely in common stock of the Borrower)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of Capital Stock of the Borrower,
including, without limitation, any payments under Section 10 of the Registration
Rights Agreement, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Borrower or any Subsidiary.
9.8 Limitation on Capital Expenditures. Make or commit to make (by
----------------------------------
way of the acquisition of securities of a Person or otherwise) any expenditure
in respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) except for
expenditures not exceeding, in the aggregate for the Borrower and its
Subsidiaries, $3,000,000 during any fiscal year.
9.9 Limitation on Investments, Loans and Advances. Make any advance,
---------------------------------------------
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person (an "Investment"),
----------
except:
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash Equivalents or as otherwise permitted under
the Reimbursement and Cash Collateral Agreement;
(c) loans and advances to officers, directors and employees of the
Borrower or any of its Subsidiaries in the ordinary course of business for
travel and entertainment expenses not exceeding $100,000 in the aggregate
at any time;
68
(d) Investments arising as a result of the compromise or settlement
of Accounts (other than Eligible Accounts) in the ordinary course of
business as generally conducted over a period of time;
(e) Investments in (i) Domestic Subsidiaries and (ii) Joint Ventures
and Subsidiaries (other than Domestic Subsidiaries) outstanding on the date
hereof and described in Schedule 9.9(e); and
---------------
(f) (i) Investments by the Borrower and its Subsidiaries in (A) any
newly formed Joint Venture or Subsidiary (other than a Domestic Subsidiary)
and (B) any existing Joint Venture or Subsidiary (other than a Domestic
Subsidiary) made after the date hereof, not to exceed $1,250,000 with
respect to any single such investment and (ii) acquisitions of all the
capital stock or all or substantially all of the assets of any Person,
provided that (x) the aggregate amount of all such Investments and
--------
acquisitions after the date hereof shall not exceed $10,000,000 in the
aggregate, (y) to the extent that any such Subsidiary in which an
Investment is made is or becomes a Material Foreign Subsidiary, the
Borrower and such Material Foreign Subsidiary comply with the provisions of
subsection 8.7 and (z) to the extent that any acquisition pursuant to
clause (ii) above results in the acquisition or creation of a Subsidiary,
the Borrower and such Subsidiary comply with the provisions of subsection
8.7.
9.10 Limitation on Payments on the Subordinated Debentures, the Talk
---------------------------------------------------------------
Note and the Exchange Debentures. (a) Make any optional prepayment, optional
- --------------------------------
redemption, optional defeasance or optional purchase of the principal of the
Subordinated Debentures, the or the Talk Note or (b) make any payment on account
of or in connection with the Exchange Debentures other than as required or
contemplated by the Debenture Exchange Agreement as in effect on the date
hereof.
9.11 Limitation on Modifications to Subordinated Debenture Indenture
---------------------------------------------------------------
and the Talk Note. Amend, modify or supplement any provision of (a) the
- -----------------
Subordinated Debenture Indenture or the Subordinated Debentures, other than
amendments pursuant to Section 901(5) of the Subordinated Debenture Indenture to
cure any ambiguity in the Subordinated Debenture Indenture, provided that such
--------
amendment does not adversely affect the interests of the Lenders or (b) amend,
modify or waive any provision of the Talk Note.
9.12 Transactions with Affiliates. Except as set forth on Schedule
---------------------------- --------
9.12, enter into any transaction, including, without limitation, any purchase,
- ----
sale, lease or exchange of property or the rendering of any service, with any
Affiliate, unless such transaction is in the ordinary course of, and pursuant to
the reasonable requirements of, the Borrower's or
69
such Subsidiary's business, is in good faith and is upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person not
an Affiliate and, with respect to a transaction between the Borrower or any
Subsidiary, on the one hand, and a Joint Venture, on the other hand, is upon
such terms that are (a) commercially reasonable based upon the volume of
business transacted between the Borrower or such Subsidiary, on the one hand,
and such Joint Venture, on the other hand, and (b) with respect to transfers of
Inventory, at a price not less than the lowest price charged to the Borrower's
other Joint Ventures and in no event less than the price for a sale of such
Inventory in effect with such Joint Venture on the Closing Date. Accounts owed
by any Joint Venture to the Borrower or any Subsidiary shall be promptly
invoiced (and, in any event, shall be invoiced within five days after the
shipment of goods relating thereto), shall be payable not later than 90 days
after the date of creation of original invoices related thereto, and the time
for payment on any such Account shall not be extended, nor shall any such
Account be compromised, compounded or settled for less than the full amount
thereof.
9.13 Sale and Leaseback. Enter into any arrangement with any Person
------------------
providing for the leasing by the Borrower or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary.
9.14 Fiscal Year. Permit the fiscal year of the Borrower or any of
-----------
its Subsidiaries to end on a day other than November 30.
9.15 Limitation on Negative Pledge Clauses. Enter into any agreement
-------------------------------------
or Financing Leases permitted by this Agreement (in which cases, any prohibition
or limitation shall only be effective against the assets financed thereby), with
any Person other than the Lenders pursuant hereto which prohibits or limits the
ability of the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
9.16 Compromise of Receivables. Except other than in the ordinary
-------------------------
course of business as generally conducted over a period of time, grant any
extension of the time of payment of any of the Accounts, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
9.17 Accounting Policies and Procedures. Except as set forth in
----------------------------------
Schedule 9.17, permit any material change in the
- -------------
70
accounting policies or procedures of the Borrower or any of its subsidiaries,
other than as required by GAAP (or, in the case of Subsidiaries organized under
the laws of a foreign country, generally accepted accounting principles in
effect from time to time in their respective jurisdictions of organization),
without the prior written consent of the Agent.
9.18 Consignment of Title Documents. Deliver any title or other
------------------------------
similar documents in respect of Inventory as collateral security to any Person
other than the Collateral Agent.
9.19 Limitation on Restrictions on Intercompany Payments. Enter into
---------------------------------------------------
any agreement which restricts in any way, or has the effect of restricting, the
payment of dividends, distributions or other amounts to the Borrower by any
Subsidiary or amend the terms of any existing agreement so as to impose or
increase any restrictions on the payment of dividends, distributions or other
amounts to the Borrower by any Subsidiary or Joint Venture in a manner that is
more onerous than any such restrictions in effect on the Closing Date.
9.20 Limitation on Foreign Exchange Contracts. Enter into a Foreign
----------------------------------------
Exchange Contract if the aggregate amount of Foreign Exchange Liabilities of the
Borrower at such time, as most recently determined prior to such time by the
Agent pursuant to this subsection 5.16 and after giving effect to such Foreign
Exchange Contract, exceed $3,000,000.
SECTION 10. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of or interest on
any Note or any L/C Obligation or Acceptance Obligation or any fee or other
amount payable hereunder when due in accordance with the terms thereof or
hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower herein, in any Security Document or in any other Loan Document or
which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement
or any Security Document or other Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;
or
(c) The Borrower shall default in the observance or performance of
any agreement contained in Section 9 or Section 5(h), 5(i), 5(j) or 5(k) of
the Borrower Security Agreement or the Subsidiaries Security Agreement; or
71
(d) The Borrower shall default in the observance or performance of
any other agreement contained in this Agreement, any Security Document or
any of the other Loan Documents (other than as provided in paragraphs (a)
through (c) of this Section), and such default shall continue unremedied
(i) in the case of the agreements contained in subsection 8.1, for a period
of 14 days and (ii) in the case of all other agreements, for a period of 30
days; or
(e) (i) an Event of Default (as defined in the Debenture Exchange
Agreement) or an event which with notice or lapse of time or both would
become an Event of Default under and as defined in the Debenture Exchange
Agreement shall occur and be continuing under the Debenture Exchange
Agreement or (ii) an Event of Default (as defined in the Subordinated
Debenture Indenture) shall occur and be continuing under the Subordinated
Debenture Indenture; or
(f) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Exchange Debentures and the Subordinated Debentures), or in the payment of
any Guarantee Obligation (provided that the principal amount of such
Indebtedness or Guarantee Obligation exceeds, individually, or in the
aggregate, $500,000), provided in the instrument or agreement under which
such Indebtedness or Guarantee Obligation was created; or (ii) default in
the observance or performance of any other agreement or condition relating
to any such Indebtedness or Guarantee Obligation (provided that the
principal amount of such Indebtedness or Guarantee Obligation exceeds,
individually, or in the aggregate, $500,000) or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; or
(g) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for
72
all or any substantial part of its assets, or the Borrower or any of its
Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of
its Subsidiaries any case, proceeding or other action of a nature referred
to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any of its Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part
of its assets which results in the entry of an order for any such relief
which shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) the Borrower or any
of its Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan,
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Required Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan or (vi) any other event or condition shall occur or
exist, with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or
conditions, if any, could, in the reasonable judgment of the Borrower or
the Required Lenders, subject the Borrower or any Commonly Controlled
Entity to any tax, penalty or other liabilities that in the aggregate could
reasonably be expected to have a Material Adverse Effect; or
(i) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by
73
insurance) of $500,000 or more and (i) all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof or (ii) the judgement creditors with respect
to such judgments or their successors or assigns shall have commenced
enforcement proceedings, which enforcement proceedings shall have remained
unstayed for 10 consecutive days; or
(j) Any Security Document shall cease for any reason to be in full
force and effect, or the Borrower shall so assert or the security interests
created by any such Document shall cease for any reason, other than a
release by the Lenders, to be enforceable and of the same effect and
priority purported to be created thereby; or
(k) Any Risk Event (as defined in the Subordinated Debenture
Indenture) or Redemption Event (as defined in the Subordinated Debenture
Indenture) shall occur under the Subordinated Debenture Indenture;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder and all amounts of Acceptance
Obligations, whether or not the Acceptances related thereto have matured) and
the Notes shall immediately become due and payable, and (B) if such event is any
other Event of Default, either or both of the following actions may be taken:
(i) with the consent of the Required Lenders, the Agent may, or upon the request
of the Required Lenders, the Agent shall, by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders, the
Agent may, or upon the request of the Required Lenders, the Agent shall, by
notice of default to the Borrower, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder and all amounts of Acceptance Obligations, whether
or not the Acceptances related thereto have matured) and the Notes to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit (including Existing Letters of
Credit) with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to the preceding paragraph, the Borrower
shall at such
74
time deposit in a cash collateral account opened by the Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit.
Amounts held in such cash collateral account shall be applied by the Agent to
the payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon and, if any, shall be applied to repay other Obligations of the Borrower
hereunder and under the Notes. After all such Letters of Credit shall have
expired or been fully drawn upon, all L/C Obligations shall have been satisfied
and all other Obligations of the Borrower hereunder and under the Notes shall
have been paid in full, the balance, if any, in such cash collateral account
shall be returned to the Borrower.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 11. THE AGENT
11.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints Chemical as the Agent of such Lender under this Agreement, the Security
Documents and the other Loan Documents, and each such Lender irrevocably
authorizes Chemical, as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement, the Security Documents and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement, the Security
Documents and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement, the Security Documents or any other Loan Document or otherwise exist
against the Agent.
11.2 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement, the Security Documents and the other Loan Documents by or
through agents 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 agents or attorneys in-fact
selected by it with reasonable care.
11.3 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement, the Security Documents or any
other Loan Document (except for its or such
75
Person's own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by the Borrower or any officer thereof contained in this
Agreement, the Security Documents or 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, the
Security Documents or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Notes, the Security Documents or any other Loan Document or for any failure of
the Borrower to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, the Security Documents or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
11.4 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order 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,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement, the Security Documents or any other Loan Document
unless it shall first receive such advice or concurrence of the Required Lenders
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. The Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement, the Notes, the Security Documents and the other Loan Documents
in accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
11.5 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Lenders. The
Agent shall take such action with respect to
76
such Default or Event of Default as shall be reasonably directed by the Required
Lenders, including any action under the Security Documents; provided that unless
--------
and until the Agent shall have received such directions, 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 in
the best interests of the Lenders. Any knowledge of any Default or Event of
Default which the Agent has or acquires in its capacity as a Lender shall be
deemed to be notice to the Agent of such Default or Event of Default.
11.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
---------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Loans and/or issue or participate
in Letters of Credit (including Existing Letters of Credit) and/or create or
participate in Acceptances (including Existing Acceptances) hereunder and enter
into this Agreement. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
11.7 Indemnification. The Lenders agree to indemnify the Agent in
---------------
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
original Commitment Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time
77
following the payment of the Notes) be imposed on, incurred by or asserted
against the Agent in its capacity as such in any way relating to or arising out
of this Agreement, the Security Documents, any of the other Loan Documents or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided that no
--------
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
willful misconduct. The agreements in this subsection shall survive the payment
of the Notes and all other amounts payable hereunder.
11.8 Agent in Its Individual Capacity. The Agent and its Affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Agent were not the Agent hereunder, the
Security Documents and the other Loan Documents. With respect to Loans made or
renewed by it and any Note issued to it and with respect to any Letter of Credit
issued or participated in by it or any Acceptance created or participated in by
it, the Agent shall have the same rights and powers under this Agreement, the
Security Documents and the other Loan Documents as any Lender and may exercise
the same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.
11.9 Successor Agent. The Agent may resign as Agent upon 10 days'
---------------
notice to the Lenders. If the Agent shall resign as Agent under this Agreement
then the Required Lenders shall appoint from among the Lenders a successor agent
for the Lenders, which successor agent shall be approved by the Borrower,
whereupon such successor agent shall succeed to the rights, powers and duties of
the Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement or any holders of the
Notes. After any retiring Agent's resignation as Agent, the provisions of this
subsection shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
11.10 Issuing Bank and Accepting Bank. The provisions of this
-------------------------------
Section 11 shall apply mutatis mutandis to the Issuing Bank and the Accepting
------- --------
Bank in their respective capacities as such to the same extent that such
provisions apply to the Agent.
78
SECTION 12. MISCELLANEOUS
12.1 Amendments and Waivers. Neither this Agreement, any Note,
----------------------
Security Document or other Loan Document, nor any terms hereof or thereof may be
amended, supplemented or modified except in accordance with the provisions of
this subsection. With the prior written consent of the Required Lenders, the
Agent and the Borrower may, from time to time, enter into written amendments,
supplements or modifications hereto and to the Notes, the Security Documents and
the other Loan Documents for the purpose of adding any provisions to this
Agreement, the Notes, the Security Documents or the other Loan Documents or
changing in any manner the rights of the Lenders or of the Borrower hereunder or
thereunder or waiving, on such terms and conditions as the Agent may specify in
such instrument, any of the requirements of this Agreement, the Notes, the
Security Documents or the other Loan Documents or any Default or Event of
Default and its consequences; provided, however, that no such waiver and no such
-------- -------
amendment, supplement or modification shall (a) increase the Commitments, reduce
the amount or extend the maturity of any Note or any installment thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce any
fee payable to any Lender hereunder, or change the amount of any Lender's
Commitment, in each case without the consent of all the Lenders affected
directly or indirectly thereby, or (b) amend, modify or waive any provision of
this subsection or reduce the percentage specified in the definition of Required
Lenders, or increase the advance rates specified in the definition of Borrowing
Base, or consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement or the other Loan Documents or
consent to the release of all or a substantial part of the collateral upon which
Liens have been created pursuant to the Security Documents or consent to the
release of any Guarantee Obligations under the Security Documents, in each case
without the prior written consent of all the Lenders, or (c) amend, modify or
waive any provision of Section 3 without the prior written consent of the
Issuing Bank, (d) amend, modify or waive any provision of Section 4 without the
prior written consent of the Accepting Bank or (e) amend, modify or waive any
provision of Section 11 without the prior written consent of the then Agent.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Agent and all future holders of the Notes. In the case of any
waiver, the Borrower, the Lenders and the Agent shall be restored to their
former position and rights hereunder and under the outstanding Notes and any
other Loan Documents, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
12.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in
79
writing (including by telecopy or nationally recognized courier service), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or, in the case of telecopy notice, when
received, or, in the case of a nationally recognized courier service, one
Business Day after delivery to such courier service, addressed as follows in the
case of the Borrower and the Agent, and as set forth in Schedule 12.2 in the
-------------
case of the other parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto and any future holders of the Notes:
The Borrower: Audiovox Corporation
150 Marcus Boulevard
Hauppauge, New York 11788
Attention: Charles M. Stoehr
Telecopy: (516) 273-6922
Telephone: (516) 231-7750
The Agent and the
Collateral Agent (and
Chemical, in its
capacity as
Issuing Bank and
Accepting Bank): Chemical Bank
7600 Jericho Turnpike
Woodbury, New York 11797
Attention: Roland Driscoll
Telecopy: (516) 364-3307
Telephone: (516) 364-3300
provided that any notice, request or demand to or upon the Agent or the Lenders
- --------
pursuant to subsection 2.3, 5.1, 5.3 or 5.8 shall not be effective until
received.
12.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Agent or any Lender, 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. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
12.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder or under any other Loan Document and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Notes.
12.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
-----------------------------
or reimburse the Agent and each Lender for all its out-of-pocket costs and
expenses incurred in connection with
80
the development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement, the Notes, the Security Documents and the other
Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent, (b) to pay or reimburse each
Lender and the Agent for all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the Notes,
the Security Documents, the other Loan Documents and any such other documents,
including, without limitation, fees and disbursements of counsel to the Agent
and to the several Lenders, (c) to pay, indemnify, and hold each Lender and the
Agent harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any, which may be payable or determined to be payable
in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes, the Security Documents, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
the Agent harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
Notes, the Security Documents, the other Loan Documents, and any such other
documents (all the foregoing, collectively, the "indemnified liabilities"),
provided, that the Borrower shall have no obligation hereunder to the Agent or
- --------
any Lender, as the case may be, with respect to indemnified liabilities arising
from (i) the gross negligence or willful misconduct of the Agent or any such
Lender, as the case may be, (ii) legal proceedings commenced against the Agent
or any such Lender by any security holder or creditor thereof arising out of and
based upon rights afforded any such security holder or creditor solely in its
capacity as such, or (iii) legal proceedings commenced against the Agent or any
such Lender by any other Lender or by any Transferee (as defined in subsection
12.6). The agreements in this subsection shall survive repayment of the Notes
and all other amounts payable hereunder.
12.6 Successors and Assigns; Participations; Purchasing Lenders.
----------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes and
their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
81
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or
more banks or other entities ("Participants") participating interests in
------------
any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender or any other interest of such Lender hereunder and under the
other Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Note for all
purposes under this Agreement and the other Loan Documents, and the
Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. The Borrower agrees that if
amounts outstanding under this Agreement and the Notes are due or 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 and any Note to the same extent as if the amount
of its participating interest were owing directly to it as a Lender under
this Agreement or any Note, provided that such Participant shall only be
--------
entitled to such right of set-off if it shall have agreed in the agreement
pursuant to which it shall have acquired its participating interest to
share with the Lenders the proceeds thereof as provided in subsection 12.7.
The Borrower also agrees that each Participant shall be entitled to the
benefits of subsections 5.12, 5.13, 5.14, 5.15 and 12.5 with respect to its
participation in the Commitments and the Loans outstanding from time to
time; provided, that no Participant shall be entitled to receive any
--------
greater amount pursuant to such subsections than the transferor Lender
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had
no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any
Lender or any affiliate thereof and, with the consent of the Borrower and
the Agent (which in each case shall not be unreasonably withheld), to one
or more additional banks or financial institutions ("Purchasing Lenders")
------------------
all or any part of its rights and obligations under this Agreement and the
Notes pursuant to a Commitment Transfer Supplement, substantially in the
form of Exhibit D, executed by such Purchasing Lender, such transferor
---------
Lender (and, in the case of a Purchasing Lender that is not then a Lender
or an affiliate thereof, by the Borrower and the Agent) and delivered to
the
82
Agent for its acceptance and recording in the Register (as defined in
subsection 12.6(d)); provided that if an Event of Default has occurred
--------
under paragraph (a) of Section 10 and is continuing, the consent or
approval of the Borrower shall not be required in connection with any sale
by a Lender under this paragraph. Upon such execution, delivery,
acceptance and recording, from and after the Transfer Effective Date
determined pursuant to such Commitment Transfer Supplement, (x) the
Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein,
and (y) the transferor Lender thereunder shall, to the extent provided in
such Commitment Transfer Supplement, be released from its obligations under
this Agreement (and, in the case of a Commitment Transfer Supplement
covering all or the remaining portion of a transferor Lender's rights and
obligations under this Agreement, such transferor Lender shall cease to be
a party hereto). Such Commitment Transfer Supplement shall be deemed to
amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting adjustment
of Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Notes. On or prior to the Transfer
Effective Date determined pursuant to such Commitment Transfer Supplement,
the Borrower, at its own expense, shall execute and deliver to the Agent in
exchange for the surrendered Note a new Note to the order of such
Purchasing Lender in an amount equal to the Commitment assumed by it
pursuant to such Commitment Transfer Supplement and, if the transferor
Lender has retained a Commitment hereunder, a new Note to the order of the
transferor Lender in an amount equal to the Commitment retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall
otherwise be in the form of the Notes replaced thereby. The Notes
surrendered by the transferor Lender shall be returned by the Agent to the
Borrower marked "cancelled".
(d) The Agent shall maintain at its address referred to in subsection
12.2 a copy of each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and addresses of
--------
the Lenders and the Commitment of, and principal amount of the Loans owing
to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the
Register as the owner of the Loan recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
83
(e) Upon its receipt of a Commitment Transfer Supplement executed by
a transferor Lender and Purchasing Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an affiliate thereof, by the Borrower
and the Agent) together with payment to the Agent of a registration and
processing fee of $500, the Agent shall (i) promptly accept such Commitment
Transfer Supplement and (ii) on the Transfer Effective Date determined
pursuant thereto record the information contained therein in the Register
and give notice of such acceptance and recordation to the Lenders and the
Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any prospective
----------
Transferee any and all financial information in such Lender's possession
concerning the Borrower and its affiliates which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and its
affiliates prior to becoming a party to this Agreement, provided that any
--------
prospective Transferee shall have agreed to be bound by subsection 12.8 or
shall have executed a confidentiality agreement to substantially the same
effect.
(g) If, pursuant to this subsection, any interest in this Agreement
or any Note is transferred to any Transferee which is organized under the
laws of any jurisdiction other than the United States of America or any
state thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, (i) to represent to
the transferor Lender (for the benefit of the transferor Lender, the Agent
and the Borrower) that under applicable law and treaties no taxes will be
required to be withheld by the Agent, the Borrower or the transferor Lender
with respect to any payments to be made to such Transferee in respect of
the Loans, (ii) to furnish to the transferor Lender (and, in the case of
any Purchasing Lender registered in the Register, the Agent and the
Borrower) either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein such Transferee claims entitlement to
complete exemption from U.S. federal withholding tax on all interest
payments hereunder) and (iii) to agree (for the benefit of the transferor
Lender, the Agent and the Borrower) to provide the transferor Lender (and,
in the case of any Purchasing Lender registered in the Register, the Agent
and the Borrower) a new Form 4224 or Form 1001 upon the expiration or
obsolescence of any previously delivered form and comparable statements in
accordance with applicable laws of the United States of America and
regulations and amendments duly executed and completed by such Transferee,
and to comply from time to
84
time with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Lender in accordance with
applicable law.
12.7 Adjustments; Set-off.
--------------------
(a) If any Lender (a "benefitted Lender") shall at any time receive
-----------------
any payment of all or part of its Loans or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in Section 10(g), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's
Loans, or interest thereon, such benefitted Lender shall purchase for cash
from the other Lenders such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral,
or the proceeds thereof, as shall be necessary to cause such benefitted
Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all
-------- -------
or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest. The Borrower agrees that each Lender so purchasing a
portion of another Lender's Loan may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon any amount becoming due and
payable by the Borrower hereunder or under the Notes (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and
apply against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit
or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Agent after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not affect the
--------
validity of such set-off and application.
85
12.8 Confidentiality. Each Lender agrees that all non-public
---------------
information provided to such Lender (or any officer or employee of such Lender)
under this Agreement is confidential and proprietary to the Borrower and that
the Lender will not disclose (other than to the directors, officers, employees,
affiliates and agents of the Lender who require such information in connection
with the Lender's administration and enforcement of this Agreement and who have
been directed to treat such information as confidential and proprietary to the
Borrower or to outside advisors or auditors of the Lender, provided that such
--------
advisors or auditors have agreed to treat such information as confidential and
proprietary to the Borrower or to bank examiners or other similar officials) any
such information (excluding information which becomes (i) generally available to
the public other than as a result of the disclosure thereof by the Lender or its
representatives or (ii) available to the Lender on a non-confidential basis from
a source other than Borrower or any of its Subsidiaries or any of their
respective directors, officers, employees, agents or representatives, provided
such source is not bound by a confidentiality agreement with the Borrower),
except to the extent the Lender is required by law or requested or required by
any Governmental Authority to disclose such information.
12.9 Return of CellStar Stock. Upon the execution of this Agreement,
------------------------
the Collateral Agent shall return to Audiovox Holding Corp. the shares of common
stock of CellStar delivered to the Collateral Agent pursuant to the Pledge
Agreement, dated as of March 30, 1995, made by Audiovox Holding Corp. in favor
of the Collateral Agent for the Lenders.
12.10 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Agent.
12.11 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.12 Integration. This Agreement represents the agreement of the
-----------
Borrower, the Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
86
12.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
12.14 Submission To Jurisdiction; Waivers. The Borrower hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 12.2 or at such other
address of which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
87
12.15 Acknowledgements. The Borrower hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship
to the Borrower, and the relationship between Agent and Lenders, on one
hand, and the Borrower, on the other hand, is solely that of debtor and
creditor; and
(c) no joint venture exists among the Lenders or among the Borrower
and the Lenders.
12.16 WAIVERS OF JURY TRIAL. THE BORROWER THE AGENT AND THE LENDERS
---------------------
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
AUDIOVOX CORPORATION
By: /s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: Senior Vice President
CHEMICAL BANK, as Agent and as a
Lender
By: /s/ Richard Grabowski
-------------------------------
Name: Richard Grabowski
Title: Vice President
NATWEST BANK N.A., as a Lender
By: /s/ Christine G. Dekajlo
-------------------------------
Name: Christine G. Dekajlo
Title: Vice President
88
THE CHASE MANHATTAN BANK, N.A., as
a Lender
By: /s/ Salvatore Trifiletti
-------------------------------
Name: Salvatore Trifiletti
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By: /s/ Peter L. Griswold
-------------------------------
Name: Peter L. Griswold
Title: Director
EUROPEAN AMERICAN BANK,
as a Lender
By: /s/ Stuart N. Berman
-------------------------------
Name: Stuart N. Berman
Title: Vice President
Schedule I
COMMITMENTS
Commitment
Lender Commitment Percentage
---------------------------------- --------------- -----------
Chemical Bank $35,000,000 36.84%
Natwest Bank N.A. 25,000,000 26.32%
The Chase Manhattan Bank, N.A. 15,000,000 15.78%
European American Bank 10,000,000 10.53%
The First National Bank of Boston 10,000,000 10.53%
--------------- -----------
TOTAL $95,000,000 100.00%