CONFORMED COPY
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CREDIT AGREEMENT
dated as of August 5, 1996
Among
FURNISHINGS INTERNATIONAL INC.,
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.,
THE SUBSIDIARY BORROWERS NAMED HEREIN,
THE LENDERS NAMED HEREIN
and
THE CHASE MANHATTAN BANK,
as Swingline Lender, Administrative Agent and
Collateral Agent,
and
CHASE MANHATTAN BANK DELAWARE,
as Issuing Bank
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[CS&M Reference No. 6700-402]
TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
SECTION 1.01. Defined Terms ................................. 2
SECTION 1.02. Terms Generally ............................... 27
ARTICLE II
The Credits
SECTION 2.01. Commitments ................................... 28
SECTION 2.02. Loans ......................................... 28
SECTION 2.03. Borrowing Procedure ........................... 30
SECTION 2.04. Evidence of Debt; Repayment of Loans 30
SECTION 2.05. Fees .......................................... 31
SECTION 2.06. Interest on Loans ............................. 32
SECTION 2.07. Default Interest .............................. 32
SECTION 2.08. Alternate Rate of Interest .................... 33
SECTION 2.09. Termination and Reduction of Commitments 33
SECTION 2.10. Conversion and Continuation of Borrowings 33
SECTION 2.11. Repayment of Term Borrowings .................. 35
SECTION 2.12. Optional Prepayment ........................... 37
SECTION 2.13. Mandatory Prepayments ......................... 38
SECTION 2.14. Reserve Requirements; Change in Circumstances 40
SECTION 2.15. Change in Legality ............................ 41
SECTION 2.16. Indemnity ..................................... 42
SECTION 2.17. Pro Rata Treatment ............................ 43
SECTION 2.18. Sharing of Setoffs ............................ 43
SECTION 2.19. Payments ...................................... 43
SECTION 2.20. Taxes ......................................... 44
SECTION 2.21. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate .............. 46
SECTION 2.22. Swingline Loans ............................... 47
SECTION 2.23. Letters of Credit ............................. 49
Contents, p. 2
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ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers .......................... 53
SECTION 3.02. Authorization ................................. 53
SECTION 3.03. Enforceability ................................ 53
SECTION 3.04. Governmental Approvals ........................ 54
SECTION 3.05. Financial Statements .......................... 54
SECTION 3.06. No Material Adverse Change .................... 54
SECTION 3.07. Title to Properties; Possession Under Leases 54
SECTION 3.08. Subsidiaries .................................. 55
SECTION 3.09. Litigation; Compliance with Laws .............. 55
SECTION 3.10. Agreements .................................... 56
SECTION 3.11. Federal Reserve Regulations ................... 56
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act .................................. 56
SECTION 3.13. Use of Proceeds ............................... 56
SECTION 3.14. Tax Returns ................................... 57
SECTION 3.15. No Material Misstatements ..................... 57
SECTION 3.16. Employee Benefit Plans ........................ 57
SECTION 3.17. Environmental Matters ......................... 57
SECTION 3.18. Insurance ..................................... 58
SECTION 3.19. Security Documents ............................ 58
SECTION 3.20. Location of Real Property and Leased Premises 59
SECTION 3.21. Labor Matters ................................. 59
SECTION 3.22. Solvency ...................................... 60
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events ............................. 60
SECTION 4.02. First Credit Event ............................ 61
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties;
Compliance with Laws ......................... 65
SECTION 5.02. Insurance ..................................... 66
SECTION 5.03. Obligations and Taxes ......................... 67
SECTION 5.04. Financial Statements, Reports, etc. ........... 68
SECTION 5.05. Litigation and Other Notices .................. 69
Contents, p. 3
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SECTION 5.06. Employee Benefits ............................. 70
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections .................................. 70
SECTION 5.08. Use of Proceeds ............................... 70
SECTION 5.09. Compliance with Environmental Laws ............ 70
SECTION 5.10. Preparation of Environmental Reports .......... 70
SECTION 5.11. Further Assurances ............................ 71
SECTION 5.12. Interest Rate Protection ...................... 71
SECTION 5.13. Assets of Holdings ............................ 71
SECTION 5.14. Certificates of Occupancy, Permits and Zoning . 72
SECTION 5.15. Subsidiaries.................................. 72
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness .................................. 73
SECTION 6.02. Liens ......................................... 75
SECTION 6.03. Sale and Lease-Back Transactions .............. 77
SECTION 6.04. Investments, Loans and Advances ............... 77
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions ................................. 79
SECTION 6.06. Dividends and Distributions; Restrictions on
Ability of Subsidiaries to Pay Dividends ..... 81
SECTION 6.07. Transactions with Affiliates .................. 83
SECTION 6.08. Other Indebtedness and Agreements ............. 84
SECTION 6.09. Interest Coverage Ratio ....................... 85
SECTION 6.10. Total Debt Ratio .............................. 85
SECTION 6.11. Net Worth...................................... 86
SECTION 6.12. Capital Expenditures .......................... 86
SECTION 6.13. Bank Accounts ................................. 86
SECTION 6.14. Business of Holdings, Borrowers and
Subsidiaries ................................. 86
SECTION 6.15. Fiscal Year ................................... 87
ARTICLE VII
Events of Default
Contents, p. 4
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ARTICLE VIII
The Administrative Agent and the Collateral Agent ... 89
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices ....................................... 92
SECTION 9.02. Survival of Agreement ......................... 93
SECTION 9.03. Binding Effect ................................ 93
SECTION 9.04. Successors and Assigns ........................ 93
SECTION 9.05. Expenses; Indemnity ........................... 96
SECTION 9.06. Right of Setoff ............................... 97
SECTION 9.07. Applicable Law ................................ 97
SECTION 9.08. Waivers; Amendment ............................ 97
SECTION 9.09. Interest Rate Limitation ...................... 98
SECTION 9.10. Entire Agreement .............................. 99
SECTION 9.11. WAIVER OF JURY TRIAL .......................... 99
SECTION 9.12. Severability .................................. 99
SECTION 9.13. Counterparts .................................. 99
SECTION 9.14. Headings ...................................... 99
SECTION 9.15. Jurisdiction; Consent to Service of Process ... 100
SECTION 9.16. Confidentiality................................ 100
SECTION 9.17. Obligations Joint and Several ................. 101
Exhibits and Schedules
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Indemnity, Subrogation and Contribution
Agreement
Exhibit E Form of Deed of Trust
Exhibit F Form of Holdings Guarantee Agreement
Exhibit G Form of Pledge Agreement
Exhibit H Form of Security Agreement
Exhibit I Form of Subsidiary Guarantee Agreement
Exhibit J-1 Form of Opinion of Morgan Lewis & Bockius
Exhibit J-2 Form of Opinion of John R. Leekley, Esq., Vice President
and General Counsel of Masco Corporation
Exhibit J-3 Form of Opinion of Local Counsel
Exhibit K Terms of Masco Notes
Exhibit L Form of Confidentiality Agreement
Exhibit M Form of Subordination, Nondisturbance and Attornment
Agreement
Exhibit N Form of Note
Contents, p. 5
Schedule 1 Subsidiary Borrowers
Schedule 1.01(b) Mortgaged Properties
Schedule 1.01(c) Specified HFG Assets
Schedule 1.01(d) Specified HFG Companies
Schedule 2.01 Commitments
Schedule 3.07(b) Possession under Leases
Schedule 3.07(c) Condemnation Proceedings
Schedule 3.07(d) Rights of First Refusal, Options and Other Rights
Regarding Interests in Mortgaged Properties
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.17 Environmental Matters
Schedule 3.18 Insurance
Schedule 3.19(d) Mortgage Filing Offices
Schedule 3.20(a) Owned Real Property
Schedule 3.20(b) Leased Real Property
Schedule 3.21 Labor Matters
Schedule 4.02(a) Local Counsel
Schedule 4.02(z) Sources and Uses of Funds
Schedule 6.01 Indebtedness
Schedule 6.02(a) Liens
Schedule 6.04(l) Current Investments, Loans and Advances
Schedule 6.04(m) Customer Investments, Loans and Advances
Schedule 6.04(n) Supplier Loans and Advances
Schedule 6.07 Transactions with Affiliates
CREDIT AGREEMENT dated as of August 5, 1996, among
LIFESTYLE FURNISHINGS INTERNATIONAL LTD., a Delaware
corporation (the "Parent Borrower"); each subsidiary of the
Parent Borrower listed on Schedule 1 hereto (each, a
"Subsidiary Borrower" and collectively, the "Subsidiary
Borrowers"; the Parent Borrower and the Subsidiary Borrowers
are collectively referred to herein as the "Borrowers");
FURNISHINGS INTERNATIONAL INC., a Delaware corporation
("Holdings"); the Lenders (as defined in Article I); THE CHASE
MANHATTAN BANK, a New York banking corporation, as swingline
lender (in such capacity, the "Swingline Lender"), as
administrative agent (in such capacity, the "Administrative
Agent") and as collateral agent (in such capacity, the
"Collateral Agent") for the Lenders; and CHASE MANHATTAN BANK
DELAWARE, as issuing bank (in such capacity, the "Issuing
Bank").
Pursuant to the Acquisition Agreement dated as of March 29, 1996, as
amended (the "Acquisition Agreement"), between Holdings and Masco Corporation, a
Delaware corporation ("Masco"), (a) Holdings will acquire from Masco all the
capital stock of each of the Subsidiary Borrowers, (b) Holdings will acquire,
through one or more mergers, the Specified HFG Companies (such term and each
other capitalized term used but not defined herein having the meaning given it
in Article I), with Holdings as the surviving corporation in such mergers, and
(c) all outstanding intercompany Indebtedness of the Subsidiary Borrowers, the
Specified HFG Companies and their respective subsidiaries owed to Masco will be
repaid in full (collectively, the "Acquisition"), all for aggregate
consideration of approximately $1,080,000,000, consisting of (i) approximately
$705,300,000 in cash (including the repayment of intercompany Indebtedness owed
to Masco), (ii) the issuance by Holdings to Masco of $285,000,000 (subject to
increase in accordance with the terms of the Acquisition Agreement) of Masco
Notes, (iii) the issuance to Masco of capital stock of Holdings having an
aggregate value of approximately $59,700,000 and (iv) the assumption by the
Parent Borrower and the Subsidiaries of not more than $30,000,000 of
Indebtedness.
In connection with the Acquisition, (a) 399 Venture Partners Inc., a
Delaware corporation ("399 Venture Partners"), together with certain
institutional investors and members of management, will make a cash capital
contribution to Holdings in an aggregate amount of approximately $65,300,000
(the "Equity Contribution"), (b) Holdings will contribute to the Parent Borrower
(which, in turn, will contribute to LHL) all the capital stock of each of the
Subsidiary Borrowers (other than LHL), all the capital stock of the companies
referred to in Section 5.15 and the Specified HFG Assets, (c) the Parent
Borrower will issue the Subordinated Notes in a public offering or Rule 144A
offering and (d) Holdings, the Receivables Subsidiary and certain other
Subsidiaries will enter into the Bridge Receivables Financing.
The Borrowers have requested the Lenders to extend credit in the form of
(a) Tranche A Term Loans on the Closing Date, in an aggregate principal amount
of $125,000,000, (b) Tranche B Term Loans on the Closing Date, in an aggregate
principal amount of $175,000,000, and (c) Revolving Loans at any time and from
time to time prior to the Revolving Credit Maturity Date, in an aggregate
principal amount at any time outstanding not in excess of $150,000,000. The
Borrowers have requested the Swingline Lender to extend credit, at any time and
from time to time prior to the
2
Revolving Credit Maturity Date, in the form of Swingline Loans, in an aggregate
principal amount at any time outstanding not in excess of $25,000,000. The
Borrowers have requested the Issuing Bank to issue letters of credit, in an
aggregate face amount at any time outstanding not in excess of $50,000,000, to
support payment obligations incurred in the ordinary course of business by the
Borrowers and the Subsidiaries.
The proceeds of the Term Loans are to be used, together with a portion of
the proceeds of Revolving Loans and the proceeds of the initial sale of
receivables under the Bridge Receivables Financing to be made on the Closing
Date, solely (a) to pay the cash consideration to be paid in connection with the
Acquisition (including the repayment of intercompany Indebtedness owed to Masco)
and (b) to pay related fees and expenses. The proceeds of the Revolving Loans
(other than the Revolving Loans used for the purposes specified in the
immediately preceding sentence) and the Swingline Loans are to be used for
general corporate purposes of the Borrowers and the Subsidiaries.
The Lenders and the Swingline Lender are willing to extend such credit to
the Borrowers and the Issuing Bank is willing to issue letters of credit for the
account of the Borrowers, in each case on the terms and subject to the
conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR Term Loans.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in
effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such term
in Section 2.05(b).
3
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of
the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. If for any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms of the definition thereof,
the Alternate Base Rate shall be determined without regard to clause (b) or (c),
or both, of the immediately preceding sentence, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively. The term "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective on the date such change is publicly announced as
being effective. The term "Base CD Rate" shall mean the sum of (a) the product
of (i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate. The term "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for the day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Applicable Percentage" shall mean, for any day, with respect to (a) any
Eurodollar Loan, or (b) any ABR Loan, as the case may be, the applicable
percentage set forth below under the caption (i) "Eurodollar Spread" or (ii)
"ABR Spread", respectively, based upon the Total Debt Ratio as of the last day
of the Parent Borrower's most recently ended fiscal quarter:
4
Eurodollar ABR
Total Debt Ratio Spread Spread
- ---------------- ------ ------
Category 1
Greater than 2.50% 1.50%
3.75 to 1.00
Category 2
Less than or equal to 2.25% 1.25%
3.75 to 1.00
Category 3
Less than or equal to 2.00% 1.00%
3.25 to 1.00
Category 4
Less than or equal to 2.75 1.75% .75%
to 1.00
Category 5
Less than or equal to 1.50% .50%
2.25 to 1.00
Each change in the Applicable Percentage resulting from a change in the
Total Debt Ratio shall be effective with respect to all Tranche A Term Loans,
all Revolving Loans and all Letters of Credit outstanding on and after the date
of delivery to the Administrative Agent of the certificate required by Section
5.04(d) (which shall include attached thereto the financial statements and
certificates required by Section 5.04(a) or (b)) indicating such change until
the date immediately preceding the next date of delivery of such certificate
indicating another such change. Notwithstanding the foregoing, (a) at any time
during which the Parent Borrower has failed to deliver such certificate required
by Section 5.04(d) and the financial statements and certificates required by
Section 5.04(a) or (b), as applicable, or (b) at any time after the occurrence
and during the continuance of an Event of Default, the Total Debt Ratio shall be
deemed to be in Category 1 for purposes of determining the Applicable
Percentage.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Administrative Agent as the then current net annual assessment rate that will be
employed in determining amounts payable by the Administrative Agent to the
Federal Deposit Insurance Corporation (or any successor thereto) for insurance
by such Corporation (or such successor) of time deposits made in dollars at the
Administrative Agent's domestic offices.
"Asset Sale" shall mean the sale, transfer or other disposition (by way of
merger or otherwise) by any Loan Party or any of the Subsidiaries to any person
other than any Loan Party of (a) any Capital Stock of any of the Subsidiaries or
(b) any other assets of any Loan Party or any of the Subsidiaries, provided that
none of (i) any asset sale or series of related asset sales described in clause
(b) above for consideration, at fair market value, of less than $100,000, (ii)
any sale of accounts receivable (or any related assets) under any Permitted
Receivables Financing, (iii) any Equity Issuance
5
or (iv) any sale, transfer or other disposition of assets pursuant to Section
6.05(a), (b), (c), (d), (e), (f), (h) or (l) shall be deemed an "Asset Sale" for
purposes of this Agreement.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrowers in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit C.
"Bridge Receivables Financing" shall mean (a) the sale by Holdings and
certain of the Subsidiaries of accounts receivable to the Receivables Subsidiary
pursuant to the Receivables Sale Agreement and the capitalization of the
Receivables Subsidiary with a demand note of LHL not to exceed $5,000,000, (b)
the sale of such accounts receivable (or participation interests therein) by the
Receivables Subsidiary pursuant to the Receivables Pooling Agreement and (c) the
servicing of such accounts receivable pursuant to the Receivables Servicing
Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which banks in New York City are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean, for any period, without duplication,
the sum of (a) the aggregate of all expenditures (whether paid in cash or other
consideration) by Holdings, the Parent Borrower and the Subsidiaries during such
period that, in accordance with GAAP, are or should be included in "additions to
property, plant or equipment" or similar items reflected in the consolidated
statement of cash flows of Holdings, the Parent Borrower and the Subsidiaries
for such period and (b) to the extent not covered by clause (a) above, the
aggregate of all expenditures by Holdings, the Parent Borrower and its
Subsidiaries to acquire by purchase or otherwise the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any person (it
being understood that this clause (b) does not include any investment in a
person that is not a subsidiary at the time of such investment and that will not
become a subsidiary as a result of such investment); provided, however, that
Capital Expenditures shall not include (i) expenditures relating to the
development, purchase or acquisition of sample fabric books, (ii) in the case of
clause (b) above, the portion of such expenditures allocable in accordance with
GAAP to net current assets, (iii) expenditures of proceeds of insurance
settlements, condemnation awards and other settlements in respect of lost,
destroyed, damaged or condemned assets, equipment or other property to the
extent such expenditures are made to replace or repair such lost, destroyed,
damaged or condemned assets, equipment or other property or otherwise to acquire
assets or properties useful in the business of the Loan Parties and the
Subsidiaries within 12 months of receipt of such proceeds or (iv) with respect
to any person, expenditures that are
6
accounted for as capital expenditures of such person and that actually are paid
for by a third party and for which neither such person nor any subsidiary of
such person has provided or is required to provide or incur, directly or
indirectly, any consideration or obligation to such third party.
"Capital Lease Obligations" of any person shall mean an obligation of such
person that is required to be classified and accounted for as a capital lease
for financial reporting purposes in accordance with GAAP, and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP.
"Capital Stock" shall mean, with respect to any person, any and all
shares, interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) equity of such person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest, but excluding any debt
securities convertible into such equity. For purposes of clauses (a)(i) and
(a)(ii) of the definition of the term "Change in Control" and the definition of
the term "Equity Issuance", Capital Stock of Holdings shall be deemed to exclude
the Class D Common Stock of Holdings.
"Casualty" shall have the meaning assigned to such term in the Mortgages.
A "Change in Control" shall be deemed to have occurred if:
(a) prior to an Initial Public Offering:
(i) immediately after giving effect to any transfer by any 399
Investor of any shares of Capital Stock or Debentures of Holdings or
any issuance of additional shares of Capital Stock of Holdings, the
399 Investors shall cease to own shares of Capital Stock and
Debentures of Holdings, beneficially and of record, having an
aggregate value (determined as used herein by reference to (A) in
the case of common stock and convertible preferred stock, the
greater of the fair market value thereof and the original purchase
price thereof (it being understood that the original purchase price
for all the common stock and convertible preferred stock of Holdings
as of the Closing Date is $5,000,000), (B) in the case of any other
preferred stock, the stated value thereof plus any accrued but
unpaid dividends thereon, and (C) in the case of Debentures, the
aggregate principal amount thereof plus any accrued but unpaid
interest thereon) at least equal to the lesser of (x) $35 million
and (y) 24% of the aggregate value of all outstanding Capital Stock
and Debentures of Holdings (excluding any such outstanding Capital
Stock or Debentures then owned by the Management Investors);
(ii) immediately after giving effect to any transfer by any
Masco Investor of any shares of Capital Stock or Debentures of
Holdings or any issuance of additional shares of Capital Stock of
Holdings, the Masco Investors shall cease to own shares of Capital
Stock and Debentures of Holdings, beneficially and of record, having
an aggregate value (determined as provided in clause (i) above) at
least equal to the lesser of (x) $30 million and (y) 21% of the
aggregate value of all outstanding Capital Stock and Debentures of
Holdings (excluding any such outstanding Capital Stock or Debentures
then owned by the Management Investors);
7
(iii) except in the case of any vacancy for 30 days or less
resulting from the death or resignation of any director of Holdings,
seats on the Board of Directors of Holdings having more than 36% of
the total voting power of the Board of Directors of Holdings shall
at any time be occupied by persons who were neither (A) nominated by
399 Venture Partners, acting on behalf of the Institutional
Investors as authorized by the Stockholders' Agreement, or by the
Nominating Committee of Holdings nor (B) appointed by directors so
nominated;
(iv) except in the case of any vacancy for 30 days or less
resulting from the death or resignation of any director of Holdings,
seats on the Nominating Committee of Holdings having more than
one-third of the total voting power of such Nominating Committee
shall at any time be occupied by persons who were neither (A)
directors nominated by 399 Venture Partners, acting on behalf of the
Institutional Investors as authorize by the Stockholders' Agreement,
or by such Nominating Committee nor (B) appointed by directors so
nominated; or
(v) 399 Venture Partners shall at any time cease to have the
right, through the ownership of voting securities, by contract or
otherwise (which may be a contractual right, exercisable upon 399
Venture Partners's determination on behalf of the Institutional
Investors, that the Institutional Investors may do so in compliance
with applicable law or regulation), to elect directors of Holdings
having a majority of the total voting power of the Board of
Directors of Holdings;
(b) following an Initial Public Offering:
(i) the 399 Investors shall cease to own at any time,
beneficially and of record, (A) at least 13% of the outstanding
common stock of Holdings and (B) at least 13% of the combined voting
power of all classes of Capital Stock of Holdings;
(ii) the Masco Investors shall cease to own at any time,
beneficially and of record, (A) at least 12% of the outstanding
common stock of Holdings and (B) at least 12% of the combined voting
power of all classes of Capital Stock of Holdings;
(iii) during any period of two consecutive years beginning
after the Closing Date, individuals who at the beginning of such
period constituted the Board of Directors of Holdings (together with
any new directors whose election was approved by a majority of the
directors then in office who were either directors at the beginning
of such period or whose election was previously so approved) cease
for any reason to have a majority of the total voting power of the
Board of Directors of Holdings; or
(iv) any person or group (within the meaning of Rule 13d-5 of
the Securities Exchange Act of 1934 as in effect on the date hereof)
(other than the 399 Investors, the Masco Investors and the
Management Investors) shall own directly or indirectly, beneficially
or of record, at any time a percentage of the outstanding shares of
common stock of Holdings or of the combined voting power of all
classes of Capital Stock of Holdings, in either case in excess of
the percentage then owned, beneficially
8
and of record, by the 399 Investors, the Masco Investors and the
Management Investors collectively;
(c) any change in control (or similar event, however denominated)
with respect to Holdings or the Parent Borrower shall occur under and as
defined in (i) the Masco Notes, (ii) the Subordinated Notes, (iii) the
Debentures, (iv) any class of preferred stock of Holdings or (v) any other
agreement or instrument evidencing Indebtedness of Holdings, the Parent
Borrower or any of the Subsidiaries having, in the case of clause (v), an
aggregate principal amount in excess of $30,000,000;
(d) Holdings shall cease to own and control, directly, beneficially
and of record, 100% of the outstanding Capital Stock of the Parent
Borrower, free and clear of all Liens (other than Liens under the Loan
Documents); or
(e) the Parent Borrower shall cease to own and control, directly or
indirectly through one or more wholly owned Subsidiaries, beneficially and
of record, 100% of the outstanding Capital Stock of each Subsidiary
Borrower, free and clear of all Liens (other than Liens under the Loan
Documents), other than any Subsidiary Borrower all the Capital Stock of
which has been sold in a transaction permitted by Section 6.05.
"Citicorp" shall mean Citicorp, a Delaware corporation.
"Class D Common Stock" shall mean the Class D Common Stock of Holdings the
dividends, voting and other rights of which are designed to track the
performance of Simmons.
"Closing Date" shall mean the date of the first Credit Event.
"Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any Security
Document and shall also include the Mortgaged Properties.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment and/or Term Loan Commitment and with respect to the
Swingline Lender, the Swingline Commitment.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
"Commitment Letter" shall mean the Commitment Letter dated March 29, 1996,
as amended, between Holdings on the one hand and The Chase Manhattan Bank (as
successor in interest to Chemical Bank) and Chase Securities Inc. (as successor
in interest to Chemical Securities Inc.) on the other hand.
"Condemnation" shall have the meaning assigned to such term in the
Mortgages.
9
"Condemnation Proceeds" shall have the meaning assigned to such term in
the Mortgages.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Parent Borrower dated May 1996, as supplemented by
a supplement to such Confidential Information Memorandum dated July 19, 1996.
"Consolidated Current Assets" shall mean, at any date of determination,
all assets (other than cash and cash-equivalents) that would, in accordance with
GAAP, be classified on a consolidated balance sheet of Holdings, the Parent
Borrower and the Subsidiaries as current assets at such date of determination.
"Consolidated Current Liabilities" shall mean, at any date of
determination, all liabilities (other than the current portion of long-term
Indebtedness) that would, in accordance with GAAP, be classified on a
consolidated balance sheet of Holdings, the Parent Borrower and the Subsidiaries
as current liabilities at such date of determination.
"Consolidated EBITDA" shall mean, for any period, the Consolidated Net
Income for such period, plus, without duplication, to the extent deducted in
computing Consolidated Net Income, the sum of (a) income tax expense, (b)
interest expense (including interest-equivalent costs associated with any
Permitted Receivables Financing, whether accounted for as interest expense or
loss on the sale of receivables), (c) depreciation and amortization expense,
including amortization of sample fabric books, (d) any extraordinary losses, (e)
any non-cash charges or non-cash losses and (f) cash restructuring charges
minus, without duplication, to the extent added in computing such Consolidated
Net Income, (i) any interest income, (ii) any extraordinary gains and (iii) any
non-cash income or any non-cash gains, all as determined on a consolidated basis
with respect to Holdings, the Parent Borrower and the Subsidiaries in accordance
with GAAP. Notwithstanding anything herein to the contrary, the aggregate amount
of cash restructuring charges added back to Consolidated Net Income in the
determination of Consolidated EBITDA for any period shall not exceed $3,500,000.
"Consolidated Interest Expense" shall mean, for any period, the gross
interest expense accrued or paid by the Parent Borrower and the Subsidiaries
during such period, as determined on a consolidated basis in accordance with
GAAP, plus interest-equivalent costs associated with any Permitted Receivables
Financing, whether accounted for as interest expense or loss on the sale of
receivables, provided that for purposes of this Agreement, "Consolidated
Interest Expense" shall not include (i) the Fees payable hereunder, (ii)
expenses relating to the Transactions or amortization thereof and (iii)
penalties and premiums associated with any prepayment of Indebtedness.
"Consolidated Net Income" shall mean, for any period, net income or loss
of Holdings, the Parent Borrower and the Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP, provided that there shall be
excluded (a) the net income (or loss) of any person in which any other person
(other than Holdings, the Parent Borrower, any wholly owned Subsidiary or any
director holding qualifying shares or any nominee holding shares for the benefit
of the Parent Borrower in compliance with applicable law) has an equity
interest, except that (i) Holdings's, the Parent Borrower's or such Subsidiary's
equity in the net income of any such person shall be included in determining
Consolidated Net Income to the extent of the amount of dividends, other
distributions or payments in respect of loans actually paid to Holdings, the
Parent Borrower or any of the Subsidiaries,
10
as the case may be, by such person during such period, provided that if the
ownership of such equity interest by such other person is required by local
ownership laws in any foreign country, Holdings's, the Parent Borrower's or such
Subsidiary's equity in the net income of any such person shall be included in
determining Consolidated Net Income to the extent that cash could have been
distributed by such person during such period to Holdings, the Parent Borrower
or such Subsidiary, as the case may be, as a dividend and (ii) Holdings's or the
Parent Borrower's equity in a net loss of any such person for such period shall
be included in determining Consolidated Net Income; (b) the net income (or loss)
of any person for any period prior to the date it becomes a Subsidiary or is
merged into or consolidated with Holdings, the Parent Borrower or any of the
Subsidiaries or the date that person's assets are acquired by Holdings, the
Parent Borrower or any of the Subsidiaries, (c) any after tax gains or losses
attributable to sales of assets out of the ordinary course of business and (d)
any interest expense of Holdings in respect of the Masco Notes.
"Consolidated Net Worth" shall mean, as at any date of determination, the
consolidated stockholders' equity of the Parent Borrower and the Subsidiaries,
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" shall mean, at any date of determination,
Consolidated Current Assets at such date of determination minus Consolidated
Current Liabilities at such date of determination.
"Control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Credit Event" shall have the meaning assigned to such term in Section
4.01.
"Debentures" shall mean any junior subordinated debentures issued by
Holdings in exchange for shares of Series A Preferred Stock of Holdings on the
terms and subject to the conditions set forth in the articles of incorporation
of Holdings.
"Default" shall mean any event or condition that upon notice, lapse of
time or both would constitute an Event of Default.
"Disqualified Stock" shall mean, with respect to any person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to ninety-one days
after the Tranche A Maturity Date. Disqualified Stock shall not include any
Capital Stock that is not otherwise Disqualified Stock if by its terms the
holders thereof have the right to require the issuer to repurchase such stock
upon a change of control.
"dollars" or "$" shall mean lawful money of the United States of America.
11
"Domestic Subsidiary" shall mean any Subsidiary incorporated or organized
under the laws of the United States of America, any State thereof or the
District of Columbia.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action by, or on behalf of, any Governmental Authority or any
person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, property damage, natural
resource damages, nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for fines, penalties or restrictions,
resulting from or based upon (a) the existence, or the continuation of the
existence, of a Release (including sudden or non-sudden, accidental or
nonaccidental Releases), (b) exposure to any Hazardous Material, (c) the
presence, use, handling, transportation, storage, treatment or disposal of any
Hazardous Material or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
Release or threatened Release of any Hazardous Material or to health and safety
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. ss.ss. 6901 et seq., the Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 U.S.C. ss.ss. 1251 et seq., the Clean Air Act
of 1970, as amended 42 U.S.C. ss.ss. 7401 et seq., the Toxic Substances Control
Act of 1976, 15 U.S.C. ss.ss. 2601 et seq., the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. ss.ss. 651 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et seq., the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss. 300(f) et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 5101 et seq., and
any similar or implementing state or local law, and all amendments or
regulations promulgated under any of the foregoing.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance or filing required by or from any Governmental
Authority pursuant to any Environmental Law.
"Equity Issuance" shall mean any issuance or sale by Holdings of any
shares of Capital Stock of Holdings, except for (a) any issuance or sale to the
Parent Borrower or any Subsidiary, (b) sales or issuances of Capital Stock to
management or key employees of Holdings, the Parent Borrower or any Subsidiary
under any employee stock option, stock purchase, stock grant or other similar
incentive or employee benefit plan in existence from time to time or (c)
issuances of Capital Stock by Holdings upon the conversion, exercise or exchange
of any class or series of Holdings' Capital Stock pursuant to
12
the terms thereof as set forth in the Certificate of Incorporation of Holdings
as the same may be in effect at such time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 and
the rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with any Loan Party, is treated as a single
employer under Section 414(b) or (c) of the Code, or solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b)
the adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA
with respect to the termination of any Plan or the withdrawal or partial
withdrawal of any Loan Party or any of its ERISA Affiliates from any Plan or
Multiemployer Plan; (f) the receipt by any Loan Party or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g)
the receipt by any Loan Party or any ERISA Affiliate of any notice concerning
the imposition of Withdrawal Liability or a determination that a Multiemployer
Plan is, or is expected to be, insolvent or in reorganization, within the
meaning of Title IV of ERISA; (h) the occurrence of a "prohibited transaction"
with respect to which any Loan Party or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which any Loan Party or any such Subsidiary could otherwise be
liable; and (i) any other event or condition with respect to a Plan or
Multiemployer Plan or any plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of any Loan Party.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or Eurodollar
Term Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised of Eurodollar
Term Loans.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
13
"Excess Cash Flow" shall mean, for any fiscal year, Consolidated EBITDA of
Holdings, the Parent Borrower and the Subsidiaries on a consolidated basis for
such fiscal year, minus, without duplication, (a) cash interest paid during such
fiscal year (including interest-equivalent costs that are associated with any
Permitted Receivables Financing, whether accounted for as interest expense or
loss on the sale of receivables), (b) scheduled principal repayments of Total
Debt made during such year, (c) voluntary prepayments of Term Loans during such
fiscal year, (d) permitted Capital Expenditures by Holdings, the Parent Borrower
and the Subsidiaries on a consolidated basis during such fiscal year that are
paid in cash (provided that this clause (d) shall not include Capital
Expenditures made during such fiscal year from any prior fiscal year's Excess
Cash Flow pursuant to Section 6.12(B)), (e) taxes paid in cash by Holdings, the
Parent Borrower and the Subsidiaries on a consolidated basis during such fiscal
year, (f) cash payments made by Holdings to Simmons pursuant to the Tax Sharing
Agreement during such fiscal year, (g) an amount equal to any increase in
Consolidated Working Capital during such fiscal year, (h) capital expenditures
in cash relating to the development, purchase or acquisition of sample fabric
books during such fiscal year, (i) restructuring charges paid in cash during
such fiscal year to the extent included in determining Consolidated EBITDA, (j)
any increase in investments, loans and advances to customers, suppliers and
Joint Ventures permitted pursuant to Section 6.04(m), (n) or (o) during such
fiscal year and (k) to the extent included in Consolidated EBITDA, all non-cash
payments received by Holdings, the Parent Borrower and the Subsidiaries on a
consolidated basis during such fiscal year, plus, without duplication, (i) an
amount equal to any decrease in Consolidated Working Capital during such fiscal
year, (ii) interest income received in cash during such fiscal year, (iii) any
decrease in investments, loans and advances to customers, suppliers and Joint
Ventures permitted pursuant to Section 6.04(m), (n) or (o) during such fiscal
year, (iv) the proceeds of any Capital Lease Obligations, purchase money
Indebtedness and other Indebtedness permitted by Section 6.01 to the extent used
to finance permitted cash Capital Expenditures made during such fiscal year and
(v) to the extent deducted in determining Consolidated EBITDA, all non-cash
payments made by Holdings, the Parent Borrower and the Subsidiaries on a
consolidated basis during such fiscal year.
"Exchange Rate Protection Agreement" shall mean any currency hedging
agreement or arrangement designed to protect the Borrowers against fluctuations
in currency exchange rates and not for speculation.
"Excluded Taxes" shall have the meaning assigned to such term in Section
2.20.
"Fee Letter" shall mean the Fee Letter dated March 29, 1996, as amended,
between Holdings on the one hand and The Chase Manhattan Bank (as successor in
interest to Chemical Bank) and Chase Securities Inc. (as successor in interest
to Chemical Securities Inc.) on the other hand.
"Fees" shall mean the Commitment Fees, the Administrative Agent Fees, the
L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, treasurer or controller of such
corporation.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
14
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis. All accounting terms shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Section 1.02.
"Governmental Authority" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Guarantee 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
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, 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 shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Parent Borrower in
good faith.
"Guarantee Agreements" shall mean the Holdings Guarantee Agreement and the
Subsidiary Guarantee Agreement.
"Guarantors" shall mean Holdings and the Subsidiary Guarantors.
"Hazardous Materials" shall mean all explosive or radioactive substances
or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.
"HFG Companies" shall mean the Subsidiary Borrowers and the Specified HFG
Companies.
"Holdings Guarantee Agreement" shall mean the Holdings Guarantee
Agreement, substantially in the form of Exhibit F, made by Holdings in favor of
the Collateral Agent for the benefit of the Secured Parties.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person upon which interest charges are customarily
15
paid (excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (d) all obligations of such person under
conditional sale or other title retention agreements relating to property or
assets purchased by such person, (e) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued obligations incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed; provided, however, that the
amount of Indebtedness of such person shall be the lesser of (i) the fair market
value of such asset at such date of determination and (ii) the amount of such
Indebtedness, (g) all Guarantees by such person of Indebtedness of others, (h)
all Capital Lease Obligations of such person, (i) all obligations of such person
in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements and (j) all
obligations of such person as an account party in respect of letters of credit
and bankers' acceptances. The Indebtedness of any person shall include the
Indebtedness of any partnership in which such person is a general partner, other
than to the extent that the instrument or agreement evidencing such Indebtedness
expressly limits the liability of such person in respect thereof.
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among the Borrowers, the Subsidiary Guarantors and the Collateral
Agent.
"Initial Public Offering" shall mean a fully distributed initial public
offering of common stock of Holdings pursuant to an effective registration
statement under the Securities Act of 1933.
"Institutional Investors" shall mean 399 Venture Partners and certain
other institutional investors.
"Insurance Proceeds" shall have the meaning assigned to such term in the
Mortgages.
"Intercompany Indebtedness" shall mean any Indebtedness of (a) any Loan
Party or (b) any of the Subsidiaries, that, in any such case, is owing to any
Loan Party.
"Interest Coverage Ratio" shall have the meaning assigned to such term in
Section 6.09.
"Interest Rate Protection Agreement" shall mean any interest rate hedging
agreement or arrangement designed to protect the Borrowers against fluctuations
in interest rates and not for speculation.
"Interest Payment Date" shall mean, with respect to any Loan, the last day
of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Borrowing with an Interest Period of more than
three months' duration, each day that would have been an Interest Payment Date
had successive Interest Periods of three months' duration been applicable to
such Borrowing, and, in addition, the date of any prepayment of a Eurodollar
Borrowing or conversion of such Borrowing to a Borrowing of a different Type.
16
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter (or 9 or 12
months if such 9- or 12- month period is consented to by each Lender), as the
applicable Borrower may elect and (b) as to any ABR Borrowing, the period
commencing on the date of such Borrowing and ending on the earliest of (i) the
next succeeding March 31, June 30, September 30 or December 31 and (ii) the
Revolving Credit Maturity Date, the Tranche A Maturity Date or the Tranche B
Maturity Date, as applicable; provided, however, that if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest Period.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(c).
"Joint Venture" shall mean any person of which securities or other
ownership interests representing at least 20% but no greater than 50% of the
equity or ordinary voting power are owned, controlled or held by Holdings, the
Parent Borrower or any Subsidiary, provided that neither Chang Chun Universal
Flooring Co. Ltd. nor Chang Chun Wood Product Co. Ltd. shall be deemed a "Joint
Venture" for purposes of this Agreement.
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.23.
"L/C Disbursement" shall mean a payment or disbursement made by the
Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Revolving Credit Lender at any time shall
mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(c).
"Lenders" shall mean (a) the financial institutions listed on Schedule
2.01 (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance. Unless the context clearly indicates otherwise, the term "Lenders"
shall include the Swingline Lender.
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.23.
"LHL" shall mean LIFESTYLE HOLDINGS LTD., a Delaware corporation and a
wholly-owned subsidiary of the Parent Borrower.
17
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such service, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of the Telerate Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
so available at such time for any reason, then the "LIBO Rate" with respect to
such Eurodollar Borrowing for such Interest Period shall be the rate at which
dollar deposits approximately equal in principal amount to the Administrative
Agent's portion of such Eurodollar Borrowing and for a maturity comparable to
such Interest Period are offered to the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loan Documents" shall mean this Agreement, the Letters of Credit, the
Guarantee Agreements, the Security Documents and the Indemnity, Subrogation and
Contribution Agreement.
"Loan Parties" shall mean the Borrowers and the Guarantors.
"Loans" shall mean the Revolving Loans, the Term Loans and the Swingline
Loans.
"Management Agreement" shall mean the Management Agreement dated as of the
Closing Date, between Holdings and the Parent Borrower, as the same may be
amended, supplemented or otherwise renewed or replaced from time to time in
accordance with the terms thereof and hereof.
"Management Investors" shall mean any officers or employees of Holdings,
the Parent Borrower or the Subsidiaries who acquire Capital Stock of Holdings on
or after the Closing Date and any of their Permitted Transferees.
"Margin Stock" shall have the meaning assigned to such term in Regulation
U.
"Masco" shall mean Masco Corporation, a Delaware corporation.
"Masco Investors" shall mean Masco and its Permitted Transferees.
"Masco Notes" shall mean the senior pay-in-kind notes of Holdings issued
to Masco on the Closing Date in an aggregate principal amount of $285,000,000
(subject to increase in accordance with the Acquisition Agreement).
18
"Master Servicer" shall mean any entity formed for purposes of acting as a
master servicer under any Permitted Receivables Financing, in each case, a
special purpose wholly owned Subsidiary.
"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, operations, properties or financial condition of Holdings,
the Parent Borrower and the Subsidiaries, taken as a whole, (b) material
impairment of the ability of the Loan Parties to perform their obligations under
the Loan Documents or (c) material impairment of the rights of or remedies
available to the Lenders under any Loan Document.
"Moody's" shall mean Moody's Investors Service, Inc. and its successors.
"Mortgaged Properties" shall mean the owned real properties of the Loan
Parties specified on Schedule 1.01(b).
"Mortgages" shall mean the mortgages, deeds of trust, assignments of
leases and rents, modifications and other security documents delivered pursuant
to clause (i) of Section 4.02(j) or pursuant to Section 5.11, each substantially
in the form of Exhibit E.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which any Loan Party is obligated to contribute.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the
cash proceeds thereof (including cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring person of Indebtedness or other
obligations relating to the properties or assets that are subject to the Asset
Sale or received in any other non-cash form (collectively, "Deferred Cash")) net
of (i) costs of sale (including payment of legal, title and recording tax
expenses, commissions and other fees directly incurred in connection therewith
and the outstanding principal amount of, premium or penalty, if any, interest
and other amounts on any Indebtedness (other than Loans) required to be repaid
under the terms thereof or by applicable law as a result of such Asset Sale),
(ii) taxes paid or payable in the year such Asset Sale occurs or in the
following year as a result thereof, (iii) amounts (A) provided as a reserve, in
accordance with GAAP, against any liabilities under any indemnification
obligations associated with such Asset Sale or (B) held in escrow pursuant to an
agreement relating to such Asset Sale (provided that, to the extent and at the
time any such amounts are released from such reserve or escrow, such amounts
shall constitute Net Cash Proceeds (net of any taxes paid or payable)) and (iv)
payments to holders of minority interests in the asset subject to such Asset
Sale or in the entity selling the asset and (b) with respect to any Equity
Issuance or any issuance or other disposition of Indebtedness for borrowed
money, the cash proceeds thereof (including Deferred Cash) net of underwriting
discounts and commissions or placement fees, attorneys' fees, accountants' fees,
filing and registration fees, trustee fees and other fees and expenses directly
incurred in connection therewith net of any taxes paid or payable as a result
thereof.
"90%-Owned Foreign Subsidiary" shall mean a Foreign Subsidiary of which
securities (except for directors' qualifying shares) or other ownership
interests representing at least 90% of the equity or at least 90% of the
ordinary voting power are, at the time any determination is being made, owned,
controlled or held by the Parent Borrower or any wholly owned Subsidiary.
19
"Obligations" shall mean (a) the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by any Borrower under this Agreement in respect of any Letter of Credit,
when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Loan Parties to the Secured
Parties under this Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrowers under or pursuant to this Agreement or the other Loan Documents
and (c) all obligations of the Borrowers, monetary or otherwise, under each
Exchange Rate Protection Agreement and each Interest Rate Protection Agreement
entered into with a counterparty that was a Lender (or any Affiliate of a
Lender) at the time such Exchange Rate Protection Agreement and such Interest
Rate Protection Agreement was entered into.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
"Permitted Encumbrances" shall have the meaning assigned to such term in
the Mortgages.
"Permitted Foreign Indebtedness" shall mean Indebtedness under each loan
facility permitting borrowings by or letters of credit issued on behalf of a
Foreign Subsidiary, which may be supported by an unsecured Guarantee of any Loan
Party, a letter of credit issued for the account of any Loan Party or a pledge
of or a security interest in any assets of such Foreign Subsidiary.
"Permitted Foreign Investments" shall mean (a) any investments in, or
loans or advances to, any Foreign Subsidiary by the Parent Borrower or any
Domestic Subsidiary or (b) any letters of credit or Guarantees to support
Permitted Foreign Indebtedness issued by or for the account of the Parent
Borrower or any Domestic Subsidiary. For purposes of determining the amount of
any Permitted Foreign Investment outstanding at any time, (i) the amount of any
investment, loan or advance made pursuant to clause (a) above shall equal the
aggregate amount of the consideration (whether in cash or property, valued at
the time each such investment, loan or advance is made) paid for such
investment, loan or advance (net of any return of capital or principal of (but
not dividends or interest on) such investment, loan or advance) and (ii) the
amount of any Permitted Foreign Investment pursuant to clause (b) above shall be
the face amount of any such letter of credit or Guarantee.
20
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(c) investments in (i) certificates of deposit, banker's acceptances
and time deposits maturing within one year from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus profits of not less than
$250,000,000 or (ii) Eurocurrency time deposits maturing within 360 days
from the date of acquisition thereof with any branch or office of (A) any
commercial bank organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development, and comparable
in credit quality to the investments permitted under the preceding clause
(i), or (B) any Lender;
(d) repurchase obligations with a term of not more than 30 days for,
and secured by, underlying securities of the types described in clause (a)
above entered into with a bank meeting the qualifications described in
clause (c) above;
(e) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by S&P or "A-1" by Moody's;
(f) investments in money market funds complying with the risk
limiting conditions of Rule 2a-7 (or any successor rule) of the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended;
(g) in the case of any Foreign Subsidiary, investments comparable in
credit quality and tenor to those referred to above and customarily used
by corporations for cash management purposes in any jurisdiction outside
the United States of America; and
(h) other investment instruments approved in writing by the Required
Lenders.
"Permitted Receivables Financing" shall mean (a) the Bridge Receivables
Financing and (b) any subsequent financing secured substantially by receivables
(and related assets) originated by Holdings and any Subsidiary in any amount,
provided that (i) any such subsequent receivables financing has a later or equal
final maturity and a longer or equal weighted average life than the Bridge
Receivables Financing, (ii) sales of receivables to any Receivables Subsidiary
are made at fair market
21
value, (iii) the interest rate applicable to such subsequent receivables
financing shall be a market interest rate (as determined in good faith by the
Board of Directors of the Parent Borrower) as of the time such financing is
entered into, (iv) such financing is non-recourse to the Parent Borrower and its
Subsidiaries (other than any Receivables Subsidiary) except to a limited extent
customary for such financings and (v) the covenants, events of default and other
provisions thereof, collectively, shall be market terms (as determined in good
faith by the board of directors of the Parent Borrower).
"Permitted Transferee" shall mean (a) with respect to 399 Venture
Partners, (i) Citicorp or any direct or indirect wholly owned subsidiary of
Citicorp, and (ii) any officer, director or employee of 399 Venture Partners,
Citicorp or any wholly owned subsidiary of Citicorp; (b) with respect to Masco,
any direct or indirect majority owned subsidiary of Masco (provided Masco
Controls such subsidiary); and (c) with respect to any officer, director or
employee of Holdings, the Parent Borrower, any of the Subsidiaries, 399 Venture
Partners or Citicorp or any wholly owned subsidiary of Citicorp, (i) any spouse
or lineal descendant (including by adoption and stepchildren) of such officer,
director or employee and (ii) any trust, corporation or partnership a majority
in interest of the beneficiaries, stockholders or partners of which consists of
such employees, officers or directors or one or more of the persons described in
clause (c)(i).
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which any Loan Party
is (or, if such plan were terminated, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the
form of Exhibit G, among Holdings, the Borrowers, the Subsidiaries party thereto
and the Collateral Agent for the benefit of the Secured Parties.
"Properties" shall have the meaning given such term in Section 3.17.
"Pro Rata Percentage" of any Revolving Credit Lender at any time shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment.
"Receivables Pooling Agreement" shall mean the Pooling Agreement relating
to a Permitted Receivables Financing, among the Receivables Subsidiary, the
Master Servicer and the Receivables Trustee.
"Receivables Sale Agreement" shall mean the Receivables Sale Agreement
relating to a Permitted Receivables Financing, among the Receivables Subsidiary,
Holdings and the Subsidiaries party thereto.
22
"Receivables Servicing Agreement" shall mean the Master Servicing
Agreement dated as of the date hereof, among the Receivables Subsidiary, the
Master Servicer, Holdings, the Subsidiaries party thereto and the Receivables
Trustee.
"Receivables Subsidiary" shall mean LFI Receivables Corporation or any
successor thereto or other entity formed for purposes of a Permitted Receivables
Financing, in each case a bankruptcyremote, special-purpose wholly owned
Subsidiary.
"Receivables Trustee" shall mean the trustee on behalf of the holders of
participation interests in the receivables sold pursuant to the Permitted
Receivables Financing.
"Refinancing Indebtedness" shall have the meaning given such term is
Section 6.01(q).
"Register" shall have the meaning given such term in Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
"Required Lenders" shall mean, at any time, Lenders having Loans
(excluding Swingline Loans), L/C Exposures, Swingline Exposures and unused
Revolving Credit Commitments representing more than 50% of the sum of all Loans
outstanding (excluding Swingline Loans), the L/C Exposure, the Swingline
Exposure and unused Total Revolving Credit at such time.
"Responsible Officer" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
23
"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans hereunder and participate in
Letters of Credit and Swingline Loans in an aggregate amount at any time
outstanding not in excess of the amount opposite the name of such Lender in the
column entitled "Revolving Credit Commitment" in the table appearing in Schedule
2.01, or the amount in the Assignment and Acceptance pursuant to which such
Lender assumed its Revolving Credit Commitment, as applicable, as such amount
may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any Revolving
Credit Lender at any time, the aggregate principal amount at such time of all
outstanding Revolving Loans made by such Lender, plus the aggregate amount at
such time of such Lender's L/C Exposure, plus the aggregate amount at such time
of such Lender's Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Credit Maturity Date" shall mean August 5, 2002.
"Revolving Loans" shall mean the loans made by the Lenders to the
Borrowers pursuant to clause (c) of Section 2.01. Each Revolving Loan shall be a
Eurodollar Revolving Loan or an ABR Revolving Loan.
"S&P" shall mean Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"Secured Parties" shall have the meaning assigned to such term in the
Security Agreement.
"Security Agreement" shall mean the Security Agreement, substantially in
the form of Exhibit H, among Holdings, the Borrowers, the Subsidiaries party
thereto and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages, the Security Agreement, the
Pledge Agreement and each of the security agreements, mortgages and other
instruments and documents executed and delivered pursuant to any of the
foregoing or pursuant to Section 5.11.
"Significant Foreign Subsidiary" shall mean, at any date of determination,
a Foreign Subsidiary with respect to which the sum of (x) such Foreign
Subsidiary's net worth, as determined in accordance with GAAP plus (y) the
aggregate amount of outstanding advances to such Foreign Subsidiary from
Holdings, the Parent Borrower or any Subsidiary as of the last day of the most
recent fiscal period for which financial statements have been delivered pursuant
to Section 5.04(a) or (b) (or June 30, 1996 in the event that the applicable
date of determination occurs prior to the first delivery date of the financial
statements described above) is equal to or greater than $4,000,000.
"Simmons" shall mean Simmons Upholstered Furniture Corporation, a Delaware
corporation and a wholly owned subsidiary of Holdings.
24
"Specified HFG Assets" shall mean the assets of the Specified HFG
Companies set forth on Schedule 1.01(c).
"Specified HFG Companies" shall mean the corporations set forth on
Schedule 1.01(d).
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board or successor banking authority to which the
Administrative Agent is subject (a) with respect to the Base CD Rate, for new
negotiable nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months, and (b) with respect to the Adjusted LIBO
Rate, for Eurocurrency Liabilities (as defined in Regulation D of the Board).
Such reserve percentages shall include those imposed pursuant to such Regulation
D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and
to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Stockholders' Agreement" shall mean the Stockholders' Agreement dated as
of the date hereof, among Holdings, Masco, the Institutional Investors and the
Management Investors, as the same may be amended, supplemented or otherwise
renewed or replaced from time to time in accordance with the terms thereof and
hereof.
"Subordinated Notes" shall mean the 10-7/8% Senior Subordinated Notes due
2006 issued on the Closing Date in an aggregate principal amount of not less
than $200,000,000 and shall include any substantially identical notes issued in
the exchange therefor after the Closing Date, pursuant to the indenture
governing such notes.
"subsidiary" shall mean, with respect to any person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) that is, at the time any
determination is made, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent, provided that the term "subsidiary", when used in respect of Holdings,
the Parent Borrower or any of its subsidiaries, shall not include any foreign
joint venture in which Holdings, the Parent Borrower or any such subsidiary owns
less than or equal to 50% of the equity interest in such joint venture.
"Subsidiary" shall mean any subsidiary of the Parent Borrower.
"Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit I, made by the Subsidiary
Guarantors in favor of the Collateral Agent for the benefit of the Secured
Parties.
25
"Subsidiary Guarantor" shall mean each Subsidiary that is or becomes a
party to a Subsidiary Guarantee Agreement.
"Sunbury" shall mean Sunbury Textile Mills, Inc., a Delaware corporation.
"Swingline Commitment" shall mean the commitment of the Swingline Lender
to make loans pursuant to Section 2.22, as the same may be reduced from time to
time pursuant to Section 2.09 .
"Swingline Exposure" shall mean at any time the aggregate principal amount
at such time of all outstanding Swingline Loans. The Swingline Exposure of any
Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the
aggregate Swingline Exposure at such time.
"Swingline Loan" shall mean any loan made by the Swingline Lender pursuant
to Section 2.22(a).
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement dated as of
the Closing Date, among Holdings, the Parent Borrower, the Receivables
Subsidiary and Simmons, as the same may be amended, supplemented or otherwise
renewed or replaced from time to time in accordance with the terms thereof and
hereof.
"Term Borrowing" shall mean a Borrowing comprised of Tranche A Term Loans
or Tranche B Term Loans.
"Term Loan Commitments" shall mean the Tranche A Commitments and the
Tranche B Commitments.
"Term Loan Repayment Amounts" shall mean, for any period, the Tranche A
Term Loan Repayment Amounts and the Tranche B Term Loan Repayment Amounts
payable during such period.
"Term Loan Repayment Dates" shall mean the Tranche A Term Loan Repayment
Dates and the Tranche B Term Loan Repayment Dates.
"Term Loans" shall mean the Tranche A Term Loans and the Tranche B Term
Loans.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m., New York City time,
on such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.
26
"399 Investors" shall mean, 399 Venture Partners and its Permitted
Transferees.
"Total Debt" shall mean, at any time, all Indebtedness of the Parent
Borrower and its Subsidiaries of the type referred to in clauses (a), (b), (c),
(e), (h) and (j) (provided that obligations in respect of letters of credit
shall not be included in Total Debt except to the extent of any unreimbursed
drawings thereunder) of the definition of the term "Indebtedness".
"Total Debt Ratio" shall have the meaning assigned to such term in Section
6.10.
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Lenders' Revolving Credit Commitments, as in
effect at such time.
"Tranche A Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche A Term Loans hereunder in an aggregate
amount at any time outstanding not in excess of the amount opposite the name of
such Lender in the column entitled "Tranche A Commitment" in the table appearing
in Schedule 2.01 or the amount in the Assignment and Acceptance pursuant to
which such Lender assumed its Term Loan Commitment, as applicable.
"Tranche A Maturity Date" shall mean August 5, 2002.
"Tranche A Term Borrowing" shall mean a Borrowing comprised of Tranche A
Term Loans.
"Tranche A Term Loan Repayment Amount" shall have the meaning assigned to
such term in Section 2.11(a)(i).
"Tranche A Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(i).
"Tranche A Term Loans" shall mean the loans made by the Lenders to the
Borrowers pursuant to Section 2.01(a). Each Tranche A Term Loan shall be either
a Eurodollar Term Loan or an ABR Term Loan.
"Tranche B Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche B Term Loans hereunder in an aggregate
amount at any time outstanding not in excess of the amount opposite the name of
such Lender in the column entitled "Tranche B Commitment" in the table appearing
in Schedule 2.01 or the amount in the Assignment and Acceptance pursuant to
which such Lender assumed its Term Loan Commitment, as applicable.
"Tranche B Maturity Date" shall mean August 5, 2004.
"Tranche B Term Borrowing" shall mean a Borrowing comprised of Tranche B
Term Loans.
"Tranche B Term Loan Repayment Amount" shall have the meaning assigned to
such term in Section 2.11(a)(ii).
27
"Tranche B Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(ii).
"Tranche B Term Loans" shall mean the loans made by the Lenders to the
Borrowers pursuant to Section 2.01(b). Each Tranche B Term Loan shall be either
a Eurodollar Term Loan or an ABR Term Loan.
"Transactions" shall have the meaning assigned to such term in Section
3.02.
"Transition Services Agreement" shall mean the Transition Services
Agreement dated as of the Closing Date, between Holdings and Masco, as the same
may be amended, supplemented or otherwise renewed or replaced from time to time
in accordance with the terms thereof and hereof.
"Type", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term "Rate" shall include the
Adjusted LIBO Rate and the Alternate Base Rate.
"Upstream Payment" shall have the meaning assigned to such term in Section
6.06(b).
"wholly owned subsidiary" of any person shall mean a subsidiary of such
person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power or 100% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by such person or one or
more wholly owned subsidiaries of such person or by such person and one or more
wholly owned subsidiaries of such person. The term "wholly owned", when used to
modify the term "Subsidiary" or "Domestic Subsidiary", shall have a correlative
meaning.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as otherwise expressly
provided herein, (a) any reference in this Agreement to any Loan Document shall
mean such document as amended, restated, supplemented or otherwise modified from
time to time, (b) all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided,
however, that for purposes of determining compliance with the covenants
contained in Article VI or Section 2.13(d), all accounting terms herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied on a
basis consistent with the application used in the financial statements referred
to in Section 3.05(a) and (c) (i) all references herein to Holdings on an
unconsolidated basis shall be deemed to exclude any investment by Holdings in
any of
28
its subsidiaries and (ii) all financial terms and all financial statements with
respect to Holdings, the Parent Borrower and the Subsidiaries on a consolidated
basis shall exclude Simmons.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, (a) to make a Tranche A Term Loan to the Borrowers on
the Closing Date in a principal amount not to exceed its Tranche A Commitment,
(b) to make a Tranche B Term Loan to the Borrowers on the Closing Date in a
principal amount not to exceed its Tranche B Commitment and (c) to make
Revolving Loans to the Borrowers, at any time and from time to time on or after
the date hereof, and until the earlier of the Revolving Credit Maturity Date and
the termination of the Revolving Credit Commitment of such Lender in accordance
with the terms hereof, in an aggregate principal amount at any time outstanding
that will not result in (i) such Lender's Revolving Credit Exposure exceeding
(ii) such Lender's Revolving Credit Commitment. Within the limits set forth in
clause (c) of the immediately preceding sentence and subject to the terms,
conditions and limitations set forth herein, the Borrowers may borrow, pay or
prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term
Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall be
made as part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Tranche A Commitments, Tranche B Commitments or
Revolving Credit Commitments, as applicable; provided, however, that the failure
of any Lender to make any Loan shall not in itself relieve any other Lender of
its obligation to lend hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to make any Loan
required to be made by such other Lender). Except for Loans deemed made pursuant
to Section 2.02(f) and Swingline Loans, the Loans comprising any Borrowing shall
be in an aggregate principal amount that is (i) not less than $5,000,000 (in the
case of Eurodollar Borrowings) and $1,000,000 (in the case of ABR Borrowings)
and, in each case, in an integral multiple of $1,000,000 or (ii) equal to the
remaining available balance of the applicable Commitment.
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the applicable Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan, provided that any exercise of such option shall not affect the
obligation of the Borrowers to repay such Loan in accordance with the terms of
this Agreement. Borrowings of more than one Type may be outstanding at the same
time; provided, however, that the Borrowers shall not be entitled to request any
Borrowing that, if made, would result in more than twelve Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
29
(c) Except with respect to Loans made pursuant to Section 2.02(f), each
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to such account in New
York City as the Administrative Agent may designate not later than 12:00 (noon),
New York City time, and the Administrative Agent shall by 1:00 p.m., New York
City time, credit the amounts so received to an account in the name of the
Parent Borrower (acting as agent for and on behalf of itself and the Subsidiary
Borrowers), maintained with the Administrative Agent and designated in the
applicable Borrowing Request or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have been met, return
the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the applicable Borrower on such
date a corresponding amount. If the Administrative Agent shall have so made
funds available then, to the extent that such Lender shall not have made such
portion available to the Administrative Agent, such Lender and the Borrowers
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrowers until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrowers, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, a rate determined by the Administrative Agent
to represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrowers
shall not be entitled to request any Revolving Credit Borrowing, Tranche A Term
Borrowing or Tranche B Term Borrowing if the Interest Period requested with
respect thereto would end after the Revolving Credit Maturity Date, the Tranche
A Maturity Date or the Tranche B Maturity Date, respectively.
(f) If the Issuing Bank shall not have received from the Borrowers the
payment required to be made by Section 2.23(e) within the time specified in such
Section, the Issuing Bank will promptly notify the Administrative Agent of the
L/C Disbursement and the Administrative Agent will promptly notify each
Revolving Credit Lender of such L/C Disbursement and its Pro Rata Percentage
thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately
available funds to the Administrative Agent not later than 2:00 p.m., New York
City time, on such date (or, if such Revolving Credit Lender shall have received
such notice later than 12:00 (noon), New York City time, on any day, not later
than 10:00 a.m., New York City time, on the immediately following Business Day),
an amount equal to such Lender's Pro Rata Percentage of such L/C Disbursement
(it being understood that such amount shall be deemed to constitute an ABR
Revolving Loan of such Lender and such payment shall be deemed to have reduced
the L/C Exposure), and the Administrative Agent will promptly pay to the Issuing
Bank amounts so received by it from the Revolving Credit Lenders. The
Administrative Agent will promptly pay to the Issuing Bank any amounts received
by it from the Borrowers pursuant to Section 2.23(e) prior to the time that any
Revolving Credit Lender makes any
30
payment pursuant to this paragraph (f); any such amounts received by the
Administrative Agent thereafter will be promptly remitted by the Administrative
Agent to the Revolving Credit Lenders that shall have made such payments and to
the Issuing Bank, as their interests may appear. If any Revolving Credit Lender
shall not have made its Pro Rata Percentage of such L/C Disbursement available
to the Administrative Agent as provided above, such Lender and the Borrowers
severally agree to pay interest on such amount, for each day from and including
the date such amount is required to be paid in accordance with this paragraph to
but excluding the date such amount is paid, to the Administrative Agent for the
account of the Issuing Bank at (i) in the case of the Borrowers, a rate per
annum equal to the interest rate applicable to Revolving Loans pursuant to
Section 2.06(a), and (ii) in the case of such Lender, for the first such day,
the Federal Funds Effective Rate, and for each day thereafter, the Alternate
Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other
than a Swingline Loan or a deemed Borrowing pursuant to Section 2.02(f), as to
which this Section 2.03 shall not apply), the applicable Borrower shall notify
the Administrative Agent by telephone of its intent to request a Borrowing and
shall hand deliver or telecopy to the Administrative Agent a duly completed
Borrowing Request (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before a proposed Borrowing,
and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York
City time, one Business Day before a proposed Borrowing. Each Borrowing Request
shall be irrevocable, shall be signed by or on behalf of the applicable Borrower
and shall specify the following information: (i) whether the Borrowing then
being requested is to be a Term Borrowing or a Revolving Credit Borrowing, and
whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii)
the date of such Borrowing (which shall be a Business Day), (iii) the number and
location of the account to which funds are to be disbursed (which shall be an
account that complies with the requirements of Section 2.02(c)); (iv) the amount
of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing,
the Interest Period with respect thereto; provided, however, that,
notwithstanding any contrary specification in any Borrowing Request, each
requested Borrowing shall comply with the requirements set forth in Section
2.02. If no election as to the Type of Borrowing is specified in any such
notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest
Period with respect to any Eurodollar Borrowing is specified in any such notice,
then the applicable Borrower shall be deemed to have selected an Interest Period
of one month's duration. The Administrative Agent shall promptly advise the
applicable Lenders of any notice given pursuant to this Section 2.03 (and the
contents thereof), and of each Lender's portion of the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrowers,
jointly and severally, unconditionally promise to pay to the Administrative
Agent for the account of each Lender (i) the then unpaid principal amount of
each Swingline Loan, on the last day of the Interest Period applicable to such
Loan or, if earlier, on the Revolving Credit Maturity Date, (ii) the principal
amount of each Term Loan of such Lender as provided in Section 2.11 and (iii)
the then unpaid principal amount of each Revolving Loan on the Revolving Credit
Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the Indebtedness of the Borrowers to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.
31
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrowers or any Guarantor and each Lender's share thereof.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that each Loan made hereunder shall be deemed made for the account of all
the Borrowers, jointly and severally, and the Administrative Agent and the
Lenders shall not have any obligation to maintain any accounts with respect to
any Borrowing (or any portion thereof) made by any individual Borrower.
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrowers to repay the Loans in
accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 9.04) be represented by one or more promissory notes payable to the
payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrowers agree to pay to the Administrative
Agent (for the benefit of each Revolving Credit Lender), on the last day of
March, June, September and December in each year, on each date on which the
Revolving Credit Commitment of such Lender shall expire or be terminated as
provided herein and on the Revolving Credit Maturity Date, a commitment fee (a
"Commitment Fee") on the average daily unused amount of the Revolving Credit
Commitment of such Lender (other than the Swingline Commitment) during the
preceding quarter (or applicable shorter period) at a rate per annum equal to
0.50%. All Commitment Fees shall be computed on the basis of the actual number
of days elapsed in a year of 360 days. The Commitment Fee due to each Lender
shall commence to accrue on the Closing Date and shall cease to accrue on the
date on which the Revolving Credit Commitment of such Lender shall expire or be
terminated as provided herein or on the Revolving Credit Maturity Date. For
purposes of calculating Commitment Fees only, no portion of the Revolving Credit
Commitments shall be deemed utilized under Section 2.17 as a result of
outstanding Swingline Loans.
(b) The Borrowers agree to pay to the Administrative Agent, for its own
account, the administration fee set forth in the Fee Letter at the times and in
the amounts specified therein (the "Administrative Agent Fees").
(c) The Borrowers agree to pay (i) to the Administrative Agent (for the
benefit of each Revolving Credit Lender), on the last day of March, June,
September and December of each year, on the date on which the Revolving Credit
Commitment of such Lender shall be terminated as provided herein and on the
Revolving Credit Maturity Date, a fee (an "L/C Participation Fee") calculated on
such Lender's Pro Rata Percentage of the average daily aggregate L/C Exposure
(excluding the portion thereof attributable to unreimbursed L/C Disbursements)
during the preceding quarter (or applicable
32
shorter period) at a rate equal to the Applicable Percentage from time to time
used to determine the interest rate on Revolving Credit Borrowings comprised of
Eurodollar Loans pursuant to Section 2.06, and (ii) to the Issuing Bank with
respect to each Letter of Credit the fronting fees, payable on the last day of
March, June, September and December of each year, the date on which the
Revolving Credit Commitment shall be terminated as provided herein and on the
Revolving Credit Maturity Date, set forth in the Commitment Letter plus, in
connection with the issuance, amendment or transfer of any Letter of Credit or
any L/C Disbursement, the Issuing Bank's customary documentary and processing
charges (collectively, the "Issuing Bank Fees"). All L/C Participation Fees and
Issuing Bank Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days.
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Revolving Credit Lenders, except that the Issuing Bank Fees shall be
paid directly to the Issuing Bank. Once paid, none of the Fees shall be
refundable under any circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section
2.07, the Loans comprising each ABR Borrowing, including each Swingline Loan,
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate
is determined by reference to the Prime Rate and over a year of 360 days at all
other times) at a rate per annum equal to (i) in the case of Revolving Credit
Borrowings and Tranche A Term Borrowings, the Alternate Base Rate plus the
Applicable Percentage with respect to ABR Loans in effect from time to time and
(ii) in the case of Tranche B Term Borrowings, the Alternate Base Rate plus
2.00%.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to (i)
in the case of Revolving Credit Borrowings and Tranche A Term Borrowings, the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage with respect to Eurodollar Loans in effect from time to
time and (ii) in the case of Tranche B Term Borrowings, the Adjusted LIBO Rate
for the Interest Period in effect for such Borrowing plus 3.00%.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.07. Default Interest. If the Borrowers shall default in the
payment of the principal of, or interest on, any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, or under any other Loan
Document, the Borrowers agree to pay on demand from time to time interest, to
the extent permitted by law, on such defaulted amount to but excluding the date
of actual payment (after as well as before judgment) (a) in the case of overdue
principal, at the rate otherwise applicable to such Loan pursuant to Section
2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be, when the Alternate Base Rate determined by
reference to the
33
Prime Rate and over a year of 360 days at all other times) equal to the sum of
the Alternate Base Rate plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on or before the day two Business Days prior to the commencement
of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall
have determined, or shall have been advised by the Required Lenders or the
applicable Lender required to make a Eurodollar Loan, that dollar deposits in
the principal amounts of the Loans comprising such Borrowing are not generally
available in the London interbank market, or that the rates at which such dollar
deposits are being offered will not adequately and fairly reflect the cost to
any Lender of making or maintaining its Eurodollar Loan during such Interest
Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO
Rate, the Administrative Agent shall, as soon as practicable thereafter, give
written or telecopy notice of such determination to the Borrowers and the
Lenders. In the event of any such determination, until the Administrative Agent
shall have advised the Borrowers and the Lenders that the circumstances giving
rise to such notice no longer exist, any request by the Borrowers for a
Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a
request for an ABR Borrowing, provided that if the circumstances giving rise to
such determination do not affect all the Lenders, then requests by the Borrowers
for Eurodollar Borrowings may be made to Lenders that are not affected thereby
and such unaffected Lender shall remain obligated to make the Eurodollar Loan
contained in such request on the terms and subject to the conditions set forth
in this Agreement. Each determination by the Administrative Agent hereunder
shall be conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The Term Loan
Commitments shall automatically terminate at 5:00 p.m., New York City time, on
the Closing Date. The Revolving Credit Commitments, the Swingline Commitment and
the L/C Commitment shall automatically terminate on the Revolving Credit
Maturity Date. Notwithstanding the foregoing, all the Commitments shall
automatically terminate at 5:00 p.m., New York City time, on August 15, 1996, if
the initial Credit Event shall not have occurred by such time.
(b) Upon at least three Business Days' prior irrevocable notice to the
Administrative Agent given by telephone (promptly confirmed by written or
telecopy notice), the Borrowers may at any time in whole permanently terminate,
or from time to time in part permanently reduce the Revolving Credit
Commitments; provided, however, that (i) each partial reduction of the Revolving
Credit Commitments shall be in an integral multiple of $1,000,000 and in a
minimum amount of $5,000,000 and (ii) the Total Revolving Credit Commitment
shall not be reduced to an amount that is less than the Aggregate Revolving
Credit Exposure at the time.
(c) Each reduction in the Total Revolving Credit Commitment hereunder
shall be made ratably among the Revolving Credit Lenders in accordance with
their respective Revolving Credit Commitment. The Borrowers shall pay to the
Administrative Agent for the account of the applicable Lenders, on the date of
each termination or reduction, the Commitment Fees on the amount of the
Revolving Credit Commitments so terminated or reduced accrued to but excluding
the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The applicable
Borrower shall have the right at any time upon prior irrevocable notice to the
Administrative Agent given by telephone
34
(promptly confirmed by written or telecopy notice) (a) not later than 12:00
(noon), New York City time, one Business Day prior to conversion, to convert any
Eurodollar Borrowing into an ABR Borrowing, (b) not later than 11:00 a.m., New
York City time, three Business Days prior to conversion or continuation, to
convert any ABR Borrowing into a Eurodollar Borrowing or to continue any
Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest
Period, and (c) not later than 11:00 a.m., New York City time, three Business
Days prior to conversion, to convert the Interest Period with respect to any
Eurodollar Borrowing to another permissible Interest Period, subject in each
case to the following:
(i) each conversion or continuation shall be made pro rata among
the Lenders in accordance with the respective principal amounts of the
Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new
Loan of such Lender resulting from such conversion and reducing the Loan
(or portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on any Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrowers at the time of
conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than
the end of the Interest Period applicable thereto, the Borrowers shall
pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16;
(v) any portion of a Borrowing maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be converted
into or continued as a Eurodollar Borrowing by reason of the immediately
preceding clause shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR Borrowing;
(vii) no Interest Period may be selected for any Eurodollar Term
Borrowing that would end later than a Term Loan Repayment Date occurring
on or after the first day of such Interest Period if, after giving effect
to such selection, the aggregate outstanding amount of (A) the Eurodollar
Term Borrowings with Interest Periods ending on or prior to such Term Loan
Repayment Date and (B) the ABR Term Borrowings would not be at least equal
to the principal amount of Term Borrowings to be paid on such Term Loan
Repayment Date; and
(viii) upon notice to the Borrowers from the Administrative Agent
given at the request of the Required Lenders, after the occurrence and
during the continuance of a Default or Event of Default, no outstanding
Loan may be converted into, or continued as, a Eurodollar Loan.
35
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the Borrowing
that the applicable Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
applicable Borrower shall be deemed to have selected an Interest Period of one
month's duration. The Administrative Agent shall advise the Lenders of any
notice given pursuant to this Section 2.10 and of each Lender's portion of any
converted or continued Borrowing. If the applicable Borrower shall not have
given notice in accordance with this Section 2.10 to continue any Eurodollar
Borrowing into a subsequent Interest Period (and shall not otherwise have given
notice in accordance with this Section 2.10 to convert such Borrowing), such
Borrowing shall, at the end of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be converted into an ABR
Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Borrowers shall
pay to the Administrative Agent, for the account of the Lenders, on the dates
set forth below, or if any such date is not a Business Day, on the next
succeeding Business Day (each such date being a "Tranche A Term Loan Repayment
Date"), a principal amount of the Tranche A Term Loans equal to the amount set
forth below for such date, as such amount may be adjusted from time to time
pursuant to Sections 2.11(b), 2.12 and 2.13 (such amount, as adjusted, being
called the "Tranche A Term Loan Repayment Amount"), together in each case with
accrued and unpaid interest on the principal amount to be paid to but excluding
the date of such payment:
Date Amount
---- ------
January 31, 1997 $5,000,000
April 30, 1997 5,000,000
July 31, 1997 5,000,000
October 31, 1997 5,000,000
January 31, 1998 5,000,000
April 30, 1998 5,000,000
July 31, 1998 5,000,000
October 31, 1998 5,000,000
January 31, 1999 5,000,000
April 30, 1999 5,000,000
July 31, 1999 5,000,000
October 31, 1999 5,000,000
36
January 31, 2000 5,000,000
April 30, 2000 5,000,000
July 31, 2000 5,000,000
October 31, 2000 6,250,000
January 31, 2001 6,250,000
April 30, 2001 6,250,000
July 31, 2001 6,250,000
October 31, 2001 6,250,000
January 31, 2002 6,250,000
April 30, 2002 6,250,000
Tranche A Maturity Date 6,250,000
(ii) The Borrowers shall pay to the Administrative Agent, for the account
of the Lenders, on the dates set forth below or, if any such date is not a
Business Day, on the next succeeding Business Day (each such date being a
"Tranche B Term Loan Repayment Date"), a principal amount of the Tranche B Term
Loans equal to the amount set forth below for such date, as such amount may be
adjusted from time to time pursuant to Sections 2.11(b), 2.12 and 2.13 (such
amount, as adjusted, being called the "Tranche B Term Loan Repayment Amount"),
together in each case with accrued and unpaid interest on the principal amount
to be paid to but excluding the date of such payment:
Date Amount
---- ------
January 31, 1997 $333,333
April 30, 1997 333,333
July 31, 1997 333,334
October 31, 1997 250,000
January 31, 1998 250,000
April 30, 1998 250,000
July 31, 1998 250,000
October 31, 1998 250,000
January 31, 1999 250,000
April 30, 1999 250,000
July 31, 1999 250,000
October 31, 1999 250,000
January 31, 2000 250,000
April 30, 2000 250,000
July 31, 2000 250,000
October 31, 2000 250,000
37
January 31, 2001 250,000
April 30, 2001 250,000
July 31, 2001 250,000
October 31, 2001 8,750,000
January 31, 2002 8,750,000
April 30, 2002 8,750,000
July 31, 2002 8,750,000
October 31, 2002 15,000,000
January 31, 2003 15,000,000
April 30, 2003 15,000,000
July 31, 2003 15,000,000
October 31, 2003 18,750,000
January 31, 2004 18,750,000
April 30, 2004 18,750,000
Tranche B Maturity Date 18,750,000
(b) In the event and on each occasion that any Term Loan Commitments
shall be reduced or shall expire or terminate other than as a result of the
making of a Term Loan, the installments payable on each Term Loan Repayment Date
shall be reduced pro rata by an aggregate amount equal to the amount of such
reduction, expiration or termination.
(c) To the extent not previously paid, all Tranche A Term Loans and
Tranche B Term Loans shall be due and payable on the Tranche A Maturity Date and
Tranche B Maturity Date, respectively, together with accrued and unpaid interest
on the principal amount to be paid to but excluding the date of payment.
(d) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
SECTION 2.12. Optional Prepayment. (a) The Borrowers shall have the right
at any time and from time to time to prepay any Borrowing, in whole or in part,
upon at least one Business Day's prior notice (in the case of an ABR Borrowing)
and three Business Days' prior notice (in the case of a Eurodollar Borrowing) to
the Administrative Agent given by telephone (promptly confirmed by written or
telecopy notice) before 11:00 a.m., New York City time; provided, however, that
each partial prepayment shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 (in the case of repayments of Eurodollar
Borrowings) and $1,000,000 (in the case of repayments of ABR Borrowings).
(b) Optional prepayments of Term Loans shall be allocated pro rata between
the then-outstanding Tranche A Term Loans and Tranche B Term Loans and applied
pro rata against the
38
remaining scheduled installments of principal due in respect of the Tranche A
Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and (ii),
respectively.
(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrowers to prepay such Borrowing by the
amount stated therein on the date stated therein. All prepayments under this
Section 2.12 shall be subject to Section 2.16 but otherwise without premium or
penalty. All prepayments of Eurodollar Borrowings under this Section 2.12 shall
be accompanied by accrued interest on the principal amount being prepaid to the
date of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination
of all the Revolving Credit Commitments, the Borrowers shall repay or prepay all
its outstanding Revolving Credit Borrowings and all outstanding Swingline Loans
on the date of such termination. In the event of any partial reduction of the
Revolving Credit Commitments, then (i) at or prior to the effective date of such
reduction, the Administrative Agent shall notify the Borrowers and the Revolving
Credit Lenders of the Aggregate Revolving Credit Exposure after giving effect
thereto and (ii) if the Aggregate Revolving Credit Exposure would exceed the
Total Revolving Credit Commitment after giving effect to such reduction or
termination, then the Borrowers shall, on the date of such reduction or
termination, repay or prepay Revolving Credit Borrowings or Swingline Loans (or
a combination thereof) in an amount sufficient to eliminate such excess.
(b) Not later than the third Business Day following the receipt of any Net
Cash Proceeds from any Asset Sale, the Borrowers shall apply 100% of the Net
Cash Proceeds received with respect thereto to prepay outstanding Term Loans in
accordance with Section 2.13(g).
(c) In the event and on each occasion that an Equity Issuance occurs, the
Borrowers shall, substantially simultaneously with (and in any event not later
than the third Business Day next following) the occurrence of such Equity
Issuance, apply 40% of the Net Cash Proceeds therefrom to prepay outstanding
Term Loans in accordance with Section 2.13(g).
(d) No later than the earlier of (i) 90 days after the end of each fiscal
year of the Parent Borrower, commencing with the fiscal year ending on December
31, 1997, and (ii) the date on which the financial statements with respect to
such fiscal year are delivered pursuant to Section 5.04(a), the Borrowers shall
prepay outstanding Term Loans in accordance with Section 2.13(g) in an aggregate
principal amount equal to 75% of the Excess Cash Flow for such fiscal year,
provided that in the event that (A) the Interest Coverage Ratio for such fiscal
year is greater than or equal to 3.25 to 1.00 and (B) the Borrowers have repaid
at least $135,000,000 aggregate principal amount of the Term Loans, the
mandatory prepayments in this clause (d) shall be equal to 50% of the Excess
Cash Flow for such fiscal year.
(e) In the event that Holdings, the Parent Borrower or any Subsidiary
shall receive Net Cash Proceeds from the issuance of Indebtedness for money
borrowed of Holdings, the Parent Borrower or any Subsidiary (other than
Indebtedness for money borrowed permitted pursuant to Section 6.01), the
Borrowers shall, substantially simultaneously with (and in any event not later
than the third Business Day next following) the receipt of such Net Cash
Proceeds by such Loan Party or such Subsidiary,
39
apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding
Term Loans in accordance with Section 2.13(g).
(f) In the event that there shall occur any Casualty or Condemnation and,
pursuant to the Mortgages, the Insurance Proceeds or Condemnation Proceeds, as
the case may be, are required to be used to prepay the Term Loans, then the
Borrowers shall apply an amount equal to 100% of such Insurance Proceeds or
Condemnation Proceeds, as the case may be, less any amounts deducted for the
Collateral Agent's or other expenses pursuant to the Mortgages, to prepay
outstanding Term Loans in accordance with Section 2.13(g).
(g) Subject to paragraph (j) below, mandatory prepayments of outstanding
Term Loans under this Agreement shall be allocated pro rata between the
then-outstanding Tranche A Term Loans and Tranche B Term Loans, and applied pro
rata against the remaining scheduled installments of principal due in respect of
Tranche A Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and
(ii), respectively.
(h) The Borrowers shall deliver to the Administrative Agent, at the time
of each prepayment required under this Section 2.13, (i) a certificate signed by
a Financial Officer of the Parent Borrower setting forth in reasonable detail
the calculation of the amount of such prepayment and (ii) to the extent
reasonably practicable, at least three days prior written notice of such
prepayment. Each notice of pre-payment shall specify the prepayment date, the
Type of each Loan being prepaid, the principal amount of each Loan (or portion
thereof) to be prepaid and the amount, if any, to be deposited in the Prepayment
Account. All prepayments of Borrowings under this Section 2.13 shall be subject
to Section 2.13(i) and Section 2.16, but shall otherwise be without premium or
penalty. All prepayments of Eurodollar Borrowings under this Section 2.13 shall
be accompanied by accrued interest on the principal amount being prepaid to the
date of payment.
(i) Amounts to be applied pursuant to this Section 2.13 to the prepayment
of Term Loans and Revolving Loans shall be applied, as applicable, first to
reduce outstanding ABR Term Loans and ABR Revolving Loans. Any amounts remaining
after each such application shall, at the option of the Parent Borrower, be
applied to prepay Eurodollar Term Loans or Eurodollar Revolving Loans, as the
case may be, immediately and/or shall be deposited in the Prepayment Account (as
defined below). The Administrative Agent shall apply any cash deposited in the
Prepayment Account (i) allocable to Term Loans to prepay Eurodollar Term Loans
and (ii) allocable to Revolving Loans to prepay Eurodollar Revolving Loans, in
each case on the last day of their respective Interest Periods (or, at the
direction of the Parent Borrower, on any earlier date) until all outstanding
Term Loans or Revolving Loans, as the case may be, have been prepaid or until
all the allocable cash on deposit with respect to such Loans has been exhausted.
For purposes of this Agreement, the term "Prepayment Account" shall mean an
account established by the Parent Borrower with the Administrative Agent and
over which the Administrative Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal for application in accordance with
this paragraph (i). The Administrative Agent will, at the request of the Parent
Borrower, invest amounts on deposit in the Prepayment Account in Permitted
Investments that mature prior to the last day of the applicable Interest Periods
of the Eurodollar Term Borrowings or Eurodollar Revolving Borrowings to be
prepaid, as the case may be; provided, however, that (i) the Administrative
Agent shall not be required to make any investment that, in its sole judgment,
would require or cause the Administrative Agent to be in, or would result in
any, violation
40
of any law, statute, rule or regulation and (ii) the Administrative Agent shall
have no obligation to invest amounts on deposit in the Prepayment Account if a
Default or Event of Default shall have occurred and be continuing. The
Administrative Agent shall provide to the Parent Borrower statements with regard
to the Prepayment Account in accordance with the Administrative Agent's
customary practice. The Borrowers shall indemnify the Administrative Agent for
any losses relating to the investments so that the amount available to prepay
Eurodollar Borrowings on the last day of the applicable Interest Period is not
less than the amount that would have been available had no investments been made
pursuant hereto. Other than any interest earned on such investments, the
Prepayment Account shall not bear interest. Interest or profits, if any, on such
investments shall be deposited in the Prepayment Account and reinvested and
disbursed as specified above. If the maturity of the Loans has been accelerated
pursuant to Article VII, the Administrative Agent may, in its sole discretion,
apply all amounts on deposit in the Prepayment Account to satisfy any of the
Obligations. The Borrowers hereby grant to the Administrative Agent, for its
benefit and the benefit of the Issuing Bank, the Swingline Lender and the
Lenders, a security interest in the Prepayment Account to secure the
Obligations.
(j) Any Lender with a Tranche B Commitment may elect, by notice to the
Administrative Agent and the Borrowers given by telephone (promptly confirmed by
written or telecopy notice) at least one Business Day prior to any prepayment of
Tranche B Term Loans required to be made by the Borrowers for the account of
such Lender pursuant to this Section 2.13, to cause all or a portion of such
prepayment to be applied instead to prepay Tranche A Term Loans, in which case
such prepayment shall be applied pro rata against the remaining scheduled
installments in respect of Tranche A Loans under Section 2.11(a)(i).
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the Issuing
Bank of the principal of or interest on any Eurodollar Loan made by such Lender
or any Fees or other amounts payable hereunder (other than changes in respect of
Excluded Taxes and taxes described in Section 2.20), or shall impose, modify or
deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of or credit extended by any Lender
or the Issuing Bank (except any such reserve requirement which is reflected in
the Adjusted LIBO Rate) or shall impose on such Lender or the Issuing Bank or
the London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or participation
therein, and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Eurodollar Loan or increase the cost to
any Lender or the Issuing Bank of issuing or maintaining any Letter of Credit or
purchasing or maintaining a participation therein or to reduce the amount of any
sum received or receivable by such Lender or the Issuing Bank hereunder (whether
of principal, interest or otherwise), in each case by an amount deemed by such
Lender or the Issuing Bank, as the case may be, to be material, then the
Borrowers agree to pay to such Lender or the Issuing Bank, as the case may be,
upon demand such additional amount or amounts as will compensate such Lender or
the Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change after the
41
date hereof in any such law, rule, regulation or guideline (whether such law,
rule, regulation or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy issued or adopted after the date hereof (whether or not having the
force of law) of any Governmental Authority has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or on
the capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made or participations in Letters of
Credit purchased by such Lender pursuant hereto or the Letters of Credit issued
by the Issuing Bank pursuant hereto to a level below that which such Lender or
the Issuing Bank or such Lender's or the Issuing Bank's holding company could
have achieved but for such applicability, adoption, change or compliance (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's holding company with respect to capital
adequacy) by an amount deemed by such Lender or the Issuing Bank to be material,
then from time to time the Borrowers agree to pay to such Lender or the Issuing
Bank, as the case may be, such additional amount or amounts as will compensate
such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth (i) the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as applicable, as specified in paragraph (a) or (b) above and
(ii) a reasonably detailed explanation of the calculation of such amount or
amounts shall be delivered to the Borrowers and shall be conclusive absent
manifest error. The Borrowers shall pay such Lender or the Issuing Bank the
amount shown as due on any such certificate delivered by it within 10 days after
its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation. The
protection of this Section shall be available to each Lender and the Issuing
Bank regardless of any possible contention of the invalidity or inapplicability
of the law, rule, regulation, guideline or other change or condition that shall
have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision
of this Agreement, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrowers and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not
thereafter (for the duration of such unlawfulness) be made by such Lender
hereunder (or be continued for additional Interest Periods and ABR Loans
will not thereafter (for such duration) be converted into Eurodollar
Loans), whereupon any request for a Eurodollar Borrowing (or to convert an
ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar
Borrowing for an additional Interest Period) shall, as to such Lender
only, be deemed a request for an ABR Loan (or to
42
convert a Eurodollar Loan into an ABR Loan, as the case may be), unless
such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all such Eurodollar
Loans shall be automatically converted to ABR Loans as of the effective
date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the Borrowers by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrowers.
SECTION 2.16. Indemnity. The Borrowers jointly and severally shall
indemnify each Lender against any loss or expense that such Lender may sustain
or incur as a consequence of (a) any event, other than a default by such Lender
in the performance of its obligations hereunder or a suspension or limitation
under Section 2.08 of the right to select a Eurodollar Loan, which results in
(i) such Lender receiving or being deemed to receive any amount on account of
the principal of any Eurodollar Loan prior to the end of the Interest Period in
effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or
the conversion of the Interest Period with respect to any Eurodollar Loan, in
each case other than on the last day of the Interest Period in effect therefor,
or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar
Loan to be made pursuant to a conversion or continuation under Section 2.10) not
being made after notice of such Loan shall have been given by the applicable
Borrower hereunder (any of the events referred to in this clause (a) being
called a "Breakage Event") or (b) any default in the making of any payment or
prepayment required to be made hereunder. In the case of any Breakage Event,
such loss shall include an amount equal to the excess, as reasonably determined
by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that
is the subject of such Breakage Event for the period from the date of such
Breakage Event to the last day of the Interest Period in effect (or that would
have been in effect) for such Loan over (ii) the amount of interest likely to be
realized by such Lender in redeploying the funds released or not utilized by
reason of such Breakage Event for such period. A certificate of any Lender (i)
setting forth any amount or amounts which such Lender is entitled to receive
pursuant to this Section 2.16 and (ii) a reasonably detailed explanation of the
calculation of such amount or amounts shall be delivered to the Borrowers and
shall be conclusive absent manifest error.
SECTION 2.17. Pro Rata Treatment. Except as provided below in this Section
2.17 with respect to Swingline Loans and as required under Sections 2.13(j) and
2.15, each Borrowing, each payment or prepayment of principal of any Borrowing,
each payment of interest on the Loans, each payment of the Commitment Fees, each
reduction of the Revolving Credit Commitments and each conversion of any
Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall
be allocated pro rata among the Lenders, in the case of principal and interest
payments, in accordance
43
with their respective applicable outstanding Loans and, in the case of all other
payments, the Commitments (or, if such Commitments shall have expired or been
terminated, in accordance with the respective principal amounts of their
outstanding Loans). For purposes of determining the available Revolving Credit
Commitments of the Lenders at any time, each outstanding Swingline Loan shall be
deemed to have utilized the Revolving Credit Commitments of the Lenders
(including those Lenders which shall not have made Swingline Loans) pro rata in
accordance with such Lender's respective Revolving Credit Commitment. Each
Lender agrees that in computing such Lender's portion of any Borrowing to be
made hereunder, the Administrative Agent may, in its discretion, round each
Lender's percentage of such Borrowing to the next higher or lower whole dollar
amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrowers or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in respect of any
Loan or Loans or L/C Disbursement as a result of which the unpaid principal
portion of its Tranche A Term Loans, Tranche B Term Loans and Revolving Loans
and participations or other interests of a type permitted to be held by such
Lender in L/C Disbursements shall be proportionately less than the unpaid
principal portion of the Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and participations or interests in L/C Disbursements of any
other Lender, it shall be deemed simultaneously to have purchased from such
other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, a participation or interest in the Tranche A Term Loans,
Tranche B Term Loans and Revolving Loans and participations or interests in L/C
Disbursements, as the case may be of such other Lender, so that the aggregate
unpaid principal amount of the Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and participations or interests in L/C Disbursements and
participations or interests in Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and participations or interests in L/C Disbursements held by
each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Tranche A Term Loans, Tranche B Term Loans and Revolving Loans and
participations or interests in L/C Disbursements then outstanding as the
principal amount of its Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans and participations or interests in L/C Disbursements prior to such
exercise of banker's lien, setoff or counterclaim or other event was to the
principal amount of all Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans and participations or interests in L/C Disbursements outstanding prior to
such exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that if any such purchase or purchases or adjustments shall be made
pursuant to this Section 2.18 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrowers and Holdings expressly
consent to the foregoing arrangements and agree that any Lender holding a
participation or interest in a Term Loan or Revolving Loan or L/C Disbursement
deemed to have been so purchased may exercise any and all rights of banker's
lien, setoff or counterclaim with respect to any and all moneys owing by the
Borrowers and Holdings to such Lender by reason thereof as fully as if such
Lender had made a Loan directly to the Borrowers in the amount of such
participation.
SECTION 2.19. Payments. (a) The Borrowers shall make each payment
(including principal of or interest on any Borrowing or any L/C Disbursement or
any Fees or other amounts) hereunder and
44
under any other Loan Document not later than 12:00 (noon), New York City time,
on the date when due in immediately available dollars, without setoff or
counterclaim. Each such payment (other than (i) Issuing Bank Fees, which shall
be paid directly to the Issuing Bank, (ii) principal of and interest on
Swingline Loans, which shall be paid directly to the Swingline Lender except as
otherwise provided in Section 2.22(e) and (iii) other payments that are
specifically required to be paid directly to a Lender) shall be made to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on behalf of the
Borrowers or any Loan Party hereunder and under any other Loan Document shall be
made, in accordance with Section 2.19, free and clear of and without deduction
for any and all current or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding (i) taxes
imposed on the net income of the Administrative Agent, any Lender or the Issuing
Bank (or any transferee or assignee thereof, including a participation holder
(any such entity a "Transferee")), however denominated, and (ii) franchise taxes
imposed on the net income or in lieu of net income of the Administrative Agent,
any Lender or the Issuing Bank (or Transferee) (the taxes referred to in the
foregoing clauses (i) and (ii) individually or collectively being called
"Excluded Taxes"), in each case imposed (a) by the U.S. or any political
subdivision or taxing authority thereof or therein; (b) by any jurisdiction
under the laws of which the Administrative Agent, such Lender or the Issuing
Bank (or Transferee) or its lending office or office through which it is issuing
any Letter of Credit is organized or in which its lending office or office
through which it is issuing any Letter of Credit is located, managed or
controlled or in which its principal office is located or any political
subdivision or taxing authority thereof or therein; or (c) by reason of any
connection between the jurisdiction imposing such tax and the Administrative
Agent, such Lender, the Issuing Bank, such Transferee, such lending office or
office through which it is issuing any Letter of Credit, other than a connection
arising solely from this Agreement or any transaction hereunder (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, being called "Taxes"). If the
Borrowers or any Loan Party shall be required to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Loan Document to the
Administrative Agent, any Lender or the Issuing Bank (or any Transferee), (i)
the sum payable shall be increased by the amount (an "additional amount")
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.20) the
Administrative Agent, such Lender or the Issuing Bank (or Transferee), as the
case may be, shall receive an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrowers or such Loan Party shall make
such deductions and (iii) the Borrowers or such Loan Party shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrowers agree to pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (including mortgage recording taxes and similar fees) that arise from any
payment made hereunder or under any other Loan Document or from the execution,
45
delivery or registration of, or otherwise solely with respect to, this Agreement
or any other Loan Document ("Other Taxes").
(c) The Borrowers shall indemnify the Administrative Agent, each Lender
and the Issuing Bank (or Transferee) for the full amount of Taxes and Other
Taxes paid by the Administrative Agent, such Lender or the Issuing Bank (or
Transferee), as the case may be, and any liability (including penalties,
interest and expenses (including reasonable attorney's fees and expenses) other
than those resulting solely from a failure by the Administrative Agent, such
Lender or the Issuing Bank (or Transferee), as the case may be, to pay any Taxes
or Other Taxes which it is required to pay and for which it received an
indemnity payment) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability prepared by the Administrative Agent, a Lender or the Issuing Bank (or
Transferee), or the Administrative Agent on its behalf, absent manifest error,
shall be final, conclusive and binding for all purposes. Such indemnification
shall be made within 30 days after the date the Administrative Agent, any Lender
or the Issuing Bank (or Transferee), as the case may be, makes written demand
therefor. If the Administrative Agent, any Lender or the Issuing Bank (or any
Transferee) shall become aware that it is entitled to receive a refund or other
tax credit or benefit in respect of any Taxes or Other Taxes, it shall promptly
notify the Borrowers thereof and, in the case of a refund, shall within 30 days
after receipt of a request by the Borrowers, apply for such refund at the
Borrowers' expense. If the Administrative Agent, any Lender or the Issuing Bank
(or any Transferee) receives a refund or other tax credit or benefit in respect
of any Taxes or Other Taxes for which the Administrative Agent, such Lender or
the Issuing Bank (or such Transferee) has received payment from the Borrowers
hereunder, it shall promptly notify the Borrowers thereof and shall promptly
repay such refund or, in the case of a tax credit or other benefit shall repay
the amount of the tax credit or benefit received promptly following the date on
which such tax credit or other benefit is offset against such party's tax
liability, in each case to the Borrowers without interest and net of any
expenses incurred, except to the extent interest shall have explicitly
accompanied such refund or other tax credit or benefit, provided that the
Borrowers, upon the request of such Lender, the Issuing Bank or the
Administrative Agent, agrees to return the amount of such refund or other tax
benefit or credit (plus any penalties, interest or other charges required to be
paid) to such Lender, the Issuing Bank or the Administrative Agent in the event
such Lender, the Issuing Bank or the Administrative Agent is required to repay
such amount to the relevant taxing authority.
(d) As soon as practicable after the date of any payment of Taxes or Other
Taxes by the Borrowers or any other Loan Party to the relevant Governmental
Authority, the Borrowers or such other Loan Party will deliver to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of any receipt issued by such Governmental Authority or
other proof reasonably acceptable to the indemnified party evidencing payment
thereof.
(e) Each Lender (or Transferee) or successor Issuing Bank that is
organized under the laws of a jurisdiction other than the United States, any
State thereof or the District of Columbia (a "Non-U.S. Lender") shall deliver to
the Borrowers and the Administrative Agent two copies of either United States
Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S.
Lender claiming exemption from U.S. Federal withholding tax under Section 871(h)
or 881(c) of the Code with respect to payments of "portfolio interest", a Form
W-8, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, a certificate representing that such
46
Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code), is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Borrowers and is not a controlled foreign corporation related to
the Borrowers (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or reduced rate of, U.S. Federal withholding tax on payments of interest
by the Borrowers under this Agreement and the other Loan Documents, provided,
that if such Non-U.S. Lender is a bank for purposes of Section 881(c) of the
Code, such Non-U.S. Lender shall make whole the Borrowers for reliance on such
certificate. Such forms shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement (or, in the case of a Transferee
that is a participation holder, on or before the date such participation holder
becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S.
Lender changes its applicable lending office by designating a different lending
office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver
such forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Notwithstanding any other provision of this
Section 2.20(e), a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 2.20(e) that such Non-U.S. Lender is not legally able
to deliver.
(f) The Borrowers shall not be required to indemnify any Non-U.S. Lender
or to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this paragraph (f) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrowers and (y) to the extent the indemnity payment or additional amounts any
Transferee, or any Lender (or Transferee), acting through a New Lending Office,
would be entitled to receive (without regard to this paragraph (f)) do not
exceed the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (e) above.
(g) Nothing contained in this Section 2.20 shall require any Lender or the
Issuing Bank (or any Transferee) or the Administrative Agent to make available
any of its tax returns (or any other information that it deems to be
confidential or proprietary).
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty
to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15 or the
Administrative Agent delivers a notice described in Section 2.08 or (iii) the
Borrowers are required to pay any additional amount or indemnification payment
to any Lender or the Issuing Bank or any Governmental Authority on account of
any Lender or the Issuing Bank pursuant to Section 2.20, the Borrowers may, at
their sole expense and effort (including with respect to the
47
processing and recordation fee referred to in Section 9.04(b)), upon notice to
such Lender or the Issuing Bank and the Administrative Agent, require such
Lender or the Issuing Bank to transfer and assign, without recourse (in
accordance with and subject to the restrictions contained in Section 9.04), all
of its interests, rights and obligations under this Agreement to an assignee
that shall assume such assigned obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that (A) such assignment
shall not conflict with any law, rule or regulation or order of any court or
other Governmental Authority having jurisdiction, (B) the Borrowers shall have
received the prior written consent of the Administrative Agent (and, if a
Revolving Credit Commitment is being assigned, of the Issuing Bank and the
Swingline Lender), which consent shall not unreasonably be withheld, and (C) the
Borrowers or such assignee shall have paid to the affected Lender or the Issuing
Bank in immediately available funds an amount equal to the sum of the principal
of, and interest accrued to the date of such payment on, the outstanding Loans
or L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all
Fees and other amounts accrued for the account of such Lender or the Issuing
Bank hereunder (including any amounts under Section 2.14 and Section 2.16), and
provided further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender's or the Issuing Bank's
claim for compensation under Section 2.14 or notice under Section 2.08 or 2.15
or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause
such Lender or the Issuing Bank to suffer increased costs or reductions in
amounts received or receivable or reduction in return on capital, or cease to
have the consequences specified in Section 2.08 or 2.15, or cease to result in
amounts being payable under Section 2.20, as the case may be (including as a
result of any action taken by such Lender or the Issuing Bank pursuant to
paragraph (b) below), or if such Lender or the Issuing Bank shall waive its
right to claim further compensation under Section 2.14 in respect of such
circumstances or event or shall withdraw its notice under Section 2.08 or 2.15
or shall waive its right to further payments under Section 2.20 in respect of
such circumstances or event, as the case may be, then such Lender or the Issuing
Bank shall not thereafter be required to make any such transfer and assignment
hereunder.
(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in
Section 2.15 or the Administrative Agent delivers a notice described in Section
2.08 or (iii) the Borrowers are required to pay any additional amount or an
indemnification payment to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to Section
2.20, then such Lender or the Issuing Bank upon the request of the Borrowers
shall use reasonable efforts (which shall not require such Lender or the Issuing
Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise
take any action inconsistent with its internal policies or legal or regulatory
restrictions or suffer any disadvantage or burden deemed by it to be
significant) (A) to file any certificate or document reasonably requested in
writing by the Borrowers or (B) to assign its rights and delegate and transfer
its obligations hereunder to another of its offices, branches or affiliates, if
such filing or assignment would reduce its claims for compensation under Section
2.14 or enable it to withdraw its notice pursuant to Section 2.15 or Section
2.08 or would reduce amounts payable pursuant to Section 2.20, as the case may
be, in the future. The Borrowers hereby agree to pay all reasonable costs and
expenses incurred by any Lender or the Issuing Bank in connection with any such
filing or assignment, delegation and transfer.
SECTION 2.22. Swingline Loans. (a) Swingline Commitment. Subject to the
terms and conditions and relying upon the representations and warranties herein
set forth, the Swingline Lender
48
agrees to make loans to any Borrower at any time and from time to time on and
after the Closing Date and until the earlier of the Revolving Credit Maturity
Date and the termination of the Revolving Credit Commitments in accordance with
the terms hereof, in an aggregate principal amount at any time outstanding that
will not result in (i) the aggregate principal amount of all Swingline Loans
exceeding $25,000,000 in the aggregate or (ii) the Aggregate Revolving Credit
Exposure, after giving effect to any Swingline Loan, exceeding the Total
Revolving Credit Commitment. Each Swingline Loan shall be in a principal amount
that is an integral multiple of $500,000 or such lesser amount necessary to
reimburse a Letter of Credit pursuant to Section 2.23(e). The Swingline
Commitment may be terminated or reduced from time to time as provided herein.
Within the foregoing limits, the Borrowers may borrow, pay or prepay and
reborrow Swingline Loans hereunder, subject to the terms, conditions and
limitations set forth herein.
(b) Swingline Loans. The applicable Borrower shall notify the
Administrative Agent by telecopy, or by telephone (confirmed by telecopy), not
later than 2:00 p.m., New York City time, on the day of a proposed Swingline
Loan. Such notice shall be delivered on a Business Day, shall be irrevocable and
shall refer to this Agreement and shall specify the requested date (which shall
be a Business Day) and amount of such Swingline Loan. The Administrative Agent
will promptly advise the Swingline Lender of any notice received from any
Borrower pursuant to this paragraph (b). The Swingline Lender shall make each
Swingline Loan available to the applicable Borrower by means of a credit to the
general deposit account of the Parent Borrower (acting as agent for and on
behalf of itself and the Subsidiary Borrowers) with the Swingline Lender by 3:00
p.m. on the date such Swingline Loan is so requested.
(c) Prepayment. The Borrowers shall have the right at any time and from
time to time to prepay any Swingline Loan, in whole or in part, upon giving
notice to the Swingline Lender and the Administrative Agent by telephone
(promptly confirmed by written or telecopy notice) before 12:00 (noon), New York
City time on the date of prepayment.
(d) Interest. Each Swingline Loan shall be an ABR Loan and, subject to the
provisions of Section 2.07, shall bear interest as provided in Section 2.06(a)
and (c).
(e) Participations. The Swingline Lender may by written notice given to
the Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Credit Lenders to acquire participations on
such Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Credit Lenders will participate. The Administrative Agent will, promptly upon
receipt of such notice, give notice to each Revolving Credit Lender, specifying
in such notice such Lender's Pro Rata Percentage of such Swingline Loan or
Loans. In furtherance of the foregoing, each Revolving Credit Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Revolving Credit Lender's Pro Rata Percentage of such Swingline Loan or
Loans. Each Lender acknowledges and agrees that its obligation to acquire
participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Lender shall comply with its
obligation under this paragraph by wire transfer of immediately available funds,
in the same
49
manner as provided in Section 2.02(c) with respect to Loans made by such Lender
(and Section 2.02(c) shall apply, mutatis mutandis, to the payment obligations
of the Lenders) and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Lenders. The Administrative Agent
shall notify the Parent Borrower of any participations in any Swingline Loan
acquired pursuant to this paragraph and thereafter payments in respect of such
Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender. Any amounts received by the Swingline Lender from any Borrower
(or other party on behalf of any Borrower) in respect of a Swingline Loan after
receipt by the Swingline Lender of the proceeds of a sale of participations
therein shall be promptly remitted to the Administrative Agent; any such amounts
received by the Administrative Agent shall be promptly remitted by the
Administrative Agent to the Lenders that shall have made their payments pursuant
to this paragraph and to the Swingline Lender, as their interests may appear.
The purchase of participations in a Swingline Loan pursuant to this paragraph
shall not relieve the Borrowers (or other party liable for obligations of the
Borrowers) of any default in the payment thereof.
SECTION 2.23. Letters of Credit. (a) General. Any Borrower may request the
issuance of a Letter of Credit for its own account or the account of any
Subsidiary (provided that a Borrower shall be a co-applicant with respect to
each Letter of Credit issued for the account of or in favor of any such
Subsidiary), in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time while the Revolving Credit
Commitments remain in effect. This Section shall not be construed to impose an
obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement. Any Letter of
Credit may, in the absolute discretion of the Issuing Bank and The Chase
Manhattan Bank, be issued by The Chase Manhattan Bank (or any Affiliate or
branch thereof), and, in the event of any such issuance, all references herein
and in the other Loan Documents to the term "Issuing Bank" shall, with respect
to any such Letter of Credit, be deemed to refer to The Chase Manhattan Bank (or
such Affiliate) in such capacity, as the context shall require.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), a Borrower shall hand deliver or telecopy
to the Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to expire (which shall
comply with paragraph (c) below), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare such Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if, and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrowers shall be deemed to represent
and warrant that, after giving effect to such issuance, amendment, renewal or
extension (i) the L/C Exposure shall not exceed $50,000,000 and (ii) the
Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit
Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance of
such Letter of Credit and the date that is five Business Days prior to the
Revolving Credit Maturity Date, unless such Letter of Credit expires by its
terms on an earlier date. Each Letter of Credit may, upon the request of the
applicable Borrower,
50
include a provision whereby such Letter of Credit shall be renewed automatically
for additional consecutive periods of 12 months or less (but not beyond the date
that is five Business Days prior to the Revolving Credit Maturity Date) unless
the Issuing Bank notifies the beneficiary thereof at least 30 days prior to the
then-applicable expiration date that such Letter of Credit will not be renewed.
(d) Participations. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Credit Lender, and each such Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Pro Rata Percentage of the aggregate amount available to be
drawn under such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Revolving
Credit Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, such Lender's Pro
Rata Percentage of each L/C Disbursement made by the Issuing Bank and not
reimbursed by the Borrowers (or, if applicable, another party pursuant to its
obligations under any other Loan Document) forthwith on the date due as provided
in Section 2.02(f). Each Revolving Credit Lender acknowledges and agrees that
its obligation to acquire participations pursuant to this paragraph in respect
of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrowers shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than 3:00 p.m. on the
day that the Borrowers shall have received notice from the Issuing Bank that
payment of such draft will be made (it being understood that such L/C
Disbursement will be made prior to or promptly after the delivery of such
notice), or, if the Borrowers shall have received such notice later than 3:00
p.m., New York City time, on any Business Day, not later than 1:00 p.m., New
York City time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrowers' obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit
or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right
that the Borrowers, any other party guaranteeing, or otherwise obligated
with, the Borrowers, any Subsidiary or other Affiliate thereof or any
other person may at any time have against the beneficiary under any Letter
of Credit, the Issuing Bank, the Administrative Agent or any Lender or any
other person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
51
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the
Issuing Bank, the Lenders, the Administrative Agent or any other person or
any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of the Borrowers' obligations
hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrowers hereunder to reimburse L/C Disbursements will not be excused by the
gross negligence or wilful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Borrowers to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrowers to the
extent permitted by applicable law) suffered by the Borrowers that are caused by
the Issuing Bank's gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof; it is understood that the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (i) the Issuing Bank's exclusive
reliance on the documents presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other statement or any other document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance
in any immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to constitute wilful
misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as possible
give telephonic notification, confirmed by telecopy, to the Administrative Agent
and the Borrowers of such demand for payment and whether and when the Issuing
Bank has made or will make an L/C Disbursement thereunder, provided that any
failure to give or delay in giving such notice shall not relieve the Borrowers
of their obligation to reimburse the Issuing Bank and the Revolving Credit
Lenders with respect to any such L/C Disbursement. The Administrative Agent
shall promptly give each Revolving Credit Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrowers shall reimburse
such L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Issuing Bank, for each day
52
from and including the date of such L/C Disbursement, to but excluding the
earlier of the date of payment by the Borrowers or the date on which interest
shall commence to accrue thereon as provided in Section 2.02(f), at the rate per
annum that would apply to such amount if such amount were an ABR Revolving Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may
resign at any time by giving 60 days' prior written notice to the Administrative
Agent, the Lenders and the Borrowers, and may be removed at any time by the
Borrowers by notice to the Issuing Bank, the Administrative Agent and the
Lenders. Subject to the last sentence of this clause (i), upon the acceptance of
any appointment as the Issuing Bank hereunder by a Lender that shall agree to
serve as successor Issuing Bank, such successor shall succeed to and become
vested with all the interests, rights and obligations of the retiring Issuing
Bank and the retiring Issuing Bank shall be discharged from its obligations to
issue additional Letters of Credit hereunder. At the time such removal or
resignation shall become effective, the Borrowers shall pay all accrued and
unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment
as the Issuing Bank hereunder by a successor Lender shall be evidenced by an
agreement entered into by such successor, in a form satisfactory to the
Borrowers and the Administrative Agent, and, from and after the effective date
of such agreement, (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and the other Loan
Documents and (ii) references herein and in the other Loan Documents to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the resignation or removal of the Issuing Bank
hereunder, the retiring Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrowers shall, on the Business Day they receive notice from
the Administrative Agent or the Required Lenders (or, if the maturity of the
Loans has been accelerated, Revolving Credit Lenders holding participations in
outstanding Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Letters of Credit) thereof and of the amount
of the L/C Exposure at such time, deposit in an account with the Collateral
Agent, for the benefit of the Revolving Credit Lenders, an amount in cash equal
to the L/C Exposure as of such date. Such deposit shall be held by the
Collateral Agent as collateral for the payment and performance of the
Obligations. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall (i) be applied by the Administrative Agent to reimburse the
Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be
held for the satisfaction of the reimbursement obligations of the Borrowers for
the L/C Exposure at such time and (iii) if the maturity of the Loans has been
accelerated (but subject to the consent of Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit), be applied
to satisfy the Obligations. If the Borrowers are required to provide an amount
of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be
53
returned to the Borrowers within three Business Days after all Events of Default
have been cured or waived.
ARTICLE III
Representations and Warranties
Each of Holdings and the Borrowers represents and warrants to the
Administrative Agent, the Collateral Agent, the Issuing Bank and each of the
Lenders that:
SECTION 3.01. Organization; Powers. Each of Holdings, the Borrowers and
the Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
all requisite power and authority to own its property and assets and to carry on
its business as now conducted and as proposed to be conducted, (c) is qualified
to do business in, and is in good standing in, every jurisdiction where the
nature of its business so requires and (d) has the corporate power and authority
to execute, deliver and perform its obligations under each of the Loan Documents
and each other agreement or instrument contemplated hereby to which it is or
will be a party and, in the case of the Borrowers, to borrow hereunder, except
in each case where the failure to satisfy any of the above could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 3.02. Authorization. The execution, delivery and performance by
each Loan Party of each of the Loan Documents to which such Loan Party is a
party, and in the case of Borrowers, the borrowings hereunder, and, in the case
of Holdings, the Acquisition and the other transactions contemplated hereby and
by the Acquisition Agreement (collectively, the "Transactions") (a) have been
duly authorized by all requisite corporate and, if required, stockholder action
on the part of such Loan Party and (b) will not (i) violate (A) any provision of
law, statute, rule or regulation, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of Holdings, any
Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C)
any provision of any indenture, agreement or other instrument to which Holdings,
any Borrower or any Subsidiary is a party or by which any of them or any of
their property is or may be bound, (ii) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default
under, or give rise to any right to accelerate or to require the prepayment,
repurchase or redemption of any obligation under any such indenture, agreement
or other instrument, except where any such conflict, violation, breach, default
or right referred to in clause (i) or (ii), individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect, or (iii)
result in the creation or imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by Holdings, any Borrower or
any Subsidiary (other than any Lien created hereunder or under the Security
Documents).
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by Holdings and each Borrower and constitutes, and each other Loan
Document when executed and delivered by each Loan Party party thereto will
constitute, a legal, valid and binding obligation of such Loan Party enforceable
against such Loan Party in accordance with its respective terms, subject (a) as
to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally, from time to time in effect
54
and (b) to general principles of equity (whether enforcement is sought by a
proceeding in equity or at law) .
SECTION 3.04. Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions or the other
transactions contemplated hereby, except for (a) the filing of appropriate
Uniform Commercial Code financing statements and filings with the United States
Patent and Trademark Office and the United States Copyright Office, (b)
recordation of the Mortgages and related Uniform Commercial Code financing
statements, (c) such as have been made or obtained and are in full force and
effect, (d) filings required pursuant to the Securities Act of 1933 or any state
"blue sky" laws in connection with the registration of securities to be
exchanged for the Subordinated Notes or the Masco Notes, (e) filings by Holdings
pursuant to the Small Business Investment Act of 1958, as amended, and (f) such
actions, consents, approvals and filings the failure of which to obtain or make
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.05. Financial Statements. (a) The Parent Borrower has heretofore
furnished to the Lenders the consolidated balance sheets and statements of
income, stockholders' equity and cash flows of the HFG Companies and their
respective subsidiaries on a consolidated basis (i) as of and for the fiscal
year ended December 31, 1995, audited by and accompanied by the opinion of
Coopers & Lybrand LLP, independent public accountants, and (ii) as of and for
the two fiscal quarter period ended June 30, 1996, certified by its chief
financial officer. Such financial statements present fairly the financial
condition and results of operations and cash flows of the Parent Borrower and
its consolidated Subsidiaries as of such dates and for such periods. Such
financial statements were prepared in accordance with GAAP (except for the
absence of footnote disclosure and subject to year-end audit adjustments in the
case of the financial statements referred to in clause (ii)).
(b) Each of Holdings and the Parent Borrower has heretofore delivered to
the Lenders its unaudited pro forma consolidated balance sheet as of June 30,
1996, prepared giving effect to the Transactions as if they had occurred on such
date. Such pro forma balance sheet has been prepared in good faith by Holdings
or the Parent Borrower, as applicable, based on the assumptions used to prepare
the pro forma financial information contained in the Confidential Information
Memorandum (which assumptions are believed by Holdings or the Parent Borrower,
as applicable, on the date hereof and on June 30, 1996, to be reasonable), is
based on the best information known (after due inquiry) to Holdings or the
Parent Borrower, as applicable, as of the date of delivery thereof, accurately
reflects all adjustments required to be made to give effect to the Transactions
and presents fairly on a pro forma basis the estimated consolidated financial
position of Holdings or the Parent Borrower, as applicable, as of June 30, 1996,
assuming that the Transactions had actually occurred on June 30, 1996.
SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, properties, financial
condition, contingent liabilities or material agreements of Holdings, the Parent
Borrower and the Subsidiaries, taken as a whole, since December 31, 1995.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
Holdings, the Borrowers and the Subsidiaries has good title to (and with respect
to real property good and marketable
55
title to), or valid leasehold interests in, all its material properties and
assets (including all Mortgaged Property and all properties listed on Schedules
3.20(a) and 3.20(b)), except where lack of such title or valid leasehold
interest does not materially interfere with its ability to conduct its business
as currently conducted. All interests of such persons in such material
properties and assets are free and clear of Liens, other than Liens expressly
permitted by Section 6.02 and, in addition, with respect to the Mortgaged
Properties, Permitted Encumbrances.
(b) Except as set forth on Schedule 3.07(b), each of Holdings, the
Borrowers and the Subsidiaries has complied with all material obligations under
all material leases to which it is a party and all such leases are in full force
and effect. Each of Holdings, the Borrowers and the Subsidiaries enjoys peaceful
and undisturbed possession under all such material leases, except where failure
to enjoy such possession does not materially interfere with its ability to
conduct its business as currently conducted.
(c) Except as set forth on Schedule 3.07(c), neither Holdings nor any
Borrower has received any notice of, nor has any knowledge of, any pending or
contemplated condemnation proceeding affecting the Mortgaged Properties or any
sale or disposition thereof in lieu of condemnation.
(d) Except as set forth on Schedule 3.07(d), none of Holdings, the
Borrowers or any of the Subsidiaries is obligated under any right of first
refusal, option or other contractual right to sell, assign or otherwise dispose
of any Mortgaged Property or any interest therein.
SECTION 3.08. Subsidiaries. (a) Schedule 3.08 sets forth as of the Closing
Date (after giving effect to the Transactions) a list of all Subsidiaries of the
Parent Borrower and the percentage ownership interest of Holdings, the Parent
Borrower and any other person therein. The shares of Capital Stock or other
ownership interests so indicated on Schedule 3.08 are fully paid and
non-assessable and are owned, as of the Closing Date, by Holdings, the Parent
Borrower or a subsidiary of Holdings or the Parent Borrower, as applicable,
directly or indirectly, free and clear of all Liens (other than Liens permitted
under the Loan Documents). Holdings owns 100% of the issued and outstanding
shares of Capital Stock of the Parent Borrower and the Parent Borrower owns
directly or indirectly 100% of the issued and outstanding shares of Capital
Stock of each Subsidiary Borrower. As of the Closing Date, the only direct or
indirect subsidiary of Holdings other than the Parent Borrower and the
Subsidiaries is Simmons.
(b) As of the Closing Date, none of the Subsidiaries is subject to a
consensual encumbrance or restriction that limits such Subsidiary's ability to
make an Upstream Payment.
(c) Each of Dixie Furniture Company, Incorporated, Henry Link Corporation,
Link-Taylor Corporation and Young-Hinkle Corporation does not have assets (other
than the rights associated with each such company's name) in excess of $5,000,
does not have any employees and does not conduct any business.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on
Schedule 3.09, there are no actions, suits or proceedings at law or in equity or
by or before any Governmental Authority now pending or, to the knowledge of
Holdings or any Borrower, threatened against or affecting Holdings or any
Borrower or any Subsidiary or any business, property or rights of any such
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person (i) that involve any Loan Document or the Transactions or (ii) as to
which there is a reasonable likelihood of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(b) None of Holdings, the Borrowers or any of the Subsidiaries or any of
their respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Mortgaged Property, or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
(c) None of Holdings, the Borrowers or any of the Subsidiaries is in
violation of any zoning or building law, ordinance, rule, regulation or
restriction affecting a Mortgaged Property or any building permit, including
certificates of occupancy, where such violation could reasonably be expected to
result in a material adverse effect on the business, assets, operations or
financial condition of the company that has title to such Mortgaged Property.
SECTION 3.10. Agreements. (a) None of Holdings, the Borrowers or any of
the Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) None of Holdings, the Borrowers or any of the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are bound, where such default could reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) None of Holdings, the
Borrowers or any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation G, U
or X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.
None of Holdings, the Borrowers or any Subsidiary is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940 or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrowers will use the proceeds of the
Loans and will request the issuance of Letters of Credit only for the purposes
specified in the preamble to this Agreement.
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SECTION 3.14. Tax Returns. Each of Holdings, the Borrowers and the
Subsidiaries has filed or caused to be filed all Federal, state or other
material tax returns required to have been filed by it and has paid or caused to
be paid all taxes due and payable by it and all assessments received by it to
the extent that such failure to file or nonpayment could reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum as of the date supplemented and the Closing Date or (b)
any other information, reports, financial statements, exhibits or schedules,
taken as a whole, furnished by or on behalf of Holdings or any Borrower to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto contained,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not materially misleading, provided that to the extent any such information,
report, financial statement, exhibit or schedule was based upon or constitutes a
forecast or projection, each of Holdings and the Borrowers represents only that
it acted in good faith and utilized reasonable assumptions and due care in the
preparation of such information, report, financial statement, exhibit or
schedule.
SECTION 3.16. Employee Benefit Plans. Except to the extent failure to
comply could not reasonably be expected to result in a Material Adverse Effect,
each of Holdings and the Borrowers is in compliance with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder. Neither Holdings nor any Borrower is aware of any
circumstances or event with respect to any employee benefit plan maintained or
contributed to by an ERISA Affiliate that could result in a liability that could
reasonably be expected to have a Material Adverse Effect. No ERISA Event has
occurred or is reasonably expected to occur that, when taken together with all
other such ERISA Events, could reasonably be expected to result in a Material
Adverse Effect. The present value of all benefit liabilities being transferred
to each Plan from the predecessor plans of Masco (the "Predecessor Plans")
(based on those assumptions used to fund such Predecessor Plans) will not exceed
by more than $7,500,000 the fair market value of the assets being transferred to
such Plan from the Predecessor Plans, and the present value of all benefit
liabilities being transferred to all underfunded Plans from the Predecessor
Plans (based on those assumptions used to fund such Predecessor Plans) will not
exceed by more than $7,500,000 the fair market value of the assets being
transferred to all such underfunded Plans.
SECTION 3.17. Environmental Matters. Except as set forth on Schedule 3.17:
(a) The properties owned or operated by Holdings, the Borrowers and the
Subsidiaries (the "Properties") do not contain any Hazardous Materials in
amounts or concentrations that (i) constitute, or constituted a violation of,
(ii) require Remedial Action under, or (iii) could reasonably be expected to
give rise to liability under, Environmental Laws, which violations, Remedial
Actions and liabilities, in the aggregate, could reasonably be expected to
result in a Material Adverse Effect;
(b) The Properties and all operations of the Borrowers and the
Subsidiaries are in compliance, and in the last three years have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent that such non-
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compliance or failure to obtain any necessary permits, in the aggregate, could
not be reasonably expected to result in a Material Adverse Effect;
(c) There have been no Releases or threatened Releases at, from, under or
proximate to the Properties or otherwise in connection with the operations of
the Borrowers or the Subsidiaries, which Releases or threatened Releases, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect;
(d) None of Holdings, the Borrowers or any of the Subsidiaries has
received any notice of an Environmental Claim in connection with the Properties
or the operations of the Borrowers or the Subsidiaries or with regard to any
person whose liabilities for environmental matters Holdings, the Borrowers or
the Subsidiaries has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, which, in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, nor do Holdings, the Borrowers
or the Subsidiaries have reason to believe that any such notice will be received
or is being threatened; and
(e) Hazardous Materials have not been transported from the Properties, nor
have Hazardous Materials been generated, treated, stored or disposed of at, on
or under any of the Properties in a manner that could reasonably be expected to
give rise to liability under any Environmental Law, nor have the Borrowers or
the Subsidiaries retained or assumed any liability, contractually, by operation
of law or otherwise, with respect to the generation, treatment, storage or
disposal of Hazardous Materials, in each case, which transportation, generation,
treatment, storage or disposal, or retained or assumed liabilities, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by or for Holdings, any Borrower
or any Domestic Subsidiary as of the date hereof and the Closing Date. As of
each such date, such insurance is in full force and effect and all premiums that
have become due and payable have been duly paid. Holdings, the Borrowers and the
Subsidiaries have insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Pledge Agreement) and, when such Collateral is delivered to the
Collateral Agent, the Pledge Agreement shall constitute a fully perfected first
priority Lien on, and security interest in, all right, title and interest of the
pledgors thereunder in such Collateral, in each case prior and superior in right
to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement) and, when financing statements in appropriate form are filed in the
offices specified on Schedule 6 to the Perfection Certificate, the Security
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the grantors thereunder in such Collateral
(other than the Intellectual Property, as defined in the Security Agreement)
that may be perfected by filing, recording or registering a financing statement
under the Uniform Commercial Code as in effect in the United States (or any
political subdivision thereof) and its territories and
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possessions, in each case prior and superior in right to any other Lien on any
Collateral other than Liens expressly permitted by Section 6.02.
(c) When the Security Agreement is filed in the United States Patent and
Trademark Office and the United States Copyright Office, the Security Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the grantors thereunder in the Patents, Trademarks (other
than "intent to use" Trademark applications) and all Copyrights material to the
Borrowers' or Guarantors' business (each, as defined in the Security Agreement)
in which a security interest may be perfected by filing, recording or
registration of the Security Agreement in the United States Patent and Trademark
Office and the United States Copyright Office, in each case prior and superior
in right to any other person other than Liens permitted by Section 6.02 (it
being understood that subsequent recordings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a lien on registered trademarks, trademark applications and copyrights
acquired or developed by the grantors after the date hereof).
(d) The Mortgages are effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal, valid and
enforceable Lien on all of the Loan Parties' right, title and interest in and to
the Mortgaged Property thereunder and the proceeds thereof, and when the
Mortgages are filed in the offices specified on Schedule 3.19(d) and the proper
amount of mortgage recording or similar taxes (if any) are paid and when the
financing statements are duly filed in the appropriate public records, the
Mortgages shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Loan Parties in such Mortgaged Property and
the proceeds thereof, in each case prior and superior in right to any other
person other than Permitted Encumbrances.
SECTION 3.20. Location of Real Property and Leased Premises. (a) Schedule
3.20(a) lists completely and correctly in all material respects as of the
Closing Date the address of all real property owned by Holdings, the Borrowers
and the Subsidiaries.
(b) Schedule 3.20(b) lists completely and correctly in all material
respects as of the Closing Date the address of all real property leased by
Holdings, the Borrowers and the Subsidiaries.
SECTION 3.21. Labor Matters. As of the date hereof and the Closing Date,
there are no strikes or lockouts against Holdings, any Borrower or any
Subsidiary pending or, to the knowledge of Holdings or any Borrower, threatened.
The hours worked by and payments made to employees of Holdings, the Borrowers
and the Subsidiaries have not been in violation of the Fair Labor Standards Act
or any other applicable Federal, state, local or foreign law dealing with such
matters in any case where a Material Adverse Effect could reasonably be expected
to occur as a result of such violation. Except as set forth on Schedule 3.21,
all payments due from Holdings, any Borrower or any Subsidiary, or for which any
claim may be made against Holdings, any Borrower or any Subsidiary, on account
of wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of Holdings, such Borrower or such
Subsidiary. The consummation of the Transactions will not give rise to any right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which Holdings, any Borrower or any
Subsidiary is bound.
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SECTION 3.22. Solvency. (a) Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each Loan made on the Closing Date and after giving effect to the application
of the proceeds of such Loans, (i) the fair value of the assets of each Loan
Party will exceed its debts and liabilities, subordinated, contingent or
otherwise; (ii) the present fair saleable value of the property of each Loan
Party will be greater than the amount that will be required to pay the probable
liability of its debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured;
(iii) each Loan Party will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) each Loan Party will not have unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing (other than
(i) any Revolving Credit Borrowing made pursuant to Section 2.02(f), (ii) any
continuation or conversion of a Revolving Credit Borrowing pursuant to Section
2.10 into a Revolving Credit Borrowing that does not increase the aggregate
principal amount of Revolving Loans outstanding and (iii) any continuation or
conversion of a Term Loan pursuant to Section 2.10), including each Borrowing of
a Swingline Loan and on the date of each issuance of a Letter of Credit (each
such event being called a "Credit Event"):
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been
deemed given in accordance with Section 2.03) or, in the case of the
issuance of a Letter of Credit, the Issuing Bank and the Administrative
Agent shall have received a notice requesting the issuance of such Letter
of Credit as required by Section 2.23(b) or, in the case of the Borrowing
of a Swingline Loan, the Swingline Lender and the Administrative Agent
shall have received a notice requesting such Swingline Loan as required by
Section 2.22(b).
(b) The representations and warranties set forth in Article III
hereof shall be true and correct in all material respects on and as of the
date of such Credit Event with the same effect as though made on and as of
such date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations
and warranties shall have been true and correct in all material respects
on such earlier date).
(c) Each Borrower and each other Loan Party shall be in compliance
with all the terms and provisions set forth herein and in each other Loan
Document on its part to be observed or performed, and at the time of and
immediately after such Credit Event, no Event of Default or Default shall
have occurred and be continuing.
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Each Credit Event shall be deemed to constitute a representation and warranty by
each Borrower and Holdings on the date of such Credit Event as to the matters
specified in paragraphs (b) (except as aforesaid) and (c) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Issuing Bank, a favorable written opinion of
(i) Morgan, Lewis & Bockius LLP, counsel for Holdings and the Borrowers,
substantially to the effect set forth in Exhibit J-1, (ii) John R.
Leekley, Esq., Vice President and General Counsel of Masco, substantially
to the effect set forth in Exhibit J-2 and (iii) each local counsel listed
on Schedule 4.02(a), substantially to the effect set forth in Exhibit J-3,
in each case (A) dated the Closing Date, (B) addressed to the Issuing
Bank, the Administrative Agent and the Lenders, and (C) covering such
other matters relating to the Loan Documents and the Transactions as the
Administrative Agent shall reasonably request, and Holdings and the
Borrowers hereby request such counsel to deliver such opinions.
(b) All legal matters incident to this Agreement, the Borrowings and
extensions of credit hereunder and the other Loan Documents shall be
satisfactory to the Lenders, to the Issuing Bank and to Cravath, Swaine &
Moore, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of each Loan Party, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate as
to the good standing of each Loan Party as of a recent date, from such
Secretary of State; (ii) a certificate of the Secretary or Assistant
Secretary of each Loan Party dated the Closing Date and certifying (A)
that attached thereto is a true and complete copy of the by-laws of such
Loan Party as in effect on the Closing Date and at all times since a date
prior to the date of the resolutions described in clause (B) below, (B)
that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the
execution, delivery and performance of the Loan Documents to which such
Loan Party is a party and, in the case of the Borrowers, the borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the certificate or
articles of incorporation of such Loan Party have not been amended since
the date of the last amendment thereto shown on the certificate of good
standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing any Loan
Document or any other document delivered in connection therewith on behalf
of such Loan Party; (iii) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to (ii) above; and (iv) such other
documents as the Lenders, the Issuing Bank or Cravath, Swaine & Moore,
counsel for the Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a certificate,
dated the Closing Date and signed by a Financial Officer of Holdings and
the Parent Borrower, confirming compliance with the conditions precedent
set forth in paragraphs (b) and (c) of Section 4.01.
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(e) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrowers hereunder or under any
other Loan Document.
(f) The Pledge Agreement shall have been duly executed by the Loan
Parties party thereto and delivered to the Collateral Agent, and all the
outstanding Capital Stock of the Borrowers and the Subsidiaries shall have
been duly and validly pledged thereunder to the Collateral Agent for the
ratable benefit of the Secured Parties and certificates representing such
shares, accompanied by instruments of transfer or stock powers endorsed in
blank, shall be in the actual possession of the Collateral Agent, provided
that (i) neither the Parent Borrower nor any Domestic Subsidiary shall be
required to pledge more than 65% of the Capital Stock of any Foreign
Subsidiary if, and to the extent that, the pledge of a greater percentage
would have adverse tax consequences for the Parent Borrower or any of the
Subsidiaries and (ii) no Foreign Subsidiary shall be required to pledge
the Capital Stock of any of its Foreign Subsidiaries.
(g) The Security Agreement shall have been duly executed by the Loan
Parties party thereto and shall have been delivered to the Collateral
Agent and each document (including each Uniform Commercial Code financing
statement) required by law or reasonably requested by the Administrative
Agent to be filed, registered or recorded in order to create in favor of
the Collateral Agent for the benefit of the Secured Parties a valid, legal
and perfected firstpriority security interest in and lien on the
Collateral described in such agreement, subject to Liens permitted by
Section 6.02, shall have been delivered to the Collateral Agent.
(h) The Collateral Agent shall have received the results of a search
of the Uniform Commercial Code (or equivalent filings) filings made with
respect to the Loan Parties in the states (or other jurisdictions) in
which the chief executive office of each such person is located, any
offices of such persons in which records have been kept relating to
Accounts (as defined in the Security Agreement) and the other
jurisdictions in which Uniform Commercial Code filings (or equivalent
filings) are to be made pursuant to the preceding paragraph, together with
copies of the financing statements (or similar documents) disclosed by
such search, and accompanied by evidence satisfactory to the Collateral
Agent that the Liens indicated in any such financing statement (or similar
document) would be permitted under Section 6.02 or have been released.
(i) The Collateral Agent shall have received a Perfection
Certificate with respect to the Loan Parties dated the Closing Date and
duly executed by a Responsible Officer of Holdings or the Parent Borrower.
(j)(i) Each of the Security Documents, in form and substance
satisfactory to the Collateral Agent, relating to each of the Mortgaged
Properties shall have been duly executed by the parties thereto and
delivered to the Collateral Agent, (ii) each of such Mortgaged Properties
shall not be subject to any Lien other than those permitted under Section
6.02 and other than Permitted Encumbrances, (iii) each of such Security
Documents shall have been filed and recorded in the recording office as
specified on Schedule 3.19(d) and, in connection therewith, the Collateral
Agent shall have received evidence satisfactory to it of each such
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filing and recordation (or a lender's title insurance policy or a marked
"commitment" of title insurance, in form and substance reasonably
acceptable to the Collateral Agent, insuring such Security Document as a
lien on such Mortgaged Property (subject only to any Lien permitted by
Section 6.02 or otherwise noted on such title policy and acceptable to the
Collateral Agent) shall have been received by the Collateral Agent) and
(iv) the Collateral Agent shall have received such other documents,
including a policy or policies of title insurance issued by a nationally
recognized title insurance company, together with such endorsements and
reinsurance as may be reasonably requested by the Collateral Agent,
insuring the Mortgages as valid liens on the Mortgaged Properties, free of
Liens other than those permitted under Section 6.02 or otherwise noted on
such title policy and acceptable to the Collateral Agent, together with
such surveys and legal opinions as reasonably requested by the Collateral
Agent.
(k) Each of the Holdings Guarantee Agreement and the Subsidiary
Guarantee Agreement shall have been duly executed by the Loan Parties
party thereto and shall have been delivered to the Collateral Agent.
(l) The Indemnity, Subrogation and Contribution Agreement shall have
been duly executed by the Loan Parties party thereto and shall have been
delivered to the Collateral Agent.
(m) The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by
Section 5.02 and the applicable provisions of the Security Documents, each
of which shall be endorsed or otherwise amended to include a "standard" or
"New York" lender's loss payable endorsement (in the case of each property
or boiler policy) and to name the Collateral Agent as additional insured,
in form and substance reasonably satisfactory to the Administrative Agent.
(n) The Administrative Agent shall have received the following
documents for each Mortgaged Property to the extent that the Parent
Borrower has such documents in its possession on the Closing Date:
(i) a copy of the original permanent or temporary certificate
of occupancy, if any, issued upon completion of the Mortgaged
Property (or any amendment issued upon completion of any alteration)
by the appropriate Governmental Authority; and
(ii) one of the following: (A) a written confirmation from the
applicable zoning commission or other appropriate Governmental
Authority stating that the applicable Mortgaged Property complies
with existing land use and zoning ordinances, regulations and
restrictions applicable to such Mortgaged Property or (B) a zoning
endorsement reasonably satisfactory to the Administrative Agent in
connection with the Collateral Agent's mortgagee title insurance
policy of such Mortgaged Property.
(o) The Administrative Agent shall have received (i) for each owned
Mortgaged Property identified on Schedule 1.01(b) as items 1 through 3, a
Subordination, Nondisturbance and Attornment Agreement executed by the
tenant under such lease substantially in the form of Exhibit M hereto and
(ii) for each Mortgaged Property identified on Schedule 1.01(b) as
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items 4 and 9, a Subordination Agreement, in form and substance reasonably
satisfactory to the Administrative Agent.
(p) The Administrative Agent shall have received an estoppel letter
from the Pennsylvania Industrial Development Authority with respect to the
mortgage encumbering the Mortgaged Property located at Miller Street in
Sunbury, Pennsylvania in form and substance reasonably satisfactory to the
Administrative Agent.
(q) There shall have been no material adverse change in the
business, assets, operations, properties, financial condition, contingent
liabilities, prospects or material agreements of Holdings, the Parent
Borrower and the Subsidiaries, taken as a whole, since December 31, 1995.
(r) The Acquisition shall have been consummated or shall be
consummated simultaneously with the first Credit Event in accordance with
applicable law, in accordance with the Acquisition Agreement, including
the issuance of Capital Stock of Holdings to Masco (without giving effect
to any waiver of any material condition set forth in the Acquisition
Agreement not approved by the Lenders) and on other terms reasonably
satisfactory to the Lenders. The aggregate level of fees and expenses to
be paid in connection with the Transactions shall not exceed $40,000,000.
(s) The Equity Contribution shall have been made prior to or
simultaneously with the first Credit Event.
(t) The Parent Borrower shall have received at least $200,000,000 in
gross cash proceeds from the issuance of the Subordinated Notes in a
public offering or Rule 144A offering. The subordination provisions,
covenants, events of default and remedies with respect to the Subordinated
Notes shall be satisfactory in all respects to the Lenders (it being
understood and agreed that the Subordinated Notes shall not mature prior
to the tenth anniversary of the Closing Date).
(u) The terms of the Masco Notes shall be substantially as set forth
on Exhibit K attached hereto.
(v) The initial closing under the Receivables Sale Agreement and the
Receivables Pooling Agreement shall have been consummated and the Parent
Borrower shall have received not less than $150,000,000 as consideration
for the initial sale of receivables thereunder.
(w) After giving effect to the Transactions, Holdings, the Parent
Borrower and the Subsidiaries shall have outstanding no Indebtedness for
borrowed money or preferred stock other than (a) in the case of Holdings,
Indebtedness under the Loan Documents, the Masco Notes and the preferred
stock of Holdings issued in connection with the Acquisition and (b) in the
case of the Parent Borrower and the Subsidiaries, (i) Indebtedness under
the Loan Documents, (ii) the Subordinated Notes in an aggregate principal
amount not to exceed $200,000,000 and (iii) other Indebtedness permitted
under Section 6.01.
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(x) The Lenders shall have received the unaudited consolidated
balance sheet and related statements of income, stockholders' equity and
cash flows of the HFG Companies and their respective subsidiaries on a
consolidated basis as of and for the two fiscal quarter period ended June
30, 1996, as contemplated by Section 3.05(a)(ii) hereof.
(y) The Lenders shall be satisfied with the tax sharing arrangements
among Holdings and its subsidiaries (it being understood that the tax
liability of the Parent Borrower and the Subsidiaries will not exceed the
tax liability of Holdings and its consolidated subsidiaries, excluding
Simmons).
(z) The Lenders shall have received an unaudited pro forma
consolidated balance sheet of each of Holdings and the Parent Borrower as
of June 30, 1996, after giving effect to the Transactions and the other
transactions contemplated hereby as if they had occurred on such date
which balance sheets shall be consistent in all material respects with the
sources and uses shown on Schedule 4.02(z) and the forecasts previously
provided to the Lenders.
(aa) The Lenders shall have received a solvency letter, in form and
substance and from an independent evaluation firm satisfactory to the
Lenders.
(ab) All governmental consents and approvals and all material third
party consents shall have been obtained with respect to the Transactions
and the other transactions contemplated hereby to the extent required, all
applicable appeal periods shall have expired and there shall be no
governmental or judicial action, actual or threatened, that has or could
have a reasonable likelihood of restraining, preventing or imposing
burdensome conditions on the Transactions or the other transactions
contemplated hereby.
ARTICLE V
Affirmative Covenants
Each of Holdings and the Borrowers covenants and agrees with each Lender
that so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, each of Holdings and the Borrowers
will, and will cause each of the Subsidiaries (other than the Receivables
Subsidiary and the Master Servicer) to:
SECTION 5.01. Existence; Businesses and Properties; Compliance with Laws.
(a) Do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence, except as otherwise expressly
permitted under Section 6.05.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; comply in all material respects with
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all applicable laws, rules, regulations (including any zoning, building,
Environmental and Safety Law, ordinance, code or approval or any building
permits or any restrictions of record or agreements affecting the Mortgaged
Properties) and decrees and orders of any Governmental Authority, whether now in
effect or hereafter enacted except where noncompliance could not reasonably be
expected to result in a Material Adverse Effect, or in the case of the Mortgaged
Properties, where noncompliance with zoning and building laws, rules and
regulations, building permits and certificates of occupancy could not reasonably
be expected to result in a material adverse effect on the business, assets,
operations or financial condition of the person that has title to the Mortgaged
Property; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition (reasonable wear and tear excepted) and from time to time make, or
cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted in all material
respects at all times.
SECTION 5.02. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including commercial general liability insurance against claims for bodily
injury or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by it; and maintain
such other insurance as may be required by law.
(b) Cause all property and boiler policies to be endorsed or otherwise
amended to include a "standard" or "New York" lender's loss payable endorsement,
in form and substance reasonably satisfactory to the Administrative Agent and
the Collateral Agent, which endorsement shall provide that, from and after the
Closing Date, if the insurance carrier shall have received written notice from
the Administrative Agent or the Collateral Agent of the occurrence of an Event
of Default, the insurance carrier shall pay all proceeds otherwise payable to
the Loan Parties under such policies directly to the Collateral Agent; cause all
such policies to provide that none of Holdings, the Borrowers, the
Administrative Agent, the Collateral Agent or any other party shall be a
coinsurer thereunder and to contain a "Replacement Cost Endorsement", without
any deduction for depreciation, and such other provisions as the Administrative
Agent or the Collateral Agent may reasonably require from time to time to
protect their interests; deliver, promptly as available but in no event later
than 120 days after the Closing Date, original or certified copies of all such
policies to the Collateral Agent; cause each such policy to provide that it
shall not be canceled or not renewed (i) by reason of nonpayment of premium upon
not less than 10 days' prior written notice thereof by the insurer to the
Administrative Agent and the Collateral Agent (giving the Administrative Agent
and the Collateral Agent the right to cure defaults in the payment of premiums)
or (ii) for any other reason upon not less than 30 days' prior written notice
thereof by the insurer to the Administrative Agent and the Collateral Agent;
deliver to the Administrative Agent and the Collateral Agent, (A) prior to the
cancellation, or nonrenewal of any such policy of insurance, a copy of a renewal
or replacement policy (or other evidence of renewal of a policy previously
delivered to the Administrative Agent and the Collateral Agent) together with
evidence satisfactory to the Administrative Agent and the Collateral Agent of
payment of the premium therefor to the extent due and payable and (B) promptly
upon any modification of any such policy, a copy of such modified policy.
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(c) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), obtain flood insurance in such total amount as the
Administrative Agent or the Collateral Agent may from time to time reasonably
require, and otherwise comply with the National Flood Insurance Program as set
forth in the Flood Disaster Protection Act of 1973, as it may be amended from
time to time.
(d) With respect to any Mortgaged Property, carry and maintain commercial
general liability insurance including the "broad form CGL endorsement" and
coverage on an occurrence basis against claims made for bodily injury, death and
property damage and umbrella liability insurance against such claims, in no
event for a combined single limit of less than $25,000,000, naming the
Collateral Agent as an additional insured, on forms reasonably satisfactory to
the Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent immediately
whenever any separate insurance concurrent in form or contributing in the event
of loss with that required to be maintained under this Section 5.02 is taken out
by Holdings or the Borrowers; and promptly deliver to the Administrative Agent
and the Collateral Agent a duplicate original or certified copy of such policy
or policies.
(f) In connection with the covenants set forth in this Section 5.02, it is
understood and agreed that:
(i) none of the Administrative Agent, the Lenders, the Issuing Bank,
or their respective agents or employees shall be liable for any loss or
damage insured by the insurance policies required to be maintained under
this Section 5.02, it being understood that (A) the Borrowers and the
other Loan Parties shall look solely to their insurance companies or any
other parties other than the aforesaid parties for the recovery of such
loss or damage and (B) Holdings and the Borrowers shall use reasonable
efforts to cause such insurance policies to waive the insurer's rights of
subrogation against the Administrative Agent, the Collateral Agent, the
Lenders, the Issuing Bank or their agents or employees. If, however, any
such insurance policy does not provide waiver of subrogation rights
against such parties, as required above, then Holdings and each Borrower
hereby agrees, to the extent permitted by law, to waive its right of
recovery, if any, against the Administrative Agent, the Collateral Agent,
the Lenders, the Issuing Bank and their agents and employees in respect of
any such loss or damage; and
(ii) the designation of any form, type or amount of insurance coverage
by the Administrative Agent or the Collateral Agent under this Section
5.02 shall in no event be deemed a representation, warranty or advice by
the Administrative Agent or the Collateral Agent that such insurance is
adequate for the purposes of the business of Holdings, the Borrowers and
the Subsidiaries or the protection of their properties.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
monetary obligations promptly and in accordance with their terms and pay and
discharge promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of its
property, before such taxes, assessments and governmental charges shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise that,
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if unpaid, might give rise to a Lien upon such properties or any part thereof;
provided, however, that such payment and discharge shall not be required with
respect to (i) any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and Holdings or such Borrower, as applicable, shall have set aside
on its books adequate reserves with respect thereto in accordance with GAAP and
such contest operates to suspend collection of the contested obligation, tax,
assessment or charge and enforcement of a Lien and, in the case of a Mortgaged
Property, there is no risk of forfeiture of such property and (ii) any
Indebtedness or other obligation or any tax, assessment, charge, levy or claims,
the failure to pay and discharge when due which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.04. Financial Statements, Reports, etc. In the case of Holdings
and the Parent Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, its
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows showing the consolidated financial condition of such
Person and its consolidated subsidiaries as of the close of such fiscal
year and the consolidated results of its operations and the operations of
such subsidiaries during such year (and showing, on a comparative basis,
the figures for the previous year), all audited by Ernst & Young LLP,
Coopers and Lybrand LLP or other independent public accountants of
recognized national standing acceptable to the Required Lenders and
accompanied by an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such consolidated
financial statements fairly present in all material respects the financial
condition and results of operations of such Person and its consolidated
subsidiaries on a consolidated basis in accordance with GAAP consistently
applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, its unaudited consolidated balance sheet and
related statements of income, stockholders' equity and cash flows showing
the consolidated financial condition of such Person and its consolidated
subsidiaries as of the close of such fiscal quarter and the consolidated
results of its operations and the operations of such subsidiaries during
such fiscal quarter and the then elapsed portion of the fiscal year (and
showing, on a comparative basis, such information as of and for the
corresponding dates and periods of the preceding fiscal year), all
certified by a Financial Officer of such Person as fairly presenting in
all material respects the consolidated financial condition and results of
operations of such Person and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP (except for the absence of
footnote disclosure) consistently applied, subject to year-end audit
adjustments;
(c) within 30 days after the end of each month (other than the last
month of any fiscal quarter), its unaudited consolidated balance sheet and
related statements of income, stockholders' equity and cash flows, showing
the consolidated financial condition of such Person and its consolidated
subsidiaries as of the close of such month and the consolidated results of
its operations and the operations of such subsidiaries during such month
and the thenelapsed portion of the fiscal year;
69
(d) concurrently with any delivery of financial statements under
sub-paragraph (a) or (b) above, a certificate of the Financial Officer
certifying such statements and (i) certifying that no Event of Default or
Default has occurred or, if an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective action taken
or proposed to be taken with respect thereto, (ii) setting forth
computations in reasonable detail satisfactory to the Administrative Agent
demonstrating compliance (A) with the covenants contained in Section
6.06(a)(vi), 6.09, 6.10, 6.11 and 6.12 and (B) with the maximum limitation
amounts contained in the several clauses in Section 6.01, 6.04, 6.05 and
6.06 and (iii) setting forth any change in the Applicable Percentage;
(e) concurrently with the delivery of financial statements under
sub-paragraph (a) above, a certificate of the accounting firm opining on
such statements (which certificate may be limited to accounting matters
and disclaim responsibility for legal interpretations) (i) certifying
whether such accounting firm has become aware of the occurrence of any
Event of Default or Default and (ii) confirming the accuracy of the
computations referred to in clauses (ii) and (iii) of sub-paragraph (d)
above;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Holdings, any Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or
distributed to its shareholders generally, as the case may be;
(g) promptly, from time to time, such other information regarding
the operations, business affairs and financial condition of Holdings, any
Borrower or any Subsidiary, or compliance with the terms of any Loan
Document, or, if available, such financial statements showing the results
of operations of Simmons, in each case as the Administrative Agent or any
Lender may reasonably request; and
(h) prior to the beginning of each fiscal year, a copy of the budget
for its consolidated balance sheet and related statements of income and
cash flows for each quarter of such fiscal year.
SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent, the Issuing Bank and each Lender written notice of the following promptly
after (and, in any event, no later than five days after) any Responsible
Officers of Holdings or the Parent Borrower obtains knowledge thereof:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to be
taken with respect thereto;
(b) the filing or commencement of, or any written threat or notice
of intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against Holdings, any Borrower or any Subsidiary that could
reasonably be expected to result in a Material Adverse Effect; and
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(c) any development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects with
the applicable provisions of ERISA and the Code to the extent failure to comply
could reasonably be expected to result in a Material Adverse Effect and (b)
furnish to the Administrative Agent promptly, and in any event within 10 days
after any Responsible Officer of Holdings or any Borrower knows or has reason to
know that, any ERISA Event has occurred that, alone or together with any other
ERISA Event could reasonably be expected to result in liability of Holdings or
the Borrowers in an aggregate amount exceeding $5,000,000, a statement of a
Financial Officer of Holdings or the Parent Borrower, as applicable, setting
forth details as to such ERISA Event and the action, if any, that Holdings or
the Parent Borrower, as applicable, has taken or proposes to take with respect
thereto.
SECTION 5.07. Maintaining Records; Access to Properties and Inspections.
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all requirements of law are made in relation to its
business and activities. Each Loan Party and each Subsidiary (a) will permit any
representatives designated by the Administrative Agent or any Lender to visit
and inspect the financial records and the properties of Holdings, any Borrower
or any Subsidiary at reasonable times and as often as reasonably requested and
to make extracts from and copies of such financial records, and (b) will permit
any representatives designated by the Administrative Agent or any Lender to
discuss the affairs, finances and condition of Holdings, any Borrower or any
Subsidiary with the officers thereof and independent accountants therefor;
provided, however, that the number of visits pursuant to clause (a) above in any
year shall not exceed two, unless (i) a Default or Event of Default shall have
occurred and be continuing or (ii) the Collateral Agent, or the Required Lenders
through the Administrative Agent, determines in good faith that any material
event or material change has occurred with respect to Holdings, the Borrowers
and the Subsidiaries and that as a result of such event or change more frequent
visits are necessary or prudent.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.09. Compliance with Environmental Laws. Comply, and cause all
lessees and other persons occupying its Properties to comply, in all material
respects with all Environmental Laws and Environmental Permits applicable to its
operations and Properties and the operations conducted thereon; obtain and renew
all material Environmental Permits necessary for its Properties; and conduct any
Remedial Action in accordance with Environmental Laws, except where
noncompliance with Environmental Laws and Environmental Permits or the failure
to obtain or renew such Environmental Permits or conduct such Remedial Action,
in the aggregate, could not be reasonably expected to result in a Material
Adverse Effect.
SECTION 5.10. Preparation of Environmental Reports. If a Default caused by
reason of a breach of Section 3.17 or 5.09 relating to the presence of Hazardous
Materials at any Properties shall have occurred and be continuing, at the
request of the Required Lenders through the Administrative Agent, provide to the
Lenders within 45 days after such request, at the expense of the Borrowers, an
environmental site assessment report for the Properties which are the subject of
such Default prepared by an environmental consulting firm reasonably acceptable
to the Administrative Agent and indicating
71
the presence or absence of Hazardous Materials and the estimated cost of any
compliance or Remedial Action in connection with such Properties.
SECTION 5.11. Further Assurances. Execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing Uniform Commercial Code and other financing statements,
mortgages and deeds of trust) that may be required under applicable law, or that
the Required Lenders, the Administrative Agent or the Collateral Agent may
reasonably request, in order to effectuate the transactions contemplated by the
Loan Documents and in order to grant, preserve, protect and perfect the validity
and first priority of the security interests created or intended to be created
by the Security Documents (subject to Liens permitted by Section 6.02). Holdings
and the Borrowers will cause any subsequently acquired or organized Domestic
Subsidiary to execute a Subsidiary Guarantee Agreement, Indemnity Subrogation
and Contribution Agreement and each applicable Security Document in favor of the
Collateral Agent. In addition, from time to time, Holdings and each Borrower
will, at its cost and expense, promptly secure the Obligations by pledging or
creating, or causing to be pledged or created, perfected security interests with
respect to such of its assets and properties as the Administrative Agent or the
Required Lenders shall designate (it being understood that it is the intent of
the parties that the Obligations shall be secured by, among other things,
substantially all the assets of Holdings, the Borrowers and the Domestic
Subsidiaries (other than the Receivables Subsidiary and the Master Servicer),
including real and other properties acquired subsequent to the Closing Date).
Such security interests and Liens will be created under the Security Documents
and other security agreements, mortgages, deeds of trust and other instruments
and documents in form and substance satisfactory to the Collateral Agent, and
Holdings and each Borrower shall deliver or cause to be delivered to the Lenders
all such instruments and documents (including legal opinions, title insurance
policies, lien searches and surveys) as the Collateral Agent shall reasonably
request to evidence compliance with this Section. Holdings and each Borrower
agrees to provide such evidence as the Collateral Agent shall reasonably request
as to the perfection and priority status of each such security interest and
Lien. Each Loan Party agrees promptly to notify the Collateral Agent if any
material portion of the Collateral owned or held by such Loan Party is damaged
or destroyed. The Parent Borrower shall deliver, no later than 60 days after the
Closing Date or such dates as otherwise agreed to by the Administrative Agent,
to the Administrative Agent, on behalf of itself, the Lenders and the Issuing
Bank a favorable written opinion of foreign local counsel with respect to
material Foreign Subsidiaries covering matters reasonably satisfactory to the
Administrative Agent.
SECTION 5.12. Interest Rate Protection. As promptly as practicable and in
any event within 90 days after the Closing Date, enter into, and for a period of
three years thereafter maintain at all times in full force and effect, Interest
Rate Protection Agreements at rates, in form and with parties reasonably
satisfactory to the Administrative Agent, the effect of which shall be to set at
fixed rates the interest cost to the Borrowers with respect to at least 50% of
the outstanding principal amount of the Term Loans.
SECTION 5.13. Assets of Holdings. (a) As promptly as practicable and in
any event within 30 days after the Closing Date, cause the Specified HFG Assets
to be contributed by Holdings to the Parent Borrower or a Subsidiary so that,
after giving effect to such contribution and any Intercompany Indebtedness owed
by Holdings to the Parent Borrower, the stockholders' equity of Holdings (on an
unconsolidated basis) shall be less than $5,000,000.
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(b) Holdings shall, from time to time commencing with the 30th day
following the Closing Date, upon the reasonable request of the Administrative
Agent, contribute additional assets of Holdings to the Parent Borrower or a
Subsidiary so that, after giving effect to such contribution and any
Intercompany Indebtedness owed by Holdings to the Parent Borrower, the
stockholders' equity of Holdings (on an unconsolidated basis) shall be less than
$5,000,000.
SECTION 5.14. Certificates of Occupancy, Permits and Zoning. (a) After the
Closing Date, each of Holdings, the Borrowers or any of the Subsidiaries shall
use reasonable efforts to obtain (and promptly upon obtaining the same shall
deliver to the Collateral Agent) the following:
(i)(A) a copy of the original permanent certificate or temporary
certificate of occupancy as the same may have been amended or issued from
time to time, covering each Improvement located upon the Mortgaged
Properties, that were required to have been issued by the appropriate
Governmental Authority for such Improvement, or (B) a letter from an
appropriate Governmental Authority stating that at the time of
construction or completion certificates of occupancy were not required for
each such Improvement for which a certificate as described above has not
been delivered and, if reasonably requested by the Administrative Agent or
the Collateral Agent, suitable evidence of the date of construction of
each Improvement on such Mortgaged Property; and
(ii) one of the following: (A) written confirmation from the
applicable zoning commission or other appropriate Governmental Authority
stating that with respect to each Mortgaged Property as built it complies
with existing land use and zoning ordinances, regulations and restrictions
to such Mortgaged Property, (B) an opinion from local counsel reasonably
acceptable to the Administrative Agent to the same effect as covered by
clause (i)(A) above or (C) a zoning endorsement reasonably satisfactory to
the Administrative Agent in connection with the Collateral Agent's
mortgage title insurance policy of such Mortgaged Property.
(b) In furtherance of, but without limiting, the obligations under
paragraph (a) above, Holdings, the Borrowers or any Subsidiaries, as applicable,
shall obtain (and promptly upon obtaining the same shall deliver to the
Collateral Agent) on at least 80% of the total number of Mortgaged Properties
all items required to be delivered pursuant to paragraphs (a)(i) and (ii) above
within one year after the Closing Date.
(c) Within 45 days after the Closing Date, each of Holdings, the Borrowers
or any of the Subsidiaries shall furnish the Collateral Agent with an as-built
survey for each Mortgaged Property that is certified to the Collateral Agent.
SECTION 5.15. Subsidiaries. In the event that any of Dixie Furniture
Company, Incorporated, Henry Link Corporation, Link-Taylor Corporation or
Young-Hinkle Corporation (i) acquires or otherwise obtains any assets (other
than rights associated with each such company's name) in excess of $5,000, (ii)
hires or otherwise retains any employees or (iii) conducts any business, then
such company shall become a Subsidiary Guarantor in accordance with Section 5.11
as if such company is a subsequently acquired or organized Domestic Subsidiary.
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ARTICLE VI
Negative Covenants
Each of Holdings and the Borrowers covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been cancelled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, neither Holdings nor the Borrowers
will, nor will they cause or permit any of the Subsidiaries (other than the
Receivables Subsidiary and the Master Servicer, except in the case of Section
6.14) to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness existing on the date hereof and set forth on
Schedule 6.01;
(b) Indebtedness created hereunder and under the other Loan
Documents;
(c) in the case of Holdings, the Masco Notes and the Debentures;
(d) (i) in the case of the Parent Borrower, the Subordinated Notes
and (ii) in the case of the Subsidiary Guarantors, the Guarantees
guaranteeing the Subordinated Notes;
(e) Permitted Foreign Indebtedness in an aggregate principal amount
at any time outstanding not to exceed $75,000,000 (less, without
duplication, the aggregate amount of Indebtedness of Foreign Subsidiaries
pursuant to Section 6.01(n) outstanding at such time and the aggregate
outstanding amount of Permitted Foreign Investments made pursuant to
Section 6.04(j));
(f) intercompany loans and letters of credit and guarantees in
support of Indebtedness and advances permitted by Section 6.04(b), (i),
(j) and (l);
(g) Indebtedness consisting of purchase money Indebtedness
(including purchase money Indebtedness that is in existence with respect
to any asset or other property at the time such asset or other property is
acquired), industrial revenue bonds or Capital Lease Obligations incurred
in the ordinary course of business after the Closing Date to finance
Capital Expenditures, provided that (i) the Indebtedness incurred shall
not exceed the purchase price of the assets financed thereby and (ii) the
aggregate principal amount of any Indebtedness or Capital Lease
Obligations incurred pursuant to this paragraph (g) outstanding at any
time shall not exceed $25,000,000;
(h) Indebtedness of the Borrowers pursuant to Exchange Rate
Protection Agreements and Interest Rate Protection Agreements, in the case
of Interest Rate Protection Agreements in form and with parties reasonably
satisfactory to the Administrative Agent;
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(i) Indebtedness of Holdings, the Parent Borrower and the
Subsidiaries owed to (including obligations in respect of letters of
credit for the benefit of) any person providing worker's compensation,
health, disability or other employee benefits or property, casualty or
liability insurance to Holdings, the Parent Borrower or any Subsidiary,
pursuant to reimbursement or indemnification obligations to such person,
in each case incurred in the ordinary course of business;
(j) Indebtedness of Holdings, the Parent Borrower or any Subsidiary
in respect of performance bonds, bid bonds, appeal bonds, surety bonds and
similar obligations and trade related letters of credit, in each case
provided in the ordinary course of business, including those incurred to
secure health, safety and environmental obligations in the ordinary course
of business;
(k) Indebtedness in a principal amount not to exceed $10,000,000,
provided that the proceeds from such Indebtedness shall be used to build,
purchase or equip a manufacturing facility for the Berkline Corporation;
(l) Indebtedness issued by Holdings or the Parent Borrower, in lieu
of the payment of cash, in connection with the purchase or redemption of
Capital Stock held by officers or employees of Holdings, the Parent
Borrower or any Subsidiary, subject to the proviso in Section 6.06(a)(iv);
(m) Indebtedness incurred pursuant to any Permitted Receivables
Financing or any factoring arrangements permitted under Section 6.05(d);
(n) Indebtedness not in excess of $15,000,000, which Indebtedness is
guaranteed by Masco, or with respect to which Masco has provided credit
support, in either case pursuant to the terms of the Acquisition Agreement
(the "Masco Guarantees");
(o) Indebtedness incurred pursuant to any sale and lease-back
transaction permitted by Section 6.03;
(p) unsecured Indebtedness in addition to that permitted by clauses
(a) through (o) above in an aggregate principal amount not to exceed
$20,000,000 at any time outstanding, so long as such Indebtedness is
created under agreements or instruments imposing covenants on the Parent
Borrower and the Subsidiaries no more restrictive than the covenants
imposed under this Agreement; and
(q) extensions, renewals or refinancings of Indebtedness under
paragraphs (a), (g) (subject to the proviso contained in such clause (g))
and (k) so long as (A) such Indebtedness ("Refinancing Indebtedness") is
in an aggregate principal amount not greater than the aggregate principal
amount of the Indebtedness being extended, renewed or refinanced plus the
amount of any premiums required to be paid thereon and fees and expenses
associated therewith, (B) such Refinancing Indebtedness has a later or
equal final maturity and a longer or equal weighted average life than the
Indebtedness being extended, renewed or refinanced, (C) the interest rate
applicable to such Refinancing Indebtedness is a market interest rate (as
determined in good
75
faith by the Board of Directors of the Parent Borrower) as of the time of
such extension, renewal or refinancing, (D) if the Indebtedness being
extended, renewed or refinanced is subordinated to the Obligations, such
Refinancing Indebtedness is subordinated to the Obligations to the same
extent as the Indebtedness being extended, renewed or refinanced and (E)
at the time and after giving effect to such extension, renewal or
refinancing, no Default or Event of Default shall have occurred and be
continuing;
provided, however, that the aggregate principal amount of Indebtedness incurred
by Holdings pursuant to this Section 6.01 (other than pursuant to clauses (a)
(and Refinancing Indebtedness in respect thereof), (b), (c), (i), (j), (l) or
(m) above or any intercompany loan) shall not exceed $5,000,000 in the aggregate
at any time outstanding.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of Holdings, the Parent Borrower and
the Subsidiaries existing on the date hereof and set forth on Schedule
6.02(a), provided that such Liens shall secure only those obligations
which they secure on the date hereof (and extensions, renewals and
refinancings of such obligations permitted by Section 6.01);
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by Holdings, the Parent Borrower or any Subsidiary,
provided that (i) such Lien is not created in contemplation of or in
connection with such acquisition, (ii) such Lien does not apply to any
other property or assets of Holdings, any Borrower or any Subsidiary and
(iii) such Lien does not (A) materially interfere with the use, occupancy
and operation of any Mortgaged Property, (B) materially reduce the fair
market value of such Mortgaged Property but for such Lien or (C) result in
any material increase in the cost of operating, occupying or owning or
leasing such Mortgaged Property;
(d) Liens for taxes, assessments, governmental charges and levies
not yet due or which are being contested or are unpaid in compliance with
Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens arising in the ordinary course of
business and securing obligations that are not due and payable or which
are being contested in compliance with Section 5.03;
(f) Liens of landlords or of mortgagees of landlords arising by
operation of law, provided that the (A) rental payments secured thereby
are not yet due and payable and (B) the Borrowers use reasonable efforts
to obtain a consent from such landlord, in which such landlord or
mortgagee acknowledges the Collateral Agent's first priority security
interest in the Inventory (as defined in the Security Documents) pledged
by each Loan Party to the Collateral Agent and agrees to provide the
Collateral Agent with access to the premises covered by such lease in
order to enforce such security interest;
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(g) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security or similar laws or regulations;
(h) pledges and deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital Lease
Obligations), statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
(i) zoning restrictions, easements, rights-of-way, minor defects or
irregularities in title, restrictions on use of real property and other
similar encumbrances which, in the aggregate, do not materially detract
from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of Holdings, the Parent Borrower
or the Subsidiaries;
(j) purchase money security interests in real property, improvements
thereto or equipment hereafter acquired (or, in the case of improvements,
constructed) by Holdings, any Borrower or any Subsidiary, provided that
(i) such security interests secure Indebtedness permitted by Section
6.01(g), (ii) such security interests are incurred, and the Indebtedness
secured thereby is created, within 120 days after such acquisition (or
construction) or are incurred to extend, renew or refinance such security
interests and Indebtedness incurred within such 120-day period, (iii) the
Indebtedness secured thereby does not exceed the lesser of the cost or the
fair market value of such real property, improvements or equipment at the
time of such acquisition (or construction) and (iv) such security
interests do not apply to any other property or assets of Holdings, any
Borrower or any Subsidiary;
(k) attachment or judgment Liens securing judgments, unless the
aggregate amount of such judgments shall (A) exceed $7,500,000 (except to
the extent the Administrative Agent shall have received satisfactory
evidence that such judgments are covered by insurance) and (B) remain
undischarged for a period of more than 30 consecutive days during which
execution shall not be effectively stayed;
(l) Liens to secure Capital Lease Obligations, industrial revenue
bonds or Indebtedness permitted by Sections 6.01(g) or (k), provided that
such Liens (i) do not extend to any property or assets of Holdings, the
Parent Borrower or any Subsidiary other than the property or assets
financed thereby and (ii) do not interfere with the business of Holdings,
the Parent Borrower and the Subsidiaries in any material respect;
(m) rights of first offer or refusal relating to interests in joint
ventures;
(n) UCC filings that relate to the preservation of claims in respect
of interests in property subject to operating leases (it being agreed that
the permissiveness of such filing hereunder shall not be considered a
waiver of any claim that the Lenders or the Collateral Agent may have on
the property to which such interest relates);
(o) in the case of any Foreign Subsidiary, Liens securing any
Permitted Foreign Indebtedness permitted by Section 6.01(e);
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(p) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods in the ordinary course of business;
(q) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
Holdings, the Parent Borrower or any of the Subsidiaries in the ordinary
course of business;
(r) Liens on accounts receivables financed in connection with any
Permitted Receivables Financing or factoring arrangement permitted by
Section 6.05; and
(s) pledges of any Capital Stock of Simmons.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred, provided that the Parent
Borrower and the Subsidiaries may enter into any such transaction (i) to the
extent that the Capital Lease Obligation and Liens associated therewith would be
permitted by Sections 6.01(g) and 6.02(l) or (ii) whereby Holdings shall
transfer assets to the Parent Borrower or a Subsidiary as contemplated by
Section 5.13 and Holdings shall thereafter rent or lease such assets from the
Parent Borrower or a Subsidiary.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire
any Capital Stock, evidences of Indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments by Holdings existing on the Closing Date in the
Capital Stock of the Parent Borrower and Simmons;
(b) investments, loans or advances made by (i) the Parent Borrower
in or to Holdings, (A) to pay the fees and expenses payable pursuant to
the Management Agreement (including all amounts due under the Transition
Services Agreement), (B) to the extent necessary to enable Holdings to
make payments consisting of indemnification obligations, guarantee fees
and reimbursement of amounts expended by Masco for the benefit of the
Parent Borrower and the Subsidiaries required to be made pursuant to the
Acquisition Agreement, (C) to pay interest on the Masco Notes to the
extent permitted by Section 6.08(b)(iv)(B) and (D) to the extent necessary
to cover any operating expenses of Holdings or (ii) Holdings, any Borrower
or any Subsidiary in or to any Borrower or any Subsidiary Guarantor;
provided, however, that any such loans or advances in excess of $200,000
shall (x) in the event that such loan or advance is made by Holdings or a
Subsidiary Guarantor, be evidenced by a note, substantially in the form of
Exhibit N, that shall be pledged to the Collateral Agent for the benefit
of the Secured Parties pursuant to the Pledge Agreement and (y) in the
event that such loan or advance is made by a Subsidiary (other than a Loan
Party), be subordinated to the prior payment in full of the Obligations as
evidenced by a note substantially in the form of Exhibit N;
78
(c) Permitted Investments;
(d) investments by Holdings, any Borrower or any Subsidiary in (i)
the Capital Stock of the Receivables Subsidiary or any Master Servicer and
(ii) other interests in the Receivables Subsidiary, in each case to the
extent necessary in connection with or required by the terms of the
Permitted Receivables Financing;
(e) investments consisting of non-cash consideration received in
connection with a sale of assets permitted by Section 6.05;
(f) investments arising from transactions by any Loan Party or any
of the Subsidiaries with customers or suppliers (including Affiliates to
the extent permitted by Section 6.07) in the ordinary course of business,
including endorsements of negotiable instruments and debt obligations and
other investments received in connection with the bankruptcy or
reorganization of customers and suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers, arising
in the ordinary course of business, and in the exercise of the reasonable
business judgment of such Borrower or such Subsidiary;
(g) advances to employees made to cover payroll, travel and similar
expenses that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP and that are made in the
ordinary course of business, provided that in the event it is determined
that any item with respect to which any such advance is made will not be
treated as such an expense, this clause (g) shall be inapplicable with
respect to such advances;
(h) loans or advances to employees made in the ordinary course of
business not exceeding $5,000,000 in the aggregate outstanding at any
time;
(i) investments, loans or advances made by any Foreign Subsidiary in
or to any other Foreign Subsidiary;
(j) Permitted Foreign Investments not to exceed $75,000,000 at any
time outstanding (less, without duplication, the aggregate outstanding
principal amount of Permitted Foreign Indebtedness and the aggregate
amount of Indebtedness of Foreign Subsidiaries pursuant to Section 6.01(n)
outstanding at such time);
(k) Capital Expenditures and other purchases permitted hereunder;
(l) investments, loans and advances existing on the date hereof and
as set forth on Schedule 6.04(l) and renewals, replacements and extensions
thereof, provided that (i) the amount of any such renewed, replaced or
extended investment, loan or advance shall be for an amount no greater
than the amount of the investment, loan or advance being renewed or
extended and (ii) any such loan or advance in excess of $200,000 shall be
evidenced by a note pledged to the Collateral Agent for the benefit of the
Lenders to the extent required under the Pledge Agreement;
79
(m) investments, loans and advances in or to customers and dealers
in the ordinary course of business (including investments, loans and
advances existing on the date hereof and set forth on Schedule 6.04(m))
not exceeding in the aggregate $60,000,000 at any time outstanding;
(n) investments, loans and advances in or to suppliers in the
ordinary course of business (including investments, loans and advances
existing on the date hereof and set forth on Schedule 6.04(n)) not
exceeding in the aggregate $20,000,000 at any time outstanding;
(o) investments, loans and advances in or to Joint Ventures not
exceeding in the aggregate $35,000,000 at any time outstanding, provided
that investments in equity of Joint Ventures permitted pursuant to this
clause (o) shall not exceed in the aggregate $15,000,000 at any time
outstanding;
(p) investments, loans and advances in or to a Foreign Subsidiary
originally arising from dividend receivables owed by such Foreign
Subsidiary or any other Foreign Subsidiary (whether or not thereafter
reclassified from a loan or an advance to an investment or vice versa),
provided that there shall be no net increase in the aggregate amount of
cash investments, cash loans and cash advances to Foreign Subsidiaries as
a result of any investments, loans and advances permitted pursuant to this
Section 6.04(p); and
(q) investments, loans or advances in addition to those permitted by
clauses (a) through (p) above not exceeding in the aggregate $15,000,000
at any time outstanding.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any of its assets
(whether now owned or hereafter acquired) or any Capital Stock of the Parent
Borrower or any Subsidiary, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or any of the assets of any other
person, except that:
(a) Holdings, any Borrower and any Subsidiary may purchase and sell
inventory and Permitted Investments and purchase and sell obsolete or worn
out assets and scrap in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be
continuing, (i) any wholly owned Subsidiary may merge into the Parent
Borrower in a transaction in which the Parent Borrower is the surviving
corporation, (ii) any wholly owned Subsidiary may merge into or
consolidate with any other wholly owned Domestic Subsidiary in a
transaction in which the surviving entity is a wholly owned Domestic
Subsidiary; (iii) any 90%-Owned Foreign Subsidiary may merge into any
other 90%-Owned Foreign Subsidiary in a transaction in which the surviving
entity is a 90%-Owned Foreign Subsidiary and no person other than the
Parent Borrower, a wholly owned Domestic Subsidiary or a 90%-Owned Foreign
Subsidiary receives any consideration other than interests in the
surviving entity to any applicable minority interest holder not exceeding
the proportionate interests of such minority interest holder in the
applicable
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Subsidiary and (iv) any direct wholly owned subsidiary of any Foreign
Subsidiary may merge into such Foreign Subsidiary or into another direct
wholly owned subsidiary of such Foreign Subsidiary so long as no person
other than such Foreign Subsidiary receives any consideration;
(c) (i) any Loan Party or any Subsidiary may sell, transfer, lease
or otherwise dispose of any of its assets to any Borrower or any
Subsidiary Guarantor, (ii) any 90%-Owned Foreign Subsidiary may sell,
transfer, lease or otherwise dispose of any of its assets to any 90%-Owned
Foreign Subsidiary and (iii) any direct wholly owned subsidiary of any
Foreign Subsidiary may sell, transfer, lease or otherwise dispose of any
of its assets to such Foreign Subsidiary or another wholly owned
subsidiary of such Foreign Subsidiary;
(d) (i) Holdings, any Borrower or any Subsidiary may sell accounts
receivable and related assets to the Receivables Subsidiary pursuant to
any Permitted Receivables Financing or (ii) to the extent not included in
clause (i), Sunbury may sell accounts receivable pursuant to factoring
arrangements entered into in the ordinary course of business in an
aggregate amount not to exceed $20,000,000 at any time outstanding;
(e) any sale and lease-back transaction permitted by Section 6.03
may be effected;
(f) any Loan Party or any Subsidiary may sell any assets in the
ordinary course of business, provided that (i) the aggregate fair market
value of all such assets sold pursuant to this clause (f) shall not exceed
$10,000,000 in any fiscal year and (ii) within 180 days after any such
asset sale, such Loan Party or Subsidiary shall apply the Net Cash
Proceeds thereof to purchase assets used in the business of such Loan
Party or Subsidiary or to make an investment in another Loan Party that
within such 180-day period uses the proceeds of such investment to
purchase assets used in the business of such other Loan Party;
(g) any Loan Party or any Subsidiary may sell any other assets or
the Capital Stock of any Subsidiary, provided that (i) in the case of a
sale of Capital Stock of a Domestic Subsidiary, such sale shall be of all
the Capital Stock of such Subsidiary, (ii) the aggregate fair market value
of all such assets and Capital Stock sold pursuant to this clause (g)
shall not exceed in the aggregate $150,000,000 at any time, (iii) the Net
Cash Proceeds of such sale shall be applied to prepay outstanding Term
Loans to the extent required by Section 2.13(b), (iv) in the case of a
sale of all the Capital Stock of any Subsidiary Borrower, no Loans or
Letters of Credit shall be outstanding with respect to such person and (v)
at the time of, and immediately after giving effect to, such sale, no
Default or Event of Default shall have occurred and be continuing;
(h) any Loan Party or any Subsidiary may lease or sublease
properties in which it has interests or lease any other property in the
ordinary course of business;
(i) any Loan Party or any Subsidiary may make acquisitions
constituting Capital Expenditures permitted hereunder; provided, however,
that if such acquisition consists of all or substantially all the assets
or Capital Stock of any person or a division or a line of business of such
person, the Parent Borrower shall be in compliance, on a pro forma basis
after giving effect to such acquisition, with the covenants contained in
Sections 6.09, 6.10, 6.11 and 6.12
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recomputed as at the last day of the most recently ended fiscal quarter of
the Parent Borrower as if such acquisition had occurred on the first day
of each relevant period for testing such compliance, and the Parent
Borrower shall have delivered to the Administrative Agent and the Lenders
an officers' certificate to such effect, together with all relevant
financial information for such person or assets;
(j) the Parent Borrower or any Subsidiary may acquire the interests
not owned by the Parent Borrower, directly or indirectly, in an entity
that is a Subsidiary or otherwise is jointly owned by the Parent Borrower,
directly or indirectly, and a third party or parties at the time of such
acquisition, provided that (i) the consideration for such acquisition
shall be no greater than the fair market value of such interests (as
determined in good faith by the board of directors of the Parent
Borrower), (ii) upon such acquisition, to the extent applicable, such
entity shall become a Subsidiary and the Borrowers shall comply with
Section 5.11 with respect to such Subsidiary and (iii) the aggregate
consideration paid by Holdings, the Parent Borrower and the Subsidiaries
in connection with all such acquisitions pursuant to this clause (j) shall
not exceed an aggregate of $10,000,000 during the term of this Agreement;
(k) a Foreign Subsidiary may issue (i) any director qualifying
shares and (ii) its Capital Stock (A) to the extent it is required to do
so pursuant to local ownership laws in the applicable foreign country and
(B) to the management of such Foreign Subsidiary under any employee stock
option, stock purchase, stock grant or other similar incentive or employee
benefit plan in existence from time to time; and
(l) Holdings may sell, transfer or otherwise dispose of (including
by means of a dividend) the Capital Stock or assets of Simmons;
provided, however, that any sale, transfer or other disposition of assets or
stock otherwise permitted by this Section 6.05 (other than pursuant to clauses
(a), (b), (c), (d) and (l) above) shall not be permitted unless (A) such sale,
transfer or other disposition is for consideration at least 80% (or 100% in the
case of lease payments) of which is cash and (B) such consideration is at least
equal to the fair market value of the assets sold, transferred or disposed of
(as determined in good faith by the board of directors of the Parent Borrower)
and provided, further that for purposes of the immediately preceding proviso,
(i) any proceeds from such sale used to pay the outstanding principal amount of,
premium or penalty, if any, interest and other amounts on any Indebtedness
required to be repaid under the terms thereof or by applicable law as a result
of such sale, transfer or other disposition and (ii) in the case of a sale of a
distinct business unit that is structured as a sale of assets, the assumption of
liabilities (other than Indebtedness) of such business unit by the purchaser
thereof shall, in each case, be deemed cash.
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, with respect to
any shares of its Capital Stock or directly or indirectly redeem, purchase,
retire or otherwise acquire for value (or permit any Subsidiary to purchase or
acquire for value) any shares of any class of its Capital Stock or set aside any
amount for any such purpose; provided, however, that:
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(i) any Subsidiary may declare and pay dividends to, repurchase its
Capital Stock from, or make other distributions to, the Parent Borrower or
any wholly owned Subsidiary (or, in the case of non-wholly owned
Subsidiaries, to or from the Parent Borrower or any Subsidiary and each
other owner of Capital Stock of such Subsidiary on a pro rata basis (or
more favorable basis from the perspective of the Parent Borrower or such
Subsidiary) based on their relative ownership interests);
(ii) Holdings may declare and pay (A) dividends solely in shares of
Capital Stock (other than Disqualified Stock) of Holdings and may exchange
any shares of its Capital Stock for other shares of its Capital Stock or
(B) in connection with a disposition described in Section 6.05(l),
dividends consisting of either shares of Capital Stock or assets of
Simmons or the proceeds from the sale of assets or Capital Stock of
Simmons;
(iii) the Parent Borrower may declare and pay dividends or make
other distributions to Holdings to the same extent that the Parent
Borrower may loan or advance funds to Holdings pursuant to Section
6.04(b);
(iv) (A) the Parent Borrower or Holdings or a Foreign Subsidiary may
purchase or redeem, and Holdings or the Parent Borrower may make payments
of principal and interest on Indebtedness issued pursuant to Section
6.01(l) to purchase or redeem, shares of Capital Stock (or options or
warrants in respect of such shares) of Holdings, the Parent Borrower, or
any Subsidiary (including related stock appreciation rights or similar
securities) held by any current or former officer or employee of Holdings,
the Parent Borrower or any Subsidiary (or spouses or descendants of such
person or trusts or partnerships the beneficiaries of which are such
person, the spouse of such person or descendants of such person) upon such
person's death, disability, retirement or termination of employment or
under the terms of any agreement under which such shares of stock or
related rights or similar securities were issued and (B) the Parent
Borrower may declare and pay dividends or make other distributions to
Holdings the proceeds of which are to be used by Holdings pursuant to
clause (A), provided that the aggregate amount of cash purchases, cash
redemptions or other cash payments (without duplication) that may be made
pursuant to this paragraph (iv) (net of purchases of stock by such
officers or employees) shall not exceed $5,000,000 in any fiscal year;
(v) Holdings may redeem any of its Class D Common Stock with
consideration derived from or arising from Simmons or from the proceeds of
sales or issuances of such Class D Common Stock;
(vi) at any time during the period from the Closing Date through 270
days after the Closing Date, Holdings may redeem, purchase or otherwise
acquire for value shares of its Capital Stock pursuant to the terms of the
Call Agreement dated as of the date hereof between Holdings and 399
Venture Partners; and
(vii) Holdings shall be permitted to issue Debentures to any person
in exchange for shares of Series A Preferred Stock of Holdings in
accordance with the articles of incorporation of Holdings if (A) no Change
in Control would occur if (and assuming that), immediately after giving
effect to such exchange, such person were to transfer all Debentures then
held by such
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person to an unaffiliated third party or (B) at the time of and
immediately after giving effect to such exchange, (I) the ratio of (x)
Consolidated EBITDA minus Capital Expenditures for the period of four
consecutive fiscal quarters last ended prior such date to (y) Consolidated
Interest Expense for such four-fiscal-quarter period, shall be greater
than or equal to 2.50 to 1.00 and (II) the Total Debt Ratio as of the end
of such four-fiscal quarter period shall be less than or equal to 3.10 to
1.00, provided in each case that no Default or Event of Default shall have
occurred and be continuing.
(b) Permit its subsidiaries (other than the Receivables Subsidiary, the
Master Servicer and Simmons) to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any such subsidiary to (i) pay any dividends or make any other
distributions on its Capital Stock or any other equity interest or (ii) make or
repay any loans or advances to the Parent Borrower or the parent of such
subsidiary (subclauses (i) and (ii) are collectively referred to as an "Upstream
Payment") other than encumbrances and restrictions:
(A) pursuant to the Loan Documents;
(B) existing under, or by reason of, applicable law;
(C) contained in any debt instrument relating to (i) a person acquired
after the date hereof, provided that (x) such instrument was in
existence at the time of such acquisition and was not created in
contemplation of or in connection with such acquisition, (y) the
officers of the Parent Borrower reasonably believe at the time of
such acquisition that the terms of such instrument will not encumber
or restrict the ability of such acquired person to make an Upstream
Payment and (z) such instrument contains no express encumbrances or
restrictions on the ability of such acquired person to make an
Upstream Payment and (ii) industrial revenue bonds permitted under
Section 6.01(g) or Indebtedness permitted under Section 6.01(k),
provided that such instrument contains no express encumbrances or
restrictions on the ability of the applicable obligor thereon to
make an Upstream Payment;
(D) contained in or required by Permitted Foreign Indebtedness; and
(E) contained in agreements for Asset Sales permitted under Section 6.05.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any property
or assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except that
Holdings, any Borrower or any Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to Holdings, such Borrower or such Subsidiary than
could be obtained on an arm's-length basis from unrelated third parties;
provided, however, that the foregoing restriction shall not apply to (i) any
transactions expressly permitted by this Agreement, including those permitted by
Section 6.06 and any Permitted Receivables Financing, (ii) transactions among
Foreign Subsidiaries, (iii) transactions pursuant to agreements entered into or
in effect on the Closing Date and set forth on Schedule 6.07, including
amendments thereto entered into after the Closing Date, provided that the terms
of any such amendment are not, in the aggregate, less favorable to the Lenders
than the terms of such agreement prior to such amendment, (iv) any transactions
among the Loan Parties and
84
(v) transactions with Affiliates of Citicorp conducted in the normal course of
such Affiliates' banking business.
SECTION 6.08. Other Indebtedness and Agreements. (a) (i) Make any
distribution, whether in cash, property, securities or a combination thereof,
other than scheduled payments of principal and interest as and when due (to the
extent not prohibited by applicable subordination provisions), in respect of, or
pay, or offer or commit to pay, or directly or indirectly redeem, repurchase,
retire or otherwise acquire for consideration, or set apart any sum for the
aforesaid purposes, any of the Masco Notes, the Subordinated Notes, the
Debentures or any other Indebtedness for borrowed money (other than Intercompany
Indebtedness, Indebtedness under the Loan Documents and Indebtedness incurred
pursuant to Section 6.01(a), (e), (g), (h), (i), (j), (k), (m), (n), (o) or (p)
or any Refinancing Indebtedness in respect thereof) of any Loan Party or any
Subsidiary, (ii) make any payment or prepayment of any such Indebtedness that
would violate the terms of this Agreement or of such Indebtedness, any agreement
or document evidencing, related to or securing the payment or performance of
such Indebtedness or any subordination agreement or provision applicable to such
Indebtedness or (iii) pay in cash any amount in respect of such Indebtedness
that may at the applicable Loan Party's or Subsidiary's option be paid in kind
thereunder.
(b) Notwithstanding anything contained in this Section 6.08 to the
contrary,
(i) Holdings, the Parent Borrower and the Subsidiaries shall be
permitted to refinance any Indebtedness to the extent permitted by Section
6.01;
(ii) the Parent Borrower shall be permitted to exchange the
Subordinated Notes for substantially identical notes in accordance with
the exchange agreement relating to the Subordinated Notes;
(iii) Holdings shall be permitted to exchange the Masco Notes for
substantially identical notes in accordance with the Registration Rights
Agreement dated as of the Closing Date, between Holdings and Masco,
subject to the transfer restrictions set forth in the Masco Notes;
(iv) (A) prior to the fifth anniversary of the Closing Date, Holdings
shall be permitted to pay interest on the Masco Notes solely in the form
of additional Masco Notes and (B) following the fifth anniversary of the
Closing Date, but not less than 15 days after the Parent Borrower has
delivered the financial statements pursuant to Section 5.04(a) for the
fiscal year ending immediately prior to such fifth anniversary of the
Closing Date and for each fiscal year thereafter, Holdings shall be
permitted to pay cash interest on the Masco Notes (and the Parent Borrower
shall be permitted to pay dividends to Holdings to fund the payment of
such interest) in an amount equal to the portion of Excess Cash Flow for
such applicable fiscal year that (x) is not required to be used to prepay
outstanding Term Loans pursuant to Section 2.13(d) and (y) has not
previously been used to prepay Indebtedness (excluding scheduled principal
payments) that cannot be redrawn or reborrowed or to make a Capital
Expenditure pursuant to Section 6.12(B) in any fiscal year, provided that
no deduction shall be required pursuant to this subclause (y) to the
extent the proceeds used for such prepayments or expenditures are derived
from casualty proceeds, condemnation awards, refinancings or equity
85
issuances permitted hereunder, and provided, further, in each case that no
Default or Event of Default shall have occurred and be continuing at the
time of such payment;
(v) Holdings shall be permitted to redeem all or part of the Masco
Notes with the portion of the Net Cash Proceeds of any public offering of
Capital Stock (other than Disqualified Stock) of Holdings that is not
required to be used to prepay outstanding Term Loans pursuant to Section
2.13(c), provided that no Default or Event of Default shall have occurred
and be continuing at the time of such redemption; and
(vi) Holdings shall be permitted to pay interest on the Debentures
solely in the form of additional Debentures in accordance with the terms
thereof.
(c) Permit any waiver, supplement, modification, amendment, termination or
release of any indenture, instrument or agreement governing the Debentures, the
Masco Notes or the Subordinated Notes (or any Indebtedness issued to refinance
such Indebtedness in accordance with this Agreement), to the extent that any
such waiver, supplement, modification, amendment, termination or release would
be adverse to the Lenders in any material respect.
(d) Permit any waiver, supplement, modification, amendment, termination or
release of (i) the certificate of incorporation or by-laws of Holdings, any
Borrower or any Subsidiary, (ii) the Acquisition Agreement, (iii) the
Stockholders' Agreement, (iv) the Management Agreement, (v) the Transition
Services Agreement or (vi) the Tax Sharing Agreement, in each case to the extent
that any such waiver, supplement, modification, amendment, termination or
release would be adverse to the
Lenders in any material respect.
SECTION 6.09. Interest Coverage Ratio. Permit the ratio (the "Interest
Coverage Ratio") of (i) Consolidated EBITDA to (ii) Consolidated Interest
Expenses (A) for the fiscal-quarter ending September 30, 1996, to be less than
2.00 to 1.00, (B) for the two-fiscal-quarter period ending December 31, 1996, to
be less than 2.00 to 1.00, (C) for the three-fiscal-quarter period ending March
31, 1997, to be less than 2.00 to 1.00 and (D) for any period of four
consecutive fiscal quarters ending on the last day of any fiscal quarter
included in any period set forth below to be less than the ratio set forth below
for such period:
From and Including: To and Including: Interest Coverage Ratio
- ------------------- ----------------- -----------------------
April 1, 1997 December 30, 1998 2.00 to 1.00
December 31, 1998 December 30, 1999 2.25 to 1.00
December 31, 1999 December 30, 2000 2.50 to 1.00
December 31, 2000 December 30, 2001 2.75 to 1.00
December 31, 2001 and thereafter 3.00 to 1.00
SECTION 6.10. Total Debt Ratio. Permit the ratio (the "Total Debt Ratio")
of (i) Total Debt as of the last day of any fiscal quarter included in any
period set forth below to (ii) Consolidated EBITDA for the period of four fiscal
quarters ending on such day, to be in excess of the ratio set forth below for
such period, provided that for purposes of calculating Consolidated EBITDA for
each of the
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four-fiscal-quarter periods ending September 30, 1996, December 31, 1996, and
March 31, 1997, Consolidated EBITDA for such four-fiscal-quarter period shall
equal Consolidated EBITDA for the period commencing on July 1, 1996, and ending
on (A) September 30, 1996, multiplied by 4, (B) December 31, 1996, multiplied by
2 and (C) March 31, 1997, multiplied by 4/3, as applicable:
From and Including: To and Including: Total Debt Ratio
- ------------------- ----------------- ----------------
July 1, 1996 December 30, 1998 5.00 to 1.00
December 31, 1998 December 30, 1999 4.50 to 1.00
December 31, 1999 and thereafter 4.00 to 1.00
SECTION 6.11. Net Worth. Permit Consolidated Net Worth at any time to be
less than the sum of (a) $300,000,000 and (b) 50% of Consolidated Net Income (if
positive) for the period (taken as a single accounting period) from the Closing
Date and ending on the last date of the quarter as to which compliance with this
Section 6.11 is being determined.
SECTION 6.12. Capital Expenditures. Incur Capital Expenditures in excess
of $50,000,000 in any fiscal year commencing with the fiscal year ending
December 31, 1996; provided, however, that the amount of permitted Capital
Expenditures in any fiscal year ending after December 31, 1997, shall be
increased by the total amount of (A) unused permitted Capital Expenditures for
the immediately preceding year (less an amount equal to any unused permitted
Capital Expenditures carried forward to such preceding year pursuant to this
proviso) and (B) cumulative Excess Cash Flow in all fiscal years, commencing
with the fiscal year ending December 31, 1997, that (x) is not required to be
used to prepay outstanding Term Loans pursuant to Section 2.13(d) and (y) has
not previously been used to prepay Indebtedness (excluding scheduled principal
payments) that cannot be redrawn or reborrowed, to pay interest on the Masco
Notes pursuant to Section 6.08(b)(iv) or to make a Capital Expenditure pursuant
to this clause (B) in any fiscal year, but no deduction shall be required
pursuant to this subclause (y) to the extent the proceeds used for such
prepayments or expenditures are derived from casualty proceeds, condemnation
awards, refinancings or equity issuances permitted hereunder); and provided,
further, that Holdings, the Parent Borrower and the Subsidiaries may incur, in
the aggregate, an additional $10,000,000 in each fiscal year commencing with the
fiscal year ending December 31, 1997, of Capital Expenditures in connection with
matters relating to compliance with any Environmental Law or cleanup of any
Hazardous Materials that is not in the ordinary course of business.
SECTION 6.13. Bank Accounts. Establish or maintain any bank account or
similar account with any financial institution that is not a Lender, other than
(a) the accounts specified in Section 2A of the Perfection Certificate, (b) any
deposit account used exclusively for the payment of payroll of any Loan Party or
any Subsidiary, (c) foreign accounts of any Foreign Subsidiary and (d) other
accounts with an aggregate balance of less than $3,000,000.
SECTION 6.14. Business of Holdings, Borrowers and Subsidiaries. Engage at
any time in any business or business activity other than (a) in the case of the
Parent Borrower and the Subsidiaries (other than the Receivables Subsidiary and
the Master Servicer), the business currently conducted by it and business
activities reasonably incidental thereto; (b) in the case of Holdings, (i) the
ownership of
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all the outstanding Capital Stock of the Parent Borrower and Simmons, together
with activities directly related thereto, (ii) the business currently conducted
by the Specified HFG Companies and business activities reasonably incidental
thereto, (iii) performance of its obligations under the Loan Documents, under
intercompany Indebtedness and under all agreements, Capital Stock and
Indebtedness contemplated by the Acquisition Agreement, (iv) actions required by
law to maintain its status as a corporation, (v) actions incidental to the
consummation of the Transactions and (vi) sale and servicing obligations under a
Permitted Receivables Financing; (c) in the case of the Receivables Subsidiary,
the purchase and sale of receivables (or participation interests therein) in
connection with any Permitted Receivables Financing, together with activities
directly related thereto; and (d) in the case of the Master Servicer, the
servicing obligations under the Permitted Receivables Financing, together with
activities related thereto.
SECTION 6.15. Fiscal Year. Change the end of its fiscal year from December
31 to any other date.
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made by a Loan Party
in or in connection with any Loan Document or the borrowings or issuances
of Letters of Credit hereunder, or any representation, warranty, statement
or information contained in any report, certificate, financial statement
or other instrument furnished in connection with or pursuant to any Loan
Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan
or the reimbursement with respect to any L/C Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or L/C Disbursement or any other amount (other than an amount
referred to in (b) above) due under any Loan Document, when and as the
same shall become due and payable, and such default shall continue
unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by
Holdings, any Borrower or any Subsidiary of any covenant, condition or
agreement contained in Section 5.01(a), 5.05, 5.08 or 5.13(a) or in
Article VI;
(e) default shall be made in the due observance or performance by
Holdings, any Borrower or any Subsidiary of any covenant, condition or
agreement contained in any Loan Document (other than those specified in
(b), (c) or (d) above) and such default shall continue
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unremedied for a period of 30 days after notice thereof from the
Administrative Agent or any Lender to the Borrowers;
(f) (i) Holdings, any Borrower or any Subsidiary shall (A) fail to pay
any principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $7,500,000, when and as
the same shall become due and payable, or (B) fail to observe or perform
any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any such Indebtedness if
the effect of any failure referred to in this clause (B) is to cause, or
to permit the holder or holders of such Indebtedness or a trustee on its
or their behalf (with or without the giving of notice, the lapse of time
or both) to cause, such Indebtedness to become due prior to its stated
maturity, or (ii) any default or other event shall have occurred under the
Receivables Sale Agreement, the Receivables Pooling Agreement or any other
document governing any Permitted Receivables Financing if the effect of
such default or other event is to cause, or to permit the holder or
holders of interests in the receivables purchased thereunder or a trustee
on its or their behalf (with or without the giving of notice, the lapse of
time or both) to cause, the termination of any Permitted Receivables
Financing;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary, or of a substantial part of the
property or assets of Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary, under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal, state
or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary or for a substantial part of the
property or assets of Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary or (iii) the winding-up or liquidation
of Holdings, any Borrower, any Domestic Subsidiary or any Significant
Foreign Subsidiary; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered;
(h) Holdings, any Borrower, any Domestic Subsidiary or any Significant
Foreign Subsidiary shall (i) voluntarily commence any proceeding or file
any petition seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal, state or
foreign bankruptcy, insolvency, receivership or similar law, (ii) consent
to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in (g)
above, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
Holdings, any Borrower, any Domestic Subsidiary or any Significant Foreign
Subsidiary or for a substantial part of the property or assets of
Holdings, any Borrower, any Domestic Subsidiary or any Significant Foreign
Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become
due or (vii) take any action for the purpose of effecting any of the
foregoing;
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(i) one or more judgments for the payment of money in an aggregate
amount in excess of $7,500,000, which amount is not covered by insurance
(provided that in the event such a judgment is covered by insurance, the
Administrative Agent is provided with satisfactory evidence that the
insurance provider will provide the coverage relating thereto) shall be
rendered against Holdings, any Borrower, any Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed,
or any action shall be legally taken by a judgment creditor to levy upon
assets or properties of Holdings, any Borrower or any Subsidiary to
enforce any such judgment;
(j) an ERISA Event shall have occurred that, in the reasonable opinion
of the Required Lenders, when taken together with all other such ERISA
Events, could reasonably be expected to result in liability of Holdings or
the Borrowers in an aggregate amount exceeding $5,000,000;
(k) any security interest purported to be created by any Security
Document and to extend to assets that are not immaterial to Holdings, the
Parent Borrower and the Subsidiaries shall cease to be, or shall be
asserted by any Borrower or any other Loan Party not to be, a valid,
perfected, first priority (except as otherwise expressly provided in this
Agreement or such Security Document) security interest in the securities,
assets or properties covered thereby, except to the extent that any such
loss of perfection or priority results from the failure of the Collateral
Agent to maintain possession of certificates representing securities
pledged under the Pledge Agreement and except to the extent that such loss
is covered by a lender's title insurance policy and the Administrative
Agent is provided with satisfactory evidence that related insurance
provider will provide the coverage relating thereto;
(l) any Loan Document shall not be for any reason, or shall be
asserted by any Loan Party not to be, in full force and effect and
enforceable in accordance with its terms; or
(m) there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to Holdings or
any Borrower described in paragraph (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent may
and, at the request of the Required Lenders shall, by written notice to the
Borrowers, take either or both of the following actions, at the same or
different times: (i) terminate forthwith the Commitments and (ii) declare the
Loans then outstanding to be forthwith due and payable in whole or in part,
whereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of Holdings and the Borrowers accrued hereunder and under any other
Loan Document, shall become forthwith due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by Holdings and the Borrowers, anything contained herein or in
any other Loan Document to the contrary notwithstanding; and in any event with
respect to Holdings or any of the Borrowers described in paragraph (g) or (h)
above, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of Holdings and the Borrowers accrued
hereunder and under any other Loan Document, shall automatically become due and
payable, without presentment, demand,
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protest or any other notice of any kind, all of which are hereby expressly
waived by Holdings and the Borrowers, anything contained herein or in any other
Loan Document to the contrary notwithstanding.
ARTICLE VIII
The Administrative Agent and the Collateral Agent
In order to expedite the transactions contemplated by this Agreement, The
Chase Manhattan Bank is hereby appointed to act as Administrative Agent and
Collateral Agent on behalf of the Lenders and the Issuing Bank (for purposes of
this Article VIII, the Administrative Agent and the Collateral Agent are
referred to collectively as the "Agents"). Each of the Lenders and each assignee
of any such Lender, hereby irrevocably authorizes the Agents to take such
actions on behalf of such Lender or assignee or the Issuing Bank and to exercise
such powers as are specifically delegated to the Agents by the terms and
provisions hereof and of the other Loan Documents, together with such actions
and powers as are reasonably incidental thereto. The Administrative Agent is
hereby expressly authorized by the Lenders and the Issuing Bank, without hereby
limiting any implied authority, (a) to receive on behalf of the Lenders and the
Issuing Bank all payments of principal of and interest on the Loans, all
payments in respect of L/C Disbursements and all other amounts due to the
Lenders hereunder (other than payments that are specifically required to be paid
directly to a Lender), and promptly to distribute to each Lender or the Issuing
Bank its proper share of each payment so received; (b) to give notice on behalf
of each of the Lenders to Holdings and the Borrowers of any Event of Default
specified in this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and other
materials delivered by Holdings, any Borrower or any other Loan Party pursuant
to this Agreement or the other Loan Documents as received by the Administrative
Agent. Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized to execute any and all documents (including releases) with
respect to the Collateral and the rights of the Secured Parties with respect
thereto, as contemplated by and in accordance with the provisions of this
Agreement and the Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrowers or any other Loan Party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall not be responsible
to the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents, instruments or
agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Agents nor any of their respective directors, officers,
employees or agents shall have any responsibility to the Borrowers or any other
Loan Party on account of the
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failure of or delay in performance or breach by any Lender or the Issuing Bank
of any of its obligations hereunder or to any Lender or the Issuing Bank on
account of the failure of or delay in performance or breach by any other Lender
or the Issuing Bank or the Borrowers or any other Loan Party of any of their
respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. Each of the Agents may execute any and all
duties hereunder by or through agents or employees and shall be entitled to rely
upon the advice of legal counsel selected by it with respect to all matters
arising hereunder and shall not be liable for any action taken or suffered in
good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrowers. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor, provided that such appointment shall require the consent
of the Borrowers (which consent shall not be unreasonably withheld), so long as
no Default or Event of Default shall have occurred and be continuing. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Agent gives notice
of its resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent which shall be a bank with an office in New York, New
York, having a combined capital and surplus of at least $500,000,000 or an
Affiliate of any such bank. Upon the acceptance of any appointment as Agent
hereunder by a successor bank, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After the Agent's resignation hereunder, the provisions of this Article and
Section 9.05 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with Holdings, any Borrower or any
Subsidiary or other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the amount
of its pro rata share (based on its Commitments hereunder, or if such
Commitments have expired or been terminated, based on its outstanding Loans) of
any expenses incurred for the benefit of the Lenders by the Agents, including
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Lenders, that are required to be but shall not have been
reimbursed by the Borrowers and (b) to indemnify and hold harmless each Agent
and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all liabilities, taxes,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against it in its capacity as Agent or any of them
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by it or any of them under this
Agreement or any other Loan Document, to the extent the same are required to be
but shall not have been reimbursed by the
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Borrowers or any other Loan Party, provided that no Lender shall be liable to an
Agent or any such other indemnified person for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements that is determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Agent or any of its directors, officers,
employees or agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agents or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement or any other Loan Document, any related agreement or any
document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrowers or Holdings, to it at 1300 National Highway,
Thomasville, North Carolina 27360, Attention of President (Telecopy
No.(910) 476-2656) with a copy to the Attention of General Counsel
(Telecopy No. (910) 476-4551) and Morgan, Lewis & Bockius LLP, Attention
of Gerald M. Freedman (Telecopy No. (212) 309-6273);
(b) if to the Administrative Agent or the Swingline Lender, to Chase
Manhattan Agency Services, Grand Central Tower, 140 East 45th Street, New
York, New York 10017, Attention of Ms. Janet Belden (Telecopy No. (212)
622-0002), with a copy to The Chase Manhattan Bank, at 270 Park Avenue,
New York 10017, Attention of Robert Kellas (Telecopy No. (212) 270-1403);
and
(c) if to a Lender, to it at its address (or telecopy number) set
forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or when
receipt is acknowledged if sent by telecopy or on the date five Business Days
after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 9.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 9.01.
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SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrowers or Holdings herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated. The provisions of Sections 2.14, 2.16, 2.20, 9.05 and
9.16 shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the expiration of the
Commitments, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Administrative Agent,
the Collateral Agent, any Lender or the Issuing Bank.
SECTION 9.03. Binding Effect. This Agreement shall become effective when
it shall have been executed by each of the Borrowers, Holdings and the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrowers, Holdings, the Administrative
Agent, the Issuing Bank or the Lenders that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment, the Loans at the time owing to it and participations
in Letters of Credit held by it (it being understood that Revolving Credit
Commitments, Revolving Loans, L/C Disbursements and participations in Letters of
Credit may only be assigned in pro rata amounts)); provided, however, that (i)
except in the case of an assignment to a Lender or an Affiliate of such Lender,
(A) the Parent Borrower (only so long as an Event of Default pursuant to clauses
(b), (c), (g) or (h) of Article VII shall not have occurred and be continuing)
and the Administrative Agent (and, in the case of any assignment of a Revolving
Credit Commitment, the Issuing Bank and the Swingline Lender) must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (B) the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 (or, if less, the entire remaining
amount of such Lender's Commitment) and (C) the assigning Lender's percentage
interest in the Revolving Loans shall be no different than such Lender's
percentage interest in the Tranche A Term Loans upon such assignment, (ii) the
parties to each such assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation
fee of $3,500 and (iii) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire. Upon acceptance and
recording pursuant
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to paragraph (e) of this Section 9.04, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement and (B) the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16,
2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Revolving Credit Commitment, and the outstanding balances of its Term Loans
and Revolving Loans, in each case without giving effect to assignments thereof
which have not become effective, are as set forth in such Assignment and
Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto, or the financial condition of
Holdings, any Borrower or any Subsidiary or the performance or observance by
Holdings, any Borrower or any Subsidiary of any of its obligations under this
Agreement, any other Loan Document or any other instrument or document furnished
pursuant hereto; (iii) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; (iv) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the most recent financial statements referred to in Section 3.05(a) or delivered
pursuant to Section 5.04 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent and the Collateral Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its offices in The
City of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amount of the Loans owing to, each Lender pursuant
to the terms hereof from time to time (the "Register"). The entries in the
Register shall be conclusive and Holdings, the Borrowers, the other Loan
Parties, the Administrative Agent, the Issuing Bank, the Collateral Agent and
the Lenders shall treat each person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
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Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by Holdings, the Borrowers, the other Loan Parties, the
Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Parent Borrower, the
Swingline Lender, the Issuing Bank and the Administrative Agent to such
assignment, the Administrative Agent shall (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Lenders, the Issuing Bank and the
Swingline Lender. No assignment shall be effective unless and until it has been
recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Parent Borrower, the
Swingline Lender, the Issuing Bank or the Administrative Agent sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participating banks or other entities shall be
entitled to the benefit of the cost protection provisions contained in Sections
2.14, 2.16 and 2.20 to the same extent as if they were Lenders, provided that no
such participating bank or entity shall be entitled to receive any greater
amount pursuant to such Sections than a Lender would have been entitled to
receive in respect of the amount of participation sold by such Lender to such
participating bank or entity had no sale occurred, and (iv) Holdings, the
Borrowers, the other Loan Parties, the Administrative Agent, the Issuing Bank
and the Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of Holdings
and the Borrowers relating to the Loans or L/C Disbursements and to approve any
amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable hereunder or
the amount of principal of or the rate at which interest is payable on the
Loans, extending any scheduled principal payment date or date fixed for the
payment of interest on the Loans, increasing or extending the Commitments or
releasing all or any substantial part of the Collateral (except as expressly
permitted by the Loan Documents)).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to Holdings or the Borrowers furnished to
such Lender by or on behalf of Holdings or the Borrowers, provided that, prior
to any such disclosure of information, each such assignee or participant or
proposed assignee or participant shall execute an agreement in the form of
Exhibit L.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank to secure extensions of credit by
such Federal Reserve Bank to such Lender, provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
Bank for such Lender as a party hereto. In order to facilitate such an
assignment to
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a Federal Reserve Bank, the Borrowers shall, at the request of the assigning
Lender, duly execute and deliver to the assigning Lender a promissory note or
notes, in form and substance reasonably satisfactory to the Borrowers,
evidencing the Loans made to the Borrowers by the assigning Lender hereunder.
(i) Neither Holdings nor any Borrower shall assign or delegate any of its
rights or duties hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender, and any attempted
assignment without such consent shall be null and void.
(j) In the event that S&P, Moody's and Thompson's BankWatch (or
InsuranceWatch Ratings Service, in the case of Lenders that are insurance
companies (or Best's Insurance Reports, if such insurance company is not rated
by Insurance Watch Ratings Service)) shall, after the date that any Lender
becomes a Revolving Credit Lender, downgrade the long-term certificate deposit
ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and
C (or BB, in the case of a Lender that is an insurance company (or B, in the
case of an insurance company not rated by InsuranceWatch Ratings Service)), then
the Issuing Bank shall have the right, but not the obligation, at its own
expense, upon notice to such Lender and the Administrative Agent, to replace (or
to request the Borrowers to use their reasonable efforts to replace) such Lender
with an assignee (in accordance with and subject to the restrictions contained
in paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) the Issuing Bank or such assignee, as the case
may be, shall pay to such Lender in immediately available funds on the date of
such assignment the principal of and interest accrued to the date of payment on
the Loans made by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Swingline Lender in connection with
the syndication of the credit facilities provided for herein and the preparation
and administration of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof or incurred by the Administrative Agent, the Collateral Agent
or any Lender in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or Letters of Credit issued hereunder, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Administrative Agent and the Collateral Agent, and, in connection with
any such enforcement or protection, the reasonable fees, charges and
disbursements of any other counsel for the Administrative Agent, the Collateral
Agent or any Lender.
(b) The Borrowers agree, jointly and severally, to indemnify the
Administrative Agent, the Collateral Agent, each Lender and the Issuing Bank,
each Affiliate of any of the foregoing persons and each of their respective
directors, trustees, officers, employees and agents (each such person being
called an "Indemnitee") against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
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of (i) any claim, litigation, investigation or proceeding, whether or not any
Indemnitee is a party thereto, relating to the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder, the consummation of the Transactions and the other transactions
contemplated thereby or the use of the proceeds of the Loans or issuance of
Letters of Credit or (ii) any actual or alleged presence or Release of Hazardous
Materials on any property owned or operated by Holdings, the Borrowers or any of
the Subsidiaries, or any Environmental Claim related in any way to Holdings, the
Borrowers or the Subsidiaries; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the expiration of the Commitments, the expiration of any Letter of
Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Administrative Agent, the Collateral Agent, any Lender or the Issuing
Bank. All amounts due under this Section 9.05 shall be payable on written demand
therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of Holdings or any Borrower against any of and all the
obligations of Holdings or any Borrower now or hereafter existing under this
Agreement and other Loan Documents held by such Lender, irrespective of whether
or not such Lender shall have made any demand under this Agreement or such other
Loan Document and although such obligations may be unmatured. The rights of each
Lender under this Section 9.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in
exercising any power or right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a
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right or power, preclude any other or further exercise thereof or the exercise
of any other right or power. The rights and remedies of the Administrative
Agent, the Collateral Agent, the Issuing Bank and the Lenders hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
this Agreement or any other Loan Document or consent to any departure by any
Borrower or any other Loan Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on the Borrowers or Holdings in any case
shall entitle the Borrowers or Holdings to any other or further notice or demand
in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrowers, Holdings and the Required Lenders; provided, however,
that no such agreement (i) shall (A) decrease the principal amount of, or extend
the maturity of or any scheduled principal payment date or date for the payment
of any interest on, any Loan or any date for reimbursement of an L/C
Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement, without the prior
written consent of each Lender affected thereby, (B) increase or extend the
Commitment of any Lender or decrease or extend the date for payment of the
Commitment Fees of such Lender without the prior written consent of such Lender
or (C) amend or modify the provisions of Section 2.17 or 9.04(i), the provisions
of this Section, the definition of the term "Required Lenders" or release any
Guarantor or all or any substantial part of the Collateral (except, in each
case, as expressly permitted by the Loan Documents), without the prior written
consent of each Lender, (ii) shall amend, modify or otherwise affect the rights
or duties of the Administrative Agent, the Collateral Agent, the Issuing Bank or
the Swingline Lender hereunder or under any other Loan Document without the
prior written consent of the Administrative Agent, the Collateral Agent, the
Issuing Bank or the Swingline Lender, as the case may be, (iii) shall change the
allocation between Tranche A Term Loans and Tranche B Term Loans of any
prepayment pursuant to Section 2.12 or 2.13 without the prior written consent of
(A) Lenders holding Tranche A Term Loans representing more than 50% of the
aggregate outstanding principal amount of the Tranche A Term Loans and (B)
Lenders holding Tranche B Term Loans representing more than 50% of the aggregate
outstanding principal amount of the Tranche B Term Loans, (iv) shall decrease
the principal amount of, or extend the date for payment of, any prepayment of
(A) Tranche A Term Loans or (B) Tranche B Term Loans, in each case required
pursuant to Section 2.13 without the prior written consent of (A) Lenders
holding Tranche A Term Loans representing more than 50% of the aggregate
outstanding principal amount of the Tranche A Term Loans or (B) Lenders holding
Tranche B Term Loans representing more than 50% of the aggregate outstanding
principal amount of the Tranche B Term Loans, respectively, or (v) shall amend
Section 2.13(j) without the prior written consent of Lenders holding Tranche B
Term Loans representing more than 50% of the aggregate outstanding principal
amount of the Tranche B Term Loans.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest or loan charges on such Loan or
participation in such L/C Disbursement under applicable law (collectively the
"Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged, taken, received or reserved by the Lender holding
such Loan or participation in accordance with applicable law, the
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rate of interest payable in respect of such Loan or participation hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan or participation but were not payable as a
result of the operation of this Section 9.09 shall be cumulated and the interest
and Charges payable to such Lender in respect of other Loans or participations
or periods shall be increased (but not above the Maximum Rate therefor) until
such cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by such
Lender.
SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter, the other
Loan Documents and the confidentiality agreements previously signed by the
Lenders constitute the entire contract between the parties relative to the
subject matter hereof. Any other previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Loan Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 9.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
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SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of
Holdings and the Borrowers hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrowers, Holdings or their
respective properties in the courts of any jurisdiction.
(b) Each of Holdings and the Borrowers hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court sitting in New
York City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Confidentiality. The Administrative Agent, the Collateral
Agent, the Issuing Bank and each of the Lenders agrees to keep confidential and
not to publish, disclose or otherwise divulge (and to cause its respective
officers, directors, employees, agents and representatives to keep confidential
and not publish, disclose or otherwise divulge) the Information (as defined
below), except that the Administrative Agent, the Collateral Agent, the Issuing
Bank or any Lender shall be permitted to disclose Information (a) to such of its
respective officers, directors, employees, agents, affiliates and
representatives (including counsel) as need to know such Information (who will
be informed of the confidential nature of the Information), (b) to the extent
otherwise required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any regulatory authority (in any which
event notice thereof will be provided to the Parent Borrower and the applicable
party to the extent not prohibited by applicable law), (c) in connection with
any suit, action or proceeding relating to the enforcement of its rights
hereunder or under the other Loan Documents or (d) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 9.16 or (ii) becomes available, or was available, to the
Administrative Agent, the Issuing Bank, any Lender or the Collateral Agent on a
nonconfidential basis from a source other than the Borrowers or Holdings or any
of their respective affiliates and such source is not bound by a confidentiality
agreement to any of the Borrowers or Holdings and is not otherwise prohibited
from transmitting the information to a third party. For the purposes of this
Section, the term "Information" shall mean all financial statements,
certificates, reports, agreements and information (including all analyses,
compilations and studies prepared by the Administrative Agent, the Collateral
Agent, the Issuing Bank or any Lender based on
101
any of the foregoing) that are received from any of the Borrowers or Holdings or
any of their respective affiliates or representatives and related to any of the
Borrowers or Holdings or any of their respective affiliates, any shareholder of
any of the Borrowers or Holdings or any employee, customer or supplier of any of
the Borrowers or Holdings or any of their respective affiliates, other than any
of the foregoing that were available to the Administrative Agent, the Collateral
Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its
disclosure thereto by the Borrowers or Holdings. The provisions of this Section
9.16 shall remain operative and in full force and effect regardless of the
expiration and term of this Agreement.
SECTION 9.17. Obligations Joint and Several. (a) Each Borrower agrees that
it shall, jointly with the other Borrowers and severally, be liable for all the
Obligations. Each Borrower further agrees that the Obligations of the other
Borrowers may be extended and renewed, in whole or in part, without notice to or
further assent from it, and that it will remain bound upon its agreement
hereunder notwithstanding any extension or renewal of any Obligation of the
other Borrowers.
(b) Each Borrower waives presentment to, demand of payment from and
protest to the other Borrowers of any of the Obligations, and also waives notice
of acceptance of its obligations and notice of protest for nonpayment. The
obligations of a Borrower hereunder shall not be affected by (i) the failure of
any Lender or the Administrative Agent to assert any claim or demand or to
enforce any right or remedy against the other Borrowers under the provisions of
this Agreement or any of the other Loan Documents or otherwise; (ii) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Agreement, any of the other Loan Documents or any other agreement; or
(iii) the failure of any Lender to exercise any right or remedy against any
other Borrower.
(c) Each Borrower further agrees that its agreement hereunder constitutes
a promise of payment when due and not of collection, and waives any right to
require that any resort be had by any Lender to any balance of any deposit
account or credit on the books of any Lender in favor of any other Borrower or
any other person.
(d) The Obligations of each Borrower hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including
compromise, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations of the other Borrowers or otherwise. Without
limiting the generality of the foregoing, the obligations of each Borrower
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Administrative Agent or any Lender to assert any claim or demand
or to enforce any remedy under this Agreement or under any other Loan Document
or any other agreement, by any waiver or modification in respect of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations of the other Borrowers, or by any other act or omission which may or
might in any manner or to any extent vary the risk of such Borrower or otherwise
operate as a discharge of such Borrower as a matter of law or equity.
(e) Each Borrower further agrees that its obligations hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation of
the other Borrowers is rescinded or must otherwise be restored by the
Administrative Agent or any Lender upon the bankruptcy or reorganization of any
of the other Borrowers or otherwise.
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(f) In furtherance of the foregoing and not in limitation of any other
right which the Administrative Agent or any Lender may have at law or in equity
against any Borrower by virtue hereof, upon the failure of a Borrower to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each other Borrower
hereby promises to and will, upon receipt of written demand by the
Administrative Agent, forthwith pay, or cause to be paid, in cash the amount of
such unpaid Obligations, and thereupon each Lender shall, in a reasonable
manner, assign the amount of the Obligations of the other Borrowers owed to it
and paid by such Borrower pursuant to this guarantee to such Borrower, such
assignment to be pro tanto to the extent to which the Obligations in question
were discharged by such Borrower, or make such disposition thereof as such
Borrower shall direct (all without recourse to any Lender and without any
representation or warranty by any Lender).
(g) Upon payment by a Borrower of any sums as provided above, all rights
of such Borrower against another Borrower, as the case may be, arising as a
result thereof by way of right of subrogation or otherwise shall in all respects
be subordinated and junior in right of payment to the prior indefeasible payment
in full of all the Obligations to the Lenders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
LIFESTYLE FURNISHINGS
INTERNATIONAL LTD., as the Parent
Borrower,
by
/s/ Ronald Hoffman
------------------
Name: Ronald Hoffman
Title: Vice President, Treasurer
103
AMETEX FABRICS, INC.
THE BERKLINE CORPORATION,
DREXEL HERITAGE FURNISHINGS INC.,
HENREDON FURNITURE INDUSTRIES,
INC.,
INTERIOR FABRIC DESIGN, INC.,
INTRO EUROPE, INC.,
LA BARGE, INC.,
LEXINGTON FURNITURE INDUSTRIES,
INC.,
LIFESTYLE HOLDINGS, LTD.,
MAITLAND-SMITH, INC.,
MARBRO LAMP COMPANY,
RAMM, SON & CROCKER, INC.,
ROBERT ALLEN FABRICS, INC.,
ROBERT ALLEN FABRICS OF N.Y., INC.,
SUNBURY TEXTILE MILLS, INC.,
UNIVERSAL FURNITURE LIMITED,
each as a Subsidiary Borrower,
by
/s/ Ronald Hoffman
------------------
Name: Ronald Hoffman
Title: Vice President, Treasurer
FURNISHINGS INTERNATIONAL INC.,
by
/s/ Ronald Hoffman
------------------
Name: Ronald Hoffman
Title: Vice President, Treasurer
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent, Collateral Agent and Swingline
Lender,
by
/s/ Marian N. Schulman
----------------------
Name: Marian N. Schulman
Title: Attorney-in-fact
104
CHASE MANHATTAN BANK DELAWARE,
as Issuing Bank,
by
/s/ Michael P. Handago
----------------------
Name: Michael P. Handago
Title: Vice President
ACADIA PARTNERS,
by
/s/ Glen R. August
------------------
Name: Glen R. August
Title: Vice President
AMSOUTH BANK OF ALABAMA,
by
/s/ John J. Hooker
------------------
Name: John J. Hooker
Title: Commercial Banking Officer
BANK OF AMERICA ILLINOIS,
by
/s/ Andrea Lapeyre
------------------
Name: Andrea Lapeyre
Title: Managing Director
BANK OF MONTREAL,
by
/s/ Brian L. Banke
------------------
Name: Brian L. Banke
Title: Director
BANK OF SCOTLAND,
by
/s/ Catherine M. Oniffrey
-------------------------
Name: Catherine M. Oniffrey
Title: Vice President
105
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY,
by
/s/ Paul P. Malecki
-------------------
Name: Paul P. Malecki
Title: Vice President
CHL HIGH YIELD LOAN PORTFOLIO (a unit
of The Chase Manhattan Bank),
by
/s/ Richard W. Stewart
----------------------
Name: Richard W. Stewart
Title: Vice President
CIBC INC.,
by
/s/ Roger Colden
----------------
Name: Roger Colden
Title: Director
COMERICA BANK,
by
/s/ Tamara J. Gurne
-------------------
Name: Tamara J. Gurne
Title: Account Officer
CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ Robert H. Dial
------------------
Name: Robert H. Dial
Title: Vice President
106
CREDIT LYONNAIS ATLANTA AGENCY,
by
/s/ David M. Cawrse
-------------------
Name: David M. Cawrse
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES,
by
/s/ John W. Sweeney
-------------------
Name: John W. Sweeney
Title: Assistant Vice
President
by
/s/ Lora Lam
------------
Name: Lora Lam
Title: Assistant Vice
President
FIRST AMERICAN NATIONAL BANK,
by
/s/ Russell S. Rogers
---------------------
Name: Russell S. Rogers
Title: Vice President
FIRST SOURCE FINANCIAL LLP,
By First National Source, Inc.,
Its Agent/Manager,
by
/s/ James W. Wilson
-------------------
Name: James W. Wilson
Title: Senior Vice President
107
FLEET NATIONAL BANK,
by
/s/ Guy Smith
-------------
Name: Guy Smith
Title: Senior Vice President
HELLER FINANCIAL, INC.,
by
/s/ Christine M. Rashid
-----------------------
Name: Christine M. Rashid
Title: Vice President
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.,
by
/s/ R. Douglas Henderson
------------------------
Name: R. Douglas Henderson
Title: Authorized Signatory
NBD BANK,
by
/s/ R. H. Huttenlocher
----------------------
Name: R. H. Huttenlocher
Title: F. V. P.
NEW YORK LIFE INSURANCE COMPANY,
by
/s/ Lydia S. Sangree
--------------------
Name: Lydia S. Sangree
Title: Investment Vice
President
108
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION,
by
/s/ Lydia S. Sangree
--------------------
Name: Lydia S. Sangree
Title: Investment Vice
President
PILGRIM AMERICA PRIME RATE TRUST,
by
/s/ Michael J. Bacevich
-----------------------
Name: Michael J. Bacevich
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
by
/s/ M. J. Williams
------------------
Name: M. J. Williams
Title: Vice President
PRIME INCOME TRUST,
by
/s/ Prime Income Trust
----------------------
Name:
Title:
PROTECTIVE LIFE INSURANCE
COMPANY,
by
/s/ Mark K. Okada
-----------------
Name: Mark K. Okada
Title: Principal
109
THE BANK OF NEW YORK,
by
/s/ Gregory L. Batson
---------------------
Name: Gregory L. Batson
Title: Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ William E. Zarrett
----------------------
Name: William E. Zarrett
Title: Senior Relationship
Manager
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH,
by
/s/ Takeshi Hemmi
-----------------
Name: Takeshi Hemmi
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ C. Andrew Piculell
----------------------
Name: C. Andrew Piculell
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by
/s/ Patricia Loret de Mola
--------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
110
THE SANWA BANK, LIMITED, CHICAGO
BRANCH,
by
/s/ Richard H. Ault
-------------------
Name: Richard H. Ault
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
by
/s/ Brian W. Good
-----------------
Name: Brian W. Good
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA,
N.A.,
by
/s/ Charlene A. Johnson
-----------------------
Name: Charlene A. Johnson
Title: Vice President