Exhibit 10.1
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CREDIT AGREEMENT
Dated as of March 4, 2004
among
SOTHEBY'S HOLDINGS, INC.,
SOTHEBY'S, INC.,
SOTHEBY'S FINANCIAL SERVICES, INC.,
SOTHEBY'S FINANCIAL SERVICES CALIFORNIA, INC.,
OBERON, INC.,
THETA, INC.,
SOTHEBY'S VENTURES, LLC,
OATSHARE LIMITED,
SOTHEBY'S, and
SOTHEBY'S FINANCIAL SERVICES LIMITED,
as Borrowers,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and a Lender
and
GECC CAPITAL MARKETS GROUP, INC.,
as Lead Arranger
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TABLE OF CONTENTS
Page
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1. AMOUNT AND TERMS OF CREDIT.....................................................................1
1.1 Credit Facilities......................................................................1
1.2 Letters of Credit......................................................................6
1.3 Prepayments; Commitment Reductions.....................................................6
1.4 Use of Proceeds.......................................................................10
1.5 Interest and Applicable Margins.......................................................10
1.6 Eligible Art Loans....................................................................13
1.7 [Reserved]............................................................................16
1.8 Cash Management Systems...............................................................16
1.9 Fees..................................................................................16
1.10 Receipt of Payments...................................................................17
1.11 Application and Allocation of Payments................................................17
1.12 Loan Account and Accounting...........................................................18
1.13 Indemnity.............................................................................18
1.14 Access................................................................................19
1.15 Taxes.................................................................................20
1.16 Capital Adequacy; Increased Costs; Illegality.........................................23
1.17 Credit Support........................................................................24
1.18 Conversion to Dollars and Sterling....................................................24
1.19 Judgment Currency; Contractual Currency...............................................25
1.20 Currency of Account...................................................................26
2. CONDITIONS PRECEDENT..........................................................................26
2.1 Conditions to the Initial Loans.......................................................26
2.2 Further Conditions to Each Loan.......................................................28
3. REPRESENTATIONS AND WARRANTIES................................................................29
3.1 Corporate Existence; Compliance with Law..............................................29
3.2 Executive Offices, Collateral Locations, FEIN.........................................30
3.3 Corporate Power, Authorization, Enforceable Obligations...............................30
3.4 Financial Disclosures.................................................................30
3.5 Material Adverse Effect...............................................................31
3.6 Ownership of Property; Liens..........................................................32
3.7 Labor Matters.........................................................................32
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.............33
3.9 Government Regulation.................................................................33
3.10 Margin Regulations....................................................................34
3.11 Taxes.................................................................................34
3.12 ERISA.................................................................................35
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3.13 Litigation............................................................................36
3.14 Brokers...............................................................................36
3.15 Intellectual Property.................................................................36
3.16 Full Disclosure.......................................................................37
3.17 Environmental Matters.................................................................37
3.18 Insurance.............................................................................38
3.19 Deposit...............................................................................38
3.20 Government Contracts..................................................................38
3.21 Bonding; Licenses.....................................................................38
3.22 Solvency..............................................................................38
3.23 Sale-Leasebacks.......................................................................39
3.24 Current Employees.....................................................................39
3.25 U.S. Money-Laundering and Terrorism Regulatory Matters................................39
3.26 U.S. Lending and Auction Regulatory Matters...........................................40
3.27 English Regulatory Matters............................................................40
4. FINANCIAL STATEMENTS AND INFORMATION..........................................................41
4.1 Reports and Notices...................................................................41
4.2 Communication with Accountants........................................................41
5. AFFIRMATIVE COVENANTS.........................................................................42
5.1 Maintenance of Existence and Conduct of Business......................................42
5.2 Payment of Charges....................................................................42
5.3 Books and Records.....................................................................43
5.4 Insurance; Damage to or Destruction of Collateral.....................................43
5.5 Compliance with Laws..................................................................45
5.6 Supplemental Disclosure...............................................................45
5.7 Intellectual Property.................................................................45
5.8 Environmental Matters.................................................................45
5.9 Landlords' Agreements, Bailee Letters and Real Estate Purchases.......................46
5.10 U.S. Lending and Auction Regulatory Matters...........................................47
5.11 Further Assurances....................................................................47
5.12 Art Loans.............................................................................47
5.13 Money-Laundering and Terrorism Regulatory Matters.....................................47
5.14 Syndication...........................................................................48
5.15 New Subsidiaries......................................................................49
5.16 U.K. Collateral Ownership.............................................................49
5.17 Immaterial Subsidiaries...............................................................49
5.18 U.K. Mortgages........................................................................49
6. NEGATIVE COVENANTS............................................................................50
6.1 Mergers, Subsidiaries, Etc. ..........................................................50
6.2 Investments; Loans and Revolving Credit Advances......................................50
6.3 Indebtedness..........................................................................50
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6.4 Employee Loans and Affiliate Transactions.............................................52
6.5 Capital Structure and Business........................................................52
6.6 Guaranteed Indebtedness...............................................................52
6.7 Liens.................................................................................53
6.8 Sale of Stock and Assets..............................................................53
6.9 ERISA.................................................................................53
6.10 Financial Covenants...................................................................54
6.11 Hazardous Materials...................................................................54
6.12 Sale-Leasebacks.......................................................................54
6.13 Restricted Payments...................................................................54
6.14 Change of Corporate Name, State of Incorporation or Location; Change of Fiscal Year...54
6.15 No Impairment of Intercompany Transfers...............................................55
6.16 Changes Relating to Material Contracts................................................55
7. TERM..........................................................................................55
7.1 Termination............................................................................55
7.2 Survival of Obligations Upon Termination of Financing Arrangements.....................55
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES........................................................56
8.1 Events of Default......................................................................56
8.2 Remedies...............................................................................58
8.3 Waivers by Credit Parties..............................................................58
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT...........................................58
9.1 Assignment and Participations..........................................................58
9.2 Appointment of Agent...................................................................61
9.3 Agent's Reliance, Etc. ................................................................62
9.4 GE Capital and Affiliates..............................................................62
9.5 Lender Credit Decision.................................................................63
9.6 Indemnification........................................................................63
9.7 Successor Agent........................................................................63
9.8 Setoff and Sharing of Payments.........................................................64
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert...............65
10. SUCCESSORS AND ASSIGNS........................................................................67
10.1 Successors and Assigns.................................................................67
11. MISCELLANEOUS.................................................................................67
11.1 Complete Agreement; Modification of Agreement.........................................67
11.2 Amendments and Waivers................................................................68
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11.3 Fees and Expenses.....................................................................69
11.4 No Waiver.............................................................................70
11.5 Remedies..............................................................................71
11.6 Severability..........................................................................71
11.7 Conflict of Terms.....................................................................71
11.8 Confidentiality.......................................................................71
11.9 GOVERNING LAW.........................................................................72
11.10 Notices...............................................................................73
11.11 Section Titles........................................................................73
11.12 Counterparts..........................................................................73
11.13 WAIVER OF JURY TRIAL..................................................................73
11.14 Press Releases and Related Matters....................................................74
11.15 Reinstatement.........................................................................74
11.16 Advice of Counsel.....................................................................74
11.17 No Strict Construction................................................................74
12. CROSS-GUARANTY................................................................................75
12.1 Cross-Guaranty........................................................................75
12.2 Waivers by Borrowers..................................................................75
12.3 Benefit of Guaranty...................................................................76
12.4 Waiver of Subrogation, Etc............................................................76
12.5 Subordination by U.K. Borrowers.......................................................76
12.6 Election of Remedies..................................................................77
12.7 Liability Cumulative..................................................................78
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This CREDIT AGREEMENT (this "Agreement"), dated as of March 4, 2004,
among Sotheby's Holdings, Inc., a Michigan corporation ("Holdings"), Sotheby's,
Inc., a New York corporation ("Sotheby's, Inc."), Sotheby's Financial Services,
Inc., a Nevada corporation ("SFS Inc."), Sotheby's Financial Services
California, Inc., a Nevada corporation ("SFS California"), Oberon, Inc., a
Delaware corporation ("Oberon"), Theta, Inc., a Delaware corporation ("Theta"),
Sotheby's Ventures, LLC, a New York limited liability company ("Ventures LLC"
and, collectively with Holdings, Sotheby's, Inc., SFS Inc., SFS California,
Oberon and Theta, the "U.S. Borrowers"), Oatshare Limited, a company registered
in England ("Oatshare"), Sotheby's, a company registered in England ("Sotheby's
U.K."), and Sotheby's Financial Services Limited, a company registered in
England ("SFS Ltd." and, collectively with Oatshare and Sotheby's U.K., the
"U.K. Borrowers" and, collectively with the U.S. Borrowers, the "Borrowers");
the other Credit Parties signatory hereto; General Electric Capital Corporation,
a Delaware corporation (in its individual capacity, "GE Capital"), for itself,
as a Lender, and as Agent for the Lenders (in such capacity, "Agent"), and the
other Lenders signatory hereto from time to time.
RECITALS
WHEREAS, Borrowers have requested that Lenders extend revolving credit
facilities to Borrowers of up to Two Hundred Million Dollars ($200,000,000) in
the aggregate to provide (a) working capital financing for Borrowers, (b) funds
for other general corporate purposes of Borrowers and (c) funds for other
purposes permitted hereunder; and for these purposes, Lenders are willing to
make certain loans and other extensions of credit to Borrowers of up to such
amount upon the terms and conditions set forth herein; and
WHEREAS, Borrowers have agreed to secure all of the Secured
Obligations by granting to Agent, for the benefit of Agent and the other Secured
Parties, a security interest in and lien upon all of their existing and
after-acquired personal property; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A and, for purposes of this Agreement and the
other Loan Documents, the rules of construction set forth in Annex A shall
govern. All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified to this Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility.
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(i) Subject to the terms and conditions hereof, each Lender
agrees to make available, from time to time until the Commitment Termination
Date, its Pro Rata Share of advances (each, a "Revolving Credit Advance") (a) in
Dollars to U.S. Borrowers and (b) except as otherwise provided in the last
sentence of this paragraph, in Sterling to U.K. Borrowers. The Pro Rata Share of
the aggregate Revolving Loan of any Lender shall not at any time exceed its
separate Commitment. The obligations of each Lender hereunder shall be several
and not joint. Until the Commitment Termination Date, Borrowers may borrow,
repay and reborrow under this Section 1.1(a); provided, that (i) amount of any
Revolving Credit Advance to be made at any time to a U.S. Borrower shall not
exceed U.S. Borrowing Availability at such time and (ii) the Dollar Equivalent
of the amount of any Revolving Credit Advance to be made at any time to a U.K.
Borrower shall not exceed U.K. Borrowing Availability at such time. The Dollar
Equivalent of each outstanding Revolving Credit Advance and Letter of Credit
Obligation shall be recalculated hereunder on each date on which it shall be
necessary to determine the Revolving Loan Outstandings, as determined by Agent
in its sole discretion; provided, that Agent shall recalculate the Dollar
Equivalent of the Revolving Loan Outstandings at least one time each calendar
month and otherwise in accordance with Section 1.18. U.S. Borrowing Availability
or U.K. Borrowing Availability, or both, may be reduced by Reserves imposed by
Agent in its reasonable credit judgment. Each Revolving Credit Advance shall be
made on notice by Borrower Representative to one of the representatives of Agent
identified in Schedule 1.1 at the address specified therein. Any such notice
must be given no later than (x) 11:00 a.m. (New York time) on the Business Day
of the proposed Revolving Credit Advance, in the case of an Index Rate Loan in
Dollars, (y) 4:00 p.m. (New York time) on the date which is two (2) Business
Days prior to the proposed Revolving Credit Advance, in the case of an Index
Rate Loan in Sterling, or (z) 11:00 a.m. (New York time) on the date which is
three (3) Business Days prior to the proposed Revolving Credit Advance, in the
case of a LIBOR Loan. Each such notice (a "Notice of Revolving Credit Advance")
must be given in writing (by telecopy or overnight courier) substantially in the
form of Exhibit 1.1(a)(i), and shall include the information required in such
Exhibit and such other information as may be required by Agent. If any Borrower
desires to have the Revolving Credit Advances bear interest by reference to a
Dollar LIBOR Rate or Sterling LIBOR Rate, Borrower Representative must comply
with Section 1.5(e). A Revolving Credit Advance may not be drawn in Sterling if
Agent determines at any time prior to 10:00 a.m. (New York time) on the date of
such proposed that by reason of any change in currency availability, unusual
instability in currency exchange rates or exchange controls it is, or will be,
impracticable for such Revolving Credit Advance to be made in the Sterling. In
such event, the proposed Revolving Credit Advance shall be made in Dollars.
(ii) Except as provided in Section 1.12, each Borrower shall
execute and deliver to each Lender a note to evidence the Commitment of, and
Revolving Credit Advances made by, that Lender. Each note shall be in the
principal amount of the Commitment of the applicable Lender, dated the Closing
Date (or such later date as such Lender becomes party to this Agreement pursuant
to Section 1.1(a)(iv) or Section 9.1(a) or modifies its Commitment pursuant to
Section 1.1(a)(iv) or Section 9.1(a)) and substantially in the form of Exhibit
1.1(a)(ii)-A (in the case of the U.S. Borrowers) or Exhibit 1.1(a)(ii)-B (in the
case of the U.K. Borrowers) (each a "Revolving Note" and, collectively, the
"Revolving Notes"). Each Revolving Note shall represent the obligation of the
applicable Borrower to pay the amount of the applicable Lender's Commitment or,
if less, such Lender's Pro Rata Share of the aggregate unpaid principal amount
of all Revolving Credit Advances made to such Borrower together with
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interest thereon as prescribed in Section 1.5. The entire unpaid balance of the
aggregate Revolving Loan and all other non-contingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date.
(iii) Anything in this Agreement to the contrary notwithstanding,
at the request of Borrower Representative, in its discretion Agent may (but
shall have absolutely no obligation to), make Revolving Credit Advances (i) to
U.S. Borrowers on behalf of Lenders in Dollars in amounts that cause the sum of
(a) the aggregate outstanding balance of the Revolving Credit Advances
outstanding to the U.S. Borrowers plus (b) the Swing Line Loan then outstanding
plus (c) the Dollar Equivalent of the outstanding amount of Letter of Credit
Obligations incurred for the benefit of the U.S. Borrowers to exceed the U.S.
Borrowing Base or (ii) to U.K. Borrowers on behalf of Lenders in Sterling in
amounts that cause the Dollar Equivalent of the aggregate outstanding balance of
the Revolving Credit Advances outstanding to the U.K. Borrowers plus (b) the
Dollar Equivalent of the outstanding amount of Letter of Credit Obligations
incurred for the benefit of the U.K. Borrowers to exceed the U.K. Borrowing Base
(any such excess Revolving Credit Advances are herein referred to collectively
as "Overadvances"); provided, that (A) no such event or occurrence shall cause
or constitute a waiver of Agent's, Swing Line Lender's or Lenders' right to
refuse to make any further Overadvances, Swing Line Advances or Revolving Credit
Advances, or incur any Letter of Credit Obligations, as the case may be, at any
time that an Overadvance exists and (B) no Overadvance shall result in a Default
or Event of Default based on Borrowers' failure to comply with Section
1.3(b)(ii) for so long as Agent permits such Overadvance to be outstanding, but
solely with respect to the amount of such Overadvance. In addition, Overadvances
may be made even if the conditions to lending set forth in Section 2 have not
been met. All Overadvances shall constitute Index Rate Loans, shall bear
interest at the Default Rate and shall be payable on the earlier of demand or
the Commitment Termination Date. Except for Overadvances made for the purpose of
protecting or preserving the Collateral, as Agent deems necessary or desirable,
and as otherwise provided in Section 1.11(b), the authority of Agent to make
Overadvances is limited to an aggregate amount not to exceed a Dollar Equivalent
of $5,000,000 at any time, shall not cause the Dollar Equivalent of the
aggregate Revolving Loan to exceed the Maximum Amount, and may be revoked
prospectively by a written notice to Agent signed by Lenders holding more than
50% of the Commitments.
(iv) From the Closing Date until the earlier of (a) a
determination by Agent, in its sole discretion, that the syndication is complete
or (b) the date 180 days after the Closing Date, additional Persons may become
party hereto as a Lender or any Lender may agree to increase its Commitment (any
such Person or Lender, an "Increase Lender") pursuant to a joinder agreement in
form and substance reasonably acceptable to Agent; provided, that after giving
effect to any such addition or increase the Commitment of any Increase Lender
shall be at least $5,000,000 and a multiple of $1,000,000; provided, further,
that following any such addition or increase the aggregate Commitment of the
Lenders shall not exceed $200,000,000. The consent of Agent and, as long as no
Event of Default has occurred and is continuing, in the case of the addition of
any Person as a Lender that is not a Qualified Assignee, the Borrowers, shall be
required prior to the addition of any Person as a Lender or the increase of the
Commitment of any Lender pursuant to this Section 1.1(a)(iv). Each Increase
Lender shall accept an assignment from the existing Lenders (not including such
Increase Lender, as applicable), and such existing Lenders shall make a ratable
assignment to such Increase Lender
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of an interest in the outstanding Revolving Loan such that, after giving effect
thereto, the Revolving Loan shall be held ratably by the Lenders (including such
Increase Lender) in proportion to their respective Commitments. Assignments
pursuant to the preceding sentence shall be automatic after giving effect to any
addition of any Person as a Lender or any increase of the Commitment of any
Lender, in either case pursuant to this Section 1.1(a)(iv), and shall be made in
exchange for the principal amount assigned plus accrued and unpaid interest and
any accrued and unpaid Fee due pursuant to Section 1.9(c). In addition, the
Borrowers shall pay any LIBOR funding breakage costs due to any Lender in
accordance with Section 1.13(b).
(b) Swing Line Facility.
(i) Agent shall notify the Swing Line Lender upon Agent's receipt
of any Notice of Revolving Credit Advance in respect of a Revolving Credit
Advance to be denominated in Dollars and to accrue interest at the Dollar Index
Rate. Subject to the terms and conditions hereof, the Swing Line Lender may, in
its discretion, make available from time to time until the Commitment
Termination Date advances in Dollars to the U.S. Borrowers (each, a "Swing Line
Advance") in accordance with any such notice. The provisions of this Section
1.1(b) shall not relieve Lenders of their obligations to make Revolving Credit
Advances under Section 1.1(a); provided, that if the Swing Line Lender makes a
Swing Line Advance pursuant to any such notice, such Swing Line Advance shall be
in lieu of any Revolving Credit Advance that otherwise may be made by Revolving
Credit Lenders pursuant to such notice. The aggregate amount of Swing Line
Advances outstanding shall not exceed at any time the Swing Line Availability as
of such time. Until the Commitment Termination Date, the U.S. Borrowers may from
time to time borrow, repay and reborrow under this Section 1.1(b). Each Swing
Line Advance shall be made pursuant to a Notice of Revolving Credit Advance
delivered to Agent by Borrower Representative on behalf of the applicable U.S.
Borrower in accordance with Section 1.1(a). Any such notice must be given no
later than 11:00 a.m. (New York time) on the Business Day of the proposed Swing
Line Advance. Unless the Swing Line Lender has received at least one Business
Day's prior written notice from Requisite Lenders instructing it not to make a
Swing Line Advance, the Swing Line Lender shall, notwithstanding the failure of
any condition precedent set forth in Sections 2.2, be entitled to fund that
Swing Line Advance, and to have each Lender make Revolving Credit Advances in
accordance with Section 1.1(b)(iii) or purchase participating interests in
accordance with Section 1.1(b)(iv). Subject to Section 1.5(d), the Swing Line
Loan shall accrue interest at the Dollar Index Rate. If any Lender shall fail to
make available to Agent its Pro Rata Share of any Revolving Credit Advance in
accordance with Section 1.1(b)(iii), Borrowers shall repay the outstanding
principal amount of the portion of the Swing Line Loan then outstanding due to
such failure upon demand therefor by Agent.
(ii) Each U.S. Borrower shall execute and deliver to the Swing
Line Lender a promissory note to evidence the Swing Line Commitment. Such note
shall be in the principal amount of the Swing Line Commitment of the Swing Line
Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(b)(ii) (the "Swing Line Note"). The Swing Line Note shall represent the
obligation of each U.S. Borrower to pay the amount of the Swing Line Commitment
or, if less, the aggregate unpaid principal amount of all Swing Line Advances
made to such U.S. Borrower together with interest thereon as prescribed in
Section 1.5. The entire unpaid balance of the Swing Line Loan and all other
noncontingent Obligations shall be
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immediately due and payable in full in immediately available funds on the
Commitment Termination Date if not sooner paid in full.
(iii) The Swing Line Lender, at any time and from time to time no
less frequently than once weekly, shall on behalf of the Borrower Representative
(and the Borrower Representative hereby irrevocably authorizes the Swing Line
Lender to so act on its behalf) request each Lender (including the Swing Line
Lender) to make available to the U.S. Borrowers its Pro Rata Share of Revolving
Credit Advances in Dollars equal, in the aggregate, to the principal amount of
the Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the date
such notice is given. Unless any of the events described in Sections 8.1(h) or
8.1(i) has occurred (in which event the procedures of Section 1.1(b)(iv) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied, each
Lender shall disburse directly to Agent its Pro Rata Share of such Revolving
Credit Advances on behalf of the Swing Line Lender prior to 3:00 p.m. (New York
time) in immediately available funds on the Business Day next succeeding the
date that notice is given. The proceeds of those Revolving Credit Advances shall
be immediately paid to the Swing Line Lender and applied to repay the Refunded
Swing Line Loan.
(iv) If, prior to refunding a Swing Line Loan with a Revolving
Credit Advance pursuant to Section 1.1(b)(iii), one of the events described in
Sections 8.1(h) or 8.1(i) has occurred, then, subject to the provisions of
Section 1.1(b)(v) below, each Lender shall, on the date such Revolving Credit
Advance was to have been made, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan in an amount equal to its Pro Rata
Share of such Swing Line Loan. Upon request, each Lender shall promptly transfer
to the Swing Line Lender, in immediately available funds, the amount of its
participation interest.
(v) Each Lender's obligation to make Revolving Credit Advances in
accordance with Section 1.1(b)(iii) and to purchase participation interests in
accordance with Section 1.1(b)(iv) shall be absolute and unconditional and shall
not be affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right that such Lender may have against the Swing
Line Lender, any U.S. Borrower or any other Person for any reason whatsoever;
(B) the occurrence or continuance of any Default or Event of Default; (C) any
inability of any U.S. Borrower to satisfy the conditions precedent to borrowing
set forth in this Agreement at any time or (D) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing. If any
Lender does not make available to Agent or the Swing Line Lender, as applicable,
the amount required pursuant to Sections 1.1(b)(iii) or 1.1(b)(iv), as the case
may be, the Swing Line Lender shall be entitled to recover such amount on demand
from such Lender, together with interest thereon for each day from the date of
non-payment until such amount is paid in full at the Federal Funds Rate for the
first two Business Days and at the Dollar Index Rate thereafter.
(c) Reliance on Notices; Appointment of Borrower Representative. Agent
shall be entitled to rely upon, and shall be fully protected in relying upon,
any Notice of Revolving Credit Advance, Notice of Conversion/Continuation or
similar notice believed by Agent to be genuine. Agent may assume that each
Person executing and delivering any notice in accordance herewith was duly
authorized, unless the responsible individual acting thereon for Agent has
actual knowledge to the contrary.
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Each Borrower hereby designates Holdings as its representative and agent on its
behalf for the purposes of issuing Notices of Revolving Credit Advances and
Notices of Conversion/Continuation, giving instructions with respect to the
disbursement of the proceeds of the Loans, selecting interest rate options,
requesting Letters of Credit, giving and receiving all other notices and
consents hereunder or under any of the other Loan Documents and taking all other
actions (including in respect of compliance with covenants) on behalf of any
Borrower or Borrowers under the Loan Documents. Borrower Representative hereby
accepts such appointment. Agent and each Lender may regard any notice or other
communication pursuant to any Loan Document from Borrower Representative as a
notice or communication from all Borrowers, and may give any notice or
communication required or permitted to be given to any Borrower or Borrowers
hereunder to Borrower Representative on behalf of such Borrower or Borrowers.
Each Borrower agrees that each notice, election, representation and warranty,
covenant, agreement and undertaking made on its behalf by Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.
1.2 Letters of Credit. Subject to and in accordance with the terms and
conditions contained herein and in Annex B, Borrower Representative, on behalf
of the applicable Borrower (and any Subsidiary thereof that may be a
co-applicant on any applicable Letter of Credit), shall have the right to
request, and Lenders agree to incur, or purchase participations in, Letter of
Credit Obligations.
1.3 Prepayments; Commitment Reductions.
(a) Reductions in Commitments. Borrowers may at any time, on at least
five (5) days' prior written notice by Borrower Representative to Agent of the
intent of the Borrowers to effect such a reduction and at least two (2) days'
prior written notice by Borrower Representative to Agent of the exact date on
which such reduction shall occur, permanently reduce (but not terminate) the
Commitment; provided, that (A) any such reduction shall be in a minimum amount
of $5,000,000 and integral multiples of $1,000,000 in excess of such amount, (B)
the Commitment shall not be reduced to an amount less than the sum of (i) the
Dollar Equivalent of the amount of the aggregate Revolving Loan then outstanding
and (ii) the Swing Line Loan then outstanding, and (C) after giving effect to
such reductions, Borrowers shall comply with Sections 1.3(b)(i) and (ii). In
addition, Borrowers may at any time, on at least ten (10) days' prior written
notice by Borrower Representative to Agent of the intent of the Borrowers to
effect such a termination and at least two (2) days' prior written notice by
Borrower Representative to Agent of the exact date on which such termination
shall occur, terminate the Commitment; provided, that upon such termination, all
Loans and other Obligations shall be immediately due and payable in full and all
Letter of Credit Obligations shall be cash collateralized or otherwise satisfied
in accordance with Annex B hereto. Any reduction or termination of the
Commitment must be accompanied by payment of the Fee required by Section 1.9(c),
if any, plus the payment of any LIBOR funding breakage costs in accordance with
Section 1.13(b). Upon any such reduction or termination of the Commitment, each
Borrower's right to request Revolving Credit Advances, or request that Letter of
Credit Obligations be incurred on its behalf, or request Swing Line Advances,
shall simultaneously be
6
permanently reduced or terminated, as the case may be; provided, that a
permanent reduction of the Commitment below $100,000,000 shall require a
corresponding pro rata reduction in the Sterling Subfacility Limit and the L/C
Sublimit to the extent of such reduction below $100,000,000.
(b) Mandatory Prepayments.
(i) If at any time the aggregate outstanding balance of the
Revolving Loan and the Swing Line Loan exceeds the Maximum Amount, Borrowers
shall immediately repay the aggregate outstanding Revolving Credit Advances to
the extent required to eliminate such excess. If any such excess remains after
repayment in full of the aggregate outstanding Revolving Credit Advances,
Borrowers shall provide cash collateral for the Letter of Credit Obligations in
the manner set forth in Annex B to the extent of such remaining excess. If at
any time the Dollar Equivalent of the aggregate outstanding principal balance of
Revolving Credit Advances outstanding to the U.K. Borrowers and the Dollar
Equivalent of the outstanding Letter of Credit Obligations incurred on behalf of
the U.K. Borrowers, in the aggregate, exceed the Sterling Subfacility Limit, the
U.K. Borrowers shall, at Agent's request, immediately repay such Revolving
Credit Advances to the extent required to eliminate such excess. If any such
excess remains after repayment in full of the aggregate outstanding principal
balance of such Revolving Credit Advances, the U.K. Borrowers shall, at Agent's
request, provide cash collateral for such Letter of Credit Obligations in the
manner set forth in Annex B to the extent of such remaining excess.
(ii) If at any time the aggregate outstanding balance of the
Revolving Credit Advances and Swing Line Advances outstanding to the U.S.
Borrowers and the Dollar Equivalent of the Letter of Credit Obligations incurred
on behalf of the U.S. Borrowers, in the aggregate, exceed the U.S. Borrowing
Base, the U.S. Borrowers shall immediately repay such outstanding Revolving
Credit Advances and Swing Line Advances to the extent required to eliminate such
excess. If any such excess remains after repayment in full of such outstanding
Revolving Credit Advances and Swing Line Advances, the U.S. Borrowers shall
provide cash collateral for such Letter of Credit Obligations in the manner set
forth in Annex B to the extent of such remaining excess. If at any time the
Dollar Equivalent of the aggregate outstanding balance of the Revolving Credit
Advances outstanding to the U.K. Borrowers and the Dollar Equivalent of the
Letter of Credit Obligations incurred on behalf of the U.K. Borrowers, in the
aggregate, exceed the U.K. Borrowing Base, the U.K. Borrowers shall immediately
repay such outstanding Revolving Credit Advances to the extent required to
eliminate such excess. If any such excess remains after repayment in full of the
aggregate outstanding principal balance of such Revolving Credit Advances, the
U.K. Borrowers shall, at Agent's request, provide cash collateral for such
Letter of Credit Obligations in the manner set forth in Annex B to the extent of
such remaining excess. Notwithstanding the foregoing, any Overadvance made
pursuant to Section 1.1(a)(iii) shall be repaid in accordance with Section
1.1(a)(iii).
(iii) Subject to Section 1.3(c), immediately upon receipt by any
Sotheby Entity of any cash proceeds of any asset disposition, the applicable
Borrower (which is the Borrower that received such cash proceeds or, if such
cash proceeds are received by a Sotheby Entity other than a Borrower, which is
the Borrower that is the most direct holder of Stock of such Sotheby Entity)
shall prepay the Secured Obligations (and cash collateralize the
7
Letter of Credit Obligations, as applicable) in an amount equal to all of such
proceeds, net of (A) commissions and other reasonable and customary transaction
costs, fees and expenses properly attributable to such transaction and payable
by Sotheby Entities in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens on such asset (to the extent such Liens constitute Permitted Encumbrances
hereunder), if any, and (D) an appropriate reserve for income taxes in
accordance with GAAP in connection therewith. Any such prepayment shall be
applied in accordance with Section 1.3(d) or (e), as applicable. The following
shall not be subject to mandatory prepayment under this clause (iii): (1)
proceeds of sales of Inventory in the ordinary course of business; (2) asset
dispositions giving rise to proceeds having a Dollar Equivalent of less than
$750,000 in the aggregate for any Fiscal Year; and (3) asset disposition
proceeds with respect to Equipment or Fixtures that are reinvested in Equipment
or Fixtures within one hundred and eighty (180) days of receipt thereof;
provided, that the applicable Borrower notifies Agent of its intent to reinvest
at the time such proceeds are received and when such reinvestment occurs.
(iv) Subject to Section 1.3(c), if any Sotheby Entity issues
Stock to any entity other than another Sotheby Entity, no later than the
Business Day following the date of receipt of any cash proceeds thereof, the
applicable Borrower (which is the Borrower that received such cash proceeds or,
if such cash proceeds are received by a Sotheby Entity other than a Borrower,
which is the Borrower that is the most direct holder of Stock of such Sotheby
Entity) shall prepay the Secured Obligations (and cash collateralize Letter of
Credit Obligations, as applicable) in an amount equal to all such proceeds, net
of underwriting discounts and commissions and other reasonable costs paid to
non-Affiliates in connection therewith. Any such prepayment shall be applied in
accordance with Section 1.3(d) or (e), as applicable. The following shall not be
subject to prepayment under this clause (iv) up to a Dollar Equivalent of
$1,000,000 in the aggregate for any Fiscal Year: (1) proceeds of Stock issuances
to employees of any Sotheby Entity and (2) proceeds of Stock issuances to
Persons that hold Stock of Holdings as of the Closing Date.
(c) Adjustments to Mandatory Prepayment Amounts. The Borrowers shall
be required to make any prepayment otherwise payable pursuant to Sections
1.3(b)(iii), 1.3(b)(iv) or 5.4 only to the extent that the amount of such
prepayment exceeds (i) in the case of the U.S. Borrowers, the U.S. Borrowing
Availability as of the date of such required prepayment or (ii) in the case of
the U.K. Borrowers, the U.K. Borrowing Availability as of the date of such
required prepayment, in each case as set forth in a Borrowing Base Certificate
delivered as of the date of such required prepayment. In addition, if, after
giving effect to the previous sentence, any U.K. Borrower shall be required to
make a prepayment pursuant to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4 in excess
of the outstanding principal balance of the Revolving Credit Advances
outstanding to the U.K. Borrowers and the Letter of Credit Obligations incurred
on behalf of the U.K. Borrowers, in the aggregate, as of such date, then the
U.S. Borrowers shall be jointly and severally liable to make a prepayment of the
Loans (and cash collateralize the Letter of Credit Obligations) (in addition to
any prepayment made by such U.K. Borrower pursuant to Sections 1.3(b)(iii),
1.3(b)(iv) or 5.4, as applicable) in an amount equal to (i) the amount of such
excess minus (ii) the U.S. Borrowing Availability as of the date of such
required prepayment as set forth in a Borrowing Base Certificate delivered to
Agent.
8
(d) Application of Mandatory Prepayments by U.S. Borrowers. Subject to
the terms of the Collateral Documents, any prepayments made by any U.S. Borrower
pursuant to Sections 1.3(b)(iii) or (iv) or Section 5.4 shall be applied as
follows: first, to Fees and reimbursable expenses of Agent then due and payable
pursuant to any of the Loan Documents; second, to interest then due and payable
on the Swing Line Loan; third, to the principal balance of the Swing Line Loan
until the same has been paid in full; fourth, to interest then due and payable
on Revolving Credit Advances outstanding to the U.S. Borrowers; fifth, to the
principal balance of Revolving Credit Advances outstanding to the U.S. Borrowers
until the same have been paid in full; sixth, to any Letter of Credit
Obligations incurred on behalf of the U.S. Borrowers to provide cash collateral
therefor in the manner set forth in Annex B, until all such Letter of Credit
Obligations have been fully cash collateralized in the manner set forth in Annex
B; seventh, to any other Obligations owing by the U.S. Credit Parties; eighth,
to amounts owing by the U.S. Credit Parties in respect of Bank Product and
Hedging Obligations; ninth, to interest then due and payable on the Revolving
Credit Advances outstanding to the U.K. Borrowers; tenth, to the principal
balance of the Revolving Credit Advances outstanding to the U.K. Borrowers, pro
rata, until the same have been paid in full; eleventh, to any Letter of Credit
Obligations incurred on behalf of the U.K. Borrowers to provide cash collateral
therefor in the manner set forth in Annex B, until all such Letter of Credit
Obligations have been fully cash collateralized in the manner set forth in Annex
B; twelfth, to any other Obligations owing by the U.K. Credit Parties; and,
last, to any amounts owing by the U.K. Credit Parties in respect of Bank Product
and Hedging Obligations. The Commitment shall not be permanently reduced by the
amount of any such prepayments.
(e) Application of Mandatory Prepayments by U.K. Borrowers. Subject to
the terms of the Collateral Documents, any prepayments made by any U.K. Borrower
pursuant to Sections 1.3(b)(iii) or (iv) or Section 5.4 above shall be applied
as follows: first, to Fees and reimbursable expenses of Agent then due and
payable pursuant to any of the Loan Documents in respect of the Revolving Loans
made to the U.K. Borrowers; second, to interest then due and payable on
Revolving Credit Advances outstanding to the U.K. Borrowers; third, to the
principal balance of Revolving Credit Advances outstanding to the U.K. Borrowers
until the same have been paid in full; fourth, to any Letter of Credit
Obligations incurred on behalf of the U.K. Borrowers to provide cash collateral
therefor in the manner set forth in Annex B, until all such Letter of Credit
Obligations have been fully cash collateralized in the manner set forth in Annex
B; fifth, to any other Obligations owing by the U.K. Credit Parties; and, last,
to any amounts owing by the U.K. Credit Parties in respect of Bank Product and
Hedging Obligations. Neither the Commitment nor the Sterling Subfacility Limit
shall be permanently reduced by the amount of any such prepayments.
(f) No Implied Consent. Nothing in this Section 1.3 shall be construed
to constitute Agent's or any Lender's consent to any transaction that is not
permitted by other provisions of this Agreement or the other Loan Documents.
(g) Application to Revolving Credit Advances. Any prepayment made on
the Revolving Credit Advances or Swing Line Advances outstanding to the U.S.
Borrowers pursuant to Sections 1.1(a)(i), 1.3(b) or 5.4 shall be applied to
prepay such Revolving Credit Advances or Swing Line Advances, as applicable, in
the inverse order in which such Revolving Credit Advances or Swing Line
Advances, as applicable, were made. Any prepayment made on the
9
Revolving Credit Advances outstanding to the U.K. Borrowers pursuant to Sections
1.1(a)(i), 1.3(b) or 5.4 shall be applied to prepay such Revolving Credit
Advances in the inverse order in which such Revolving Credit Advances were made.
Application to specific Advances pursuant to this Section 1.3(g) shall not
affect the calculation of the indemnities, if any, owing to the Lenders pursuant
to Section 1.13(b).
1.4 Use of Proceeds. Borrowers shall utilize the proceeds of the Loans
solely for the financing of Borrowers' ordinary working capital and general
corporate needs. Disclosure Schedule (1.4) contains a description of Borrowers'
sources and uses of funds as of the Closing Date, including any Loans and Letter
of Credit Obligations to be made or incurred on that date, and a funds flow
memorandum detailing how funds from each source are to be transferred to
particular uses.
1.5 Interest and Applicable Margins.
(a) Borrowers shall pay interest to Agent, for the ratable benefit of
Lenders in accordance with the various Loans being made by each Lender, in
arrears on each applicable Interest Payment Date, at the following rates: (i)
with respect to the Revolving Credit Advances denominated in Dollars, the Dollar
Index Rate plus the Applicable Dollar Revolver Index Margin per annum or, at the
election of Borrower Representative, the applicable Dollar LIBOR Rate plus the
Applicable Dollar Revolver LIBOR Margin per annum, (ii) with respect to the
Revolving Credit Advances denominated in Sterling, the Sterling Index Rate plus
the Applicable Sterling Revolver Index Margin per annum or, at the election of
Borrower Representative, the applicable Sterling LIBOR Rate plus the Applicable
Sterling Revolver LIBOR Margin per annum and (iii) with respect to the Swing
Line Loan, the Dollar Index Rate plus the Applicable Dollar Revolver Index
Margin per annum.
10
As of the Closing Date, the Applicable Margins are as follows:
- -------------------------------------------------
Applicable Dollar Revolver Index Margin 1.25%
- -------------------------------------------------
Applicable Dollar Revolver LIBOR Margin 2.75%
- -------------------------------------------------
Applicable Sterling Revolver Index Margin 1.25%
- -------------------------------------------------
Applicable Sterling Revolver LIBOR Margin 2.75%
- -------------------------------------------------
Applicable L/C Margin 2.75%
- -------------------------------------------------
Applicable Unused Line Fee Margin 0.50%
- -------------------------------------------------
The Applicable Margins (other than the Applicable L/C Margin and the
Applicable Unused Line Fee Margin) may be adjusted by reference to the following
grids following receipt of Financial Statements with respect to the Fiscal
Quarter ending March 31, 2005:
- --------------------------------------------------------
If the Fixed Charge Coverage Ratio
for the immediately preceding four Level of
Fiscal Quarters is: Applicable Margins:
- --------------------------------------------------------
> 1.50x Level I
- --------------------------------------------------------
>= 1.25x but <= 1.50x Level II
- --------------------------------------------------------
< 1.25x Level III
- --------------------------------------------------------
------------------------------
Applicable Margins
------------------------------
Level I Level II Level III
- -----------------------------------------------------------------
Applicable Dollar Revolver
Index Margin 1.00% 1.25% 1.50%
- -----------------------------------------------------------------
Applicable Dollar Revolver LIBOR
Margin 2.50% 2.75% 3.00%
- -----------------------------------------------------------------
Applicable Sterling Revolver
Index Margin 1.00% 1.25% 1.50%
- -----------------------------------------------------------------
Applicable Sterling Revolver
LIBOR Margin 2.50% 2.75% 3.00%
- -----------------------------------------------------------------
Adjustments in such Applicable Margins shall be implemented quarterly
on a prospective basis, for each calendar month commencing at least five (5)
days after the date of delivery to Lenders of the quarterly unaudited or annual
audited (as applicable) Financial Statements evidencing the need for an
adjustment. Concurrently with the delivery of those Financial Statements,
Borrower Representative shall deliver to Agent and Lenders a certificate, signed
by its chief financial officer, setting forth in reasonable detail the basis for
the continuance of, or any change in, such Applicable Margins. Failure to timely
deliver such Financial Statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in such Applicable Margins
to the highest level set forth in the foregoing grid (i.e., Level III), until
the first day of the first calendar month following the delivery of those
Financial Statements demonstrating that such an increase is not required. If an
Event of Default has occurred and is continuing at the time any reduction in
such Applicable Margins is to be implemented, that reduction shall be deferred
until the first day of the first calendar month following the date on which such
Event of Default is waived or cured.
11
(b) If any payment on any Loan becomes due and payable on a day other
than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and
interest on all Loans denominated in Dollars shall be made by Agent on the basis
of a 360-day year, in each case for the actual number of days occurring in the
period for which such interest and Fees are payable. All computations of
interest on all Loans denominated in Sterling shall be made by Agent on the
basis of a 365-day year for the actual number of days occurring the period for
which such interest is payable. The Dollar Index Rate and the Sterling Index
Rate are floating rates determined for each day. Each determination by Agent of
an interest rate and Fees hereunder shall be presumptive evidence of the
correctness of such rates and Fees.
(d) So long as an Event of Default has occurred and is continuing
under Section 8.1(a), (h) or (i) or so long as any other Event of Default has
occurred and is continuing and at the election of Agent (or upon the written
request of Requisite Lenders) confirmed by written notice from Agent to Borrower
Representative, the interest rates applicable to the Loans and the Letter of
Credit Fees shall be increased by two percentage points (2%) per annum above the
rates of interest or the rate of such Fees otherwise applicable hereunder unless
Agent or Requisite Lenders elect to impose a smaller increase (the "Default
Rate"), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Event of Default until
that Event of Default is cured or waived and shall be payable upon demand.
(e) Subject to the conditions precedent set forth in Section 2.2,
Borrower Representative shall have the option to (i) request that any Revolving
Credit Advance be made as a LIBOR Loan, (ii) convert at any time all or any
portion of the outstanding Revolving Loan from Index Rate Loans to LIBOR Loans,
(iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.13(b) if such conversion is made
prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue
all or any portion of the outstanding Revolving Loan as a LIBOR Loan upon the
expiration of the applicable LIBOR Period and the succeeding LIBOR Period of
that continued portion of the outstanding Revolving Loan shall commence on the
first day after the last day of the LIBOR Period of the portion of the
outstanding Revolving Loan to be continued. Any portion of the outstanding
Revolving Loan to be made or continued as, or converted into, a LIBOR Loan must
be in a minimum amount of (i) if denominated in Dollars, $5,000,000 or an
integral multiple of $1,000,000 in excess of such amount or (ii) if denominated
in Sterling, 'L'3,000,000 or an integral multiple of 'L'500,000 in
excess of such amount. Any such election must be made by 11:00 a.m. (New York
time) on the third Business Day prior to (1) the date of any proposed Revolving
Credit Advance which is to be made as a LIBOR Loan, (2) the end of each LIBOR
Period with respect to any LIBOR Loans to be continued as such, or (3) the date
on which Borrower Representative wishes to convert any Index Rate Loan to a
LIBOR Loan for a LIBOR Period designated by Borrower Representative in such
election. If no election is received with respect to a LIBOR Loan by 11:00 a.m.
(New York time) on the third Business Day prior to the end of the LIBOR Period
with respect thereto (or if a Default or an Event of Default has occurred and is
continuing or if the additional conditions precedent set forth in
12
Section 2.2 shall not have been satisfied), that LIBOR Loan shall be converted
to an Index Rate Loan at the end of its LIBOR Period. Borrower Representative
must make such election by notice to Agent in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such election must be
made pursuant to a written notice (a "Notice of Conversion/Continuation") in the
form of Exhibit 1.5(e). No portion of the outstanding Revolving Loan may be made
as or converted into a LIBOR Loan until the earlier of (i) forty-five (45) days
after the Closing Date or (ii) completion of the syndication in accordance with
Section 1.1(a)(iv). Notwithstanding anything in this Section 1.5(e) or Agreement
to the contrary, conversions and continuations of Index Rate Loans and LIBOR
Loans hereunder shall not result in refinancings or repayments of such portions
of the outstanding Revolving Loan, but only repricings of such continuously
outstanding portions of the outstanding Revolving Loan.
(f) Notwithstanding anything to the contrary set forth in this Section
1.5, if a court of competent jurisdiction determines in a final order that the
rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had the
interest rate payable hereunder been (but for the operation of this paragraph)
the interest rate payable since the Closing Date as otherwise provided in this
Agreement. In no event shall the total interest received by any Lender pursuant
to the terms hereof exceed the amount that such Lender could lawfully have
received had the interest due hereunder been calculated for the full term hereof
at the Maximum Lawful Rate.
1.6 Eligible Art Loans. All of the Art Loans owned by each Borrower
and reflected in the most recent Borrowing Base Certificate delivered by the
Borrower Representative to Agent shall be "Eligible Art Loans" for purposes of
this Agreement, except any Art Loans to which any of the exclusionary criteria
set forth below applies. Agent shall have the right to establish, modify or
eliminate Reserves against Eligible Art Loans from time to time in its
reasonable credit judgment. In addition, Agent reserves the right, at any time
and from time to time after the Closing Date, to adjust any of the criteria set
forth below and to establish new criteria, and to adjust advance rates with
respect to Eligible Art Loans, in its reasonable credit judgment, reflecting
changes in the collectibility or realization values of such Art Loans arising or
discovered by Agent after the Closing Date subject to the approval of
Supermajority Lenders in the case of adjustments or new criteria or changes in
advance rates which have the effect of making more credit available. Eligible
Art Loans shall not include any Art Loan of any Borrower:
(a) that is not secured by a first priority security interest in the
applicable Works of Art in favor of such Borrower that is perfected in each
applicable jurisdiction (i) by the filing of a financing statement pursuant to
the UCC or the PPSA or (ii) by possession of such Works of Art by such Borrower
or its agent at all times until such Art Loan has been repaid;
(b) if the security interest of such Borrower in the applicable Works
of Art is perfected by possession of such Works of Art by a Person acting as an
agent of such Borrower
13
(which Person may be another Sotheby Entity) or such Works of Art are otherwise
in the possession of any Person other than such Borrower, unless otherwise
agreed by Agent, such Person has not executed a bailee letter, or other
arrangements have not been entered into, in form and substance reasonably
acceptable to Agent;
(c) (i) if any Work of Art securing repayment of such Art Loan is not
(x) located in the United States, Canada, the United Kingdom, or a Permitted
Country or (y) or in transport between such countries or (ii) if any Work of Art
securing repayment of such Art Loan is located in a Permitted Country, such
Borrower shall not have taken each action reasonably required by Agent with
respect to such Work of Art located in such Permitted Country in order to
protect the interests of such Borrower and Agent therein under the laws of such
Permitted Country;
(d) if the Works of Art securing repayment of such Art Loan are held
by such Borrower (i) at a location in which a Sotheby Entity has obtained a
leasehold interest after the Closing Date, unless otherwise agreed by Agent, the
lessor thereof shall not have executed a landlord waiver, in form and substance
reasonably acceptable to Agent, or (ii) at any warehouse, storage facility or
other third-party location (including, without limitation, the Geneva free port,
but not including the location of any agent described in paragraph (b) above),
unless otherwise agreed by Agent, such third party has not executed a bailee
letter in form and substance reasonably acceptable to Agent;
(e) with respect to which (i) such Borrower shall not have conducted
(x) appropriate UCC, tax lien and judgment searches against the applicable Art
Loan Debtor or (y) with respect to any Art Loan originated by such Borrower
after the Closing Date, in the case of any Art Loan Debtor located in the United
Kingdom, appropriate bankruptcy, winding up and company searches against the
applicable Art Loan Debtor and (ii) the results of such searches shall not have
indicated any material risks with respect to the applicable Art Loan Debtor or
the Works of Art securing repayment of such Art Loan;
(f) with respect to which such Art Loan and the related security
interest are not governed by a loan and security agreement reasonably acceptable
to Agent in form and substance;
(g) with respect to which the Works of Art securing repayment of such
Art Loan are (i) not in the possession of (x) such Borrower, (y) an agent
described in paragraph (b) above or (z) the applicable Art Loan Debtor, (ii) not
adequately insured by such Borrower or the applicable Art Loan Debtor or (iii)
if such Works of Art are insured by the applicable Art Loan Debtor, not subject
to a valid loss payable endorsement in favor of such Borrower with respect to
such Works of Art;
(h) with respect to which the Art Loan Debtor is the original artist
or creator of any of the Works of Art securing repayment of such Art Loan;
(i) with respect to which any payment under the related loan agreement
(or any other Art Loan outstanding to such related Art Loan Debtor) has been
deemed by such Borrower to be non-accrual;
(j) that is subject to litigation challenging the validity or
enforceability of such Art Loan or any related documentation or the validity,
enforceability, perfection or priority of such Borrower's security interest in
any Work of Art securing such Art Loan;
14
(k) that is subject to litigation challenging the rights of the
related Art Loan Debtor in any Work of Art securing such Art Loan, which
litigation, in the reasonable judgment of Agent, has a material risk of being
determined adversely to such Borrower;
(l) (i) that is not denominated in Dollars, Canadian Dollars,
Sterling, Euros, Swiss Francs or an Alternative Art Loan Currency or (ii) if
such Art Loan is denominated in an Alternative Art Loan Currency, unless Agent
shall have otherwise agreed, a Credit Party (in the case of any U.K. Borrower)
or a U.S. Credit Party (in the case of any U.S. Borrower) shall have not entered
into a Rate Management Transaction reasonably acceptable to Agent (x) having a
notional amount substantially equal to the outstanding principal balance of such
Art Loan at all times until the maturity of such Art Loan and (y) directly
mitigating the risk associated with changes in the exchange rate between the
currency in which such Art Loan is denominated and Dollars (in the case of any
Art Loan owned by a U.S. Borrower) or Sterling (in the case of any Art Loan
owned by a U.K. Borrower) at all times until the maturity of such Art Loan;
(m) that was not generated in the ordinary course of the applicable
Borrower's business;
(n) unless Agent shall have otherwise agreed, that by its terms is due
and payable later than 18 months following the later of (i) the date of the
initial advance of such Art Loan or (ii) the most recent extension of the
maturity thereof;
(o) to the extent that any defense, counterclaim, setoff or dispute
(other than any dispute described in clauses (j) or (k) above) is asserted as to
repayment by the relevant Art Loan Debtor of such Art Loan;
(p) that is subject to any Lien of any Person other than Agent, except
Permitted Encumbrances;
(q) with respect to which the Art Loan Debtor is a director, officer,
other employee or Affiliate of any Sotheby Entity, unless Agent shall have
determined, in its sole discretion, that such Art Loan shall constitute an
Eligible Art Loan notwithstanding the provisions of this clause (q);
(r) that is the obligation of an Art Loan Debtor that is the United
States government or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof;
(s) to the extent by which the outstanding principal balance of such
Art Loan exceeds sixty percent (60%) of the aggregate Estimated Value of the
Works of Art securing repayment of such Art Loan;
(t) in the case of an Art Loan Debtor that is not an individual, such
Borrower has not obtained confirmation of authorization of the incurrence of
such Art Loan by such Person and the individuals executing documents on its
behalf;
(u) with respect to which the related Art Loan Debtor suspends
business (in the case of an Art Loan Debtor that is not an individual), makes a
general assignment for the benefit of creditors or fails to pay its debts
generally as they come due;
(v) a petition is filed by or against the related Art Loan Debtor
under any bankruptcy law or any other federal, state or foreign (including any
provincial) receivership, insolvency relief or other law or laws for the relief
of debtors;
15
(w) to the extent any Sotheby Entity is liable for goods sold or
services rendered by the applicable Art Loan Debtor to such Sotheby Entity, but
only to the extent of the potential offset;
(x) with respect to which (i) any of the documentation evidencing such
Art Loan is not in the possession of such Borrower or Agent or (ii) any of the
representations or warranties in this Agreement and the other Loan Documents is
untrue;
(y) to the extent such Art Loan exceeds any credit limit with respect
to any Art Loan Debtor established by Agent, in its reasonable credit judgment,
taking into account the nature and value of the Works of Art securing such Art
Loan and after consultation with the Borrower Representative; or
(z) with respect to which the initial outstanding principal amount is
less than (i) if owned by a U.S. Borrower, $25,000 or (ii) if owned by a U.K.
Borrower, 'L'25,000.
1.7 [Reserved]
1.8 Cash Management Systems. Within 90 days after the Closing Date,
the Credit Parties will establish and will maintain until the Termination Date
the cash management systems described in Annex C (the "Cash Management
Systems").
1.9 Fees.
(a) Borrowers shall pay to GE Capital, individually, the Fees
specified in the GE Capital Fee Letter.
(b) As additional compensation for the Lenders, Borrowers shall pay to
Agent, for the ratable benefit of the Lenders, in arrears, on the first Business
Day of each month prior to the Commitment Termination Date and on the Commitment
Termination Date, a Fee for Borrowers' non-use of available funds in an amount
equal to the Applicable Unused Line Fee Margin per annum (calculated on the
basis of a 360 day year for actual days elapsed) multiplied by the difference
between (x) the Maximum Amount (as it may be increased or reduced from time to
time) and (y) the average for the period of the daily closing balances of the
aggregate Revolving Loan and the Swing Line Loan outstanding during the period
for which such Fee is due.
(c) If Borrowers reduce or terminate the Commitment prior to the
second anniversary of the Closing Date, whether voluntarily or involuntarily and
whether before or after acceleration of the Obligations, Borrowers shall pay to
Agent, for the benefit of Lenders as liquidated damages and compensation for the
costs of being prepared to make funds available hereunder, an amount equal to
(i) if such reduction or termination occurs prior to the first anniversary of
the Closing Date, 1.0% multiplied by the amount of such reduction of the
Commitment or (ii) if such reduction or termination occurs after the first
anniversary of the Closing Date and prior to the second anniversary of the
Closing Date, 0.50% multiplied by the amount of such reduction of the
Commitment. The Borrowers agree that such fee is a reasonable calculation of
Lenders' lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an early termination of the
Commitment.
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(d) Borrowers shall pay to Agent, for the ratable benefit of Lenders,
the Letter of Credit Fee as provided in Annex B.
1.10 Receipt of Payments. Borrowers shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars or Sterling, as applicable, to the
applicable Collection Account. Payments received after 2:00 p.m. New York time
on any Business Day or on a day that is not a Business Day shall be deemed to
have been received on the following Business Day.
1.11 Application and Allocation of Payments.
(a) So long as no Event of Default has occurred and is continuing, (i)
payments matching specific scheduled payments then due shall be applied to those
scheduled payments; (ii) voluntary prepayments shall be applied in accordance
with the provisions of Section 1.3(a); and (iii) mandatory prepayments shall be
applied as set forth in Section 1.3(d) or 1.3(e), as applicable. All payments
and prepayments applied to the Revolving Loan shall be applied ratably to the
portion thereof held by each Lender as determined by its Pro Rata Share. As to
any other payment, and as to all payments made when an Event of Default has
occurred and is continuing or following the Commitment Termination Date, each
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of such Borrower, and each Borrower
hereby irrevocably agrees that Agent shall have the continuing exclusive right
to apply any and all such payments against the Secured Obligations as Agent may
deem advisable, subject to the terms of the Collateral Documents,
notwithstanding any previous entry by Agent in the Loan Account or any other
books and records. In the absence of a specific determination by Agent with
respect thereto, payments shall be applied to amounts then due and payable in
the following order, subject to the terms of the Collateral Documents: (1) to
Fees and Agent's expenses reimbursable hereunder; (2) to interest on the Swing
Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on
the Revolving Loan; (5) to principal payments on the Revolving Loan and to
provide cash collateral for Letter of Credit Obligations in the manner described
in Annex B; (6) to all other Obligations owing by the Credit Parties, including
expenses of Lenders to the extent reimbursable under Section 11.3; and (7) to
amounts owing in respect of Bank Product and Hedging Obligations; provided, that
any payment by a U.K. Credit Party shall be applied only to the Secured
Obligations of the U.K. Credit Parties according to the preceding order of
priority.
(b) Agent is authorized to, and at its sole election may, charge to
the Revolving Loan balance on behalf of each Borrower and cause to be paid all
Fees, expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(a)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan
Documents if and to the extent Borrowers fail to pay promptly any such amounts
as and when due, even if the Dollar Equivalent of the amount of such charges
would exceed the applicable Borrowing Availability at such time. At Agent's
option and to the extent permitted by law, any charges so made shall constitute
a Revolving Credit Advance made in the applicable currency and part of the
Revolving Loan hereunder.
1.12 Loan Account and Accounting. Agent shall maintain a loan account
(the "Loan Account") on its books to record: all Revolving Credit Advances and
Swing
17
Line Advances, all payments made by Borrowers, and all other debits and credits
as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall, absent manifest error, be presumptive evidence
of the amounts due and owing to Agent and Lenders by each Borrower; provided
that any failure to so record or any error in so recording shall not limit or
otherwise affect any Borrower's duty to pay the Obligations. Agent shall render
to Borrower Representative a monthly accounting of transactions with respect to
the Loans setting forth the balance of the Loan Account as to each Borrower for
the immediately preceding month. Unless Borrower Representative notifies Agent
in writing of any objection to any such accounting (specifically describing the
basis for such objection), within thirty (30) days after the date thereof, each
and every such accounting shall be presumptive evidence of all matters reflected
therein. Only those items expressly objected to in such notice shall be deemed
to be disputed by Borrowers. Notwithstanding any provision herein contained to
the contrary, any Lender may elect (which election may be revoked) to dispense
with the issuance of Notes to that Lender and may rely on the Loan Account as
evidence of the amount of Obligations from time to time owing to it.
1.13 Indemnity.
(a) Each Credit Party shall jointly and severally indemnify and hold
harmless each of Agent, Lenders and their respective Affiliates, and each such
Person's respective officers, directors, employees, attorneys, agents and
representatives (each, an "Indemnified Person"), from and against any and all
suits, actions, proceedings, claims, damages, losses, liabilities and expenses
(including reasonable attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) that may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents and the administration of such credit,
and in connection with or arising out of the transactions contemplated hereunder
and thereunder and any actions or failures to act in connection therewith,
including any and all Environmental Liabilities and legal costs and expenses
arising out of or incurred in connection with disputes between or among any
parties to any of the Loan Documents (collectively, "Indemnified Liabilities");
provided, that no such Credit Party shall be liable for any indemnification to
an Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from that Indemnified Person's
gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. It is understood and
agreed that, notwithstanding anything to the contrary set forth in this Section
1.13(a), no U.K. Credit Party shall have any obligation to any Indemnified
Person with respect to Indemnified Liabilities relating to Obligations of any
U.S. Credit Party.
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(b) To induce Lenders to provide the LIBOR Loan option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or occurs
as a result of acceleration, by operation of law or otherwise); (ii) any
Borrower shall default in payment when due of the principal amount of or
interest on any LIBOR Loan; (iii) any Borrower shall refuse to accept any
borrowing of, or shall request a termination of, any borrowing of, conversion
into or continuation of, LIBOR Loans after Borrower Representative has given
notice requesting the same in accordance herewith; (iv) any Borrower shall fail
to make any prepayment of a LIBOR Loan after Borrower Representative has given a
notice thereof in accordance herewith; or (v) any assignment shall occur
pursuant to Section 1.1(a)(iv) or Section 1.16(d), then Borrowers shall jointly
and severally indemnify and hold harmless each Lender from and against all
losses, costs and expenses resulting from or arising from any of the foregoing.
Such indemnification shall include any loss (excluding loss of margin) or
expense arising from the reemployment of funds obtained by it or from fees
payable to terminate deposits from which such funds were obtained. For the
purpose of calculating amounts payable to a Lender under this subsection, each
Lender shall be deemed to have actually funded its relevant LIBOR Loan through
the purchase of a deposit bearing interest at the Dollar LIBOR Rate or the
Sterling LIBOR Rate, as applicable, in an amount equal to the amount of that
LIBOR Loan and having a maturity comparable to the relevant LIBOR Period;
provided, that each Lender may fund each of its LIBOR Loans in any manner it
sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 1.13(b), and
such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.
1.14 Access. Each Credit Party shall, during normal business hours,
from time to time upon two (2) Business Days' prior notice as frequently as
Agent reasonably determines to be appropriate: (a) provide Agent and any of its
officers, employees and agents access to its properties, facilities, advisors,
officers and employees and to the Collateral, (b) permit Agent, and any of its
officers, employees and agents, to inspect, audit and make extracts from any
Sotheby Entity's books and records, and (c) permit Agent, and its officers,
employees and agents, to inspect, review, evaluate, and make test verifications
and counts of the Collateral of any Credit Party; provided, that, if no Event of
Default has occurred and is continuing, such Credit Party shall only be required
to pay for the costs and expenses of two (2) such audits during any 12 month
period beginning on the date hereof or any anniversary of the date hereof;
provided, further, that, if an Event of Default has occurred and is continuing,
each such Credit Party shall provide such access to Agent and to each Lender at
all times and without advance notice. Furthermore, so long as any Event of
Default has occurred and is continuing, each Credit Party shall provide Agent
and each Lender with access to their suppliers and customers to the extent such
access is within the rights and powers of such Credit Party. Each Credit Party
shall make available to Agent and its counsel reasonably promptly originals or
copies of all books and records that Agent may reasonably request. Each Credit
Party shall deliver any document or instrument necessary for Agent, as it may
from time to time reasonably request, to obtain records from any service bureau
or other Person that maintains records for such Credit Party, and shall
19
maintain duplicate records or supporting documentation on media, including
computer tapes and discs owned by such Credit Party. Agent will give Lenders at
least five (5) days' prior written notice of regularly scheduled audits.
Representatives of other Lenders may accompany Agent's representatives on
regularly scheduled audits at no charge to Borrowers.
1.15 Taxes.
(a) Tax gross-up.
(i) Each Credit Party shall make all payments to be made by it
under the Loan Documents without any Tax Deduction, unless a Tax Deduction is
required by law.
(ii) The Borrower Representative shall promptly upon becoming
aware that a Credit Party must make a Tax Deduction (or that there is any change
in the rate or the basis of a Tax Deduction) notify Agent accordingly.
Similarly, a Lender shall notify Agent promptly on becoming so aware in respect
of any payment to that Lender pursuant to any Loan Document. If Agent receives
such notification from a Lender it shall promptly notify the Borrower
Representative.
(iii) Subject to paragraph (iv) below, if a Tax Deduction is
required by law to be made by any Credit Party, the amount of the payment due
from such Credit Party shall be increased to an amount which (after making any
Tax Deduction) leaves an amount equal to the payment which would have been due
if no Tax Deduction had been required.
(iv) A Credit Party is not required to make an increased payment
to a Lender under paragraph (iii) above for a Tax Deduction in respect of tax
imposed by the United Kingdom or the United States of America on a payment of
interest on a Loan, if on the date on which the payment falls due:
(A) the payment could have been made to the relevant Lender
without a Tax Deduction if it was a Qualifying Lender, but on that
date that Lender is not or has ceased to be a Qualifying Lender other
than as a result of any change after the date it became a Lender under
this Agreement in (or in the interpretation, administration, or
application of) any law or Treaty, or any published practice or
concession of any relevant taxing authority;
(B) with respect to any payment to be made by a U.K. Credit
Party, (i) the relevant Lender is a U.K. Non-Bank Lender, or would
have been a U.K. Non-Bank Lender were it not for any change after the
date it became a Lender under this Agreement in (or in the
interpretation, administration, or application of) any law or Treaty,
or any published practice or concession of any relevant taxing
authority and (ii) the Board of the Inland Revenue has given (and not
revoked) a direction under section 349C of the Taxes Act (as that
provision has effect on the date on which the relevant Lender became a
party to this Agreement) which relates to that payment and that Credit
Party has notified that U.K. Non-Bank Lender of the precise terms of
that notice; or
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(C) with respect to any payment to be made by a U.K. Credit
Party, the relevant Lender is a Treaty Lender and the Credit Party
making the payment is able to demonstrate that the payment could have
been made to the Lender without the Tax Deduction had that Lender
complied with its obligations under paragraph (viii) below.
(v) If any Credit Party is required to make a Tax Deduction, such
Credit Party shall make such Tax Deduction and any payment required in
connection with such Tax Deduction within the time allowed and in the minimum
amount required by law.
(vi) Within thirty days of making either a Tax Deduction or any
payment required in connection with a Tax Deduction, the Credit Party making
such Tax Deduction shall deliver to Agent for the applicable Lender evidence
reasonably satisfactory to such Lender that such Tax Deduction has been made or
(as applicable) any appropriate payment paid to the relevant taxing authority.
(vii) A Treaty Lender shall, if so requested by Borrower
Representative (on behalf of the U.K. Credit Parties), complete and file with
the appropriate tax authority an application for authorization by that tax
authority to make that payment without a Tax Deduction, but the Borrower
Representative (on behalf of the U.K. Credit Parties) shall, thereafter, be
responsible for dealing with such authority in relation to the processing of
such application.
(viii) A U.K. Non-Bank Lender which becomes a party to this
Agreement as a Lender on the day on which this Agreement is entered into gives a
Tax Confirmation to the U.K. Credit Parties by entering into this Agreement.
(ix) A U.K. Non-Bank Lender shall promptly notify Agent who shall
notify the U.K. Credit Parties if there is any change in the position from that
set out in the Tax Confirmation.
(b) Tax indemnity.
(i) The Credit Parties shall (within three Business Days of
demand by Agent) pay (or procure payment) to a Protected Party an amount equal
to the loss, liability or cost which that Protected Party determines will be or
has been (directly or indirectly) suffered for or on account of Tax by that
Protected Party in respect of any Loan Document.
(ii) Paragraph (a) above shall not apply:
(A) with respect to any Tax (i) assessed on a Lender under
(x) the law of the jurisdiction in which that Lender is incorporated
or, if different, the jurisdiction (or jurisdictions) in which that
Lender is treated as resident for tax purposes or (y) under the law of
the jurisdiction in which that Lender's facility office is located in
respect of amounts received or receivable in that jurisdiction and
(ii) imposed on or calculated by reference to the net income received
or receivable (but not any sum deemed to be received or receivable) by
that Lender; and
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(B) to the extent a loss, liability or cost (i) is
compensated for by an increased payment under Section 1.15(a) or (ii)
would have been compensated for by an increased payment under Section
1.15(a) but was not so compensated solely because one of the
exclusions in Section 1.15(a)(iv) applied.
(iii) A Protected Party making, or intending to make a claim
under, paragraph (i) above shall promptly notify Agent of the event which will
give, or has given, rise to the claim, following which Agent shall notify the
Borrower Representative.
(iv) A Protected Party shall, on receiving a payment from a
Credit Party under this Section 1.15(b), notify Agent.
(c) Tax Credit. If a Credit Party makes a Tax Payment and the relevant
Lender determines that:
(i) a Tax Credit is attributable either to an increased payment
of which that Tax Payment forms part, or to that Tax Payment; and
(ii) that Lender has obtained, utilized and retained that Tax
Credit,
the Lender shall pay an amount to the applicable Credit Party which that Lender
determines will leave it (after that payment) in the same after-Tax position as
it would have been had the Tax Payment not been required to be made by such
Credit Party.
(d) Stamp Taxes. The Credit Parties shall pay, and within three
Business Days of demand, indemnify each Lender against any cost, loss, or
liability that a Lender incurs in relation to all stamp duty, registration and
other similar Taxes payable in respect of the Loan Documents.
(e) Value Added Tax.
(i) All consideration expressed to be payable under the Loan
Documents by any Credit Party to a Lender or Agent, shall be deemed to be
exclusive of VAT. If VAT is chargeable on any supply made by any Lender or Agent
to any Credit Party in connection with any Loan Document, such Credit Party
shall pay to such Lender or Agent, as applicable, (in addition to and at the
same time as paying the consideration) an amount equal to the amount of the VAT.
(ii) Where any Loan Document requires any Credit Party to
reimburse a Lender or Agent for any costs or expenses, such Credit Party shall
also at the same time pay and indemnify such Lender or Agent, as applicable,
against all VAT incurred by such Lender or Agent, as applicable, in respect of
the costs and expenses to the extent that such Lender or Agent, as applicable,
reasonably determines that it is not entitled to credit or repayment of the VAT.
1.16 Capital Adequacy; Increased Costs; Illegality.
(a) If any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy, reserve requirements
or similar requirements or
22
compliance by any Lender (including, as applicable, as L/C Issuer) with any
request or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law), in each case, adopted
after the Closing Date, from any central bank or other Governmental Authority
increases or would have the effect of increasing the amount of capital, reserves
or other funds required to be maintained by such Lender and thereby reducing the
rate of return on such Lender's capital as a consequence of its obligations
hereunder, then Borrowers shall from time to time upon demand by such Lender
(with a copy of such demand to Agent) pay to Agent, for the account of such
Lender, additional amounts sufficient to compensate such Lender for such
reduction. A certificate as to the amount of that reduction and showing the
basis of the computation thereof submitted by such Lender to Borrower
Representative and to Agent shall be presumptive evidence of the matters set
forth therein.
(b) If, due to either (i) the introduction of or any change in any law
or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender (including, as applicable, as L/C Issuer) of agreeing to make or making,
funding or maintaining any Loan or Letter of Credit, then Borrowers shall from
time to time, upon demand by such Lender (with a copy of such demand to Agent),
pay to Agent for the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost. A certificate as to the amount
of such increased cost, submitted to Borrower Representative and to Agent by
such Lender, shall be presumptive evidence of the matters set forth therein.
Each Lender agrees that, as promptly as practicable after it becomes aware of
any circumstances referred to above which would result in any such increased
cost, the affected Lender shall, to the extent not inconsistent with such
Lender's internal policies of general application, use reasonable commercial
efforts to minimize costs and expenses incurred by it and payable to it by
Borrowers pursuant to this Section 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
reasonable opinion, materially adversely affecting it or its Loans or the income
obtained therefrom, on notice thereof and demand therefor by such Lender to
Borrower Representative through Agent, (i) the obligation of such Lender to
agree to make or to make or to continue to fund or maintain LIBOR Loans shall
terminate and (ii) each Borrower shall forthwith prepay in full all outstanding
LIBOR Loans owing by such Borrower to such Lender, together with interest
accrued thereon, unless Borrower Representative on behalf of such Borrower,
within five (5) Business Days after the delivery of such notice and demand,
converts all LIBOR Loans into Index Rate Loans.
(d) Within thirty (30) days after receipt by Borrower Representative
of written notice and demand from any Lender (an "Affected Lender") for payment
of additional amounts or increased costs as provided in Sections 1.15(a),
1.16(a) or 1.16(b), Borrower Representative may, at its option, notify Agent and
such Affected Lender of its intention to replace the Affected
23
Lender. So long as no Default or Event of Default has occurred and is
continuing, Borrower Representative, with the consent of Agent, may obtain, at
Borrowers' expense, a replacement Lender ("Replacement Lender") for the Affected
Lender, which Replacement Lender must be reasonably satisfactory to Agent. If
Borrowers obtain a Replacement Lender within ninety (90) days following notice
of their intention to do so, the Affected Lender must sell and assign its
outstanding Loans, Letter of Credit Obligations and Commitments to such
Replacement Lender for an amount equal to the outstanding principal balance of
all Loans held by the Affected Lender and all accrued interest and Fees with
respect thereto through the date of such sale and such assignment shall not
require the payment of an assignment fee to Agent; provided, that Borrowers
shall have reimbursed such Affected Lender for the additional amounts or
increased costs that it is entitled to receive under this Agreement through the
date of such sale and assignment. Notwithstanding the foregoing, Borrowers shall
not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts within 15 days
following its receipt of Borrowers' notice of intention to replace such Affected
Lender. Furthermore, if Borrowers give a notice of intention to replace and do
not so replace such Affected Lender within ninety (90) days thereafter,
Borrowers' rights under this Section 1.16(d) shall terminate with respect to
such Affected Lender and Borrowers shall promptly pay all increased costs or
additional amounts demanded by such Affected Lender pursuant to Sections
1.15(a), 1.16(a) and 1.16(b).
1.17 Credit Support. All Loans to each U.S. Borrower and all of the
other Obligations of the each U.S. Borrower arising under this Agreement and the
other Loan Documents shall constitute one general obligation of the U.S.
Borrowers secured, until the Termination Date, by all of the U.S. Collateral.
All Loans to each U.K. Borrower and all of the other Obligations of each U.K.
Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of the U.K. Borrowers secured, until the
Termination Date, by all of the U.K. Collateral.
1.18 Conversion to Dollars and Sterling.
(a) Except as expressly set forth herein, all valuations or
computations of monetary amounts set forth in this Agreement shall include the
Dollar Equivalent of Sterling or any other applicable currency. All currency
conversions to be made under this Agreement shall be made in accordance with the
following procedure:
(i) Conversions to Dollars shall occur in accordance with
prevailing exchange rates, as determined by Agent in its reasonable discretion,
on the applicable date.
(ii) Conversions to Sterling shall occur in accordance with
prevailing exchange rates, as determined by Agent in its reasonable discretion,
on the applicable date.
(iii) Revolving Credit Advances and Letter of Credit Obligations
denominated in currencies other than Dollars shall be marked to market on (a) so
long as the Aggregate Borrowing Availability equals or exceeds $5,000,000, the
first Business Day of each month and (b) otherwise, the first Business Day of
each week.
24
(b) All valuations or computations of monetary amounts set forth in
any Borrowing Base Certificate, any Art Loan Receivables Report or any other
report, certificate, Financial Statement or other document delivered by any
Credit Party to Agent hereunder shall be made in accordance with GAAP and the
ordinary business practices of the Credit Parties as of the Closing Date;
provided, that any such report or document shall set forth the conversion
factors used with respect to any foreign currencies.
1.19 Judgment Currency; Contractual Currency.
(a) If, for the purpose of obtaining or enforcing judgment against any
Credit Party in any court in any jurisdiction, it becomes necessary to convert
into any other currency (such other currency being hereinafter in this Section
1.19 referred to as the "Judgment Currency") an amount due under any Loan
Document in any currency (the "Obligation Currency") other than the Judgment
Currency, the conversion shall be made at the rate of exchange prevailing on the
Business Day immediately preceding (i) the date of actual payment of the amount
due, in the case of any proceeding in the courts of any jurisdiction that will
give effect to such conversion being made on such date, or (ii) the date on
which the judgment is given, in the case of any proceeding in the courts of any
other jurisdiction (the applicable date as of which such conversion is made
pursuant to this Section 1.19 being hereinafter referred to as the "Judgment
Conversion Date").
(b) If, in the case of any proceeding in the court of any jurisdiction
referred to in Section 1.19(a), there is a change in the rate of exchange
prevailing between the Judgment Conversion Date and the date of actual receipt
for value of the amount due, the applicable Credit Party shall pay such
additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date. Any
amount due from a Credit Party under this Section 1.19(b) shall be due as a
separate debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of any of the Loan Documents.
(c) The term "rate of exchange" in this Section 1.19 means the rate of
exchange at which Agent would, on the relevant date at or about noon (New York
City time), be able to sell the Obligation Currency against the Judgment
Currency to prime banks.
(d) Any amount received or recovered by Agent in respect of any sum
expressed to be due to them (whether for itself or on behalf of any other
person) from any Credit Party under this Agreement or under any of the other
Loan Documents in a currency other than the currency (the "contractual
currency") in which such sum is so expressed to be due (whether as a result of,
or from the enforcement of, any judgment or order of a court or tribunal of any
jurisdiction, the winding-up of a Borrower or otherwise) shall only constitute a
discharge of such Borrower to the extent of the amount of the contractual
currency that Agent is able, in accordance with its usual practice, to purchase
with the amount of the currency so received or recovered on the date of receipt
or recovery (or, if later, the first date on which such purchase is
practicable). If the amount of the contractual currency so purchased is less
than the amount of
25
the contractual currency so expressed to be due, such Borrower shall indemnify
Agent against any loss sustained by it as a result, including the cost of making
any such purchase other than losses resulting from the gross negligence or
willful misconduct of the Person seeking such indemnification.
1.20 Currency of Account. Dollars are the currency of account and
payment for each and every sum at any time due from the Borrowers hereunder;
provided, that:
(i) unless expressly provided elsewhere in this Agreement, each
repayment of a Revolving Credit Advance or a part thereof advanced in Sterling
shall be made in Sterling;
(ii) each payment of interest in respect of principal, or any
other sum, denominated in Sterling shall be made in Sterling;
(iii) each payment in respect of costs and expenses incurred in
Sterling shall be made in Sterling; and
(iv) any other amount expressed to be payable in Sterling shall
be paid in Sterling.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans. No Lender shall be obligated to
make any Loan or incur any Letter of Credit Obligations on the Closing Date, or
to take, fulfill, or perform any other action hereunder, until the following
conditions have been satisfied or provided for in a manner reasonably
satisfactory to Agent, or waived in writing by Agent:
(a) Credit Agreement; Loan Documents. Each Loan Document delivered on
the date hereof or counterparts thereof shall have been duly executed and
delivered by Borrowers, each other Credit Party, Agent and Lenders party
thereto; and Agent shall have received such documents, instruments, agreements
and legal opinions as Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the Closing Checklist attached hereto as Annex D,
each in form and substance reasonably satisfactory to Agent.
(b) Repayment of Prior Lender Obligations. Agent shall have received
evidence satisfactory to Agent that all of the Prior Lender Obligations have
been repaid in full by the Borrowers and all Liens upon any of the property of
Borrowers or any of their Subsidiaries in favor of the Prior Agent have been
terminated.
(c) Approvals. Agent shall have received (i) satisfactory evidence
that the Sotheby Entities have obtained all required consents and approvals of
all Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents or (ii)
an officer's certificate in form and substance
26
reasonably satisfactory to Agent affirming that no such consents or approvals
are required (other than those that have been obtained).
(d) Opening Availability. The Eligible Art Loans owned by the
Borrowers on the Closing Date, after giving effect to any Reserves to be
established on the Closing Date, shall be sufficient in value, as determined by
Agent, to provide Borrowers, collectively, after giving effect to any initial
Revolving Credit Advances made to the Borrowers and the incurrence of any
initial Letter of Credit Obligations, with a U.S. Borrowing Availability of at
least $15,000,000 and a U.K. Borrowing Availability of at least $5,000,000 as of
the Closing Date.
(e) Payment of Fees. Borrowers shall have paid the Fees required to be
paid on the Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified in the GE Capital Fee Letter) and shall have
reimbursed Agent for all fees, costs and expenses of closing presented as of the
Closing Date.
(f) Capital Structure: Other Indebtedness. The capital structure of
each Sotheby Entity and the terms and conditions of all Indebtedness of each
Sotheby Entity shall be acceptable to Agent in its sole discretion.
(g) Due Diligence. Agent shall have completed its business and legal
due diligence with results reasonably satisfactory to Agent.
(h) Senior Notes. All Obligations and all Liens granted under the Loan
Documents shall constitute permitted indebtedness and permitted Liens, as
applicable, under the Senior Note Indenture.
(i) Syndication. Agent shall have determined that (i) there is an
absence of any material adverse change or disruption in primary or secondary
loan syndication markets, financial markets or in capital markets generally that
would likely impair syndication of the Revolving Loan and the Commitment, and
(ii) each Borrower has fully cooperated with Agent's syndication efforts,
including, without limitation, by providing Agent with information regarding
such Borrower's operations and prospects and such other information as Agent
deems necessary to successfully syndicate the Revolving Loan and the Commitment.
(j) No Material Adverse Change. Since December 31, 2002, (i) no
material adverse change has occurred in the business, financial or other
condition of Holdings and its Subsidiaries taken as a whole, the industry in
which Holdings and its Subsidiaries operates, or the collateral which will be
subject to the security interest granted to Agent and Lenders or in the
prospects of Holdings and its Subsidiaries taken as a whole, (ii) no litigation
has commenced that, in the reasonable judgment of Agent, has a material risk of
being determined adversely to the applicable Sotheby Entity and that, if so
determined, would have a material adverse impact on Holdings and its
Subsidiaries taken as a whole, their business, or their ability to repay the
Loans, (iii) no litigation has commenced that would challenge the transactions
under consideration and (iv) there has occurred no material increase in the
liabilities, liquidated or contingent, of Holdings and its Subsidiaries taken as
a whole, or a material decrease in the assets of Holdings and its Subsidiaries
taken as a whole.
27
2.2 Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Advance, convert or
continue any portion of the outstanding Revolving Loan as a LIBOR Loan or incur
any Letter of Credit Obligation, if, as of the date thereof:
(a) any representation or warranty by any Credit Party contained
herein or in any other Loan Document is untrue or incorrect as of such date as
determined by Agent or Requisite Lenders (or in the case of a representation or
warranty that is expressly made as of an earlier date, is untrue or incorrect as
of such earlier date), except for changes therein expressly permitted or
expressly contemplated by this Agreement, and Agent or Requisite Lenders have
determined not to make such Advance, convert or continue any portion of the
outstanding Revolving Loan as LIBOR Loan or incur such Letter of Credit
Obligation as a result of the fact that such warranty or representation is
untrue or incorrect;
(b) any Default or Event of Default has occurred and is continuing or
would result after giving effect to any Advance, the incurrence of any Letter of
Credit Obligation, or the conversion or continuation of any portion of the
outstanding Revolving Loan into, or as, a LIBOR Loan, and Agent or Requisite
Lenders shall have determined not to make any Advance, convert or continue any
portion of the outstanding Revolving Loan as a LIBOR Loan or incur any Letter of
Credit Obligation as a result of that Default or Event of Default;
(c) after giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations), (i) the Dollar Equivalent of the outstanding
principal amount of the aggregate Revolving Loan would exceed the Maximum Amount
less the then outstanding principal amount of the Swing Line Loan, (ii) the
aggregate outstanding principal balance of Revolving Credit Advances and Swing
Line Advances made to U.S. Borrowers and the Dollar Equivalent of the Letter of
Credit Obligations incurred for the benefit of the U.S. Borrowers would, in the
aggregate, exceed the U.S. Borrowing Base, (iii) the Dollar Equivalent of the
outstanding amount of the Letter of Credit Obligations would exceed the L/C
Sublimit, (iv) the aggregate outstanding principal amount of the Swing Line Loan
would exceed Swing Line Availability or (v) the Dollar Equivalent of the
aggregate outstanding principal balance of Revolving Credit Advances made to
U.K. Borrowers and the Dollar Equivalent of the outstanding amount of the Letter
of Credit Obligations incurred for the benefit of the U.K. Borrowers would, in
the aggregate, exceed either the Sterling Subfacility Limit or the U.K.
Borrowing Base; or
(d) notwithstanding the provisions of Annex F, the Borrowers shall not
have delivered to Agent a Borrowing Base Certificate and Art Loan Receivables
Report (accompanied in each case by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion), in each case prepared
as of (i) with respect to any Advance to be made or Letter of Credit Obligation
to be incurred during the first thirteen days of any Fiscal Month, the last of
day of the second preceding Fiscal Month or (ii) with respect to any Advance to
be made or Letter of Credit Obligation to be incurred during the remainder of
any Fiscal Month, the last day of the preceding Fiscal Month.
The request and acceptance by any Borrower of the proceeds of any Advance, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any portion of the
28
outstanding Revolving Loan into, or as, a LIBOR Loan shall be deemed to
constitute, as of the date thereof, (i) a representation and warranty by
Borrowers that the conditions in this Section 2.2 have been satisfied and (ii) a
reaffirmation by Borrowers of the cross-guaranty provisions set forth in Section
12 and of the granting and continuance of Agent's Liens, on behalf of itself and
the other Secured Parties, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties, jointly and severally, make the following
representations and warranties to Agent and each Lender with respect to all
Sotheby Entities, each and all of which shall survive the execution and delivery
of this Agreement.
3.1 Corporate Existence; Compliance with Law.
(a) Each Credit Party (i) is a corporation, limited liability company
or limited partnership (or, in the case of Sotheby's U.K., an unlimited
liability company) duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation or organization set
forth in Disclosure Schedule (3.1); (ii) is duly qualified to conduct business
and is in good standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not result in exposure to losses or
liabilities which could reasonably be expected to have a Material Adverse
Effect; (iii) has the requisite power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease and to conduct its business as now conducted or
proposed to be conducted; and (iv) is in compliance with its charter and bylaws
or partnership or operating agreement, as applicable.
(b) Each Sotheby Entity (i) subject to specific representations
regarding Environmental Laws, has all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given all
notices to, all Governmental Authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; and (ii) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law, except where
the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
3.2 Executive Offices, Collateral Locations, FEIN. As of the Closing
Date, each U.S. Credit Party's name as it appears in official filings in its
jurisdiction of incorporation or organization, jurisdiction of incorporation or
organization, organization type, organization number, if any, issued by its
jurisdiction incorporation or organization, and the current location of each
U.S. Credit Party's chief executive office and the warehouses and premises at
which any Collateral is located are set forth in Disclosure Schedule (3.2), none
of such locations has changed within the four (4) months preceding the Closing
Date and each U.S.
29
Credit Party has only one jurisdiction of incorporation or organization. In
addition, Disclosure Schedule (3.2) lists the federal employer identification
number of each U.S. Credit Party.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's power; (b) have been duly authorized by all necessary
corporate, limited liability company or limited partnership action; (c) do not
contravene any provision of any Sotheby Entity's charter, bylaws or partnership
or operating agreement as applicable; (d) do not violate any law or regulation,
or any order or decree of any court or Governmental Authority; (e) do not
conflict with or result in the breach or termination of, constitute a default
under or accelerate or permit the acceleration of any performance required by,
any indenture, mortgage, deed of trust, lease, agreement or other instrument to
which any Sotheby Entity is a party or by which any Sotheby Entity or any of its
property is bound, including, without limitation, the Senior Note Indenture and
the agreements executed in connection with the York Avenue Sale-Leaseback; (f)
do not result in the creation or imposition of any Lien upon any of the property
of any Sotheby Entity other than those in favor of Agent, on behalf of itself
and the other Secured Parties, pursuant to the Loan Documents; and (g) do not
require the consent or approval of any Governmental Authority or any other
Person. Each of the Loan Documents shall be duly executed and delivered by each
Credit Party and each such Loan Document shall constitute a legal, valid and
binding obligation of such Credit Party enforceable against it in accordance
with its terms.
3.4 Financial Disclosures. Except for the Projections, all Financial
Statements concerning the Borrowers and their Subsidiaries that are referred to
below (i) in the case of all Financial Statements concerning Holdings and its
Subsidiaries on a consolidated basis, have been prepared in accordance with GAAP
consistently applied throughout the periods covered (except as disclosed therein
and except, with respect to unaudited Financial Statements, for the absence of
footnotes and normal year-end audit adjustments) and (ii) present fairly in all
material respects the financial position of the Persons covered thereby as at
the dates thereof and the results of their operations and cash flows for the
periods then ended.
(a) Financial Statements. The following Financial Statements attached
hereto as Disclosure Schedule (3.4(a)) have been delivered on the date hereof:
(i) The audited consolidated (with respect to Holdings and its
Subsidiaries) balance sheets at December 31, 2001 and 2002 and the related
consolidated statements of income and cash flows for the Fiscal Years then
ended, which consolidated Financial Statements shall have been certified by
Deloitte & Touche LLP.
(ii) The unaudited consolidated balance sheet at December 31,
2003, and the related statement(s) of income and cash flows of Holdings and its
Subsidiaries for the Fiscal Year then ended, and the unaudited consolidating
balance sheets of Holdings and the Borrowers for the Fiscal Year then ended.
(b) Projections. The Projections delivered on the date hereof and
attached hereto as Disclosure Schedule (3.4(b)) have been prepared by the
Borrowers in light of the past operations of their businesses and reflect
projections for the fourth quarter of 2003 ending
30
December 31, 2003 and the four year period beginning on January 1, 2004 on a
quarterly basis for the year 2004 and on a year-by-year basis thereafter. The
Projections are based upon the same accounting principles as those used in the
preparation of the financial statements described above and the estimates and
assumptions stated therein, all of which the Borrowers believe to be reasonable
and fair in light of current conditions and current facts known to the Borrowers
and, as of the Closing Date, reflect the Borrowers' good faith and reasonable
estimates of the future financial performance of Holdings and its Subsidiaries
for the period set forth therein. The Projections are not a guaranty of future
performance, and actual results may differ from the Projections.
(c) Debt Disclosure. As of the Closing Date, except as set forth on
Disclosure Schedule (3.4(c)), no Sotheby Entity is liable on any "Secured Debt"
or "Attributable Debt" (in each case as defined in the Senior Note Indenture)
other than the Obligations.
3.5 Material Adverse Effect. Between December 31, 2002 and the Closing
Date: (a) except as reflected on the unaudited Financial Statements described in
Section 3.4(a)(ii), no Sotheby Entity has incurred any obligations, contingent
or noncontingent liabilities, liabilities for Charges, long-term leases or
unusual forward or long-term commitments that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (b) no contract, lease
or other agreement or instrument has been entered into by any Sotheby Entity or
has become binding upon any Sotheby Entity's assets and no law or regulation
applicable to any Sotheby Entity has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect, and (c) no Sotheby
Entity is in default and to the best of Borrowers' knowledge no third party is
in default under any material contract, lease or other agreement or instrument,
that alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect. Since December 31, 2002 no event has occurred, that alone or
together with other events, could reasonably be expected to have a Material
Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, Disclosure
Schedule (3.6) lists all of the real property owned, leased, subleased, or used
by any Credit Party (the "Real Estate") and discloses which Credit Party is the
owner or lessee of such Real Estate. Each Credit Party owns good and marketable
fee simple title to all of its owned Real Estate, and valid and marketable
leasehold interests in all of its leased Real Estate, all as described on
Disclosure Schedule (3.6), and copies of all such leases or a summary of terms
thereof reasonably satisfactory to Agent have been made available to Agent.
Disclosure Schedule (3.6) further describes any Real Estate with respect to
which any Credit Party is a lessor, sublessor or assignor as of the Closing
Date. Each Credit Party also has title to, or valid leasehold interests in, all
of its personal property and assets. As of the Closing Date, none of the
properties and assets of any Sotheby Entity are subject to any Liens other than
Permitted Encumbrances, and there are no facts, circumstances or conditions
known to any Sotheby Entity that may result in any Liens (including Liens
arising under Environmental Laws) other than Permitted Encumbrances. Disclosure
Schedule (3.6) also describes any purchase options, rights of first refusal or
other similar contractual rights pertaining to any Real Estate. As of the
Closing Date, no portion of any Credit Party's Real Estate has suffered any
material damage by fire or other casualty loss that has not heretofore been
repaired and restored in all material respects to its original condition or
otherwise remedied. As of the Closing Date, all material permits required to
have been issued or appropriate to enable the Real Estate to be lawfully
occupied and used for
31
all of the purposes for which it is currently occupied and used have been
lawfully issued and are in full force and effect.
3.7 Labor Matters. (a) Except as set forth on Disclosure Schedule 3.7,
as of the Closing Date (a) no strikes or other material labor disputes against
any Credit Party are pending or, to any Credit Party's knowledge, threatened;
(b) hours worked by and payment made to employees of each Credit Party comply
with the Fair Labor Standards Act, to the extent applicable, and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party; (d)
no Credit Party is a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement, employment agreement, bonus,
restricted stock, stock option, or stock appreciation plan or agreement or any
similar plan, agreement or arrangement other than such plans, agreements or
arrangements that are (i) entered into in the ordinary course of business or
(ii) are reflected in the consolidated Financial Statements of Holdings (and
true and complete copies of any agreements described on Disclosure Schedule
(3.7) have been made available to Agent); (e) there is no organizing activity
involving any Credit Party pending or, to any Credit Party's knowledge,
threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) there are no complaints or charges against any Credit Party
pending or, to the knowledge of any Credit Party, threatened to be filed with
any Governmental Authority or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment by
any Credit Party of any individual, which if adversely determined could
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth on Disclosure Schedule 3.7, as of the Closing
Date, with respect to each Sotheby Entity that is not a Credit Party (i) no
strikes or other material labor disputes against any such Sotheby Entity are
pending or, to any such Sotheby Entity's knowledge, threatened; (ii) hours
worked by and payment made to employees of each such Sotheby Entity comply with
the Fair Labor Standards Act, to the extent applicable, and each other federal,
state, local or foreign law applicable to such matters; (iii) all payments due
from any such Sotheby Entity for employee health and welfare insurance have been
paid or accrued as a liability on the books of such Sotheby Entity; (iv) no such
Sotheby Entity is a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement, employment agreement, bonus,
restricted stock, stock option, or stock appreciation plan or agreement or any
similar plan, agreement or arrangement other than such plans, agreements or
arrangements that are (x) entered into in the ordinary course of business or (y)
are reflected in the consolidated Financial Statements of Holdings (and true and
complete copies of any agreements described on Disclosure Schedule (3.7) have
been made available to Agent); (v) there is no organizing activity involving any
such Sotheby Entity pending or, to any such Sotheby Entity's knowledge,
threatened by any labor union or group of employees; (vi) there are no
representation proceedings pending or, to any such Sotheby Entity's knowledge,
threatened with the National Labor Relations Board, and no
32
labor organization or group of employees of any such Sotheby Entity has made a
pending demand for recognition; and (vii) there are no complaints or charges
against any such Sotheby Entity pending or, to the knowledge of any such Sotheby
Entity, threatened to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by any such Sotheby Entity of any
individual, except, in the case of each of clauses (i) through (vii), as could
not reasonably be expected to have a Material Adverse Effect.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), as of the
Closing Date, no Sotheby Entity has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. All of the issued and outstanding Stock of each Sotheby Entity is owned
by each of the Stockholders and in the amounts set forth in Disclosure Schedule
(3.8). Except as set forth in Disclosure Schedule (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Sotheby Entity may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries.
3.9 Government Regulation. No Sotheby Entity is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940. No Sotheby Entity is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, or any other federal
or state statute that restricts or limits its ability to incur Indebtedness or
to perform its obligations hereunder. The making of the Loans by Lenders to
Borrowers, the incurrence of the Letter of Credit Obligations on behalf of
Borrowers and the application of the proceeds thereof and repayment thereof will
not violate any provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission.
3.10 Margin Regulations. No Sotheby Entity is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as "Margin Stock"). No Sotheby Entity owns any Margin Stock (other than
Stock of Holdings in an amount that does not exceed 25% of the assets of
Holdings and its Subsidiaries), and none of the proceeds of the Loans or other
extensions of credit under this Agreement will be used, directly or indirectly,
for the purpose of purchasing or carrying any Margin Stock (other than Stock of
Holdings repurchased in accordance with Section 6.13), for the purpose of
reducing or retiring any Indebtedness that was originally incurred to purchase
or carry any Margin Stock or for any other purpose that might cause any of the
Loans or other extensions of credit under this Agreement to be considered a
"purpose credit" within the meaning of Regulations T, U or X of the Federal
Reserve Board. No Sotheby Entity will take or permit to be taken any action that
might cause any Loan Document to violate any regulation of the Federal Reserve
Board.
3.11 Taxes. All Federal and other material tax returns, reports and
statements, including information returns, required by any Governmental
Authority to be filed by any Sotheby Entity have been filed with the appropriate
Governmental Authority, and all
33
Charges have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof excluding Charges or
other amounts being contested in accordance with Section 5.2(b) and unless the
failure to so file or pay would not reasonably be expected to result in fines,
penalties or interest in excess of the Dollar Equivalent of $100,000 in the
aggregate. Proper and accurate amounts have been withheld by each Sotheby Entity
from its respective employees for all periods in full and complete compliance
with all applicable federal, state, local and foreign laws and such withholdings
have been timely paid to the respective Governmental Authorities. Disclosure
Schedule (3.11) sets forth as of the Closing Date those taxable years for which
any Sotheby Entity's tax returns are currently being audited by the IRS or any
other applicable Governmental Authority, and any assessments or threatened
assessments in connection with such audit, or otherwise currently outstanding.
Except as described in Disclosure Schedule (3.11), as of the Closing Date, no
Sotheby Entity has executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any Charges. None of the
Sotheby Entities and their respective predecessors are liable for any Charges:
(a) under any agreement (including any tax sharing agreements) or (b) to each
Sotheby Entity's knowledge, as a transferee. As of the Closing Date, no Sotheby
Entity has agreed or been requested to make any adjustment under IRC Section
481(a), by reason of a change in accounting method or otherwise, which would
reasonably be expected to have a Material Adverse Effect.
3.12 ERISA. (a) Disclosure Schedule (3.12(a)) lists, as of the Closing
Date, (i) all ERISA Affiliates and (ii) all Plans and separately identifies all
Pension Plans, including Title IV Plans, Multiemployer Plans, and all Retiree
Welfare Plans. Copies of all such listed Plans, together with a copy of the
latest form IRS/DOL 5500-series, as applicable, for each such Plan, have been
made available to Agent. Except with respect to Multiemployer Plans, each
Qualified Plan has been determined by the IRS to qualify under Section 401 of
the IRC, the trusts created thereunder have been determined to be exempt from
tax under the provisions of Section 501 of the IRC, and nothing has occurred
that would cause the loss of such qualification or tax-exempt status. Each Plan
is in compliance in all material respects with the applicable provisions of
ERISA, the IRC and its terms, including the timely filing of all reports
required under the IRC or ERISA. Neither any Sotheby Entity nor ERISA Affiliate
has failed to make any material contribution or pay any material amount due as
required by either Section 412 of the IRC or Section 302 of ERISA or the terms
of any such Plan. No "prohibited transaction," as defined in Section 406 of
ERISA and Section 4975 of the IRC, has occurred with respect to any Plan, that
would subject any Sotheby Entity to a material tax on prohibited transactions
imposed by Section 502(i) of ERISA or Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12(a)): (i) no Title
IV Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Sotheby Entity, threatened material claims (other than
claims for benefits in the normal course), sanctions, actions or lawsuits,
asserted or instituted against any Plan or any Person as fiduciary or sponsor of
any Plan; (iv) no Sotheby Entity or ERISA Affiliate has incurred or reasonably
expects to incur any material liability as a result of a complete or partial
withdrawal from a Multiemployer Plan; and (v) within the last five years no
Title IV Plan of any Sotheby Entity or ERISA Affiliate has been terminated,
whether or not in a "standard termination" as that term is used in Section 4041
of ERISA, nor has any Title IV Plan of any Sotheby Entity or any ERISA Affiliate
34
(determined at any time within the last five years) with material Unfunded
Pension Liabilities been transferred outside of the "controlled group" (within
the meaning of Section 4001(a)(14) of ERISA) of any Sotheby Entity or ERISA
Affiliate (determined at such time).
(c) Disclosure Schedule (3.12(c)) lists, as of the Closing Date, all
pension plans or arrangements operating in the United Kingdom through which any
Sotheby Entity currently contributes or could be required to contribute (the
"U.K. Pension Plans"). There are no amounts which are treated either under
Section 75 of the United Kingdom Pensions Act 1995 or under Section 144 of the
Pension Schemes Act 1993 as due to any other pension scheme operated in the
United Kingdom in which any Sotheby Entity has been a participating employer.
Disclosure Schedule (3.12(c)) separately identifies which of the U.K. Pension
Plans is a defined benefit plan and which is a defined contribution plan. All of
the U.K. Pension Plans are approved under Chapter 1 or Chapter 4 of Part XIV of
the United Kingdom Income and Corporation Taxes Act 1988. There is no plan of
any U.K. Credit Party (or, to the knowledge of the U.K. Credit Parties, of any
other Person having the power to amend or terminate any U.K. Pension Plan) to
amend or terminate any U.K. Pension Plan so as to give rise to any claim by the
trustees of that plan whether under the related trust deed or rules of that plan
or under Section 75 of the United Kingdom Pensions Act 1995. Contributions have
been made to the U.K. Pension Plans as required under their governing documents
in all material respects.
3.13 Litigation. (a) No action, claim, lawsuit, demand, investigation
or proceeding is now pending or, to the knowledge of any Sotheby Entity,
threatened against any Sotheby Entity, before any Governmental Authority or
before any arbitrator or panel of arbitrators (collectively, "Litigation"), (a)
that challenges any Credit Party's right or power to enter into or perform any
of its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) that has a reasonable risk of being determined adversely to any Sotheby
Entity and that, if so determined, could reasonably be expected to have a
Material Adverse Effect. Except as set forth on Disclosure Schedule (3.13(a)),
as of the Closing Date there is no Litigation pending or, to any Sotheby
Entity's knowledge, threatened (including by Persons that have previously opted
out of any class action Litigation giving rise to the Antitrust Litigation
Liabilities), that seeks damages in excess of $1,000,000 or injunctive relief
against, or alleges criminal misconduct of, any Sotheby Entity.
(b) All suits, investigations, or proceedings that have resulted in or
are expected to result in Antitrust Litigation Liabilities, and the amount and
timing of each payment or other delivery of consideration scheduled to be made
in respect of any such Antitrust Litigation Liabilities that have been settled
or otherwise resolved as of the Closing Date, are described on Disclosure
Schedule (3.13(b)). Except as set forth in Disclosure Schedule (3.13(b)), (i)
the Settlement Agreements constitute all of the settlement agreements, plea
agreements, court decisions or governmental rulings in respect of the Antitrust
Litigation Liabilities pursuant to which any Sotheby Entity has any ongoing
payment or other obligation as of the Closing Date, (ii) each Settlement
Agreement has been approved by the applicable court pursuant to final,
non-appealable court orders, (iii) all amounts due or to become due under the
Settlement Agreements have been accrued for or paid in full and (iv) the
outstanding payment of the Antitrust Litigation Liabilities is not secured by
any Lien in favor of any Governmental Authority or any Person. As of December
31, 2003, the outstanding liability of the Sotheby
35
Entities with respect to unused Discount Certificates is equal to $61,800,000,
and none of such Discount Certificates are redeemable for cash except during the
period from May 15, 2007 through May 14, 2008.
3.14 Brokers. Except as set forth on Disclosure Schedule 3.14, no
broker or finder brought about the obtaining, making or closing of the Loans,
and no Sotheby Entity or Affiliate thereof has any obligation to any Person in
respect of any finder's or brokerage fees in connection therewith.
3.15 Intellectual Property. As of the Closing Date, each Sotheby
Entity owns or has rights to use all Intellectual Property necessary to continue
to conduct its business as now conducted by it or presently proposed to be
conducted by it, and each Patent, Trademark, registered Copyright and License
owned by the Credit Parties is listed, together with the related application or
registration number, as applicable, and the owner thereof, in Disclosure
Schedule (3.15). Each Sotheby Entity conducts its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect. Except as set forth in Disclosure Schedule
(3.15), no Credit Party is aware of any material infringement claim by any other
Person with respect to any Intellectual Property owned by the Credit Parties.
3.16 Full Disclosure. No information contained in this Agreement, any
of the other Loan Documents, Financial Statements or Collateral Reports or other
written reports from time to time prepared by any Sotheby Entity and delivered
hereunder or any written statement prepared by any Sotheby Entity and furnished
by or on behalf of any Sotheby Entity to Agent or any Lender pursuant to the
terms of this Agreement contains or will, at the time of delivery thereof,
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. The
Projections delivered hereunder are based upon the estimates and assumptions
stated therein, all of which Borrowers believed at the time of delivery to be
reasonable and fair in light of current conditions and current facts known to
Borrowers as of such delivery date, and reflect Borrowers' good faith and
reasonable estimates of the future financial performance of Borrowers and of the
other information projected therein for the period set forth therein. The
Projections are not a guaranty of future performance and actual results may
differ from those set forth in the Projections. The Liens granted to Agent, on
behalf of itself and the other Secured Parties, pursuant to the Collateral
Documents will at all times be valid, fully perfected first priority security
interests in the Collateral described therein (except as otherwise set forth in
the Collateral Documents), subject, as to priority, only to Permitted
Encumbrances that would be prior to Liens in favor of Agent as a matter of law.
3.17 Environmental Matters. Except as set forth in Disclosure Schedule
(3.17), as of the Closing Date: (i) the Real Estate is free of contamination
from any Hazardous Material except for such contamination that would not
adversely impact the value or marketability of such Real Estate and that would
not result in Environmental Liabilities that could reasonably be expected to
have a Material Adverse Effect; (ii) no Sotheby Entity has caused or suffered to
occur any material Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate; (iii) the Sotheby Entities are and have
been in compliance with all Environmental Laws, except for such noncompliance
that would not result in
36
Environmental Liabilities which could reasonably be expected to have a Material
Adverse Effect; (iv) the Sotheby Entities have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws for the
operations of their respective businesses as presently conducted or as proposed
to be conducted, except where the failure to so obtain or comply with such
Environmental Permits would not result in Environmental Liabilities that could
reasonably be expected to have a Material Adverse Effect; (v) no Sotheby Entity
is involved in operations or knows of any facts, circumstances or conditions,
including any Releases of Hazardous Materials, that are likely to result in any
Environmental Liabilities of such Sotheby Entity which could reasonably be
expected to have a Material Adverse Effect; (vi) there is no Litigation arising
under or related to any Environmental Laws, Environmental Permits or Hazardous
Material that seeks damages, penalties, fines, costs or expenses that could
reasonably be expected to have a Material Adverse Effect or injunctive relief
against, or that alleges criminal misconduct by, any Sotheby Entity; and (vii)
no notice has been received by any Sotheby Entity identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Sotheby Entities, there
are no facts, circumstances or conditions that may result in any Sotheby Entity
being identified as a "potentially responsible party" under CERCLA or analogous
state statutes;
3.18 Insurance. Disclosure Schedule (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.
3.19 Deposit. Disclosure Schedule (3.19) lists all banks and other
financial institutions at which any Credit Party maintains deposit or other
accounts as of the Closing Date, and such Schedule correctly identifies the
name, address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, the complete
account number therefor and whether such account contains amounts payable to
consignors representing proceeds of the sale of consigned Works of Art.
3.20 Government Contracts. Except as set forth in Disclosure Schedule
(3.20), as of the Closing Date, no Credit Party is a party to any contract or
agreement with any Governmental Authority other than consignment agreements
entered into in the ordinary course of business and no Borrower's Art Loans are
subject to the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any
similar state or local law.
3.21 Bonding; Licenses. Except as set forth on Disclosure Schedule
(3.21), as of the Closing Date, no Sotheby Entity is a party to or bound by any
surety bond agreement or bonding requirement with respect to products or
services sold by it or any trademark or patent license agreement with respect to
products sold by it.
3.22 Solvency. Both before and after giving effect to (a) the Loans
and Letter of Credit Obligations to be made or incurred on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or incurred, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower Representative; (c) the Refinancing;
and (d) the payment and accrual of all transaction costs in connection with the
foregoing, (i) each Credit Party is and will be Solvent and (ii) Holdings and
its Subsidiaries, on a consolidated basis, are and will be Solvent.
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3.23 Sale-Leasebacks. No Sotheby Entity is a party to any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets except the York Avenue Sale-Leaseback. None of the Indebtedness incurred
by Holdings in respect of the York Avenue Sale-Leaseback constitutes
"Attributable Debt" (as defined in the Senior Note Indenture).
3.24 Current Employees. As of the Closing Date, no current officer,
director or other employee of any Sotheby Entity was aware of, or involved in,
the events giving rise to the Antitrust Litigation Liabilities at the time such
events occurred.
3.25 U.S. Money-Laundering and Terrorism Regulatory Matters.
(a) No Sotheby Entity or any Affiliate of any Sotheby Entity, nor any
of their respective officers or directors or any of their respective brokers,
investors or other agents acting or benefiting in any capacity in connection
with Loans, is a Prohibited Person.
(b) No Sotheby Entity or any of Affiliate of any Sotheby Entity, nor
any of their respective officers or directors (in performing their
responsibilities as such officers and directors) (i) to such Sotheby Entity's
knowledge after due inquiry, has conducted or will conduct any business or has
engaged or will engage in any transaction or dealing with any Prohibited Person,
including making or receiving any contribution of funds, goods or services to or
for the benefit of any Prohibited Person, (ii) to such Sotheby Entity's
knowledge after due inquiry, has dealt or will deal in, or otherwise has engaged
or will engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order or (iii) has engaged or will
engage in or has conspired or will conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the requirements or prohibitions set forth in the Exhibit Order
or the PATRIOT Act.
(c) Each Sotheby Entity and its Affiliates, and their respective
officers and directors (in performing their responsibilities as such officers
and directors) are in full compliance with all applicable orders, rules and
regulations issued by, and recommendations of, the U.S. Department of the
Treasury and OFAC pursuant to IEEPA, the PATRIOT Act, other legal requirements
relating to money laundering or terrorism and any executive orders related
thereto.
(d) Each Borrower has established an anti-money laundering and/or
economic sanctions program and/or procedures in accordance with all applicable
laws, rules and regulations of its own jurisdiction including, without
limitation, where applicable, the PATRIOT Act. Each Borrower applies its
anti-money laundering program and/or procedures to all Art Loan Debtors.
(e) Each Borrower has taken appropriate due diligence efforts to know
each Art Loan Debtor to which it has advanced, or committed to advance, Art
Loans, including whether such Art Loan Debtor is a Prohibited Person. Each
Borrower has taken appropriate due diligence efforts to know if any such Art
Loan Debtor is a "Senior
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Foreign Political Figure" (as defined in the PATRIOT Act) and, to the extent
that any Art Loan Debtor is a Senior Foreign Political Figure, has disclosed
such information to Agent.
(f) Each Borrower does not believe, and after appropriate due
diligence, has no reason to believe, that any of its Art Loan Debtors is a
"Prohibited Foreign Shell Bank" (as defined in the PATRIOT Act), or is named on
any available lists of known or suspected terrorists, terrorist organizations or
of other sanctioned person issued by the United States government and/or the
government(s) of any jurisdiction(s) in which such Borrower is doing business.
(g) Each Sotheby Entity has adopted reasonable procedures in
accordance with applicable law as of the Closing Date to elicit information that
substantiates the statements contained in this Section 3.25.
3.26 U.S. Lending and Auction Regulatory Matters.
(a) Each Credit Party that makes or owns Art Loans is in material
compliance with, and each Art Loan has been made and remains in material
compliance with, all applicable provisions of federal, state and local laws
imposed upon lenders with respect to usury or other interest or finance charge
limitations, finance company licensing, consumer credit disclosure, consumer
credit collection practices, and similar laws and regulations.
(b) Sotheby's, Inc. and each other Credit Party that conducts auctions
in the City of New York is in material compliance with, and each employee
thereof who conducts auction in New York City maintains a valid license under,
the City of New York's Auctioneer Rules (Title 20, Chapter 2, Subchapter 13) and
any applicable similar laws of other jurisdictions. Sotheby's U.K. and each
other Credit Party which conducts auctions in the City of London is in material
compliance with, and maintains valid licenses (if required) under, all laws,
regulations and auctioneer's licensing requirements applicable in such city and
the United Kingdom, if any. None of the City of New York, the City of London nor
any other Governmental Authority, within the past 5 years, has alleged that
Sotheby's, Inc., Sotheby's U.K. or any other Credit Party is or was not in
compliance in any material respect with any such laws or regulations.
3.27 English Regulatory Matters.
(a) Each U.K. Credit Party has in place as required by law anti-money
laundering policies and procedures in accordance with the Money Laundering
Regulations 1993 and Money Laundering Regulations 2001, the Anti-Terrorism Crime
and Security Act 2001, the Proceeds of Crime Act 2002, the recommendations of
the Joint Money Laundering Steering Group and any other laws, rules or
regulations relating to money laundering in the United Kingdom that are
applicable to such U.K. Credit Party. Each U.K. Credit Party will provide a copy
of any written policies and procedures to Agent upon request.
39
(b) Each U.K. Credit Party will adopt appropriate policies and
procedures to be compliant in all material respects with the Money Laundering
Regulations 2003 when they come into force as required under such legislation.
(c) Each U.K. Credit Party is in compliance in all material respects
and at all times throughout the term of this Agreement shall be in compliance in
all material respects with all its anti-money laundering policies and procedures
in accordance with all applicable laws, rules, regulations or recommendations.
(d) SFS Ltd. maintains all consents, approvals, authorizations and
other orders of United Kingdom regulatory authorities required for the creation,
execution and performance of the documents giving rise to its Art Loans.
(e) SFS Ltd. is, and will at all times during the term of this
Agreement be, in compliance in all material respects with the Consumer Credit
Act 1974 and all applicable regulations and rules from time to time in effect
thereunder or in connection therewith.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices.
(a) Each Credit Party hereby agrees that from and after the Closing
Date and until the Termination Date, it shall deliver to Agent or to Agent and
Lenders, as required, the Financial Statements, notices, Projections and other
information at the times, to the Persons and in the manner set forth in Annex E.
(b) Each Credit Party hereby agrees that, from and after the Closing
Date and until the Termination Date, it shall deliver to Agent or to Agent and
Lenders, as required, the various Collateral Reports (including Borrowing Base
Certificates in the form of Exhibit 4.1(A) and Art Loan Receivables Reports in
the form of Exhibit 4.1(B) at the times, to the Persons and in the manner set
forth in Annex F and Section 2.2(d).
4.2 Communication with Accountants. Each Credit Party authorizes (a)
Agent and (b) so long as an Event of Default has occurred and is continuing,
each Lender, to communicate directly with its independent certified public
accountants, including Deloitte & Touche LLP, and authorizes such accountants
and advisors to (and, upon Agent's request therefor, shall request that such
accountants and advisors) communicate to Agent and each Lender information
relating to any Sotheby Entity with respect to the business, results of
operations and financial condition of any Sotheby Entity.
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5. AFFIRMATIVE COVENANTS
Each Credit Party jointly and severally agrees as to all Sotheby
Entities that from and after the date hereof and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Each Sotheby
Entity shall: do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate, partnership or limited liability company
existence and its material rights and franchises, except as otherwise permitted
under Section 6.1; continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder; at all times maintain, preserve
and protect all of its assets and properties used or useful in the conduct of
its business, and keep the same in good repair, working order and condition in
all material respects (taking into consideration ordinary wear and tear) and
from time to time make, or cause to be made, all necessary or appropriate
repairs, replacements and improvements thereto consistent with industry
practices; and transact business only in such corporate and trade names as are
set forth in Disclosure Schedule (5.1) or any supplemental disclosure schedule
delivered to Agent pursuant to the Collateral Documents.
5.2 Payment of Charges.
(a) Subject to Section 5.2(b), each Sotheby Entity shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, (ii) lawful
claims for labor, materials, supplies and services or otherwise, and (iii) all
storage or rental charges payable to warehousemen or bailees, in each case,
before any thereof shall become past due, except in the case of clauses (ii) and
(iii) where the failure to pay or discharge such Charges would not result in
aggregate liabilities in excess of $200,000.
(b) Each Sotheby Entity may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Sotheby Entity, in accordance with
GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other
than payments to warehousemen and/or bailees) that is superior to any of the
Liens securing the Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges; (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest; and (iv) such Sotheby Entity
shall promptly pay or discharge such contested Charges or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence reasonably acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Sotheby Entity or the conditions set forth in this Section 5.2(b) are no longer
met.
5.3 Books and Records. Each Sotheby Entity shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made. Holdings shall keep adequate
books and records with respect to the business activities of Holdings and its
Subsidiaries on a consolidated basis in which proper
41
entries, reflecting all financial transactions, are made in accordance with GAAP
and on a basis consistent with the Financial Statements attached as Disclosure
Schedule (3.4(a)).
5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense, maintain
the policies of insurance described on Disclosure Schedule (3.18) as in effect
on the date hereof or otherwise in form and amounts and with insurers reasonably
acceptable to Agent. Such policies of insurance (or the loss payable and
additional insured endorsements delivered to Agent) shall contain provisions
pursuant to which the insurer agrees to provide thirty (30) days prior written
notice to Agent in the event of any non-renewal, cancellation or amendment of
any such insurance policy. Each Sotheby Entity that is not a Credit Party shall,
at its sole cost and expense, maintain policies of insurance with financially
sound and reputable insurance companies in such amounts, and covering such
risks, as is consistent with sound business practice. If any Sotheby Entity at
any time or times hereafter shall fail to obtain or maintain any of the policies
of insurance required above, or to pay all premiums relating thereto, Agent may
at any time or times thereafter obtain and maintain such policies of insurance
and pay such premiums and take any other action with respect thereto that Agent
deems advisable. Agent shall have no obligation to obtain insurance for any
Sotheby Entity or pay any premiums therefor. By doing so, Agent shall not be
deemed to have waived any Default or Event of Default arising from any Sotheby
Entity's failure to maintain such insurance or pay any premiums therefor. All
sums so disbursed, including reasonable attorneys' fees, court costs and other
charges related thereto, shall be payable on demand by Borrowers to Agent and
shall be additional Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time upon any change in any
Sotheby Entity's risk profile (including any change in the product mix
maintained by any Sotheby Entity or any laws affecting the potential liability
of such Sotheby Entity) to require additional forms and limits of insurance to,
in Agent's opinion, adequately protect both Agent's and the Secured Parties'
interests in all or any portion of the Collateral and to ensure that each
Sotheby Entity is protected by insurance in amounts and with coverage customary
for its industry. If reasonably requested by Agent, each Sotheby Entity shall
deliver to Agent from time to time a report of a reputable insurance broker,
reasonably satisfactory to Agent, with respect to its insurance policies.
(c) Each Credit Party shall deliver to Agent, in form and substance
reasonably satisfactory to Agent, endorsements to (i) all "All Risk" and
business interruption insurance naming Agent, on behalf of itself and the other
Secured Parties, as a loss payee, and (ii) all general liability and other
liability policies naming Agent, on behalf of itself and the other Secured
Parties, as additional insured. Each Credit Party irrevocably makes, constitutes
and appoints Agent (and all officers, employees or agents designated by Agent),
so long as any Default or Event of Default has occurred and is continuing or the
anticipated insurance proceeds exceed the Dollar Equivalent of $750,000, as such
Credit Party's true and lawful agent and attorney-in-fact for the purpose of
making, settling and adjusting claims under such "All Risk" policies of
insurance, endorsing the name of such Credit Party on any check or other item of
payment for the proceeds of such "All Risk" policies of insurance and for making
all determinations and decisions with respect to such "All Risk" policies of
insurance. Agent shall
42
have no duty to exercise any rights or powers granted to it pursuant to the
foregoing power-of-attorney. Borrower Representative shall promptly notify Agent
of any loss, damage, or destruction to the Collateral in the amount of $750,000
or more, whether or not covered by insurance. After deducting from such proceeds
(i) the expenses incurred by Agent in the collection or handling thereof, and
(ii) amounts required to be paid to creditors (other than Lenders) having
Permitted Encumbrances, Agent (A) may, except to the extent such proceeds are
not required to applied to prepayment of the Secured Obligations pursuant to
Section 1.3(c), at its option, (x) apply any such proceeds to the reduction of
the Secured Obligations in accordance with Section 1.3(d) or (e), as applicable,
or (y) permit or require the applicable Credit Party to use such money, or any
part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction and (B)
shall, to the extent such proceeds are not required to be applied to prepayment
of the Secured Obligations pursuant to Section 1.3(c), remit such proceeds to
the applicable Credit Party. Notwithstanding the foregoing, if the casualty
giving rise to such insurance proceeds could not reasonably be expected to have
a Material Adverse Effect and such insurance proceeds do not have a Dollar
Equivalent in excess of $750,000 in the aggregate, Agent shall permit the
applicable Credit Party to replace, restore, repair or rebuild the property;
provided that if such Credit Party shall not have completed or entered into
binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent may apply such insurance
proceeds to the Secured Obligations in accordance with Section 1.3(d) or (e).
All insurance proceeds that are to be made available to any Borrower to replace,
repair, restore or rebuild the Collateral in lieu of a required prepayment of
the Secured Obligations shall be applied by Agent to reduce the outstanding
principal balance of the Revolving Loan in accordance with Section 1.3(d) or
(e), as applicable (which application shall not result in a permanent reduction
of the Commitment), and upon such application, Agent shall establish a Reserve
against the applicable Borrowing Base in an amount equal to the amount of such
proceeds so applied. All insurance proceeds made available to any Credit Party
that is not a Borrower to replace, repair, restore or rebuild Collateral in lieu
of a required prepayment of the Secured Obligations shall be deposited in a cash
collateral account. Thereafter, such funds shall be made available to that
Credit Party to provide funds to replace, repair, restore or rebuild the
Collateral as follows: (i) Borrower Representative shall request a Revolving
Credit Advance or a release from the cash collateral account be made to such
Borrower or Credit Party in the amount requested to be released; (ii) so long as
the conditions set forth in Section 2.2 have been met, Lenders shall make such
Revolving Credit Advance or Agent shall release funds from the cash collateral
account; and (iii) in the case of insurance proceeds applied against the
Revolving Loan, the Reserve established with respect to such insurance proceeds
shall be reduced by the amount of such Revolving Credit Advance. To the extent
not used to replace, repair, restore or rebuild the Collateral, such insurance
proceeds shall be applied in accordance with Section 1.3(d) or (e), as
applicable.
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5.5 Compliance with Laws. Each Sotheby Entity shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to ERISA, labor, consumer lending, usury, debt
collection, auctioneers, Environmental Laws and Environmental Permits, except to
the extent that the failure to comply, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
5.6 Supplemental Disclosure. From time to time as may be reasonably
requested by Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of an Event of Default) or at
Credit Parties' election, the Credit Parties shall supplement each Disclosure
Schedule hereto, or any representation herein or in any other Loan Document,
with respect to any matter hereafter arising that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such Disclosure Schedule or as an exception to such representation
or that is necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
or be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and Requisite Lenders
in writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.
5.7 Intellectual Property. Each Sotheby Entity will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect and shall
comply in all material respects with the terms of its Licenses.
5.8 Environmental Matters. Each Sotheby Entity shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to or from any of
its Real Estate in all material respects; (c) notify Agent promptly after such
Sotheby Entity becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to or from any
Real Estate that is reasonably likely to result in Environmental Liabilities
that could reasonably be expected to have a Material Adverse Effect; and (d)
promptly forward to Agent a copy of any order, notice, request for information
or any communication or report received by such Sotheby Entity in connection
with any such violation or Release or any other matter relating to any
Environmental Laws or Environmental Permits that could reasonably be expected to
result in Environmental Liabilities that could reasonably be expected to have a
Material Adverse Effect, in each case whether or not the Environmental
Protection Agency or any Governmental Authority has taken or threatened any
action in connection with any such violation, Release or other matter. If Agent
at any time has a reasonable basis to believe that there may be a violation
44
of any Environmental Laws or Environmental Permits by any Sotheby Entity or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to or from any of its Real Estate, that, in each case,
could reasonably be expected to have a Material Adverse Effect, then each
Sotheby Entity shall, upon Agent's written request (i) cause the performance of
such environmental audits including subsurface sampling of soil and groundwater,
and preparation of such environmental reports, at Borrowers' expense, as Agent
may from time to time reasonably request, subject to any leases, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance reasonably acceptable to Agent, and
(ii) permit Agent or its representatives to have access to all Real Estate for
the purpose of conducting such environmental audits and testing as Agent deems
appropriate, including subsurface sampling of soil and groundwater. Borrowers
shall reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.
5.9 Landlords' Agreements, Bailee Letters and Real Estate Purchases.
Unless Agent shall otherwise consent, each Credit Party shall, upon request of
Agent, use commercially reasonable efforts to obtain a landlord's agreement or
bailee letter, as applicable, from the lessor of each leased property or bailee
with respect to any warehouse, processor or converter facility or other location
where Collateral having a book value the Dollar Equivalent of which is greater
than $1,000,000 is stored or located, which agreement or letter shall contain a
waiver or subordination of all Liens or claims that the landlord, mortgagee or
bailee may assert against the Collateral at that location, and shall otherwise
be reasonably satisfactory in form and substance to Agent. After the Closing
Date, if any Credit Party proposes to lease during any Fiscal Year any real
property locations or warehouse spaces (or alter the use of any leased location
to materially increase the Collateral stored or located at such location) where
Collateral having a book value the Dollar Equivalent of which is greater than
$1,000,000 in the aggregate will be stored or located, such Credit Party shall
first notify Agent thereof and, upon request of Agent, provide to Agent a
landlord agreement or bailee letter, as appropriate, with respect to such
location, in form and substance reasonably satisfactory to Agent. Each Credit
Party shall timely and fully pay and perform its obligations under all leases
and other agreements with respect to each leased location or public warehouse
where any Collateral is or may be located. To the extent otherwise permitted
hereunder, if any Credit Party proposes to acquire a fee ownership interest in
Real Estate after the Closing Date, such Credit Party shall first notify Agent
thereof and, upon request of Agent, provide to Agent a mortgage or deed of trust
granting Agent a first priority security interest on such Real Estate, together
with environmental audits, mortgage title insurance commitment, real property
survey, local counsel opinion(s), supplemental casualty insurance and flood
insurance, and such other documents, instruments or agreements reasonably
requested by Agent, in each case, in form and substance reasonably satisfactory
to Agent.
5.10 U.S. Lending and Auction Regulatory Matters.
(a) Each Credit Party remains in material compliance with all
applicable provisions of federal, state and local laws imposed upon lenders with
respect to usury or other interest or finance charge limitations, finance
companies, finance company licensing, consumer credit disclosure, consumer
credit collection practices, and similar laws and regulations.
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(b) Sotheby's, Inc. and each other Credit Party that conducts auctions
in the City of New York shall remain in material compliance with, and maintain a
valid license under, the City of New York's Auctioneer Rules (Title 20, Chapter
2, Subchapter 13) and any applicable similar laws of other jurisdictions.
Sotheby's U.K. and each other Credit Party that conducts auctions in the City of
London shall remain in material compliance with, and maintain valid licenses
under, all laws, regulations and auctioneer's licensing requirements applicable
in such city and the United Kingdom, if any.
5.11 Further Assurances. Each Credit Party agrees that it shall and
shall cause each other Sotheby Entity to, at such Credit Party's expense and
upon the reasonable request of Agent, duly execute and deliver, or cause to be
duly executed and delivered, to Agent such further instruments and do and cause
to be done such further acts as may be necessary or proper in the reasonable
opinion of Agent to carry out more effectively the provisions and purposes of
this Agreement and each Loan Document.
5.12 Art Loans. Each Borrower, in connection with each Art Loan made
or to be made by it, shall (i) apply credit standards and loan to collateral
value requirements, (ii) follow practices with respect to documentation,
perfection and protection of security interests and (iii) follow practices with
respect to classification of Art Loans as non-accrual, as such standards,
requirements and practices are generally applied and followed in the Borrowers'
art lending business prior to the Closing Date.
5.13 Money-Laundering and Terrorism Regulatory Matters.
(a) Each Sotheby Entity shall remain in compliance in all material
respects with all applicable orders, rules and regulations issued by the U.S.
Department of the Treasury and OFAC pursuant to IEEPA, the PATRIOT Act, other
legal requirements relating to money laundering or terrorism and any executive
orders related thereto.
(b) Each Sotheby Entity is advised that, by law, Agent and the Lenders
may be obligated to "freeze its account", either by prohibiting additional
Revolving Credit Advances or Letter of Credit Obligations, declining any
withdrawal, redemption or transfer request(s) with respect to any deposit
account under the control of Agent or the Lenders and/or segregating assets, in
compliance with government regulations, and Agent and the Lenders may also be
required to report such action to governmental or regulatory authorities,
including OFAC.
(c) Each Borrower shall maintain an anti-money laundering and/or
economic sanctions program and/or procedures in accordance with all applicable
laws, rules and regulations of its own jurisdiction including, without
limitation, where applicable, the PATRIOT Act. Each Borrower shall apply its
anti-money laundering program and/or procedures to all Art Loan Debtors and
shall take appropriate steps in accordance with the laws of its own jurisdiction
to ensure that all required relevant documentation is retained, including
identification related to such Art Loan Debtors in accordance with its
anti-money laundering and/or economic sanctions program. Each Borrower shall
adopt appropriate policies, procedures and internal controls to be compliant in
all material respects with any additional laws, rules or regulations relating to
46
money laundering and/or terrorism, including the PATRIOT Act, to which it may
become subject.
(d) Each Borrower shall take appropriate due diligence efforts to know
each Art Loan Debtor to which it shall advance, or commit to advance, Art Loans,
including whether such Art Loan Debtor is a Prohibited Person. Each Borrower
shall take appropriate due diligence efforts to know if any such Art Loan Debtor
is a "Senior Foreign Political Figure" (as defined in the PATRIOT Act) and, to
the extent that any investor is a Senior Foreign Political Figure, shall
disclose such information to Agent.
(e) Each Sotheby Entity will notify or report unusual or suspicious
activity to the extent required by the laws or requirements of its own
jurisdiction including, where applicable, the PATRIOT Act.
(f) Each Sotheby Entity shall deliver to Agent any certification or
other evidence requested from time to time by Agent in its sole discretion,
confirming such Sotheby Entity's compliance with this Section 5.13 and the
representations and warranties made by such Sotheby Entity pursuant to Section
3.25.
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5.14 Syndication. The Borrowers shall fully cooperate with and assist
Agent's syndication efforts until the syndication of the Commitment shall cease
in accordance with Section 1.1(a)(iv). Such assistance shall include, but not be
limited to (i) prompt assistance in the preparation of an information memorandum
and the verification of the completeness and accuracy of the information
contained therein; (ii) preparation of offering materials and projections by
Borrowers and their advisors; (iii) providing Agent and its affiliates with all
information reasonably deemed necessary by such Persons to successfully complete
the syndication; (iv) confirmation as to the accuracy and completeness of such
offering materials, information and projections; (v) participation of the
Borrowers' senior management in meetings and conference calls with potential
lenders at such times and places as Agent and its affiliates may reasonably
request; and (vi) using best efforts to ensure that the syndication efforts
benefit from Borrowers' existing lending relationships.
5.15 New Subsidiaries. Upon (i) any Person becoming a Subsidiary of
any Credit Party or (ii) any Subsidiary of any Credit Party becoming a Domestic
Subsidiary or a Foreign Subsidiary organized under the laws of England, (a) if
such Person is a Domestic Subsidiary, such Person shall become party to the
Domestic Subsidiary Guaranty, the U.S. Security Agreement, the U.S. Pledge
Agreement and such further Collateral Documents as Agent shall reasonably
request; (b) if such Person is a Foreign Subsidiary organized under the laws of
England, such Person shall become party to a Guaranty with respect to the
Obligations of the U.K. Borrowers and such Collateral Documents as Agent shall
reasonably request; and (c) the outstanding Stock of such Person shall be
pledged to Agent, for the benefit of the Secured Parties, pursuant to such
Collateral Documents as Agent shall reasonably request; provided, that any
bankruptcy-remote entity formed for the purpose of, and whose sole business
activity is, owning and licensing some or all of the Trademarks described on
Disclosure Schedule 5.15 (the "Real Estate Trademarks") shall not be required to
execute or become a party to any Loan Documents; .
5.16 U.K. Collateral Ownership. No U.K. Credit Party other than SFS
Ltd. shall own any Art Loans. SFS Ltd. shall not, and Holdings, Sotheby's, Inc.,
Oatshare and Sotheby's U.K. shall not permit SFS Ltd. to, at any time prior to
the Termination Date constitute a "Significant Subsidiary" (as defined in the
Senior Note Indenture).
5.17 Immaterial Subsidiaries. Each Immaterial Subsidiary (i) as of the
Closing Date, owns assets having a book value of which the Dollar Equivalent is
less than $100,000 and (ii) had earnings during the 2003 Fiscal Year of which
the Dollar Equivalent was less than $100,000.
5.18 U.K. Mortgages. Within 90 days after the Closing Date, unless
otherwise agreed by Agent, the U.K. Credit Parties shall grant a lien and
security interest to Agent, for the benefit of itself and the Lenders, in each
of the items of Real Estate listed on Disclosure Schedule (5.18) owned or leased
by the U.K. Credit Parties, subject to the U.K. Credit Parties obtaining any
consents required to be obtained from the lessors of any such leased properties.
The U.K. Credit Parties shall use their best efforts (in the reasonable judgment
of Agent) to obtain such consents; provided, that such best efforts shall not
require the payment of any material (in the reasonable judgment of Agent) sum of
money. Such security interests and liens referred to in the foregoing sentence
shall be subject to such real estate mortgages and
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related closing documents as may be reasonably satisfactory to Agent. In
addition, the U.K. Credit Parties shall provide Agent with such information as
may be reasonably requested to facilitate Agent's creation and documentation of
such security interests and liens.
6. NEGATIVE COVENANTS
Each Credit Party jointly and severally agrees as to all Sotheby
Entities that from and after the date hereof until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. No Sotheby Entity shall directly or
indirectly, by operation of law or otherwise, (a) acquire, liquidate or dissolve
any Subsidiary or (b) merge with, consolidate with, acquire all or substantially
all of the assets or Stock of, or otherwise combine with or acquire, any Person,
except that any Sotheby Entity may merge with another Sotheby Entity; provided,
that (i) Borrower Representative shall be the survivor of any such merger to
which it is a party, (ii) any Borrower shall be the survivor of any such merger
with any Sotheby Entity that is not a Borrower and (iii) any Guarantor shall be
the survivor of any such merger with any Sotheby Entity that is not a Credit
Party; provided, further, that any Sotheby Entity may dissolve or liquidate any
Subsidiary thereof that is not a Borrower.
6.2 Investments; Loans and Revolving Credit Advances. Except as
otherwise expressly permitted by this Section 6, no Sotheby Entity shall make or
permit to exist any investment in, or make, accrue or permit to exist loans or
advances of money to, any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except that: (a) Borrowers may hold
investments comprised of notes payable, or stock or other securities issued by
Account Debtors to any Borrower pursuant to negotiated agreements with respect
to settlement of such Account Debtor's Accounts in the ordinary course of
business consistent with past practices; (b) each Sotheby Entity may (i)
maintain its existing investments in its Subsidiaries and joint ventures as of
the Closing Date, (ii) make investments after the Closing Date in any Credit
Party, (iii) if such Sotheby Entity is not a Credit Party, make investments
after the Closing Date in any other Sotheby Entity (other than any Immaterial
Subsidiary) or (iv) make those investments described in Disclosure Schedule
(6.2); (c) the Sotheby Entities may make investments after the Closing Date not
to exceed a Dollar Equivalent of $5,000,000 in the aggregate in joint ventures
and other Sotheby Entities (other than any Immaterial Subsidiary) to the extent
investments in such other Sotheby Entities are not permitted pursuant to the
foregoing clause (b) or Section 6.3(a)(vi)); (d) so long as Agent has not
delivered an Activation Notice with respect to any Blocked Account of a Sotheby
Entity and no Default or Event of Default has occurred and is continuing, such
Sotheby Entity may make investments in Cash Equivalent Investments; (e) any
Borrower may make, or commit to make, Art Loans; and (f) other investments
(other than in any Immaterial Subsidiary) not exceeding $250,000 in the
aggregate at any time outstanding.
6.3 Indebtedness.
(a) No Sotheby Entity shall create, incur, assume or permit to exist
any Indebtedness, except (without duplication):
49
(i) Indebtedness in connection with the York Avenue Sale-Leaseback;
(ii) the Senior Notes;
(iii) Indebtedness secured by purchase money security interests and
Capital Leases permitted in Section 6.7(c);
(iv) the Loans and the other Obligations;
(v) existing Indebtedness described in Disclosure Schedule (6.3) and
refinancings thereof or amendments or modifications thereto that do not
have the effect of increasing the principal amount thereof or reducing the
average life thereof and that are otherwise on terms and conditions no less
favorable to any Sotheby Entity, Agent or any Lender, as determined by
Agent, than the terms of the Indebtedness being refinanced, amended or
modified;
(vi) Indebtedness consisting of intercompany loans and advances made
by any Sotheby Entity to any other Sotheby Entity (other than any
Immaterial Subsidiary); provided, that: (A) in the case of any intercompany
loan or advance owing to any Credit Party after the date 90 days after the
Closing Date, any Sotheby Entity receiving the proceeds of such loan or
advance shall have executed and delivered to the applicable Credit Party a
demand note (collectively, the "Intercompany Notes") to evidence any such
intercompany Indebtedness owing at any time by such Sotheby Entity, which
Intercompany Notes shall be in form and substance reasonably satisfactory
to Agent and shall be pledged and delivered to Agent pursuant to the
applicable Collateral Document as additional collateral security for the
applicable Secured Obligations; (B) each Sotheby Entity shall record all
intercompany transactions on its books and records in a manner reasonably
satisfactory to Agent; (C) the obligations of each Credit Party under any
such intercompany loans and advances shall be subordinated to the
Obligations of such Credit Party hereunder and under the other Loan
Documents in a manner reasonably satisfactory to Agent; (D) with respect to
any intercompany loan or advance made after the Closing Date, at the time
any such intercompany loan or advance is made by any Sotheby Entity to any
other Sotheby Entity and after giving effect thereto, (i) each such Sotheby
Entity shall be Solvent or (ii)(x) such intercompany loan or advance shall
be made in the ordinary course of business, (y) if the Sotheby Entity
making such intercompany loan or advance is a Credit Party, such Credit
Party shall be Solvent and (z) the Sotheby Entity receiving such
intercompany loan or advance shall have no Funded Debt other than
intercompany loans or advances outstanding to other Sotheby Entities; and
(E) no Default or Event of Default would occur and be continuing after
giving effect to any such proposed intercompany loan or advance;
(vii) Indebtedness arising in respect of surety bonds, guaranties and
letters of credit with respect to obligations of the Foreign Subsidiaries
incurred in the ordinary course of business that are not Funded Debt;
(viii) Indebtedness arising under Rate Management Transactions;
provided, that such Rate Management Transactions are (or were) entered into
in the ordinary course of
50
such Sotheby Entity's business for the purpose of mitigating risks
associated with liabilities, commitments, investments, assets, earnings or
properties held or reasonably anticipated by such Sotheby Entity and not
for purposes of speculation; or
(ix) Overdraft credit lines extended to various Sotheby Entities in
the ordinary course of business, which overdraft credit lines extended to
the Credit Parties shall not exceed $5,000,000 in the aggregate at any one
time outstanding.
(b) No Sotheby Entity shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness prior to its scheduled
maturity, other than (i) the Obligations; (ii) Indebtedness secured by a
Permitted Encumbrance if the asset securing such Indebtedness has been sold or
otherwise disposed of in accordance with Sections 6.8; (iii) Indebtedness
permitted by Section 6.3(a)(v) upon any refinancing thereof in accordance with
Section 6.3(a)(v); and (iv) repayment by any Sotheby Entity of intercompany
loans and advances outstanding to any Sotheby Entity.
6.4 Employee Loans and Affiliate Transactions.
(a) Except as disclosed in Disclosure Schedule 6.4(a), no Sotheby
Entity shall enter into or be a party to any transaction with any other Sotheby
Entity or any Affiliate thereof except in the ordinary course of and pursuant to
the reasonable requirements of such Sotheby Entity's business and, in the case
of any transaction with any Affiliate thereof (other than another Sotheby
Entity), upon fair and reasonable terms that are no less favorable to such
Sotheby Entity than would be obtained in a comparable arm's length transaction
with a Person not an Affiliate of such Sotheby Entity.
(b) No Sotheby Entity shall enter into any lending or borrowing
transaction with any employees of any Sotheby Entity, except loans to its
respective employees in the ordinary course of business consistent with past
practices for travel and entertainment expenses, relocation costs and similar
purposes and stock option financing up to a maximum of a Dollar Equivalent of
$2,000,000 in the aggregate at any one time outstanding.
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6.5 Capital Structure and Business. If all or part of a Sotheby
Entity's Stock is pledged to Agent, that Sotheby Entity shall not issue
additional Stock unless, upon issuance thereof, such Stock is immediately
pledged (and any related security certificates delivered) by the holder thereof
to Agent pursuant to the applicable Collateral Documents. No Sotheby Entity
shall amend its charter or bylaws in a manner that would adversely affect Agent
or Lenders or such Sotheby Entity's duty or ability to repay the Obligations. No
Sotheby Entity shall engage in any business other than the businesses currently
engaged in by it or businesses reasonably related thereto.
6.6 Guaranteed Indebtedness. No Sotheby Entity shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Sotheby Entity, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Sotheby Entity if the primary obligation with respect thereto is not
prohibited by this Agreement.
6.7 Liens. No Sotheby Entity shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other properties
or assets (whether now owned or hereafter acquired) except for (a) Permitted
Encumbrances; (b) Liens (i) in existence on the date hereof, (ii) if such
property or assets are owned by a Credit Party, summarized on Disclosure
Schedule (6.7) and (iii) securing the Indebtedness described on Disclosure
Schedule (6.3) and refinancings, extensions and renewals thereof, including
extensions or renewals of any such Liens; provided, that the principal amount of
the Indebtedness so secured is not increased and the Lien does not attach to any
other property; (c) Liens securing payment of obligations described in Section
6.3(a)(vii); provided, that such Liens shall not attach to any property other
than cash on deposit with, or under the control of, the holder of such
Indebtedness; and (d) Liens created after the date hereof by conditional sale or
other title retention agreements (including Capital Leases) or in connection
with purchase money Indebtedness with respect to Equipment and Fixtures acquired
by any Sotheby Entity in the ordinary course of business, involving the
incurrence of an aggregate amount of purchase money Indebtedness and Capital
Lease Obligations of not more than a Dollar Equivalent of $1,500,000 outstanding
at any one time for all such Liens (provided that such Liens attach only to the
assets subject to such purchase money debt and such Indebtedness is incurred
within forty-five (45) days following such purchase and does not exceed 100% of
the purchase price of the subject assets). In addition, no Credit Party shall
become a party to any agreement, note, indenture or instrument, or take any
other action after the Closing Date that would prohibit the creation of a Lien
on any of its properties or other assets in favor of Agent, on behalf of itself
and the other Secured Parties, as additional collateral for the applicable
Secured Obligations, except operating leases, Capital Leases, Licenses or
agreements relating to purchase money Indebtedness which prohibit Liens upon the
assets that are subject thereto.
6.8 Sale of Stock and Assets. No Sotheby Entity shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the Stock of any of its Subsidiaries (whether in a public or a private
offering or otherwise) or any of its Accounts, other than (a) the sale of
Inventory in the ordinary course of business, (b) the sale other disposition by
a Sotheby Entity of Equipment or Fixtures that are obsolete or no longer used or
useful in such Sotheby Entity's business and having a book value not exceeding
the Dollar Equivalent of $500,000 in the aggregate in any Fiscal Year; (c) the
sale or other
52
disposition of other Equipment and Fixtures having a book value not exceeding
the Dollar Equivalent of $500,000 in the aggregate in any Fiscal Year; and (d)
the sale of property and assets described on Disclosure Schedule (6.8).
6.9 ERISA. No Sotheby Entity shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur (i) an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or (ii) an ERISA Event to the extent such ERISA Event would reasonably be
expected to result in taxes, penalties and other liabilities in an aggregate
amount in excess of $250,000 in the aggregate.
6.10 Financial Covenants. Borrowers shall not breach or fail to comply
with any of the Financial Covenants.
6.11 Hazardous Materials. No Sotheby Entity shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to or from any of
the Real Estate where such Release would (a) violate in any respect, or form the
basis for any Environmental Liabilities under, any Environmental Laws or
Environmental Permits, except as could not reasonably be expected to have a
Material Adverse Effect or (b) otherwise materially adversely impact the value
or marketability of any of the Real Estate or any of the Collateral,
6.12 Sale-Leasebacks. No Sotheby Entity shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets except the York Avenue Sale-Leaseback.
6.13 Restricted Payments. No Sotheby Entity shall make any Restricted
Payment, except (a) intercompany loans and advances between Sotheby Entities to
the extent permitted by Section 6.3, (b) dividends and distributions by
Subsidiaries of any Sotheby Entity paid to such Sotheby Entity, (c) employee
loans permitted under Section 6.4(b), (d) payments of principal and interest of
intercompany loans and advances made in accordance with Section 6.3 and (e) if
no Event of Default has occurred and is continuing or would occur as a result
thereof, as part of incentive compensation plans for employees, Holdings may
repurchase restricted Stock in Holdings or stock options related to Stock in
Holdings if (a)(i) such transaction is completed within three months after the
Closing Date in the manner reflected in the Projections delivered pursuant to
Section 3.4(b) or (ii) Holdings shall have provided to Agent prior to the date
thereof projected financial statements illustrating compliance with the
Financial Covenants on a pro forma basis and (b) after giving effect to such
repurchase, (i) U.S. Borrowing Availability shall exceed $10,000,000 and (ii)
Margin Stock shall not constitute more than 25% of the assets of Holdings and
its Subsidiaries.
6.14 Change of Corporate Name, State of Incorporation or Location;
Change of Fiscal Year. No U.S. Credit Party shall (a) change its name as it
appears in official filings in the state of its incorporation or other
organization, (b) change its chief executive office or principal place of
business or the location of its records concerning the Collateral, (c) change
the type of entity that it is, (d) change its organization identification
number, if any, issued by its state of incorporation or other organization, or
(e) change its jurisdiction of incorporation or organization or incorporate or
organize in any additional jurisdictions, in each case without at least thirty
(30) days prior written notice to Agent and after
53
Agent's written acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any Liens in favor
of Agent, on behalf of Lenders, in any Collateral, has been completed or taken;
provided, that any such new location shall be in the continental United States.
No Sotheby Entity shall change its Fiscal Year.
6.15 No Impairment of Intercompany Transfers. No Sotheby Entity shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of any Sotheby
Entity to any Sotheby Entity or between Sotheby Entities.
6.16 Changes Relating to Material Contracts. No Sotheby Entity shall
(i) change or amend the terms of the Senior Note Indenture or the Senior Notes
or (ii) change or amend any document related to the York Avenue Sale-Leaseback
in a manner adverse to the interests of Agent and Lenders in any material
respect.
7. TERM
7.1 Termination. The financing arrangements contemplated hereby shall
be in effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be automatically due and payable in full on such date.
7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the
provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
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(a) Any Borrower (i) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agent or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within ten (10) days following Agent's demand for such reimbursement or payment
of expenses.
(b) Any Sotheby Entity fails or neglects to perform, keep or observe
any of the provisions of Sections 1.4, 1.8, 1.14, 5.4(a) or 6, or any of the
provisions set forth in Annexes C or G, respectively.
(c) Any Borrower fails or neglects to perform, keep or observe any of
the provisions of Section 4.1 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for three (3) Business Days
or more.
(d) Any Sotheby Entity fails or neglects to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents
(other than any provision embodied in or covered by any other clause of this
Section 8.1) and the same shall remain unremedied for twenty (20) days or more.
(e) A default or breach occurs under any other agreement, document or
instrument to which any Sotheby Entity is a party that is not cured within any
applicable grace period therefor, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness or
Guaranteed Indebtedness (other than the Obligations) of any Sotheby Entity
having a Dollar Equivalent in excess of $1,000,000 in the aggregate (including
(x) undrawn committed or available amounts and (y) amounts owing to all
creditors under any combined or syndicated credit arrangements), or (ii) causes,
or permits any holder of such Indebtedness or Guaranteed Indebtedness or a
trustee to cause, Indebtedness or Guaranteed Indebtedness or a portion thereof
having a Dollar Equivalent in excess of $1,000,000 in the aggregate to become
due prior to its stated maturity or prior to its regularly scheduled dates of
payment, or cash collateral in respect thereof to be demanded, in each case,
regardless of whether such right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect (other than (i) inadvertent, immaterial
errors not exceeding $500,000 in the aggregate in any Borrowing Base
Certificate), (ii) errors understating either Borrowing Base and (iii) errors
occurring when Aggregate Borrowing Availability continues to exceed $5,000,000
after giving effect to the correction of such errors), or any representation or
warranty herein or in any Loan Document or in any written statement, report,
Financial Statement or certificate (other than a Borrowing Base Certificate)
made or delivered to Agent or any Lender by any Credit Party is untrue or
incorrect in any material respect as of the date when made or deemed made.
(g) Assets of any Credit Party with a fair market value having a
Dollar Equivalent in excess of $500,000 or more are attached, seized, levied
upon or subjected to a writ or distress warrant, or come within the possession
of any receiver, trustee, custodian or assignee for the benefit of creditors of
any Credit Party and such condition continues for thirty (30) days or more.
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(h) A case or proceeding is commenced against any Sotheby Entity
seeking a decree or order in respect of such Sotheby Entity (i) under the
Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) appointing a custodian, receiver, administrator,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Sotheby Entity or for any substantial part of any such Sotheby Entity's assets,
or (iii) ordering the winding-up or liquidation of the affairs of such Sotheby
Entity, and such case or proceeding shall remain undismissed or unstayed for
sixty (60) days or more or a decree or order granting the relief sought in such
case or proceeding is granted by a court of competent jurisdiction.
(i) Any Sotheby Entity (i) files a petition seeking relief under the
Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) consents to or fails to contest in a timely and
appropriate manner the institution of proceedings thereunder or the filing of
any such petition or the appointment of or taking possession by a custodian,
receiver, administrator, liquidator, assignee, trustee or sequestrator (or
similar official) for such Sotheby Entity or for any substantial part of any
such Sotheby Entity's assets, (iii) makes an assignment for the benefit of
creditors, (iv) takes any action in furtherance of any of the foregoing; or (v)
admits in writing its inability to, or is generally unable to, pay its debts as
such debts become due.
(j) A final judgment or judgments for the payment of money in excess
of a Dollar Equivalent of $1,000,000 in the aggregate at any time are
outstanding against one or more of the Sotheby Entities (which judgments are not
covered by insurance policies as to which liability has been accepted by the
insurance carrier), and the same are not, within thirty (30) days (or, in the
case of any Sotheby Entity that is not Holdings, a Domestic Subsidiary or a
Foreign Subsidiary organized under the laws of England, sixty (60) days) after
the entry thereof, discharged or execution thereof stayed or bonded pending
appeal, or such judgments are not discharged prior to the expiration of any such
stay.
(k) Any material provision of any Loan Document for any reason ceases
to be valid, binding and enforceable in accordance with its terms (or any
Sotheby Entity shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any Lien created under any Loan Document ceases to be a valid and perfected
first priority Lien (except as otherwise permitted herein or therein) in any of
the Collateral purported to be covered thereby.
(l) Any Change of Control occurs.
(m) Holdings or any other Sotheby Entity shall breach or fail to
perform any of its material obligations under any of the Settlement Agreements.
8.2 Remedies.
(a) If any Event of Default has occurred and is continuing, Agent may
(and at the written request of the Requisite Lenders shall), without notice, (i)
suspend the Revolving Loan facility with respect to additional Advances and/or
the incurrence of additional Letter of
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Credit Obligations, whereupon any additional Advances and additional Letter of
Credit Obligations shall be made or incurred in Agent's sole discretion (or in
the sole discretion of the Requisite Lenders, if such suspension occurred at
their direction) so long as such Default or Event of Default is continuing; or
(ii) reduce the Commitment from time to time. If any Event of Default has
occurred and is continuing, Agent may (and at the written request of Requisite
Lenders shall), without notice except as otherwise expressly provided herein,
increase the rate of interest applicable to the Loans and the Letter of Credit
Fees to the Default Rate.
(b) If any Event of Default has occurred and is continuing, Agent may
(and at the written request of the Requisite Lenders shall), without notice: (i)
terminate the Revolving Loan facility with respect to further Advances or the
incurrence of further Letter of Credit Obligations; (ii) reduce the Commitment
from time to time; (iii) declare all or any portion of the Obligations,
including all or any portion of any Loan, to be forthwith due and payable, and
require that the Letter of Credit Obligations be cash collateralized in the
manner set forth in Annex B, all without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by Borrowers and each
other Credit Party; or (iv) exercise any rights and remedies provided to Agent
under the Loan Documents or at law or equity, including all remedies provided
under the Code; provided, that upon the occurrence of an Event of Default
specified in Sections 8.1(h) or (i), the Commitments shall be immediately
terminated and all of the Obligations, including the aggregate Revolving Loan,
shall become immediately due and payable without declaration, notice or demand
by any Person.
8.3 Waivers by Credit Parties. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives (including for
purposes of Section 12): (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all Loan Documents, (b) all rights to notice and
a hearing prior to Agent's taking possession or control of, or to Agent's
replevy, attachment or levy upon, the Collateral or any bond or security that
might be required by any court prior to allowing Agent to exercise any of its
remedies, except as may be required by applicable law, and (c) the benefit of
all valuation, appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations.
(a) Subject to the terms of this Section 9.1, any Lender may make an
assignment to an assignee of, or sell participations in, at any time or times,
the Loan Documents, the Loans, the Letter of Credit Obligations and any
Commitment or any portion thereof or interest therein, including any Lender's
rights, title, interests, remedies, powers or duties thereunder. Any assignment
by a Lender shall: (i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an "Assignment Agreement") substantially
in the form attached hereto as Exhibit 9.1(a) and otherwise in form and
substance reasonably satisfactory to, and acknowledged by, Agent; (ii) be
conditioned on such assignee Lender representing to the
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assigning Lender and Agent that it is purchasing the applicable Loans to be
assigned to it for its own account, for investment purposes and not with a view
to the distribution thereof; (iii) after giving effect to any such partial
assignment, the assignee Lender shall have Commitments in an amount at least
equal to $5,000,000 and the assigning Lender shall have retained Commitments in
an amount at least equal to $5,000,000; (iv) include a payment to Agent of an
assignment fee of $3,500; and (v) so long as no Event of Default has occurred
and is continuing, require the consent of Borrower Representative, which shall
not be unreasonably withheld or delayed; provided that no such consent shall be
required for an assignment to a Qualified Assignee. In the case of an assignment
by a Lender under this Section 9.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as all other Lenders
hereunder. The assigning Lender shall be relieved of its obligations hereunder
with respect to its Commitments or assigned portion thereof from and after the
date of such assignment. Each Borrower hereby acknowledges and agrees that any
assignment shall give rise to a direct obligation of Borrowers to the assignee
and that the assignee shall be considered to be a "Lender". In all instances,
each Lender's liability to make Loans hereunder shall be several and not joint
and shall be limited to such Lender's Pro Rata Share of the applicable
Commitment. In the event Agent or any Lender assigns or otherwise transfers all
or any part of the Obligations, Agent or any such Lender shall so notify
Borrowers and Borrowers shall, upon the request of Agent or such Lender, execute
new Notes in exchange for the Notes, if any, being assigned. Notwithstanding the
foregoing provisions of this Section 9.1(a), any Lender may at any time pledge
the Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to a Federal Reserve Bank, and any Lender that is an
investment fund may assign the Obligations held by it and such Lender's rights
under this Agreement and the other Loan Documents to another investment fund
managed by the same investment advisor; provided, that no such pledge to a
Federal Reserve Bank shall release such Lender from such Lender's obligations
hereunder or under any other Loan Document.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrowers hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of Agent's Lien on all or substantially all of
the Collateral (other than in accordance with the terms of this Agreement, the
Collateral Documents or the other Loan Documents). Solely for purposes of
Sections 1.13, 1.15, 1.16 and 9.8, each Borrower acknowledges and agrees that a
participation shall give rise to a direct obligation of Borrowers to the
participant and the participant shall be considered to be a "Lender". Except as
set forth in the preceding sentence no Credit Party shall have any obligation or
duty to any participant. Neither Agent nor any Lender (other than the Lender
selling a participation) shall have any duty to any participant and may continue
to deal solely with the Lender selling a participation as if no such sale had
occurred.
(c) Except as expressly provided in this Section 9.1, no Lender shall,
as between Borrowers and that Lender, or Agent and that Lender, be relieved of
any of its
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obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.
(d) Each Credit Party shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 as reasonably required to
enable the assigning or selling Lender to effect any such assignment or
participation, including the execution and delivery of any and all agreements,
notes and other documents and instruments as shall be requested and, if
requested by Agent, the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants. Each Credit Party shall certify the correctness, completeness and
accuracy of all descriptions of the Sotheby Entities and their respective
affairs contained in any selling materials provided by them and all other
information provided by them and included in such materials, except that the
Projections shall only be certified by Borrowers as having been prepared by
Borrowers in compliance with the representations contained in Section 3.4(b).
(e) Any Lender may furnish any information concerning Sotheby Entities
in the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.
(f) So long as no Event of Default has occurred and is continuing, no
Lender shall assign or sell participations in any portion of its Loans or
Commitment to a potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant would be subject
to capital adequacy or similar requirements under Section 1.16(a), increased
costs under Section 1.16(b), an inability to fund LIBOR Loans under Section
1.16(c), or withholding taxes in accordance with Section 1.15(a).
(g) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender"), may grant to a special purpose funding vehicle (an
"SPC"), identified as such in writing by the Granting Lender to Agent and
Borrowers, the option to provide to Borrowers all or any part of any Loans that
such Granting Lender would otherwise be obligated to make to Borrowers pursuant
to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan; and (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of such Loan,
the Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of
the Granting Lender to the same extent, and as if such Loan were made by such
Granting Lender. No SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender). Any SPC may (i) with notice to, but without the prior written
consent of, Borrowers and Agent and without paying any processing fee therefor
assign all or a portion of its interests in any Loans to the Granting Lender or
to any financial institutions (consented to by Borrowers and Agent) providing
liquidity and/or credit support to or for the account of such SPC to support the
funding or maintenance of Loans and (ii) disclose on a confidential basis any
non-public information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guarantee or credit or
59
liquidity enhancement to such SPC. This Section 9.1(g) may not be amended
without the prior written consent of each Granting Lender, all or any of whose
Loans are being funded by an SPC at the time of such amendment. For the
avoidance of doubt, the Granting Lender shall for all purposes, including
without limitation, the approval of any amendment or waiver of any provision of
any Loan Document or the obligation to pay any amount otherwise payable by the
Granting Lender under the Loan Documents, continue to be the Lender of record
hereunder.
9.2 Appointment of Agent. GE Capital is hereby appointed to act on
behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 9.2 are solely for the benefit of
Agent and Lenders and no Sotheby Entity nor any other Person shall have any
rights as a third party beneficiary of any of the provisions hereof. Except as
expressly set forth in the U.K. Collateral Documents, in performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Sotheby Entity or any other Person. Agent shall have no duties
or responsibilities except for those expressly set forth in this Agreement and
the other Loan Documents. Except as expressly set forth in the U.K. Collateral
Documents, the duties of Agent shall be mechanical and administrative in nature
and Agent shall not have, or be deemed to have, by reason of this Agreement, any
other Loan Document or otherwise a fiduciary relationship in respect of any
Lender. Except as expressly set forth in this Agreement and the other Loan
Documents, Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to any Sotheby Entity or any
of their respective Subsidiaries or any Account Debtor that is communicated to
or obtained by GE Capital or any of its Affiliates in any capacity. Neither
Agent nor any of its Affiliates nor any of their respective officers, directors,
employees, agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages caused by
its or their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders,
Supermajority Lenders or all affected Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Loan
Document, then Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from Requisite
Lenders, Supermajority Lenders or all affected Lenders, as the case may be, and
Agent shall not incur liability to any Person by reason of so refraining. Agent
shall be fully justified in failing or refusing to take any action hereunder or
under any other Loan Document (a) if such action would, in the opinion of Agent,
be contrary to law or the terms of this Agreement or any other Loan Document,
(b) if such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Without limiting the foregoing,
no Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders, Supermajority
Lenders or all affected Lenders, as applicable.
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9.3 Agent's Reliance, Etc. Neither Agent nor any of its Affiliates nor
any of their respective directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for damages caused by
its or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, Agent: (a) may treat the payee of any Note as the
holder thereof until Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form reasonably satisfactory to Agent; (b)
may consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
9.4 GE Capital and Affiliates. With respect to its Commitments
hereunder, GE Capital shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include GE Capital in its individual capacity. GE
Capital and its Affiliates may lend money to, invest in, and generally engage in
any kind of business with, any Sotheby Entity, any of their Affiliates and any
Person who may do business with or own securities of any Sotheby Entity or any
such Affiliate, all as if GE Capital were not Agent and without any duty to
account therefor to Lenders. GE Capital and its Affiliates may accept fees and
other consideration from any Sotheby Entity for services in connection with this
Agreement or otherwise without having to account for the same to Lenders. Each
Lender acknowledges the potential conflict of interest between GE Capital as a
Lender holding disproportionate interests in the Loans and GE Capital as Agent.
9.5 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in Section 3.4(a) and such other documents
and information as it has deemed appropriate, made its own credit and financial
analysis of the Sotheby Entities and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
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9.6 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Credit Parties and without limiting the obligations of Credit
Parties hereunder), ratably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against Agent
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted to be taken by Agent in connection
therewith; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including reasonable counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Credit Parties.
9.7 Successor Agent. Agent may resign at any time by giving not less
than thirty (30) days' prior written notice thereof to Lenders and Borrower
Representative. Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within thirty (30) days after the resigning Agent's giving notice of
resignation, then the resigning Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a Lender, if a Lender is willing to accept such
appointment, or otherwise shall be a commercial bank or financial institution or
a subsidiary of a commercial bank or financial institution if such commercial
bank or financial institution is organized under the laws of the United States
of America or of any State thereof and has a combined capital and surplus of at
least $300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, within thirty (30) days after the date such notice of resignation was
given by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower Representative, such approval not
to be unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default has occurred and is continuing.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the resigning Agent. Upon the earlier of the
acceptance of any appointment as Agent hereunder by a successor Agent or the
effective date of the resigning Agent's resignation, the resigning Agent shall
be discharged from its duties and obligations under this Agreement and the other
Loan Documents, except that any indemnity rights or other rights in favor of
such resigning Agent shall continue. After any resigning Agent's resignation
hereunder, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was acting as Agent under
this Agreement and the other Loan Documents.
9.8 Setoff and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the
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occurrence and during the continuance of any Event of Default and subject to
Section 9.9(f), each Lender is hereby authorized at any time or from time to
time, without prior notice to any Credit Party or to any Person other than
Agent, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of any Credit Party (regardless of whether such balances are
then due to such Credit Party) and any other properties or assets at any time
held or owing by that Lender or that holder to or for the credit or for the
account of any Credit Party against and on account of any of the Obligations
that are not paid when due; provided, that the Lender exercising such offset
rights shall give notice thereof to the affected Credit Party promptly after
exercising such rights. Any Lender exercising a right of setoff or otherwise
receiving any payment on account of the Obligations in excess of its Pro Rata
Share thereof shall purchase for cash (and the other Lenders or holders shall
sell) such participations in each such other Lender's or holder's Pro Rata Share
of the Obligations as would be necessary to cause such Lender to share the
amount so offset or otherwise received with each other Lender or holder in
accordance with their respective Pro Rata Shares (other than offset rights
exercised by any Lender with respect to Sections 1.13, 1.15 or 1.16). Each
Lender's obligation under this Section 9.8 shall be in addition to and not in
limitation of its obligations to purchase a participation in an amount equal to
its Pro Rata Share of the Swing Line Loan under Section 1.1. Each Credit Party
agrees, to the fullest extent permitted by law, that (a) any Lender may exercise
its right to offset with respect to amounts in excess of its Pro Rata Share of
the Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender so purchasing a participation in the
Loans made or other Obligations held by other Lenders or holders may exercise
all rights of offset, bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender or holder were a direct holder
of the Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the offset amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of offset, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert.
(a) Revolving Credit Advances; Payments.
(i) Lenders shall refund or participate in the Swing Line Loan in
accordance with clauses (iii) and (iv) of Section 1.1(b). If (i) the Swing Line
Lender declines to make a Swing Line Advance, (ii) Swing Line Availability is
zero or (iii) Agent shall receive a Notice of Revolving Credit Advance in
respect of a Revolving Credit Advance to be denominated in Sterling or to accrue
interest at the Dollar LIBOR Rate, Agent shall notify Lenders, promptly after
receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00
p.m. (New York time) on the date such Notice of Revolving Credit Advance is
received, by telecopy, telephone or other similar form of transmission. Each
Lender shall make the amount of such Lender's Pro Rata Share of such Revolving
Credit Advance available to Agent in same day funds by wire transfer to Agent's
account as set forth in Annex H not later than 3:00 p.m. (New York time) on the
requested funding date, in the case of an Index Rate Loan, and not later than
11:00 a.m. (New York time) on the requested funding date, in the case of a LIBOR
Loan. After receipt of such wire transfers (or, in Agent's sole discretion,
before receipt of such
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wire transfers), subject to the terms hereof, Agent shall make the requested
Revolving Credit Advance to the deposit account designated by Borrower
Representative in the Notice of Revolving Credit Advance. All payments by each
Lender shall be made without setoff, counterclaim or deduction of any kind.
(ii) Not less than once during each calendar week or more
frequently at Agent's election (each, a "Settlement Date"), Agent shall advise
each Lender by telephone, or telecopy of the amount of such Lender's Pro Rata
Share of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Loan. Provided that each Lender has funded all
payments or Advances required to be made by it and has purchased all
participations required to be purchased by it under this Agreement and the other
Loan Documents as of such Settlement Date, Agent shall pay to each Lender such
Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers since
the previous Settlement Date for the benefit of such Lender on the Loans held by
it. To the extent that any Lender (a "Non-Funding Lender") has failed to fund
all such payments and Advances or failed to fund the purchase of all such
participations, Agent shall be entitled to set off the funding short-fall
against that Non-Funding Lender's Pro Rata Share of all payments received from
Borrowers. Such payments shall be made by wire transfer to such Lender's account
(as specified by such Lender in Annex H or the applicable Joinder Agreement or
Assignment Agreement) not later than 2:00 p.m. (New York time) on the next
Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may assume that
each Lender will make its Pro Rata Share of each Revolving Credit Advance
available to Agent on each funding date. If such Pro Rata Share is not, in fact,
paid to Agent by such Lender when due, Agent will be entitled to recover such
amount on demand from such Lender without setoff, counterclaim or deduction of
any kind. If any Lender fails to pay the amount of its Pro Rata Share forthwith
upon Agent's demand, Agent shall promptly notify Borrower Representative and
Borrowers shall immediately repay such amount to Agent. Nothing in this Section
9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be
deemed to require Agent to advance funds on behalf of any Lender or to relieve
any Lender from its obligation to fulfill its Commitments hereunder or to
prejudice any rights that Borrowers may have against any Lender as a result of
any default by such Lender hereunder. To the extent that Agent advances funds to
any Borrower on behalf of any Lender and is not reimbursed therefor on the same
Business Day as such Advance is made, Agent shall be entitled to retain for its
account all interest accrued on such Advance until reimbursed by the applicable
Lender.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this Agreement in
the belief or expectation that a related payment has been or will be received by
Agent from Borrowers and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender on demand without
setoff, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received by
Agent under this Agreement must be returned to any Borrower or paid to any other
Person pursuant to any insolvency law or otherwise, then, notwithstanding any
other term or condition of this
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Agreement or any other Loan Document, Agent will not be required to distribute
any portion thereof to any Lender. In addition, each Lender will repay to Agent
on demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to any
Borrower or such other Person, without setoff, counterclaim or deduction of any
kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender to make
any Revolving Credit Advance or any payment required by it hereunder or to
purchase any participation in any Swing Line Advance to be made or purchased by
it on the date specified therefor shall not relieve any other Lender (each such
other Lender, an "Other Lender") of its obligations to make such Revolving
Credit Advance or purchase such participation on such date, but neither any
Other Lender nor Agent shall be responsible for the failure of any Non-Funding
Lender to make a Revolving Credit Advance, purchase a participation or make any
other payment required hereunder. Notwithstanding anything set forth herein to
the contrary, a Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a "Lender" or a
"Lender" (or be included in the calculation of "Requisite Lenders" or
"Supermajority Lenders" hereunder) for any voting or consent rights under or
with respect to any Loan Document. At Borrower Representative's request, Agent
or a Person reasonably acceptable to Agent shall have the right with Agent's
consent and in Agent's sole discretion (but shall have no obligation) to
purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that it
shall, at Agent's request, sell and assign to Agent or such Person, all of the
Obligations and Commitments held by that Non-Funding Lender for an amount equal
to the principal balance of all Loans held by such Non-Funding Lender and all
accrued interest and fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
(e) Dissemination of Information. Agent shall use reasonable efforts
to provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any Event
of Default of which Agent has actually become aware and with notice of any
action taken by Agent following any Event of Default; provided, that Agent shall
not be liable to any Lender for any failure to do so, except to the extent that
such failure is attributable to Agent's gross negligence or willful misconduct.
Lenders acknowledge that Borrowers are required to provide Financial Statements
and Collateral Reports to Lenders in accordance with Annexes E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining the prior written consent of Agent and Requisite Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of Agent or Requisite Lenders.
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10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 11.2. Any letter of interest, commitment letter, fee letter or
confidentiality agreement, if any, between any Credit Party and Agent or any
Lender or any of their respective Affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or effect shall
be superseded by this Agreement. Notwithstanding the foregoing, the GE Capital
Fee Letter shall survive the execution and delivery of this Agreement and shall
continue to be binding obligations of the parties.
11.2 Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by Agent, no
amendment, modification, termination or waiver of any provision of this
Agreement or any other Loan Document, or any consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by Agent and Borrowers, and by Requisite Lenders,
Supermajority Lenders or all affected Lenders, as applicable. Except as set
forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the
written consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement or any other Loan Document
shall, unless in writing and signed by Agent and Supermajority Lenders: (i)
increase the percentage advance rates set forth in the definition of either
Borrowing Base, (ii) make less restrictive the nondiscretionary criteria for
exclusion from Eligible Art Loans set forth in Section 1.6, (iii) except as
otherwise permitted herein or in the other Loan Documents, release Agent's Lien
on, or permit any Credit Party to sell or otherwise dispose of, any Collateral
with a value exceeding $10,000,000 in the aggregate or (iv) increase the
Sterling Subfacility Limit.
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(c) No amendment, modification, termination or waiver with respect to
any provision of this Agreement or any other Loan Document shall, unless in
writing and signed by Agent and each Lender directly affected thereby: (i)
increase the principal amount of any Lender's Commitment other than pursuant to
Section 1.1(a)(iv) (which action shall be deemed to directly affect all
Lenders); (ii) reduce the principal of, rate of interest on or Fees payable with
respect to any Loan or Letter of Credit Obligations of any affected Lender;
(iii) extend any scheduled payment date (other than payment dates of mandatory
prepayments under Sections 1.3(b)(iii) and (iv)) or final maturity date of the
principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer,
extend or postpone any payment of interest or Fees as to any affected Lender;
(v) release any Guaranty (other than in connection with any sale of assets by a
Sotheby Entity permitted pursuant to Section 6.8 or consented to by Required
Lenders or Supermajority Lenders, as applicable, pursuant to this Section 11.2)
(which action shall be deemed to directly affect all Lenders); (vi) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Loans that shall be required for Lenders or any of them to take any action
hereunder; and (vii) amend or waive this Section 11.2 or the definitions of the
terms "Requisite Lenders" or "Supermajority Lenders" insofar as such definitions
affect the substance of this Section 11.2. Furthermore, no amendment,
modification, termination or waiver affecting the rights or duties of Agent or
L/C Issuer under this Agreement or any other Loan Document shall be effective
unless in writing and signed by Agent or L/C Issuer, as the case may be, in
addition to Lenders required hereinabove to take such action. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No amendment,
modification, termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document. No amendment, modification,
termination or waiver of any provision of any Note shall be effective without
the written concurrence of the holder of that Note. No notice to or demand on
any Sotheby Entity in any case shall entitle such Sotheby Entity or any other
Sotheby Entity to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 11.2 shall be binding upon each holder
of the Notes at the time outstanding and each future holder of the Notes.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders, the consent of
Requisite Lenders is obtained, but the consent of other Lenders whose consent is
required is not obtained (any such Lender whose consent is not obtained as
described in this clause (i) and in clauses (ii), (iii) and (iv) below being
referred to as a "Non-Consenting Lender");
(ii) requiring the consent of Supermajority Lenders, the consent
of Requisite Lenders is obtained, but the consent of Supermajority Lenders is
not obtained; or
(iii) requiring the consent of Requisite Lenders, the consent of
Lenders holding 51% or more of the aggregate Commitments is obtained, but the
consent of Requisite Lenders is not obtained,
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then, so long as Agent is not a Non-Consenting Lender, at Borrower
Representative's request, Agent or a Person reasonably acceptable to Agent shall
have the right with Agent's consent and in Agent's sole discretion (but shall
have no obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent's request, sell and
assign to Agent or such Person, all of the Loans and Commitments of such
Non-Consenting Lenders for an amount equal to the principal balance of all Loans
held by the Non-Consenting Lenders and all accrued interest and Fees with
respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.
(e) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all claims against Agent and Lenders, and so long
as no suits, actions, proceedings or claims are pending or threatened against
any Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to Borrowers termination
statements, mortgage releases and other documents necessary or appropriate to
evidence the termination of the Liens securing payment of the Obligations.
11.3 Fees and Expenses. Borrowers shall reimburse (i) Agent for all
fees, costs and expenses (including the reasonable fees and expenses of all of
its counsel, advisors, consultants and auditors) and (ii) Agent (and, with
respect to clauses (b) and (c) below, all Lenders) for all fees, costs and
expenses, including the reasonable fees, costs and expenses of counsel or other
advisors (including environmental and management consultants and appraisers),
incurred in connection with the negotiation, preparation and filing and/or
recordation of the Loan Documents and incurred in connection with:
(a) any amendment, modification or waiver of, consent with respect to,
or termination of, any of the Loan Documents or advice in connection with the
syndication and administration of the Loans made pursuant hereto or its rights
hereunder or thereunder;
(b) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, any Sotheby Entity or any other Person
and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Sotheby Entities or any other Person that may be obligated to Agent or any
Lender by virtue of the Loan Documents; including any such litigation, contest,
dispute, suit, proceeding or action arising in connection with any work-out or
restructuring of the Loans during the pendency of one or more Events of Default;
provided that in the case of reimbursement of counsel for Lenders other than
Agent, such reimbursement shall be limited to one counsel for all such Lenders;
provided, further, that no Person shall be entitled to reimbursement under this
clause (b) in respect of any litigation, contest, dispute, suit, proceeding or
action to the extent any of the foregoing results from such Person's gross
negligence or willful misconduct;
(c) any attempt to enforce any remedies of Agent against any or all of
the Credit Parties or any other Person that may be obligated to Agent or any
Lender by virtue of any of the Loan Documents, including any such attempt to
enforce any such remedies in the course
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of any work-out or restructuring of the Loans during the pendency of one or more
Events of Default; provided, that in the case of reimbursement of counsel for
Lenders other than Agent, such reimbursement shall be limited to one counsel for
all such Lenders;
(d) any workout or restructuring of the Loans during the pendency of
one or more Events of Default; and
(e) efforts to (i) monitor the Loans or any of the other Obligations,
(ii) evaluate, observe or assess any of the Sotheby Entities or their respective
affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (e) above, all reasonable
attorneys' and other professional and service providers' fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrowers to Agent. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees, costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
11.4 No Waiver. Agent's or any Lender's failure, at any time or times,
to require strict performance by the Sotheby Entities of any provision of this
Agreement or any other Loan Document shall not waive, affect or diminish any
right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Sotheby Entity
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Sotheby Entity shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders, and directed to Borrowers specifying
such suspension or waiver.
11.5 Remedies. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
11.6 Severability. Wherever possible, each provision of this Agreement
and the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any other Loan Document shall
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be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or such other Loan Document.
11.7 Conflict of Terms. Except as otherwise provided in this Agreement
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement
conflicts with any provision in any of the other Loan Documents, the provision
contained in this Agreement shall govern and control.
11.8 Confidentiality. Agent and each Lender agree to use commercially
reasonable efforts (equivalent to the efforts Agent or such Lender applies to
maintaining the confidentiality of its own confidential information) to maintain
as confidential all confidential information provided to them by the Sotheby
Entities until the later of (i) the date that is one (1) year after the date
such information was received and (ii) the date that is six (6) months after the
Termination Date, except that Agent and any Lender may disclose such information
(a) to Persons employed or engaged by Agent or such Lender; (b) to any bona fide
assignee or participant or potential assignee or participant that has agreed to
comply with the covenant contained in this Section 11.8 (and any such bona fide
assignee or participant or potential assignee or participant may disclose such
information to Persons employed or engaged by them as described in clause (a)
above); (c) as required or requested by any Governmental Authority or reasonably
believed by Agent or such Lender to be compelled by any court decree, subpoena
or legal or administrative order or process; (d) as, on the advice of Agent's or
such Lender's counsel, is required by law; (e) in connection with the exercise
of any right or remedy under the Loan Documents or in connection with any
Litigation to which Agent or such Lender is a party; or (f) that ceases to be
confidential through no fault of Agent or any Lender.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK
COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK COUNTY; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
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IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT
PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET
FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR FIVE
(5) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered: (a) upon the earlier of actual receipt and five (5)
days after deposit in the United States Mail (or the equivalent thereof in the
applicable jurisdiction), registered or certified mail, return receipt
requested, with proper postage prepaid; (b) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery,
recognized mail carrier, overnight courier or messenger as otherwise provided in
this Section 11.10); (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated in Annex I or to
such other address (or facsimile number) as may be substituted by notice given
as herein provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to any Person (other than Borrower Representative or
Agent) designated in Annex I to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
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11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14 Press Releases and Related Matters. Each Credit Party executing
this Agreement agrees that neither it nor its Affiliates will in the future
issue any press releases or other public disclosure using the name of GE Capital
or its affiliates or referring to this Agreement or the other Loan Documents
without the prior written consent of GE Capital unless (and only to the extent
that) such Credit Party or Affiliate is required to do so under law and then, in
any event, such Credit Party or Affiliate will consult with GE Capital before
issuing such press release or other public disclosure. Each Credit Party
consents to the publication by Agent or any Lender of advertising material
relating to the financing transactions contemplated by this Agreement using
Borrower's name, product photographs, logo or trademark. Agent consents to the
disclosure by the Credit Parties in their public securities filings and
Financial Statements of the identity and role of Agent under this Agreement.
Agent reserves the right to provide to industry trade organizations information
necessary and customary for inclusion in league table measurements.
11.15 Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Credit Party for liquidation or reorganization, should any Credit Party
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Credit Party's assets, and shall continue to be
effective or to be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee of the Obligations, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11.16 Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
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11.17 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
12. CROSS-GUARANTY
12.1 Cross-Guaranty. Each U.S. Borrower hereby agrees that such U.S.
Borrower is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to Agent and Lenders and their respective successors
and assigns, the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of, all Obligations owed or hereafter
owing to Agent and Lenders by each other U.S. Borrower and each U.K. Borrower.
Each U.K. Borrower hereby agrees that such U.K. Borrower is jointly and
severally liable for, and hereby absolutely and unconditionally guarantees to
Agent and Lenders and their respective successors and assigns, the full and
prompt payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Obligations owed or hereafter owing to Agent and Lenders by
each other U.K. Borrower; it being understood that the U.K. Borrowers shall have
no liability, direct or indirect, for the Obligations of the U.S. Borrowers or
the other U.S. Credit Parties hereunder or under any of the Loan Documents. Each
Borrower agrees that its guaranty obligation hereunder is a continuing guaranty
of payment and performance and not of collection, that its obligations under
this Section 12 shall not be discharged until payment and performance, in full,
of the Obligations (in the case of any U.S. Borrower) or the Obligations of the
U.K. Borrowers (in the case of any U.K. Borrower) has occurred, and that its
obligations under this Section 12 shall be absolute and unconditional,
irrespective of, and unaffected by,
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Loan Document or
any other agreement, document or instrument to which any Borrower is or may
become a party;
(b) the absence of any action to enforce this Agreement (including
this Section 12) or any other Loan Document or the waiver or consent by Agent
and Lenders with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for the Obligations or any action, or the absence of
any action, by Agent and Lenders in respect thereof (including the release of
any such security);
(d) the insolvency of any Sotheby Entity; or
(e) any other action or circumstances that might otherwise constitute
a legal or equitable discharge or defense of a surety or guarantor.
Each U.S. Borrower shall be regarded, and shall be in the same position, as
principal debtor with respect to the Obligations guaranteed hereunder. Each U.K.
Borrower shall be regarded, and
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shall be in the same position, as principal debtor with respect to the
Obligations of the other U.K. Borrower guaranteed hereunder.
12.2 Waivers by Borrowers. Each Borrower expressly waives all rights
it may have now or in the future under any statute, or at common law, or at law
or in equity, or otherwise, to compel Agent or Lenders to marshal assets or to
proceed in respect of the Obligations guaranteed hereunder by such Borrower
against any other Credit Party, any other party or against any security for the
payment and performance of such Obligations before proceeding against, or as a
condition to proceeding against, such Borrower. It is agreed among each
Borrower, Agent and Lenders that the foregoing waivers are of the essence of the
transaction contemplated by this Agreement and the other Loan Documents and
that, but for the provisions of this Section 12 and such waivers, Agent and
Lenders would decline to enter into this Agreement.
12.3 Benefit of Guaranty. Each Borrower agrees that the provisions of
this Section 12 are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between any other Borrower and Agent or Lenders, the
obligations of such other Borrower under the Loan Documents.
12.4 Waiver of Subrogation, Etc. Notwithstanding anything to the
contrary in this Agreement or in any other Loan Document, and except as set
forth in the Contribution Agreement, each Borrower hereby expressly and
irrevocably waives any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any and
all defenses available to a surety, guarantor or accommodation co-obligor. Each
Borrower acknowledges and agrees that this waiver is intended to benefit Agent
and Lenders and shall not limit or otherwise affect such Borrower's liability
hereunder or the enforceability of this Section 12, and that Agent, Lenders and
their respective successors and assigns are intended third party beneficiaries
of the waivers and agreements set forth in this Section 12.4.
12.5 Subordination by U.K. Borrowers. Each U.K. Borrower agrees that
any and all claims of such U.K. Borrower against any other Borrower or any
Guarantor (each an "Obligor") with respect to any "Intercompany Indebtedness"
(as hereinafter defined), any endorser, obligor or any other guarantor of all or
any part of the Obligations, or against any of its properties shall be
subordinate and subject in right of payment to the prior payment, in full and in
cash, of all Obligations of such Obligor. Notwithstanding any right of any U.K.
Borrower to ask, demand, sue for, take or receive any payment from any Obligor,
all rights, liens and security interests of such U.K. Borrower, whether now or
hereafter arising and howsoever existing, in any assets of any other Obligor
shall be and are subordinated to the rights of Agent and the Lenders in those
assets. No U.K. Borrower shall have any right to possession of any such asset or
to foreclose upon any such asset, whether by judicial action or otherwise, until
the Termination Date (in the case of the assets of any Obligor that is a U.S.
Credit Party) or the U.K. Termination Date (in the case of the assets of any
Obligor that is a U.K. Credit Party). If all or any part of the assets of any
Obligor, or the proceeds thereof, are subject to any distribution, division or
application to the creditors of such Obligor, whether partial or complete,
voluntary or involuntary, and whether by reason of liquidation, bankruptcy,
arrangement, receivership,
74
assignment for the benefit of creditors or any analogous procedure or step in
any jurisdiction or any other action or proceeding, or if the business of any
such Obligor is dissolved or if substantially all of the assets of any such
Obligor are sold, then, and in any such event (such events being herein referred
to as an "Insolvency Event"), any payment or distribution of any kind or
character, either in cash, securities or other property, which shall be payable
or deliverable upon or with respect to any indebtedness of any Obligor to any
U.K. Borrower ("Intercompany Indebtedness") shall be paid or delivered directly
to Agent for application to the Obligations in accordance with the Loan
Documents. Should any payment, distribution, security or instrument or proceeds
thereof be received by the applicable U.K. Borrower upon or with respect to such
Intercompany Indebtedness after any Insolvency Event and prior to the
Termination Date (in the case of any Intercompany Indebtedness of a U.S. Credit
Party) or the U.K. Termination Date (in the case of any Intercompany
Indebtedness of a U.K. Credit Party), such U.K. Borrower shall receive and hold
the same in trust, as trustee, for the benefit of Agent and the Lenders and
shall forthwith deliver the same to Agent in precisely the form received (except
for the endorsement or assignment of such U.K. Borrower where necessary), for
application to the Obligations in accordance with the Loan Documents, and, until
so delivered, the same shall be held in trust by such U.K. Borrower as the
property of Agent and the Lenders. If any such U.K. Borrower fails to make any
such endorsement or assignment to Agent, Agent or any of its officers or
employees is irrevocably authorized to make the same. Each U.K. Borrower agrees
that until the Termination Date (in the case of any claim against an Obligor
that is a U.S. Credit Party) or the U.K. Termination Date (in the case of any
claim against an Obligor that is a U.K. Credit Party), such U.K. Borrower will
not assign or transfer to any Person (other than Agent, a Borrower or another
Guarantor in accordance with the terms of the Loan Documents) any claim such
U.K. Borrower has or may have against any Obligor.
12.6 Election of Remedies. If Agent or any Lender may, under
applicable law, proceed to realize its benefits under any of the Loan Documents
giving Agent or such Lender a Lien upon any Collateral, whether owned by any
Borrower or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Agent or any Lender may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any of
its rights and remedies under this Section 12. If, in the exercise of any of its
rights and remedies, Agent or any Lender shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable laws pertaining
to "election of remedies" or the like, each Borrower hereby consents to such
action by Agent or such Lender and waives any claim based upon such action, even
if such action by Agent or such Lender shall result in a full or partial loss of
any rights of subrogation that each Borrower might otherwise have had but for
such action by Agent or such Lender. Any election of remedies that results in
the denial or impairment of the right of Agent or any Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower's
obligation to pay the full amount of the Obligations guaranteed hereunder by
such Borrower. In the event Agent or any Lender shall bid at any foreclosure or
trustee's sale or at any private sale permitted by law or the Loan Documents,
Agent or such Lender may bid all or less than the amount of the Obligations and
the amount of such bid need not be paid by Agent or such Lender but shall be
credited against the Obligations. The amount of the successful bid at any such
sale, whether Agent, Lender or any other party is the successful bidder, shall
be conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to
75
be the amount of the Obligations guaranteed by the applicable Borrowers under
this Section 12, notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which Agent or any Lender might otherwise be entitled but for such
bidding at any such sale.
12.7 Liability Cumulative. The liability of Borrowers under this
Section 12 is in addition to and shall be cumulative with all liabilities of
each Borrower to Agent and Lenders under this Agreement and the other Loan
Documents to which such Borrower is a party or in respect of any Obligations or
obligation of the other Borrowers, without any limitation as to amount, unless
the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
[Remainder of page intentionally left blank.]
76
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
SOTHEBY'S HOLDINGS, INC. OATSHARE LIMITED
By: /s/ William S. Sheridan By: /s/ George Bailey
---------------------------------- -----------------------------------
Name: William S. Sheridan Name: George Bailey
Title: Chief Financial Officer ---------------------------------
Title: Director
--------------------------------
SOTHEBY'S, INC.
SOTHEBY'S
By: /s/ William S. Sheridan
----------------------------------
Name: William S. Sheridan By: /s/ George Bailey
Title: Executive Vice President -----------------------------------
Name: George Bailey
---------------------------------
SOTHEBY'S FINANCIAL SERVICES, INC. Title: Director
SOTHEBY'S FINANCIAL SERVICES --------------------------------
CALIFORNIA, INC.
OBERON, INC.
THETA, INC. SOTHEBY'S FINANCIAL SERVICES LIMITED
SOTHEBY'S VENTURES, LLC
By: /s/ George Bailey
By: /s/ William S. Sheridan -----------------------------------
---------------------------------- Name: George Bailey
Name: William S. Sheridan ---------------------------------
Title: Vice President Title: Director
--------------------------------
Signature Page to
Credit Agreement
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
By: /s/ Phillip Carfora
-----------------------------------
Duly Authorized Signatory
Signature Page to
Credit Agreement
The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers.
SOTHEBY'S FINE ART HOLDINGS, INC.
SOTHEBY'S ASIA, INC.
YORK WAREHOUSE, INC.
SPTC, INC.
SOTHEBY PARKE BERNET, INC.
YORK AVENUE DEVELOPMENT, INC.
SOTHEBY'S THAILAND, INC.
SOTHEBY'S HOLDINGS INTERNATIONAL, INC.
SOTHEBY'S NEVADA, INC.
SOTHEBYS.COM LLC
SOTHEBYS.COM AUCTIONS, INC.
SIBS, LLC
By: /s/ William S. Sheridan
-----------------------------------
Name: William S. Sheridan
Title: Vice President
Signature Page to
Credit Agreement
ANNEX A (Recitals)
to
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings, and all references to Sections, Exhibits, Schedules or Annexes in the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes of
or to the Agreement:
"Acceptable Cash Equivalents" has the meaning ascribed to it in Annex
B.
"Account Debtor" means any Person who may become obligated to any
Sotheby Entity under, with respect to, or on account of, an Account, Chattel
Paper (including, without limitation, an Art Loan) or General Intangibles
(including a payment intangible).
"Accounting Changes" has the meaning ascribed thereto in Annex G.
"Accounts" means all "accounts," as such term is defined in the Code,
now owned or hereafter acquired by any Sotheby Entity, including (a) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper or
Instruments), (including any such obligations that may be characterized as an
account under the Code), (b) all of each Sotheby Entity's rights in, to and
under all purchase orders or receipts for goods or services, (c) all of each
Sotheby Entity's rights to any goods represented by any of the foregoing
(including unpaid sellers' rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), (d)
all rights to payment due to any Sotheby Entity for property sold, leased,
licensed, assigned or otherwise disposed of, for a policy of insurance issued or
to be issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by such Sotheby Entity or in connection with
any other transaction (whether or not yet earned by performance on the part of
such Sotheby Entity), (e) all health care insurance receivables and (f) all
collateral security of any kind, given by any Account Debtor or any other Person
with respect to any of the foregoing.
"Activation Event" shall mean, as of any date when the aggregate
Revolving Loan then outstanding and the aggregate Swing Line Loan then
outstanding, in the aggregate, shall be greater than zero, the occurrence of
either of the following: (i) an Event of Default shall have occurred and shall
have been continuing for at least ten (10) days as of such date or (ii) the
Liquidity Amount shall be less than $15,000,000 as of such date.
"Activation Notice" has the meanings ascribed to it in Annex C.
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"Adjusted EBITDA" means, with respect to Holdings and its
Subsidiaries, on a consolidated basis, for any Fiscal Quarter, without
duplication, an amount equal to (a) EBITDA with respect to such Fiscal Quarter
plus (b) the sum of (i) special charges related to litigation, (ii)
restructuring charges and (iii) charges with respect to employee retention
programs; provided, that the amounts included in Adjusted EBITDA pursuant to the
foregoing clause (b) in respect of the Fiscal Quarters beginning after December
31, 2003 shall not, in the aggregate, exceed $9,200,000 for all such Fiscal
Quarters.
"Advance" means any Revolving Credit Advance or Swing Line Advance, as
the context may require.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 5% or more of the Stock having ordinary voting
power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c) each
of such Person's executive officers (as such term is defined in the rules of the
Securities and Exchange Commission), directors, joint venturers and partners and
(d) in the case of Borrowers, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of any Borrower. For the purposes
of this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term "Affiliate" shall specifically
exclude Agent and each Lender.
"Agent" means GE Capital, in its capacity as Agent for Lenders, or its
successor appointed pursuant to Section 9.7.
"Agreement" means the Credit Agreement dated as of the Closing Date by
and among Borrowers, the other Sotheby Entities party thereto, GE Capital, as
Agent and a Lender, and the other Lenders from time to time party thereto, as
the same may be amended, supplemented, restated or otherwise modified from time
to time.
"Aggregate Borrowing Availability" means, as of any date of
determination, the lesser of (a) an amount equal to (i) the Maximum Amount minus
(ii) the aggregate Revolving Loan then outstanding minus (iii) the aggregate
Swing Line Loan then outstanding and (b) an amount equal to the sum of (i) the
U.S. Borrowing Availability as of such date and (ii) the U.K. Borrowing
Availability as of such date.
"Alternative Art Loan Currency" means any currency approved by Agent
(other than Dollars, Canadian Dollars, Sterling, Euros or Swiss Francs);
provided, that no currency shall be an Alternative Art Loan Currency if it is
not freely transferable and freely convertible into Dollars and Sterling in the
London foreign exchange market as determined by Agent.
"Alternative L/C Currency" means any currency approved by the L/C
Issuer with respect to the incurrence of Letter of Credit Obligations in such
currency (other than Dollars, Canadian Dollars, Sterling, Euros or Swiss
Francs); provided, that no currency shall be an
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Alternative Art Loan Currency if it is not freely transferable and freely
convertible into Dollars and Sterling in the London foreign exchange market as
determined by the L/C Issuer.
"Antitrust Litigation Liabilities" means liabilities (whether actual
or asserted), claims, judgments, settlements and expenses resulting from (a) the
antitrust investigation by the United States Department of Justice or related
antitrust investigations by other Governmental Authorities, (b) antitrust
litigation, whether commenced by Governmental Authorities or other Persons,
arising out of the matters that are or were the subject of any such
investigation, (c) related shareholder derivative lawsuits and claims and (d)
related securities lawsuits and claims.
"Antitrust Settlement Agreement" means the Sotheby's Settlement
Agreement dated October 27, 2000, entered into by Holdings and Sotheby's, Inc.
in the matter of IN RE AUCTION HOUSES ANTITRUST LITIGATION.
"Appendices" has the meaning ascribed to it in the recitals to the
Agreement.
"Applicable Dollar Revolver Index Margin" means the per annum interest
rate margin from time to time in effect and payable in addition to the Dollar
Index Rate applicable to the Revolving Loan, as determined by reference to
Section 1.5(a).
"Applicable Dollar Revolver LIBOR Margin" means the per annum interest
rate from time to time in effect and payable in addition to the Dollar LIBOR
Rate applicable to the Revolving Loan, as determined by reference to Section
1.5(a).
"Applicable L/C Margin" means 2.75%.
"Applicable Margins" means collectively the Applicable L/C Margin, the
Applicable Unused Line Fee Margin, the Applicable Dollar Revolver Index Margin,
the Applicable Dollar Revolver LIBOR Margin, the Applicable Sterling Revolver
Index Margin, and the Applicable Sterling Revolver LIBOR Margin.
"Applicable Sterling Revolver Index Margin" means the per annum
interest rate margin from time to time in effect and payable in addition to the
Sterling Index Rate applicable to the Revolving Loan, as determined by reference
to Section 1.5(a).
"Applicable Sterling Revolver LIBOR Margin" means the per annum
interest rate from time to time in effect and payable in addition to the
Sterling LIBOR Rate applicable to the Revolving Loan, as determined by reference
to Section 1.5(a).
"Applicable Unused Line Fee Margin" means 0.50%.
"Art Loan Debtor" means an Account Debtor liable on an Art Loan.
"Art Loan Receivables Report" means a report to be delivered from time
to time by the Borrowers in the form attached to the Agreement as Exhibit
4.1(B).
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"Art Loans" shall mean loans made by the Borrowers to customers of
Holdings and its Subsidiaries to finance the purchase or carrying of, or in
anticipation of the potential sale of, or secured by, Works of Art.
"Assignment Agreement" has the meaning ascribed to it in Section
9.1(a).
"Available U.K. Art Loan Balance" means the Dollar Equivalent of the
aggregate outstanding principal balance of all Eligible Art Loans owned by U.K.
Borrowers minus (a) the amount, if any, by which the Dollar Equivalent of the
aggregate outstanding principal balance of all Eligible Venture Loans owned by
U.K. Borrowers exceeds an amount equal to $10,000,000 less the Dollar Equivalent
of the outstanding principal balance of Eligible Venture Loans included in the
Available U.S. Art Loan Balance minus (b) the amount, if any, by which the
Dollar Equivalent of the outstanding principal balance of Unhedged U.K. Art
Loans exceeds 25% of the Dollar Equivalent of the aggregate outstanding
principal balance of all Eligible Art Loans owned by the U.K. Borrowers minus
(c) 1.0% of the Dollar Equivalent of the average outstanding amount of all
Eligible Art Loans owned by the U.K. Borrowers for the four Fiscal Quarters most
recently ended.
"Available U.S. Art Loan Balance" means the Dollar Equivalent of the
aggregate outstanding principal balance of all Eligible Art Loans owned by U.S.
Borrowers minus (a) the amount, if any, by which the Dollar Equivalent of the
aggregate outstanding principal balance of all Eligible Venture Loans owned by
U.S. Borrowers exceeds $10,000,000 minus (b) the amount, if any, by which the
Dollar Equivalent of the outstanding principal balance of Unhedged U.S. Art
Loans exceeds 25% of the Dollar Equivalent of the aggregate outstanding
principal balance of all Eligible Art Loans owned by the U.S. Borrowers minus
(c) 1.0% of the Dollar Equivalent of the average outstanding principal balance
of all Eligible Art Loans owned by the U.S. Borrowers for the four Fiscal
Quarters most recently ended.
"Bank Product and Hedging Obligations" means any and all obligations
of any Sotheby Entity, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), to any Lender
or any affiliate of any Lender under or in respect of (i) any and all Rate
Management Transactions, (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management Transactions and (iii) any
and all Bank Products.
"Bank Products" means any of the following services provided to any
Sotheby Entity: (i) commercial credit card services, (ii) cash management and
other treasury management services (including, without limitation, controlled
disbursements, automated clearinghouse transactions, return items, and
interstate depository network services) and (iii) foreign exchange related
services.
"Bankruptcy Code" means the provisions of Title 11 of the United
States Code, 11 U.S.C. 'SS''SS' 101 et seq.
A-4
"Benefit Equalization Plan" means the Sotheby's, Inc. 1988 Benefit
Equalization Plan.
"Blocked Accounts" has the meaning ascribed to it in Annex C.
"Borrower Representative" means Holdings, in its capacity as Borrower
Representative pursuant to the provisions of Sections 1.1(c) and 1.2.
"Borrowers" has the meaning ascribed thereto in the preamble to the
Agreement.
"Borrowing Availability" means either the U.S. Borrowing Availability
or the U.K. Borrowing Availability, as the context may require.
"Borrowing Base" means either the U.S. Borrowing Base or the U.K.
Borrowing Base, as the context may require.
"Borrowing Base Certificate" means a certificate to be executed and
delivered from time to time by the Borrowers in the form attached to the
Agreement as Exhibit 4.1(A).
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the State of New York
and in reference to LIBOR Loans shall mean any such day that is also a LIBOR
Business Day.
"Canadian Dollars" means the lawful currency of Canada.
"Capital Expenditures" means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Lease" means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"Capital Lease Obligation" means, with respect to any Capital Lease of
any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
"Cash Collateral Account" has the meaning ascribed to it Annex B.
"Cash Equivalent Investments" means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof or, in the case of any Foreign Subsidiary, guaranteed by any
other member country of O.E.C.D. or any agency thereof, in each case maturing
within one year from the date of acquisition thereof, (ii) commercial paper or
other marketable debt securities maturing no more than one year from the
A-5
date of creation thereof and currently having an investment grade rating from
either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., (iii)
certificates of deposit maturing no more than one year from the date of creation
thereof issued by commercial banks incorporated under the laws of the United
States of America or, in the case of any Foreign Subsidiary, under the laws of
any other member country of O.E.C.D., each having combined capital, surplus and
undivided profits of not less than $300,000,000 and having a senior unsecured
rating of "A" or better by an internationally recognized rating agency or an
equivalent rating from a nationally recognized rating agency of the country in
which such commercial bank is incorporated (an "A Rated Bank"), (iv) time
deposits maturing no more than one year from the date of creation thereof with A
Rated Banks and (v) mutual funds that invest primarily in one or more of the
investments described in clauses (i) through (iv) above and currently have an
investment grade rating from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.
"Cash Management Systems" has the meaning ascribed to it in Section
1.8.
"Change of Control" means either of the following: (a) any person
(other than A. Alfred Taubman) or group of persons (within the meaning of the
Securities Exchange Act of 1934) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 30% or more of the
aggregate ordinary voting power represented by all of the issued and outstanding
shares of capital Stock of Holdings; or (b) during any period of twelve
consecutive calendar months, individuals who at the beginning of such period
constituted the board of directors of Holdings (together with any new directors
whose election by the board of directors of Holdings or whose nomination for
election by the Stockholders of Holdings was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Sotheby Entity, (d) any
Sotheby Entity's ownership or use of any properties or other assets, or (e) any
other aspect of any Sotheby Entity's business.
"Chattel Paper" means any "chattel paper," as such term is defined in
the Code, including electronic chattel paper, now owned or hereafter acquired by
any Sotheby Entity.
"Class A Unrestricted Collateral" means all Collateral owned by any
Credit Party that is not Holdings or a Significant Subsidiary, and all proceeds
of the foregoing.
"Class B Unrestricted Collateral" means all Collateral consisting of
Art Loans, and all proceeds of the foregoing.
"Closing Checklist" means the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with
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the Agreement, the other Loan Documents and the transactions contemplated
thereunder, substantially in the form attached hereto as Annex D.
"Closing Date" means March 4, 2004.
"Code" means the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of New York; provided, that to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Agent's or any Lender's Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term "Code" shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.
"Collateral" means the property covered by the U.S. Collateral
Documents and the U.K. Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent, on the Secured Parties, to secure the Secured Obligations.
"Collateral Documents" means the U.S. Collateral Documents and the
U.K. Collateral Documents.
"Collateral Reports" means the reports with respect to the Collateral
referred to in Annex F.
"Collection Account" means (i) with respect to payments in Dollars,
that certain account of Agent, account number 502-328-54 in the name of Agent at
Deutsche Bank Trust Company Americas in New York, New York ABA No. 021 001 033
or (ii) with respect to payments in Sterling, account number 608-02-697 in the
name of Agent at Barclays Bank in London, or in each case such other account as
may be specified in writing by Agent as the "Collection Account" for the
applicable payments.
"Commitment Termination Date" means the earliest of (a) March 4, 2007,
(b) the date of termination of Lenders' obligations to make Advances and to
incur Letter of Credit Obligations or permit existing Advances and Letter of
Credit Obligations to remain outstanding pursuant to Section 8.2(b), and (c) the
date of (i) indefeasible prepayment in full by Borrowers of the Loans and all
other outstanding Obligations and the cancellation and return (or stand-by
guarantee) of all Letters of Credit or the cash collateralization of all Letter
of Credit Obligations pursuant to Annex B and (ii) the permanent reduction of
all Commitments to zero dollars ($0).
"Commitments" means (a) as to any Lender, the commitment of such
Lender to make Revolving Credit Advances or incur Letter of Credit Obligations
as set forth on Annex J to the Agreement, in the Joinder Agreement executed by
such Lender or in the most recent Assignment Agreement executed by such Lender
(including without duplication the Swing Line
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Lender's Swing Line Commitment as a subset of its Commitment) and (b) as to all
Lenders, the aggregate commitment of all Lenders to make Revolving Credit
Advances or incur Letter of Credit Obligations (including without duplication
the Swing Line Lender's Swing Line Commitment as a subset of its Commitment),
which aggregate commitment shall be One Hundred Million Dollars ($100,000,000)
on the Closing Date, as such amount may be increased pursuant to Section
1.01(a)(iv) or reduced or adjusted from time to time in accordance with the
Agreement.
"Compliance Certificate" has the meaning ascribed to it in Annex E.
"Consolidated Net Tangible Assets" has the meaning set forth in the
Senior Note Indenture as in effect on the date hereof, but without giving effect
to any amendments thereto or modifications thereof.
"Contingency Reserve" means any contingency reserve established by
Holdings and its Subsidiaries, on a consolidated basis, in accordance with GAAP,
except any contingency reserve established in respect of expenses incurred in
the ordinary course of business.
"Contracts" means all "contracts," as such term is defined in the
Code, now owned or hereafter acquired by any Sotheby Entity, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Sotheby Entity may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.
"Contribution Agreement" means the Contribution, Indemnification and
Subordination Agreement, dated as of the Closing Date, among each U.S. Borrower
and each Domestic Subsidiary Guarantor.
"Control Letter" means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated, securities entitlements and
other financial assets held in a securities account in the name of any Credit
Party, (iii) a futures commission merchant or clearing house, as applicable,
with respect to commodity accounts and commodity contracts held by any Credit
Party, whereby, among other things, the issuer, securities intermediary or
futures commission merchant limits any security interest in the applicable
financial assets in a manner reasonably satisfactory to Agent, acknowledges the
security interest of Agent, on behalf of itself and the other Secured Parties,
on such financial assets, and agrees to follow the instructions or entitlement
orders of Agent without further consent by the affected Credit Party.
"Copyright License" means any and all rights now owned or hereafter
acquired by any Sotheby Entity under any written agreement granting any right to
use any Copyright or Copyright registration.
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"Copyright Security Agreements" means the Copyright Security
Agreements made in favor of Agent, on behalf of itself and the other Secured
Parties, by each applicable Credit Party.
"Copyrights" means all of the following now owned or hereafter adopted
or acquired by any Sotheby Entity: (a) all copyrights and General Intangibles of
like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"Credit Party" means any Borrower or any Guarantor, and "Credit
Parties" shall mean all such Persons, collectively.
"Default" means any event that, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning ascribed to it in Section 1.5(d).
"Deposit Accounts" means all "deposit accounts" as such term is
defined in the Code, now or hereafter held in the name of any Credit Party.
"Designated Date" means, as of any date of determination, after giving
effect to any Swing Line Advance, Revolving Credit Advance or Letter of Credit
Obligation made or incurred on such date, the date of the most recent Swing Line
Advance, Revolving Credit Advance or Letter of Credit Obligation incurrence (a)
prior to which the aggregate outstanding principal amount of the Loans and
Letter of Credit Obligations shall not in the aggregate have exceeded 15% of
Consolidated Net Tangible Assets as of the date of such Swing Line Advance,
Revolving Credit Advance or Letter of Credit Obligation incurrence and (b) after
which the aggregate outstanding principal amount of the Loans and Letter of
Credit Obligations shall have in the aggregate exceeded 15% of Consolidated Net
Tangible Assets as of the date of such Swing Line Advance, Revolving Credit
Advance or Letter of Credit Obligation incurrence.
"Disclosure Schedules" means the Schedules prepared by Borrowers and
denominated as Disclosure Schedules (1.4) through (6.7) in the table of contents
to the Agreement.
"Discount Certificate Reserve" means, as of any date subsequent to
January 1, 2005, a reserve equal to the excess, if any, of (a) the aggregate
amount of cash payments made by the Sotheby Entities in respect of the Discount
Certificates during the four Fiscal Quarters preceding the immediately preceding
Fiscal Quarter over (b) the Unrestricted Cash Amount as of such date.
"Discount Certificates" means certificates distributed by Holdings and
Christie's International PLC and their respective Subsidiaries pursuant to the
Antitrust Settlement Agreement for use by the holders thereof to reduce seller's
commission and other consignment-
A-9
related charges to be paid on auction transactions occurring in the United
States of America or the United Kingdom.
"Documents" means all "documents," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
"D.O.J. Liability Reserve" means a reserve equal to (a) on any date
from and including January 1, 2005 to but excluding the earlier of (i) the date
on which the payment in respect the Antitrust Settlement Agreement due on
February 5, 2005, is made and (ii) February 5, 2005, an amount equal to the
excess, if any, of (x) $12,000,000 over (y) the Unrestricted Cash Amount as of
such date and (b) on any date from and including January 1, 2006 to but
excluding the earlier of (i) the date on which the payment in respect the
Antitrust Settlement Agreement due on February 5, 2006, is made and (ii)
February 5, 2006, an amount equal to the excess, if any, of (x) $15,000,000 over
(y) the Unrestricted Cash Amount as of such date.
"Dollar Equivalent" means, with respect to any amount denominated in
Dollars, such amount of Dollars, and with respect to any amount denominated in a
currency other than Dollars, the amount of Dollars, as of any date of
determination, into which such other currency (as the context may require) can
be converted in accordance with Section 1.18.
"Dollar Index Rate" means, for any day, a floating rate equal to the
higher of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "prime rate" (or, if The Wall Street Journal ceases quoting a
prime rate, the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus 50 basis points per annum. Each change in any
interest rate provided for in the Agreement based upon the Dollar Index Rate
shall take effect at the time of such change in the Dollar Index Rate.
"Dollar LIBOR Rate" means for each LIBOR Period with respect to a
LIBOR Loan denominated in Dollars, a rate of interest determined by Agent equal
to:
(a) the offered rate for deposits in Dollars for the applicable LIBOR
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time),
on the second full LIBOR Business Day next preceding the first day of such
LIBOR Period; divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Governmental Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) that
are required to be maintained by a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News Service
(or its successor satisfactory to Agent), the Dollar LIBOR Rate shall be
determined from such financial reporting
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service or other information as shall be mutually acceptable to Agent and
Borrower Representative.
"Dollars" or "$" means lawful currency of the United States of
America.
"Domestic Subsidiary" means any Subsidiary of Holdings incorporated or
organized under the laws of the United States of America, any state thereof or
the District of Columbia.
"Domestic Subsidiary Guarantor" means a Domestic Subsidiary that does
not constitute a U.S. Borrower or an Immaterial Subsidiary.
"Domestic Subsidiary Guaranty" means that certain Guaranty, dated as
of the Closing Date, executed by each Domestic Subsidiary Guarantor in favor of
Agent, for the benefit of Agent and the Lenders.
"Due-to-Consignor Reserve" means, at any time, a reserve equal to the
difference, if any, of (a) 100% of the amounts payable to consignors in respect
of consigned items sold to third parties by the Sotheby Entities at such time
minus (b) an amount equal to (i) the aggregate balance of accounts receivable of
the Sotheby Entities (determined in accordance with GAAP) at such time plus (ii)
the aggregate amount of cash of the Sotheby Entities (as determined in
accordance with GAAP) at such time minus (c) the amount of such cash subject to
a Lien (or held in a deposit or securities account subject to a Lien) in favor
of any Person other than (i) Agent or a (ii) consignor to whom such cash is due
to be paid in respect of the sale of a Work of Art consigned by such Person to
the Sotheby Entities for sale minus (d) without duplication of the foregoing
clause (c), the amount of such cash subject to any restriction on withdrawal
from the deposit or securities account in which such cash is held.
"EBITDA" means, with respect to Holdings and its Subsidiaries, on a
consolidated basis, for any fiscal period, without duplication, an amount equal
to (a) consolidated net income of such Persons for such period determined in
accordance with GAAP, minus (b) the sum of (i) income tax credits, (ii) gain
from extraordinary items for such period, (iii) any aggregate net gain (but not
any aggregate net loss) during such period arising from the sale, exchange or
other disposition of capital assets by such Persons (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), and (iv) any other non-cash
gains that have been added in determining consolidated net income, in each case
to the extent included in the calculation of consolidated net income of such
Persons for such period in accordance with GAAP, but without duplication, plus
(c) the sum of (i) the provision for income taxes with respect to such fiscal
period, (ii) Interest Expense with respect to such period (net of Interest
Income with respect to such period), (iii) loss from extraordinary items for
such period, (iv) depreciation and amortization for such period, (v) amortized
debt discount for such period, (vi) impairment losses relating to the
termination of a lease or relating to leasehold improvements and (vii) the
amount of any deduction to consolidated net income as the result of any grant to
any members of the management of such Persons of any Stock (including restricted
stock), in each case to the extent included in the calculation of consolidated
net income of such Persons for such period in accordance with
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GAAP, but without duplication. For purposes of this definition, the following
items shall be excluded in determining consolidated net income of such Persons:
(1) the income (or deficit) of any other Person accrued prior to the date it
became a Subsidiary of, or was merged or consolidated into, any such Person or
any of such Persons' Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which any such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of any such Person to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of any contractual
obligation or requirement of law applicable to such Subsidiary; (4) any
restoration to income of any Contingency Reserve, except to the extent that
provision for such Contingency Reserve was made out of income accrued during
such period; (5) any write-up of any asset; (6) any net gain from the collection
of the proceeds of life insurance policies; (7) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of any such Person; (8) in the case of a successor to any such
Person by consolidation or merger or as a transferee of its assets, any earnings
of such successor prior to such consolidation, merger or transfer of assets; and
(9) any deferred credit representing the excess of equity in any Subsidiary of
any such Person at the date of acquisition of such Subsidiary over the cost to
such Person of the investment in such Subsidiary.
"Eligible Art Loan" has the meaning ascribed to it in Section 1.6.
"Eligible Venture Loan" means a Venture Loan that is an Eligible Art
Loan.
"Environmental Laws" means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations, now
or hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
'SS''SS' 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. 'SS''SS' 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 'SS''SS' 136 et seq.); the
Solid Waste Disposal Act (42 U.S.C. 'SS''SS' 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C. Sections 2601 et seq.); the Clean Air Act (42 U.S.C.
'SS''SS' 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
'SS''SS' 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C.
'SS''SS' 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. 'SS''SS'
300(f) et seq.), and any and all regulations promulgated thereunder, and all
analogous state, local and foreign counterparts or equivalents and any transfer
of ownership notification or approval statutes.
"Environmental Liabilities" means, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and
A-12
expenses (including all reasonable fees, disbursements and expenses of counsel,
experts and consultants), fines, penalties, sanctions and interest incurred as a
result of or related to any claim, suit, action, investigation, proceeding or
demand by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law, arising
under or related to any Environmental Laws, Environmental Permits, or in
connection with any Release or threatened Release or presence of a Hazardous
Material whether on, at, in, under or from any real or personal property.
"Environmental Permits" means all permits, licenses, authorizations,
certificates, approvals or registrations required for the operations of any
Sotheby Entity by any Governmental Authority under any Environmental Laws.
"Equipment" means all "equipment," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located and,
in any event, including all such Credit Party's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" means, with respect to any Sotheby Entity, any trade
or business (whether or not incorporated) that, together with such Sotheby
Entity, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC.
"ERISA Event" means, with respect to any Sotheby Entity or any ERISA
Affiliate, (a) with respect to a Title IV Plan, any event described in Section
4043(c) of ERISA for which notice to the PBGC has not been waived; (b) the
withdrawal of any Sotheby Entity or ERISA Affiliate from a Title IV Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial
withdrawal of any Sotheby Entity or any ERISA Affiliate from any Multiemployer
Plan; (d) the filing of a notice of intent to terminate a Title IV Plan in a
distress termination described in Section 4041(c) of ERISA or the treatment of a
plan amendment as a termination under Section 4041 of ERISA; (e) the institution
of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC;
(f) with respect to a Title IV Plan, the existence of an "accumulated funding
deficiency" (as defined in Section 412 of the IRC or Section 302 of ERISA)
whether or not waived, or the failure to make by its due date a required
installment under Section 412(m) of the Code or the failure to make any required
contribution to a Multiemployer Plan; (g) the filing pursuant to Section 412(d)
of the Code or Section 303(d) of
A-13
ERISA of an application for a waiver of the minimum funding standard with
respect to a Title IV Plan; (h) the making of any amendment to any Title IV Plan
which could result in the imposition of a lien or the posting of a bond or other
security; (i) with respect to a Title IV Plan an event described in Section
4062(e) of ERISA; (j) any other event or condition that would reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan or for the imposition of liability under Section 4069 or
4212(c) of ERISA; (k) the termination of a Multiemployer Plan under Section
4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under
Section 4241 or 4245 of ERISA; (l) the loss of a Qualified Plan's qualification
or tax exempt status; or (m) the termination of a Plan described in Section 4064
of ERISA.
"Estimated Value" means, as of any date of determination, with respect
to any Work of Art, the most recent low auction estimate of such Work of Art, as
determined from time to time by the applicable Borrower in accordance with
Section 5.12.
"Euro" means the single currency of Participating Member States.
"Event of Default" has the meaning ascribed to it in Section 8.1.
"Executive Order" means Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, and relating to Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism.
"Fair Labor Standards Act" means the Fair Labor Standards Act, 29
U.S.C. 'SS' 201 et seq.
"Federal Funds Rate" means, for any day, a floating rate equal to the
weighted average of the rates on overnight Federal funds transactions among
members of the Federal Reserve System, as determined by Agent in its sole
discretion, which determination shall be final, binding and conclusive (absent
manifest error).
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Fees" means any and all fees payable to Agent or any Lender pursuant
to the Agreement or any of the other Loan Documents.
"Financial Covenants" means the financial covenants set forth in Annex
G.
"Financial Officer" means, with respect to any Person, the Chief
Financial Officer, Treasurer or Controller thereof or another officer thereof of
similar seniority and responsibility.
"Financial Statements" means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Borrowers delivered
in accordance with Section 3.4 and Annex E.
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"Fiscal Month" means any of the monthly accounting periods of
Holdings.
"Fiscal Quarter" means any of the quarterly accounting periods of
Holdings ending on March 31, June 30, September 30 or December 31 of each year.
"Fiscal Year" means any of the annual accounting periods of Holdings
ending on December 31 of each year.
"Fixed Charges" means, with respect to Holdings and its Subsidiaries,
on a consolidated basis, for any Fiscal Quarter, an amount equal to (a) the
aggregate of all Interest Expense with respect to such Fiscal Quarter (net of
any Interest Income with respect to such Fiscal Quarter) plus (b) scheduled
payments of principal with respect to Indebtedness during such Fiscal Quarter.
"Fixed Charge Coverage Ratio" means, with respect to Holdings and its
Subsidiaries, on a consolidated basis, for any four Fiscal Quarter period, the
ratio of (I) the sum of (a) Adjusted EBITDA for each of such four Fiscal
Quarters plus (b) to the extent not included in Adjusted EBITDA for such four
Fiscal Quarters, non-cash expenses incurred during such Fiscal Quarters with
respect to the Restricted Stock Plan in connection with the cancellation
thereunder of options to purchase Stock of Holdings previously granted to
employees minus (c) Capital Expenditures during such four Fiscal Quarters minus
(d) cash income taxes paid during such Fiscal Quarters net of (i) income tax
refunds and (ii) cash taxes paid with respect to the 2004 tax year in respect of
any gain on the assets and capital stock of Sotheby's International Realty, Inc.
sold by such Persons to (II) the aggregate Fixed Charges for such four Fiscal
Quarters.
"Fixtures" means all "fixtures" as such term is defined in the Code,
now owned or hereafter acquired by any Sotheby Entity.
"Foreign Subsidiary" means any Subsidiary of Holdings that is not a
Domestic Subsidiary.
"Funded Debt" means, with respect to any Person, without duplication,
all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person's
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness
consisting of guaranties of Funded Debt of other Persons.
"GAAP" means generally accepted accounting principles in the United
States of America consistently applied, as such term is further defined in Annex
G to the Agreement.
"GE Capital" means General Electric Capital Corporation, a Delaware
corporation.
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"GE Capital Fee Letter" means that certain letter, dated as of
February 5, 2004, between GE Capital and Borrower Representative, on behalf of
itself and the other Credit Parties, with respect to certain Fees to be paid
from time to time by Borrowers to GE Capital.
"General Intangibles" means all "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by any Sotheby Entity,
including all right, title and interest that such Sotheby Entity may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights to
receive dividends, distributions, cash, Instruments and other property in
respect of or in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Sotheby Entity or any computer bureau or service company from time to time
acting for such Sotheby Entity.
"Goods" means all "goods" as defined in the Code, now owned or
hereafter acquired by any Sotheby Entity, wherever located, including embedded
software to the extent included in "goods" as defined in the Code, manufactured
homes, standing timber that is cut and removed for sale and unborn young of
animals.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" means as to any Person, any obligation of
such Person guaranteeing, providing comfort or otherwise supporting any
Indebtedness, lease, dividend, or other obligation (including, without
limitation, any obligation described in Section 6.3(a)(vii)) (the "primary
obligation") of any other Person (the "primary obligor") in any manner,
including any obligation or arrangement of such Person to (a) purchase or
repurchase any such primary obligation, (b) advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet condition of the primary obligor, (c)
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, (d) protect the beneficiary of such
arrangement from loss (other than product warranties given in the ordinary
course of business) or (e) indemnify the owner of such primary
A-16
obligation against loss in respect thereof. The amount of any Guaranteed
Indebtedness at any time shall be deemed to be an amount equal to the lesser at
such time of (x) the stated or determinable amount of the primary obligation in
respect of which such Guaranteed Indebtedness is incurred and (y) the maximum
amount for which such Person may be liable pursuant to the terms of the
instrument embodying such Guaranteed Indebtedness, or, if not stated or
determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.
"Guaranties" means, collectively, the Domestic Subsidiary Guaranty and
any other guaranty executed by any Guarantor in favor of Agent, for the benefit
of Agent and Lenders, in respect of all or a portion of the Obligations.
"Guarantors" means the Domestic Subsidiary Guarantors, the U.K.
Subsidiary Guarantors and each other Person, if any, that executes a guaranty or
other similar agreement in favor of Agent, for the benefit of Agent and Lenders,
in connection with the transactions contemplated by the Agreement and the other
Loan Documents.
"Hazardous Material" means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.
"Holdings" has the meaning ascribed to it in the preamble to the
Agreement.
"IEEPA" means the International Emergency Economic Power Act, 50
U.S.C. 'SS' 1701 et. seq.
"Immaterial Subsidiary" means any Domestic Subsidiary or any Foreign
Subsidiary organized under the laws of England, in each case listed on
Disclosure Schedule (5.17), unless such entity shall have executed a Guaranty
and such Collateral Documents as Agent shall reasonably request, and in any
event shall include Sotheby's International Realty Ltd., a company organized
under the laws of England.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred 6 months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are unsecured and not overdue by more than 6 months unless being
contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers' acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property),
A-17
(e) all Capital Lease Obligations and the present value (discounted at the
Dollar Index Rate as in effect on the Closing Date) of future rental payments
under all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement designed
to alter the risks of that Person arising from fluctuations in currency values
or interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations.
"Indemnified Liabilities" has the meaning ascribed to it in Section
1.13.
"Indemnified Person" has the meaning ascribed to in Section 1.13.
"Index Rate Loan" means the Swing Line Loan or any portion of the
Revolving Loan bearing interest by reference to the Dollar Index Rate or the
Sterling Index Rate, as applicable.
"Insolvency Event" has the meaning ascribed to in Section 12.5.
"Instruments" means all "instruments," as such term is defined in the
Code, now owned or hereafter acquired by any Sotheby Entity, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all promissory notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks.
"Intercompany Indebtedness" has the meaning ascribed to in Section
12.5.
"Interest Expense" means, with respect to any Person for any fiscal
period, the sum of (a) interest expense (whether cash or non-cash) of such
Person determined in accordance with GAAP for the relevant period, including
interest expense with respect to any Funded Debt of such Person, interest
expense that has been capitalized on the balance sheet of such Person and
interest expense with respect to the York Avenue Sale Leaseback, plus (b) in
each case to the extent such item is not included in the foregoing clause (a) or
in Adjusted EBITDA and without duplication, the sum of (i) amortization during
the relevant period of liabilities arising in respect of the Antitrust
Litigation Liabilities plus (ii) amortization during the relevant period of
liabilities arising in respect of the Discount Certificates plus (iii) interest
expense for the relevant period related to the Benefit Equalization Plan plus
(iv) annual fees incurred during the relevant period in connection with this
Agreement plus (v) cash expenses incurred during the relevant period with
respect to the Restricted Stock Plan in connection with the cancellation
thereunder of options to purchase Stock of Holdings previously granted to
employees.
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"Interest Income" means, with respect to Holdings and its
Subsidiaries, on a consolidated basis, for any fiscal period, an amount equal to
the consolidated interest income of such Persons for such period, determined in
accordance with GAAP.
"Interest Payment Date" means (a) as to any Index Rate Loan, the first
Business Day of each month to occur while such Loan is outstanding, and (b) as
to any LIBOR Loan, the last day of the applicable LIBOR Period; provided, that
in the case of any LIBOR Period greater than three months in duration, interest
shall be payable at three-month intervals and on the last day of such LIBOR
Period; provided, further, that, in addition to the foregoing, each of (x) the
date upon which all of the Commitments have been terminated and the Loans have
been paid in full and (y) the Commitment Termination Date shall be deemed to be
an "Interest Payment Date" with respect to any interest that has then accrued
under the Agreement; provided, further, that with respect to any Revolving
Credit Advance denominated in Sterling, (i) the first Interest Payment Date to
occur after the Closing Date with respect thereto shall be October 1, 2004 and
(ii) any interest that would have been payable on any day prior to such date
without giving effect to clause (i) of this proviso shall accrue interest from
such day until the first Interest Payment Date with respect to such Revolving
Credit Advance at the Sterling Index Rate.
"Inventory" means all "inventory," as such term is defined in the
Code, now owned or hereafter acquired by any Sotheby Entity, wherever located,
and in any event including inventory, merchandise, goods and other personal
property that are held by or on behalf of any Sotheby Entity for sale or lease
or are furnished or are to be furnished under a contract of service, or that
constitute raw materials, work in process, finished goods, returned goods, or
materials or supplies of any kind, nature or description used or consumed or to
be used or consumed in such Sotheby Entity's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded software.
"Investment Property" means all "investment property" as such term is
defined in the Code now owned or hereafter acquired by any Sotheby Entity,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Sotheby Entity,
including the rights of any Sotheby Entity to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Sotheby
Entity; (iv) all commodity contracts of any Sotheby Entity; and (v) all
commodity accounts held by any Sotheby Entity.
"IRC" means the Internal Revenue Code of 1986 and all regulations
promulgated thereunder.
"IRS" means the Internal Revenue Service.
"Joinder Agreement" means an agreement pursuant to which (i) a Person
shall become a Lender hereunder or (ii) a Lender shall increase its Commitment,
in each case in accordance with Section 1.1(a)(iv).
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"Judgement Conversion Date" has the meaning ascribed to it in Section
1.19(a).
"Judgement Currency" has the meaning ascribed to it in Section
1.19(a).
"L/C Issuer" has the meaning ascribed to it in Annex B.
"L/C Sublimit" has the meaning ascribed to it in Annex B.
"Lenders" means GE Capital, the other Lenders named on the signature
pages of the Agreement, and, if any such Lender shall decide to assign all or
any portion of the Obligations, such term shall include any assignee of such
Lender.
"Letter of Credit Fee" has the meaning ascribed to it in Annex B.
"Letter of Credit Obligations" means all outstanding obligations
incurred by Agent and Lenders at the request of Borrower Representative, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of Letters of Credit by GE Capital or another L/C Issuer or the
purchase of a participation as set forth in Annex B with respect to any Letter
of Credit. The amount of such Letter of Credit Obligations shall equal the
maximum amount that may be payable at such time or at any time thereafter by the
Lenders thereupon or pursuant thereto.
"Letters of Credit" means standby letters of credit issued for the
account of any Borrower (and any Subsidiary thereof that may be a co-applicant
on any such Letter of Credit) by any L/C Issuer, and bankers' acceptances issued
by any Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.
"Letter-of-Credit Rights" means "letter-of-credit rights" as such term
is defined in the Code, now owned or hereafter acquired by any Sotheby Entity,
including rights to payment or performance under a letter of credit, whether or
not such Sotheby Entity, as beneficiary, has demanded or is entitled to demand
payment or performance.
"LIBOR Business Day" means a Business Day on which banks in the City
of London are generally open for interbank or foreign exchange transactions.
"LIBOR Loan" means any portion of the Revolving Loan bearing interest
by reference to a Dollar LIBOR Rate or a Sterling LIBOR Rate, as applicable.
"LIBOR Period" means, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower Representative pursuant
to the Agreement and ending one, two, three or six months thereafter, as
selected by Borrower Representative's irrevocable notice to Agent as set forth
in Section 1.5(e); provided, that the foregoing provision relating to LIBOR
Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be
to carry such LIBOR Period
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into another calendar month in which event such LIBOR Period shall end on
the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Commitment
Termination Date shall end two (2) LIBOR Business Days prior to such date;
(c) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such LIBOR Period) shall end on the
last LIBOR Business Day of a calendar month; and
(d) Borrower Representative shall select LIBOR Periods so that there
shall be no more than 5 separate LIBOR Loans in existence at any one time.
"License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Sotheby Entity.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Liquidity Amount" means, as of any date of determination, the sum of
(a) the Aggregate Borrowing Availability as of such date and (b) the
Unrestricted Cash Amount as of such date.
"Litigation" has the meaning ascribed to it in Section 3.13(a).
"Loan Account" has the meaning ascribed to it in Section 1.12.
"Loan Documents" means the Agreement, the Notes, the Collateral
Documents, the Contribution Agreement, the GE Capital Fee Letter, the Master
Standby Agreement, and all other agreements, instruments, documents and
certificates identified in the Closing Checklist executed and delivered to, or
in favor of, Agent or any Lenders and including all other pledges, powers of
attorney, consents, assignments, contracts, notices, letter of credit agreements
and all other written matter whether heretofore, now or hereafter executed by or
on behalf of any Credit Party, or any employee of any Credit Party, and
delivered to Agent or any Lender in connection with the Agreement or the
transactions contemplated thereby. Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to the Agreement or such Loan Document as
the same may be in effect at any and all times such reference becomes operative.
"Loans" means the Revolving Loan and the Swing Line Loan.
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"Margin Stock" has the meaning ascribed to in Section 3.10.
"Master Standby Agreement" means the Master Agreement for Standby
Letters of Credit dated as of the Closing Date among Borrowers, as Applicant(s),
and GE Capital, as issuer.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of the
Sotheby Entities considered as a whole, (b) any Borrower's ability to pay any of
the Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Collateral (including Works of Art securing repayment of Art
Loans) or Agent's Liens, on behalf of itself and the other Secured Parties, on
the Collateral or the priority of such Liens, or (d) Agent's or any Lender's
rights and remedies under the Agreement and the other Loan Documents.
"Maximum Amount" means, as of any date of determination, an amount
equal to the Commitment of all Lenders as of such date.
"Maximum Lawful Rate" has the meaning assigned to it in Section
1.5(f).
"Multiemployer Plan" means a "multiemployer plan" as defined in
Sections 3(37) or 4001(a)(3) of ERISA, and to which any Sotheby Entity or ERISA
Affiliate is making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"New Lender" has the meaning ascribed to it in Section 1.1(a)(iv).
"Non-Consignor Art Loan" means any Art Loan made by a Borrower with
respect to which the related Art Loan Debtor has not consigned any of the Works
of Art securing repayment of such Art Loan to the Borrower for sale.
"Non-Funding Lender" has the meaning ascribed to it in Section
9.9(a)(ii).
"Notes" means, collectively, the Revolving Notes and the Swing Line
Note.
"Notice of Conversion/Continuation" has the meaning ascribed to it in
Section 1.5(e).
"Notice of Revolving Credit Advance" has the meaning ascribed to it in
Section 1.1(a).
"Oatshare" has the meaning ascribed to it in the preamble to the
Agreement.
"Oberon" has the meaning ascribed to it in the preamble to the
Agreement.
"Obligation Currency" has the meaning ascribed to it in Section
1.19(a).
"Obligations" means all loans, advances, debts, liabilities and
obligations for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not
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such performance is then required or contingent, or such amounts are liquidated
or determinable) owing by any Credit Party to Agent or any Lender, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, whether or not evidenced by any note, agreement, letter of credit
agreement or other instrument, arising under the Agreement or any of the other
Loan Documents. This term includes all principal, interest (including all
interest that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case or
proceeding), Fees, expenses, attorneys' fees and any other sum chargeable to any
Credit Party under the Agreement or any of the other Loan Documents. This term
does not include any Bank Product and Hedging Obligations.
"Obligor" has the meaning ascribed to it in Section 12.5.
"O.E.C.D." means the Organisation for Economic Co-operation and
Development as contemplated by the Convention on the Organisation for Economic
Co-operation and Development of December 14, 1960, as amended from time to time.
"OFAC" means the U.S. Department of Treasury's Office of Foreign Asset
Control.
"Overadvance" has the meaning ascribed to it in Section 1.1(a)(iii).
"Participating Member State" means any member state which adopts the
euro unit of the single currency pursuant to the Treaty of Rome.
"Patent License" means rights under any written agreement now owned or
hereafter acquired by any Sotheby Entity granting any right with respect to any
invention on which a Patent is in existence.
"Patents" means all of the following in which any Sotheby Entity now
holds or hereafter acquires any interest: (a) all letters patent of the United
States or of any other country, all registrations and recordings thereof, and
all applications for letters patent of the United States or of any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State, or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.
"PATRIOT Act" means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56) (The USA PATRIOT Act).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means a Plan described in Section 3(2) of ERISA.
"Permitted Country" means any country (in addition to the United
States, Canada and the United Kingdom) with respect to which Agent, in its sole
discretion, shall have determined (and notified the Borrowers in writing) that
Works of Art securing repayment of an Art Loan may be located in such country
without causing such Art Loan to fail to constitute an
A-23
Eligible Art Loan pursuant to clause (i) of Section 1.6(c), it being understood
that Agent may withdraw such determination at any time in its sole discretion
with respect to any country (other than the United States, Canada and the United
Kingdom) and thereafter such country shall not constitute a Permitted Country.
"Permitted Encumbrances" means the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or which are being contested in accordance with Section 5.2(b); (b) pledges or
deposits of money securing statutory obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Sotheby Entity is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics'
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers',
warehousemen's, suppliers' or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of a Dollar Equivalent of $1,000,000 at any time, so long
as such Liens attach only to Inventory; (f) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Sotheby Entity is a
party; (g) any attachment or judgment lien not constituting an Event of Default
under Section 8.1(j); (h) zoning restrictions, easements, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such Real Estate; (i) any Lien in
favor of a consignor on a segregated deposit account established for the benefit
of such consignor and into which only proceeds of Works of Art consigned by such
consignor to a Sotheby Entity for sale (including such Sotheby's Entity's
commissions on such sales) are deposited; provided, that if such consignor is an
Art Loan Debtor, such Lien shall constitute a "Permitted Lien" only if an
agreement among the applicable Borrower, such consignor and the applicable
account bank expressly states that amounts received in such deposit account
shall be transferred first, without any further consent of any Person, to the
applicable Borrower until the related Art Loan is repaid in full prior to any
such amounts being transferred to such consignor; (j) presently existing or
hereafter created Liens in favor of Agent, on behalf of Lenders or the holders
of the Senior Notes, in each case pursuant to the Loan Documents; (k) other than
with respect to any Blocked Account or Cash Collateral Account, any lien or
banker's right of set-off or combination of accounts arising by operation of law
or in accordance with standard terms of banking; and (l) Liens expressly
permitted under clauses (b) and (c) of Section 6.7 of the Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, other entity or
government (whether federal, state, county, city, municipal, local, foreign, or
otherwise, including any instrumentality, division, agency, body or department
thereof).
"Plan" means, at any time, an "employee benefit plan", as defined in
Section 3(3) of ERISA, that any Sotheby Entity or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to or has maintained,
contributed to or had an obligation to contribute to
A-24
at any time within the past 7 years on behalf of participants who are or were
employed by any Sotheby Entity or ERISA Affiliate.
"PPSA" means the Personal Property Security Act as in effect from time
to time in any Canadian jurisdiction.
"Prior Agent" means JPMorgan Chase Bank, in its capacities as
administrative agent and collateral agent under the Prior Credit Agreement.
"Prior Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of February 7, 2003, among Holdings, Sotheby's, Inc.,
Oatshare, Sotheby's U.K., Sotheby's Global Trading GmbH, a company organized in
Switzerland, the Prior Lenders and the Prior Agent, as amended from time to
time.
"Prior Lender Obligations" means the obligations of Holdings and its
Subsidiaries arising under or in connection with the Prior Credit Agreement.
"Prior Lenders" shall mean the financial institutions party to the
Prior Credit Agreement as lenders or as issuing bank.
"Proceeds" means "proceeds," as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Sotheby Entity from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Sotheby Entity from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Sotheby Entity against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Sotheby Entity against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.
"Prohibited Person" means any Person:
(a) listed in the Annex to, or otherwise subject to the provisions of,
the Executive Order;
(b) that is owned or controlled by, or acting for or on behalf of, any
person or entity that is listed in the Annex to, or is otherwise subject to the
provisions of, the Executive Order;
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(c) with whom Agent or any Lender is prohibited from dealing or
otherwise engaging in any transaction by any terrorism or money laundering legal
requirements, including the PATRIOT Act and the Executive Order;
(d) that commits, threatens or conspires to commit or supports
"terrorism" as defined in the Executive Order;
(e) that is named as a "specifically designated national (SDN)" on the
most current list published by OFAC at its official website
(http://www.treas.gov.ofac/t11sdn.pdf) or at any replacement website or other
replacement official publication of such list or is named on any other U.S. or
foreign government or regulatory list issued after September 11, 2001;
(f) that is covered by IEEPA, OFAC or any other law, regulation or
executive order relating to the imposition of economic sanctions against any
country, region or individual pursuant to United States law or United Nations
resolution; or
(g) that is an affiliate (including any principal, officer, immediate
family member or close associate) of a person or entity described in one or more
of clauses (a) - (f) of this definition.
"Projections" means Holdings' forecasted consolidated: (a) balance
sheets; (b) profit and loss statements; and (c) cash flow statements, in each
case prepared on a basis consistent with the historical Financial Statements of
the Holdings, together with appropriate supporting details and a statement of
underlying assumptions.
"Pro Rata Share" means with respect to all matters relating to any
Lender, (a) the percentage obtained by dividing (i) the aggregate Commitments of
that Lender by (ii) the aggregate Commitments of all Lenders, and (b) on and
after the Commitment Termination Date, the percentage obtained by dividing (i)
the Dollar Equivalent of the aggregate outstanding principal balance of the
Loans held by that Lender by (ii) the Dollar Equivalent of the outstanding
principal balance of the Loans held by all Lenders, in each case as any such
percentages may be adjusted by assignments permitted pursuant to Section 9.1 or
other adjustments to the Commitments pursuant to the Agreement.
"Protected Party" means a Lender which is or will be, for or on
account of Tax, subject to any liability or required to make any payment in
relation to a sum received or receivable (or any sum deemed for the purposes of
Tax to be received or receivable) under any Loan Document.
"Qualified Assignee" means (a) any Lender, any Affiliate of any Lender
and, with respect to any Lender that is an investment fund that invests in
commercial loans, any other investment fund that invests in commercial loans and
that is managed or advised by the same investment advisor as such Lender or by
an Affiliate of such investment advisor, and (b) any commercial bank, savings
and loan association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a
A-26
rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody's at
the date that it becomes a Lender and which, through its applicable lending
office, is capable of lending to Borrowers without the imposition of any
withholding or similar taxes; provided, that, except as otherwise agreed by
Agent, no Person proposed to become a Lender after the Closing Date and
determined by Agent to be acting in the capacity of a vulture fund or distressed
debt purchaser shall be a Qualified Assignee, and no Person or Affiliate of such
Person proposed to become a Lender after the Closing Date and that holds Senior
Notes or Stock issued by any Sotheby Entity shall be a Qualified Assignee.
"Qualifying Lender" means:
(i) in respect of a payment made by a U.K. Credit Party, a
Lender which is beneficially entitled to amounts payable to
that Lender in respect of an advance under this Agreement or
the other Loan Documents and is:
(A) a Lender:
(1) which is a bank (as defined for the purpose of
section 349 of the Taxes Act) making an advance
under this Agreement or the other Loan Documents;
or
(2) in respect of an advance made under this Agreement
by a person that was a bank (as defined for the
purpose of section 349 of the Taxes Act) at the
time that that advance was made,
and which is within the charge to United Kingdom
corporation tax as respects any payments of interest
made in respect of that advance; or
(B) a Lender which is:
(1) a company resident in the United Kingdom for
United Kingdom tax purposes;
(2) a partnership each member of which is a company
resident in the United Kingdom for United Kingdom
tax purposes;
(3) a company not so resident in the United Kingdom
which carries on a trade in the United Kingdom
through a permanent establishment and which brings
into account interest payable in respect of that
advance in computing its chargeable profits
(within the meaning given by section 11(2) of the
Taxes Act); or
(C) a Treaty Lender.
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(ii) in respect of a payment made by a U.S. Credit Party
which would be required under the Code to pay United
States source interest in connection with this
Agreement or the other Loan Documents, a Lender which
is:
(A) created or organized under the laws of the United
States of America or of any state (including the
District of Columbia) thereof;
(B) a Treaty Lender with respect to the United States
of America that is entitled to receive payments
under any Loan Document without deduction or
withholding of any United States federal income
Taxes, provided such Lender has delivered (in a
timely fashion and without undue delay) to
Borrower Representative and Agent two original
copies of IRS Form W-8BEN (or any successor form)
certifying that it is a resident of a foreign
country with which the United States of America
has an income tax treaty; or
(C) entitled to receive payments under any Loan
Document without deduction or withholding of any
United States federal income Taxes as a result of
such payments being effectively connected with the
conduct by such Lender of a trade or business
within the United States of America, provided such
Lender has delivered (in a timely fashion and
without undue delay) to the Credit Party
Representative and Agent two original copies of
either (1) IRS Form W-8ECI (or any successor form)
certifying that the payments made pursuant to any
Loan Document are effectively connected with the
conduct by that Lender of a trade or business
within the United States of America or (2) such
other applicable form prescribed by the IRS
certifying as to such Lender's entitlement to
exemption from United States withholding tax with
respect to all payments to be made to such Lender
under any Loan Document.
"Qualified Plan" means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.
"Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered by a Sotheby
Entity that is a rate swap, basis swap, forward rate transaction, equity or
equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions) or any combination
thereof, whether linked to one or more interest rates, foreign currencies, or
equity prices.
"Real Estate" has the meaning ascribed to it in Section 3.6.
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"Real Estate Trademarks" has the meaning set forth in Section 5.15.
"Refinancing" means the repayment in full by Holdings and the
applicable Subsidiaries of Holdings of the Prior Lender Obligations on the
Closing Date.
"Refunded Swing Line Loan" has the meaning ascribed to it in Section
1.1(b)(iii).
"Related Person" has the meaning ascribed to it in Annex C.
"Relationship Bank" has the meaning ascribed to it in Annex C.
"Release" means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment.
"Replacement Lender" has the meaning ascribed to it in Section
1.16(d).
"Requisite Lenders" means Lenders having (a) more than 66 2/3% of the
Commitments of all Lenders, or (b) if the Commitments have been terminated, more
than 66 2/3% of the Dollar Equivalent of the aggregate outstanding amount of all
Loans.
"Reserves" means (a) reserves established pursuant to Section 5.4(c),
(b) the Unfunded Commitments Reserve, (c) the Due-to-Consignor Reserve, (d) the
D.O.J. Liability Reserve, (e) the Discount Certificate Reserve and (f) such
other reserves against Eligible Art Loans, U.S. Borrowing Availability or U.K.
Borrowing Availability that Agent may, in its reasonable credit judgment,
establish from time to time. Without limiting the generality of the foregoing,
Reserves established to ensure the payment of accrued Interest Expenses,
Indebtedness or other scheduled liabilities shall be deemed to be a reasonable
exercise of Agent's credit judgment.
"Restricted Collateral" means all Collateral other than Class A
Unrestricted Collateral and Class B Unrestricted Collateral, and all proceeds of
the foregoing.
"Restricted Payment" means, with respect to any Sotheby Entity (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Stock; (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Sotheby Entity's Stock or
any other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment made to redeem, purchase, repurchase or retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire Stock of such Sotheby Entity now or hereafter outstanding; (d) any
payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of such
Sotheby Entity's Stock or of a claim for reimbursement, indemnification or
contribution arising out of or related to any such claim for damages or
rescission; (e) any payment, loan, contribution, or other transfer of funds or
other property to any Stockholder of Holdings other than (i) payments of
compensation in the ordinary course of business to Stockholders who are
employees of such Person and (ii) payments made in connection with the
consignment of
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property for sale in the ordinary course of business; and (f) any payment of
management fees (or other fees of a similar nature) by a Borrower or Guarantor
to any Stockholder of such Person or its Affiliates that is not a Borrower or
Guarantor unless (i) such fees are paid in the ordinary course of business of
such Borrower or Guarantor, as applicable, and (ii) such payment is not made
following the occurrence and during the continuance of an Event of Default.
"Restricted Stock Plan" means the Sotheby's Holdings, Inc. 2003
Restricted Stock Plan.
"Retiree Welfare Plan" means, at any time, a welfare plan (within the
meaning of Section 3(1) of ERISA) that provides for continuing coverage or
benefits for any participant or any beneficiary of a participant after such
participant's termination of employment, other than continuation coverage
provided pursuant to Section 4980B of the IRC or other similar state law and at
the sole expense of the participant or the beneficiary of the participant.
"Revolving Credit Advance" has the meaning ascribed to it in Section
1.1(a)(i).
"Revolving Loan" and "Revolving Loan Outstandings" mean, at any time,
the sum of (i) the Dollar Equivalent of the aggregate amount of Revolving Credit
Advances outstanding to the Borrowers plus (ii) the Dollar Equivalent of the
aggregate Letter of Credit Obligations incurred on behalf of the Borrowers.
Unless the context otherwise requires, references to the outstanding principal
balance of the Revolving Loan shall include the outstanding balance of Letter of
Credit Obligations.
"Revolving Note" has the meaning ascribed to it in Section 1.1(a)(ii).
"Secured Obligations" means, collectively, (i) the Obligations and
(ii) the Bank Product and Hedging Obligations.
"Secured Parties" means the holders of the Secured Obligations from
time to time and the holders of the Senior Notes from time to time.
"Senior Note Indenture" means that certain Indenture, dated as of
February 5, 1999, governing the Senior Notes, as amended, supplemented or
otherwise modified from time to time.
"Senior Notes" means Holdings' 6.98% Notes due 2009, in an aggregate
principal amount outstanding on the date hereof of $100,000,000, issued pursuant
to the Senior Note Indenture.
"Settlement Agreements" means (a) the Antitrust Settlement Agreement
and (b) the Plea Agreement, dated October 5, 2000, between Holdings and the
United States of America.
"SFS California" has the meaning ascribed to it in the preamble to the
Agreement.
"SFS Inc." has the meaning ascribed to it in the preamble to the
Agreement.
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"SFS Ltd." has the meaning ascribed to it in the preamble to the
Agreement.
"Significant Subsidiary" shall mean each Subsidiary (as defined in the
Senior Note Indenture) which is a "significant subsidiary" (as defined in Rule
1-02(w) of Regulation S-X of the Securities and Exchange Commission) as of the
Designated Date.
"Software" means all "software" as such term is defined in the Code,
now owned or hereafter acquired by any Sotheby Entity, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"Solvent" means (i) with respect to any Person other than a Foreign
Subsidiary organized under the laws of England, on a particular date, that on
such date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including contingent liabilities, of such Person;
(b) the present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person's property would constitute
an unreasonably small capital and (ii) with respect to any Foreign Subsidiary
organized under the laws of England, on a particular date, (a) such Foreign
Subsidiary is unable, or has admitted its inability, to pay its debts as they
fall due, has suspended making payments on any of its debts or, by reason of
actual or anticipated financial difficulties, has commenced negotiations with
one or more of its creditors with a view to rescheduling any of its
indebtedness, (b) the value of the assets of such Foreign Subsidiary is less
than its liabilities (taking into account contingent and prospective
liabilities) or (c) a moratorium has been declared in respect of any
indebtedness of such Foreign Subsidiary. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.
"Sotheby Entity" means any Borrower or any Subsidiary of any Borrower,
and "Sotheby Entities" shall mean all such Persons, collectively.
"Sotheby's, Inc." has the meaning ascribed to it in the preamble to
the Agreement.
"Sotheby's U.K." has the meaning ascribed to it in the preamble to the
Agreement.
"Sterling" or " 'L' " means the lawful currency of Great Britain.
"Sterling Equivalent" means, with respect to any amount denominated in
Sterling, such amount of Sterling, and with respect to any amount denominated in
a currency other than Sterling, the amount of Sterling, as of any date of
determination, into which such other currency (as the context may require) can
be converted in accordance with Section 1.18.
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"Sterling Index Rate" means, for any day, a floating rate equal to the
rate publicly quoted from time to time by The Wall Street Journal as the "prime
rate" for Britain (or, if The Wall Street Journal ceases quoting a rate of the
type described, the prime rate for Sterling generally posted by Britain's
largest banks). Each change in any interest rate provided for in the Agreement
based upon the Sterling Index Rate shall take effect at the time of such change
in the Sterling Index Rate.
"Sterling LIBOR Rate" means for each LIBOR Period with respect to a
LIBOR Loan denominated in Sterling, a rate of interest determined by Agent equal
to:
(a) the offered rate for deposits in pounds sterling for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time), on the second full LIBOR Business Day next preceding the
first day of such LIBOR Period; divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Governmental Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) that
are required to be maintained by a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News
Service (or its successor satisfactory to Agent), the Sterling LIBOR Rate shall
be determined from such financial reporting service or other information as
shall be mutually acceptable to Agent and Borrower Representative.
"Sterling Subfacility Limit" means $50,000,000, as such amount may be
reduced pursuant to Section 1.3(a).
"Stock" means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934).
"Stockholder" means, with respect to any Person, each holder of Stock
of such Person.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which
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any such Person has the right to vote or designate the vote of 50% or more of
such Stock whether by proxy, agreement, operation of law or otherwise, and (b)
any partnership or limited liability company in which such Person and/or one or
more Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or may exercise the powers of a
general partner. Unless the context otherwise requires, each reference to a
Subsidiary shall be a reference to a Subsidiary of a Borrower.
"Supermajority Lenders" means Lenders having (a) 80% or more of the
Commitments of all Lenders, or (b) if the Commitments have been terminated, 80%
or more of aggregate outstanding amount of the Loans.
"Supporting Obligations" means all "supporting obligations" as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.
"Swing Line Advance" has the meaning ascribed to it in Section
1.1(b)(i).
"Swing Line Availability" means, as of any date of determination, the
least of (a) the Swing Line Commitment, (b) the Maximum Amount minus the
aggregate Revolving Loan then outstanding and (c) an amount equal to (i) the
U.S. Borrowing Base as of such date minus (ii) the aggregate outstanding
principal balance of the Revolving Credit Advances made to the U.S. Borrowers as
of such date minus (iii) the Dollar Equivalent of the aggregate Letter of Credit
Obligations incurred on behalf of the U.S. Borrowers as of such date.
"Swing Line Commitment" means, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Advances as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of the
Commitment of the Swing Line Lender.
"Swing Line Lender" means GE Capital.
"Swing Line Loan" means, as the context may require, at any time, the
aggregate amount of Swing Line Advances outstanding to any U.S. Borrower or to
all U.S. Borrowers.
"Swing Line Note" has the meaning ascribed to it in Section
1.1(b)(ii).
"Swiss Franc" means the lawful currency of Switzerland.
"Tax" means taxes, levies, imposts, deductions, Charges or
withholdings imposed by any Governmental Authority, and all liabilities with
respect thereto.
"Tax Confirmation" means a confirmation by a Lender that the person
beneficially entitled to amounts payable to that Lender under this Agreement or
the other Loan Documents is either:
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(a) a company resident in the United Kingdom, or a partnership each member
of which is a company resident in the United Kingdom, for United
Kingdom tax purposes; or
(b) a company not so resident in the United Kingdom which carries on a
trade in the United Kingdom through a permanent establishment and that
amount payable falls to be brought into account in computing the
chargeable profits of that company for the purposes of section 11(2)
of the Taxes Act.
"Tax Credit" means a credit against, relief or remission for, or
repayment of, any Tax.
"Tax Deduction" means a deduction or withholding for or on account of
Tax from a payment under any Loan Document.
"Tax Payment" means either the increased payment made by a Credit
Party to a Lender under Section 1.15(b) or a payment under Section 1.15(c).
"Taxes Act" means the Income and Corporation Taxes Act of 1988.
"Termination Date" means the date on which (a) the Loans have been
indefeasibly repaid in full, (b) all other Obligations under the Agreement and
the other Loan Documents have been completely discharged, (c) all Letter of
Credit Obligations have been cash collateralized, canceled or backed by standby
letters of credit in accordance with Annex B, and (d) the Commitment Termination
Date shall have occurred.
"Theta" has the meaning ascribed to it in the preamble to the
Agreement.
"Title IV Plan" means a Pension Plan (other than a Multiemployer
Plan), that is subject to Title IV of ERISA or Section 412 of the IRC, and that
any Sotheby Entity or ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Trademark License" means rights under any written agreement now owned
or hereafter acquired by any Sotheby Entity granting any right to use any
Trademark.
"Trademark Security Agreements" means the Trademark Security
Agreements made in favor of Agent, on behalf of Lenders, by each applicable
Credit Party.
"Trademarks" means all of the following now owned or hereafter
existing or adopted or acquired by any Sotheby Entity: (a) all trademarks, trade
names, corporate names, business names, trade styles, service marks, logos,
other source or business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof; (b)
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all reissues, extensions or renewals thereof; and (c) all goodwill associated
with or symbolized by any of the foregoing.
"Treaty" has the meaning ascribed to it in the definition of "Treaty
State".
"Treaty Lender" means a Lender which:
(a) is treated as a resident of a Treaty State for the purposes of a
Treaty;
(b) does not carry on a business in the jurisdiction in which the
applicable Credit Party is resident through a permanent establishment with which
that Lender's participation in the Loans is effectively connected.
"Treaty of Rome" means the treaty establishing the European Community
being the Treaty of Rome as amended from time to time.
"Treaty State" means a jurisdiction having a double taxation agreement
(a "Treaty") with the United Kingdom, the United States of America or, as the
case may be, the jurisdiction in which a Lender is resident which makes
provision for full exemption from tax imposed by the United Kingdom or, as the
case may be, the United States of America, on interest.
"UCC" means the Uniform Commercial Code as in effect from time to time
in each applicable jurisdiction.
"U.K. Borrowers" has the meaning ascribed to it in the preamble to the
Agreement.
"U.K. Borrowing Availability" means, as of any date of determination,
the lesser of (a) an amount equal to (i) the Maximum Amount minus (ii) the
aggregate Revolving Loan then outstanding minus (iii) the aggregate Swing Line
Loan then outstanding and (b)(i) the lesser of (x) the Sterling Subfacility
Limit and (y) the U.K. Borrowing Base as of such date minus (ii) the Dollar
Equivalent of the aggregate outstanding principal balance of the Revolving
Credit Advances made to U.K. Borrowers as of such date minus (iii) the Dollar
Equivalent of the aggregate Letter of Credit Obligations incurred for the
benefit of the U.K. Borrowers as of such date.
"U.K. Borrowing Base" means, as of any date of determination, 85% of
the Available U.K. Art Loan Balance as of such date, less Reserves established
by Agent at such time.
"U.K. Collateral Documents" means the deeds of charge and charges over
shares executed by the U.K. Credit Parties on the Closing Date and all similar
agreements entered into by the U.K. Credit Parties guaranteeing payment of the
Obligations of the U.K. Borrowers, or granting a Lien upon property as security
for payment of the Secured Obligations of the U.K. Credit Parties.
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"U.K. Credit Parties" means the U.K. Borrowers and the U.K. Subsidiary
Guarantors.
"U.K. Non-Bank Lender" means where a Lender becomes a party to this
Agreement after the Closing Date, a Lender that gives a Tax Confirmation in the
Assignment Agreement or Joinder Agreement, as applicable, that it executes on
becoming a party to this Agreement.
"U.K. Pension Plans" has the meaning ascribed to it in Section
3.12(c).
"U.K. Subsidiary Guarantors" means each subsidiary of Oatshare
organized under the laws of England that is not a U.K. Borrower or an Immaterial
Subsidiary.
"U.K. Termination Date" means the date on which (i) all Loans to the
U.K. Borrowers have been indefeasibly repaid in full, (b) all other Obligations
of the U.K. Borrowers have been completely discharged, (c) all Letter of Credit
Obligations incurred on behalf of the U.K. Borrowers have been cash
collateralized, canceled or backed by standby letters of credit in accordance
with Annex B and (d) the Commitment Termination Date shall have occurred.
"Unfunded Commitments Reserve" means, at any time the Aggregate
Borrowing Availability shall be less than $20,000,000, a reserve equal to 15% of
the aggregate unfunded commitments of the Borrowers at such time to make future
Art Loans.
"Unhedged U.K. Art Loan" means an Eligible Art Loan owned by a U.K.
Borrower (i) that is denominated in Dollars, Canadian Dollars, Euros or Swiss
Francs and (ii) unless Agent shall otherwise agree, with respect to which such
U.S. Borrower shall not have entered into a Rate Management Transaction
reasonably acceptable to Agent (x) having a notional amount substantially equal
to the outstanding principal balance of such Art Loan at all times until the
maturity of such Art Loan and (y) directly mitigating the risk associated with
changes in the exchange rate between the currency in which such Art Loan is
denominated and Sterling at all times until the maturity of such Art Loan.
"Unhedged U.S. Art Loan" means an Eligible Art Loan owned by a U.S.
Borrower (i) that is denominated in Sterling, Canadian Dollars, Euros or Swiss
Francs and (ii) unless Agent shall otherwise agree, with respect to which such
U.S. Borrower shall not have entered into a Rate Management Transaction
reasonably acceptable to Agent (x) having a notional amount substantially equal
to the outstanding principal balance of such Art Loan at all times until the
maturity of such Art Loan and (y) directly mitigating the risk associated with
changes in the exchange rate between the currency in which such Art Loan is
denominated and Dollars at all times until the maturity of such Art Loan.
"Unrestricted Cash Amount" means, as of any date of determination, the
greater of (a) zero and (b) the aggregate amount of cash of the Credit Parties
as of such date (determined in accordance with GAAP), excluding (without
duplication) any cash (i) owing to consignors in respect of Works of Art
consigned by such Persons to the Credit Parties for sale, (ii) subject to a Lien
(or held in a deposit or securities account subject to a Lien) in favor of any
Person other
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than Agent and (iii) subject to any restriction on withdrawal from the deposit
or securities account in which such cash is being held.
"U.S. Borrowers" has the meaning ascribed to it in the preamble to the
Agreement.
"U.S. Borrowing Availability" means, as of any date of determination,
the lesser of (a) an amount equal to (i) the Maximum Amount minus (ii) the
aggregate Revolving Loan then outstanding minus (iii) the aggregate Swing Line
Loan then outstanding and (b) an amount equal to (i) the U.S. Borrowing Base as
of such date minus (ii) the aggregate outstanding principal balance of the
Revolving Credit Advances made to U.S. Borrowers as of such date minus (iii) the
Dollar Equivalent of the aggregate Letter of Credit Obligations incurred for the
benefit of the U.S. Borrowers as of such date minus (iv) the aggregate Swing
Line Loan then outstanding.
"U.S. Borrowing Base" means, as of any date of determination, 85% of
the Available U.S. Art Loan Balance as of such date, less Reserves established
by Agent at such time.
"U.S. Collateral Documents" means the Domestic Subsidiary Guaranty,
the U.S. Security Agreement, the U.S. Pledge Agreement, the Trademark Security
Agreements, the Copyright Security Agreements and all similar agreements entered
into by the U.S. Credit Parties guaranteeing payment of the Obligations or
granting a Lien upon property as security for payment of the Secured
Obligations.
"U.S. Credit Parties" means each U.S. Borrower and each Domestic
Subsidiary Guarantor.
"U.S. Pledge Agreement" means that certain Pledge Agreement, dated as
of the Closing Date, executed by each U.S. Credit Party in favor of Agent, for
the benefit of Agent and the Lenders.
"U.S. Security Agreement" means that certain Security Agreement, dated
as of the Closing Date, executed by each U.S. Credit Party in favor of Agent,
for the benefit of Agent and the Lenders
"Unfunded Pension Liability" means, at any time, the aggregate amount,
if any, of the sum of (a) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets of
such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the actuarial assumptions for funding purposes in effect under
such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Sotheby Entity or any ERISA Affiliate as a result of such transaction.
"VAT" means the Tax imposed by the Value Added Tax 1994 together with
any similar sales or turnover taxes whether in the United Kingdom or elsewhere.
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"Venture Loan" means an Art Loan made to finance the purchase of a
Work of Art in conjunction with a dealer, which art is being purchased for
resale pursuant to a profit and loss sharing agreement with the dealer.
"Ventures LLC" has the meaning ascribed to it in the preamble to the
Agreement.
"Work of Art" shall mean any item of Goods of a type purchased, sold,
taken as collateral for an Art Loan, or consigned to the Credit Parties for
sale, in each case in the ordinary course of the Credit Parties' business.
"York Avenue Property" means the land, building and improvements
located at 1334 York Avenue, New York, New York.
"York Avenue Sale-Leaseback" means the simultaneous (i) sale of the
York Avenue Property pursuant to that certain Purchase and Sale Agreement, dated
as of December 16, 2002, among SIBS, LLC, a wholly owned Subsidiary of Holdings,
as seller, and RFR Holding Corp., as purchaser, and (ii) the lease of the York
Avenue Property by Sotheby's, Inc. pursuant to that certain Lease, dated as of
December 16, 2002, between RFR Holding Corp., as lessor, and Sotheby's, Inc., as
lessee.
Rules of construction with respect to accounting terms used in the
Agreement or the other Loan Documents shall be as set forth in Annex G. All
other undefined terms contained in any of the Loan Documents shall, unless the
context indicates otherwise, have the meanings provided for by the Code to the
extent the same are used or defined therein; in the event that any term is
defined differently in different Articles or Divisions of the Code, the
definition contained in Article or Division 9 shall control. Unless otherwise
specified, references in the Agreement or any of the Appendices to a Section,
subsection or clause refer to such Section, subsection or clause as contained in
the Agreement. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or
clause contained in the Agreement or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan Document refers to
the knowledge (or an analogous phrase) of any Sotheby Entity, such words are
intended to signify that such Sotheby Entity has actual knowledge or awareness
of a particular fact or circumstance or that such Sotheby Entity, if it had
exercised reasonable diligence, would have known or been aware of such fact or
circumstance. Unless otherwise set
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forth therein, for purposes of Section 1.15 (and the definitions of the
capitalized terms used therein), a reference to "determines" or "determined"
shall mean a determination made in the absolute discretion of the person making
the determination.
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ANNEX B (Section 1.2)
to
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the Agreement,
Agent and Lenders agree to incur, from time to time prior to the Commitment
Termination Date, upon the request of Borrower Representative on behalf of the
applicable Borrower (and any Subsidiary that may be a co-applicant therewith)
and for such Borrower's (and such Subsidiary's, as applicable) account, Letter
of Credit Obligations by causing Letters of Credit denominated in Dollars,
Canadian Dollars, Sterling, Euros, Swiss Francs or any Alternative L/C Currency
to be issued by GE Capital or a Subsidiary thereof or a bank or other legally
authorized Person selected by or acceptable to Agent in its sole discretion
(each, an "L/C Issuer") for such U.S. Borrower's account and guaranteed by
Agent; provided, that if the L/C Issuer is a Lender, then such Letters of Credit
shall not be guaranteed by Agent but rather each Lender shall, subject to the
terms and conditions hereinafter set forth, purchase (or be deemed to have
purchased) risk participations in all such Letters of Credit issued with the
written consent of Agent, as more fully described in paragraph (b)(ii) below.
The Dollar Equivalent of the aggregate amount of all such Letter of Credit
Obligations shall not at any time exceed the least of (i) an amount equal to
Fifty Million Dollars ($50,000,000) (the "L/C Sublimit") and (ii) the Maximum
Amount less the Dollar Equivalent of the aggregate outstanding principal balance
of the Revolving Credit Advances and the Swing Line Loan. The Dollar Equivalent
of the aggregate amount of all such Letter of Credit Obligations incurred for
the benefit of the U.S. Borrowers shall not at any time exceed the U.S.
Borrowing Base less the aggregate outstanding principal balance of the Revolving
Credit Advances and Swing Line Advances made to U.S. Borrowers. The Dollar
Equivalent of the aggregate amount of all such Letter of Credit Obligations
incurred for the benefit of the U.K. Borrowers shall not at any time exceed an
amount equal to (i) the lesser of (x) the Sterling Subfacility Limit and (y) the
U.K. Borrowing Base less (ii) the Dollar Equivalent of the outstanding principal
balance of the Revolving Credit Advances made to the U.K. Borrowers. No such
Letter of Credit shall have an expiry date that is more than one year following
the date of issuance thereof, unless otherwise determined by Agent, in its sole
discretion (including with respect to customary evergreen provisions), and
neither Agent nor Lenders shall be under any obligation to incur Letter of
Credit Obligations in respect of, or purchase risk participations in, any Letter
of Credit having an expiry date that is later than the Commitment Termination
Date.
(b) (i) Revolving Credit Advances Automatic; Participations. In the
event that Agent or any Lender shall make any payment on or pursuant to any
Letter of Credit Obligation, regardless of whether a Default or Event of Default
has occurred and is continuing and notwithstanding any Borrower's failure to
satisfy the conditions precedent set forth in Section 2, such payment shall then
be deemed automatically to constitute (i) in the case of any Letter of Credit
Obligation incurred for the benefit of a U.S. Borrower, a Revolving Credit
Advance to the applicable U.S. Borrower under Section 1.1(a) of the Agreement in
Dollars in an amount equal to the Dollar Equivalent of such payment as of the
date thereof or (ii) in the case of any Letter of Credit Obligation incurred for
the benefit of a U.K. Borrower, a Revolving Credit Advance to the applicable
U.K. Borrower under Section 1.1(a) of the Agreement in Sterling in an
B-1
amount equal to the Sterling Equivalent of such payment as of the date thereof,
and each Lender shall be obligated to pay its Pro Rata Share thereof in
accordance with the Agreement. The failure of any Lender to make available to
Agent for Agent's own account its Pro Rata Share of any such Revolving Credit
Advance or payment by Agent under or in respect of a Letter of Credit shall not
relieve any other Lender of its obligation hereunder to make available to Agent
its Pro Rata Share thereof, but no Lender shall be responsible for the failure
of any other Lender to make available such other Lender's Pro Rata Share of any
such payment.
(ii) If it shall be illegal or unlawful for any Borrower to incur
Revolving Credit Advances as contemplated by paragraph (b)(i) above because of
an Event of Default described in Sections 8.1(h) or (i) or otherwise or if it
shall be illegal or unlawful for any Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Lender, then (A) immediately and without further action
whatsoever, each Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation equal to such Lender's Pro Rata Share (based on the
Commitments) of the Letter of Credit Obligations in respect of all Letters of
Credit then outstanding and (B) thereafter, immediately upon issuance of any
Letter of Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation in such Lender's Pro Rata Share (based on
the Commitments) of the Letter of Credit Obligations with respect to such Letter
of Credit on the date of such issuance. Each Lender shall fund its participation
in all payments made under the Letters of Credit (i) in the case of any Letter
of Credit issued for the benefit of a U.S. Borrower, in the same manner as
provided in the Agreement with respect to Revolving Credit Advances made to the
U.S. Borrowers in Dollars, each of which Revolving Credit Advances shall be in
Dollars in an amount equal to the Dollar Equivalent of such payment as of the
date thereof and (ii) in the case of any Letter of Credit issued for the benefit
of a U.K. Borrower, in the same manner as provided in the Agreement with respect
to Revolving Credit Advances made to the U.K. Borrowers in Sterling, each of
which Revolving Credit Advances shall be in Sterling in an amount equal to the
Sterling Equivalent of such payment as of the date thereof.
(c) Cash Collateral.
(i) If Borrowers are required to provide cash collateral for any
Letter of Credit Obligations pursuant to the Agreement, including Section 8.2 of
the Agreement, prior to the Commitment Termination Date, each Borrower will pay
to Agent for the ratable benefit of itself and Lenders, with respect to each
Letter of Credit outstanding for the benefit of such Borrower, cash or cash
equivalents acceptable to Agent ("Acceptable Cash Equivalents") in the currency
in which such Letter of Credit is denominated in an amount equal to 105% of the
maximum amount then available to be drawn under such Letter of Credit. Such
funds or Acceptable Cash Equivalents shall be held by Agent in a cash collateral
account (each, a "Cash Collateral Account") maintained at a bank or financial
institution acceptable to Agent. Each Cash Collateral Account shall be in the
name of the applicable Borrower(s) and shall be pledged to, and subject to the
control of, Agent, on behalf of itself and the other Secured Parties, in a
manner satisfactory to Agent. Each Borrower hereby pledges and grants to Agent,
on behalf of itself and the other Secured Parties, a security interest in all
such funds and Acceptable Cash
B-2
Equivalents held from time to time in any Cash Collateral Account established in
the name of such U.S. Borrower and all proceeds thereof, as security for the
payment of all amounts due in respect of the Letter of Credit Obligations and
Secured Obligations, whether or not then due. The Agreement, including this
Annex B, shall constitute a security agreement under applicable law.
(ii) If any Letter of Credit Obligations, whether or not then due
and payable, shall for any reason be outstanding on the Commitment Termination
Date, Borrowers shall either (A) provide cash collateral therefor in the manner
described above, or (B) cause all such Letters of Credit and guaranties thereof,
if any, to be canceled and returned, or (C) deliver a stand-by letter (or
letters) of credit in guaranty of such Letter of Credit Obligations, which
stand-by letter (or letters) of credit shall be of like tenor, currency and
duration (plus thirty (30) additional days) as, and in an amount equal to 105%
of, the aggregate maximum amount then available to be drawn under, the Letters
of Credit to which such outstanding Letter of Credit Obligations relate and
shall be issued by a Person, and shall be subject to such terms and conditions,
as are be satisfactory to Agent in its sole discretion.
(iii) From time to time after funds are deposited in the Cash
Collateral Account by any Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Acceptable Cash Equivalents then
held in the Cash Collateral Account to the payment of any amounts, and in such
order as Agent may elect, as shall be or shall become due and payable by such
Borrower to Agent and Lenders with respect to such Letter of Credit Obligations
of such Borrower and, upon the satisfaction in full of all Letter of Credit
Obligations of such Borrower, to any other Secured Obligations then due and
payable.
(iv) No Borrower nor any Person claiming on behalf of or through
any Borrower shall have any right to withdraw any of the funds or Acceptable
Cash Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by Borrowers to Agent and Lenders in respect thereof, any funds
remaining in the Cash Collateral Account shall be applied to other Secured
Obligations then due and owing and upon payment in full of such Secured
Obligations, any remaining amount shall be paid to Borrowers or as otherwise
required by law. Interest earned on deposits in the Cash Collateral Account
shall be held as additional collateral.
(d) Fees and Expenses. Borrowers agree to pay to Agent for the benefit
of Lenders, as compensation to such Lenders for Letter of Credit Obligations
incurred hereunder, (i) all costs and expenses incurred by Agent or any Lender
on account of such Letter of Credit Obligations, and (ii) for each month during
which any Letter of Credit Obligation shall remain outstanding, a fee (the
"Letter of Credit Fee") in an amount equal to the Applicable L/C Margin from
time to time in effect multiplied by the Dollar Equivalent of the maximum amount
available from time to time to be drawn under the applicable Letter of Credit.
Such fee shall be paid to Agent for the benefit of the Lenders in arrears, on
the first day of each month and on the Commitment Termination Date. In addition,
Borrowers shall pay to any L/C Issuer, on demand, such fees, charges and
expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable
B-3
pursuant to the application and related documentation under which such Letter of
Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations. Borrower
Representative shall give Agent at least two (2) Business Days' prior written
notice requesting the incurrence of any Letter of Credit Obligation. The notice
shall be accompanied by the form of the Letter of Credit (which shall be
acceptable to the L/C Issuer) and a completed Application for Standby Letter of
Credit in the form of Exhibit B. Notwithstanding anything contained herein to
the contrary, Letter of Credit applications by Borrower Representative and
approvals by Agent and the L/C Issuer may be made and transmitted pursuant to
electronic codes and security measures mutually agreed upon and established by
and among Borrower Representative, Agent and the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrowers to reimburse
Agent and Lenders for payments made with respect to any Letter of Credit
Obligation shall be absolute, unconditional and irrevocable, without necessity
of presentment, demand, protest or other formalities, and the obligations of
each Lender to make payments to Agent with respect to Letters of Credit shall be
unconditional and irrevocable. Such obligations of Borrowers and Lenders shall
be paid strictly in accordance with the terms hereof under all circumstances
including the following:
(i) any lack of validity or enforceability of any Letter of
Credit or the Agreement or the other Loan Documents or any other
agreement;
(ii) the existence of any claim, setoff, defense or other right
that any Borrower or any of their respective Affiliates or any Lender
may at any time have against a beneficiary or any transferee of any
Letter of Credit (or any Persons or entities for whom any such
transferee may be acting), Agent, any Lender, or any other Person,
whether in connection with the Agreement, the Letter of Credit, the
transactions contemplated herein or therein or any unrelated
transaction (including any underlying transaction between any Borrower
or any of their respective Affiliates and the beneficiary for which
the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly provided in
paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of
Credit or guaranty thereof against presentation of a demand, draft or
certificate or other document that does not comply with the terms of
such Letter of Credit or such guaranty;
(v) any other circumstance or event whatsoever, that is similar
to any of the foregoing; or
B-4
(vi) the fact that a Default or an Event of Default has occurred
and is continuing.
(g) Indemnification; Nature of Lenders' Duties.
(i) In addition to amounts payable as elsewhere provided in the
Agreement, Borrowers hereby agree to pay and to protect, indemnify, and save
harmless Agent and each Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees and allocated costs of internal counsel) that Agent or any
Lender may incur or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit or guaranty thereof, or (B) the failure of
Agent or any Lender seeking indemnification or of any L/C Issuer to honor a
demand for payment under any Letter of Credit or guaranty thereof as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or Governmental Authority, in each case other than
to the extent solely as a result of the gross negligence or willful misconduct
of Agent or such Lender (as finally determined by a court of competent
jurisdiction).
(ii) As between Agent and any Lender and Borrowers, Borrowers
assume all risks of the acts and omissions of, or misuse of any Letter of Credit
by beneficiaries, of any Letter of Credit. In furtherance and not in limitation
of the foregoing, to the fullest extent permitted by law, neither Agent nor any
Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) failure of
the beneficiary of any Letter of Credit to comply fully with conditions required
in order to demand payment under such Letter of Credit; provided, that in the
case of any payment by Agent under any Letter of Credit or guaranty thereof,
Agent shall be liable to the extent such payment was made solely as a result of
its gross negligence or willful misconduct (as finally determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Letter of Credit or guaranty thereof complies on its face with any applicable
requirements for a demand for payment under such Letter of Credit or guaranty
thereof; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they may be in cipher; (E) errors in interpretation of technical terms;
(F) any loss or delay in the transmission or otherwise of any document required
in order to make a payment under any Letter of Credit or guaranty thereof or of
the proceeds thereof; (G) the credit of the proceeds of any drawing under any
Letter of Credit or guaranty thereof; and (H) any consequences arising from
causes beyond the control of Agent or any Lender. None of the above shall
affect, impair, or prevent the vesting of any of Agent's or any Lender's rights
or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to
expand any waivers, covenants or indemnities made by Borrowers in favor of any
L/C Issuer in any letter of credit application, reimbursement agreement or
similar document, instrument or agreement
B-5
between or among Borrowers and such L/C Issuer, including a Master Standby
Agreement entered into with Agent.
B-6
ANNEX C (Section 1.8)
to
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
Each Sotheby Entity shall, and shall cause its Subsidiaries to,
establish and maintain the Cash Management Systems described below:
(a) Within 90 days of the Closing Date and until the Termination Date,
each Borrower that makes or owns Art Loans shall (i) establish blocked accounts
("Blocked Accounts") at one or more of the banks set forth in Disclosure
Schedule (3.19), and (ii) deposit and cause the other Sotheby Entities to
deposit or cause to be deposited promptly, and in any event no later than the
first Business Day after the date of receipt thereof, all cash, checks, drafts
or other similar items of payment relating to or constituting payments made by
the applicable Art Loan Debtor (other than pursuant to the sale of Works of Art
securing repayment of such Art Loan) in respect of any and all Non-Consignor Art
Loans into one or more Blocked Accounts in such Borrower's name and at a bank
identified in Disclosure Schedule (3.19) (each, a "Relationship Bank").
(b) Within 90 days after the Closing Date (or such later date as Agent
shall consent to in writing), each Relationship Bank shall have entered into a
tri-party blocked account agreements with Agent, for the benefit of itself and
the other Secured Parties, and the applicable Borrower, in form and substance
reasonably acceptable to Agent, which shall become operative on or prior to date
90 days after the Closing Date. Each such blocked account agreement shall
provide, among other things, that (i) all items of payment deposited in such
account and proceeds thereof are held by such bank as agent or
bailee-in-possession for Agent, on behalf of itself and the other Secured
Parties, (ii) the bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (iii) from and after the Closing Date (A) with respect to banks at
which a Blocked Account is maintained, such bank agrees, from and after the
receipt of a notice (an "Activation Notice") from Agent (which Activation Notice
may be given by Agent upon the occurrence of any Activation Event), to
immediately forward all amounts received in the applicable Blocked Account to
the applicable Collection Account through daily sweeps from such Blocked Account
into the applicable Collection Account.
(c) Following the occurrence of any Activation Event, following
delivery of notice from Agent, each Credit Party shall cause all amounts
contained in any Deposit Account of any Credit Party (other than any amounts
therein constituting funds due to consignors in respect of Works of Art
consigned to the Sotheby Entities for sale), within two (2) Business Days of
receipt thereof, to be forwarded to the applicable Collection Account or such
other deposit account as Agent shall direct.
(d) So long as no Default or Event of Default has occurred and is
continuing, the Borrowers may amend Disclosure Schedule (3.19) to add or replace
a Relationship Bank or
C-1
Blocked Account; provided, that (i) Agent shall have consented in writing in
advance to the opening of such account with the relevant bank and (ii) prior to
the time of the opening of such account, the applicable Borrower and such bank
shall have executed and delivered to Agent a tri-party blocked account
agreement, in form and substance reasonably satisfactory to Agent. The Borrowers
shall close any of their Blocked Accounts (and establish replacement accounts in
accordance with the foregoing sentence) promptly and in any event within thirty
(30) days following notice from Agent that the creditworthiness of any bank
holding such an account is no longer acceptable in Agent's reasonable judgment,
or as promptly as practicable and in any event within sixty (60) days following
notice from Agent that the operating performance, funds transfer or availability
procedures or performance with respect to accounts of the bank holding such
accounts or Agent's liability under any tri-party blocked account agreement with
such bank is no longer acceptable in Agent's reasonable judgment.
(e) The Blocked Accounts shall be cash collateral accounts, with all
cash, checks and other similar items of payment in such accounts securing
payment of some or all of the Loans and other Secured Obligations in accordance
with the applicable Collateral Document, and in which each applicable Borrower
shall have granted a security interest to Agent, on behalf of itself and the
other Secured Parties, pursuant to the applicable Collateral Document.
(f) All amounts deposited in any Collection Account shall be deemed
received by Agent in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11. In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the applicable Collection Account.
(g) Each Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with such
Borrower (each a "Related Person") to (i) hold in trust for Agent, for the
benefit of itself and the other Secured Parties, all checks, cash and other
items of payment delivered by the applicable Art Loan Debtor (other than
pursuant to the sale of Works of Art securing repayment of such Art Loan) and
received by such Borrower or any such Related Person in respect of any
Non-Consignor Art Loan, and (ii) within one (1) Business Day after receipt by
such Borrower or any such Related Person of any such checks, cash or other items
of payment, deposit the same into a Blocked Account of such Borrower. Each
Borrower on behalf of itself and each Related Person thereof acknowledges and
agrees that all cash, checks or other items of payment constituting proceeds of
Non-Consignor Art Loans are part of the Collateral. During any Activation
Period, proceeds of the sale or other disposition of any Non-Consignor Art Loans
shall be deposited directly to the applicable Blocked Account within two (2)
Business Days after the receipt thereof by any Sotheby Entity.
C-2
ANNEX D (Section 2.1(a))
to
CREDIT AGREEMENT
See attached.
D-1
ANNEX E (Section 4.1(a))
to
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrowers shall deliver or cause to be delivered to Agent or to Agent
and Lenders, as indicated, the following:
(a) Monthly Financials. To Agent and Lenders, within thirty (30) days
after the end of each Fiscal Month beginning with the Fiscal Month ending March
31, 2004, financial information regarding Borrowers and their Subsidiaries,
certified by a Financial Officer of Borrower Representative, consisting of
consolidated (with respect to Holdings and its Subsidiaries) and consolidating
(i) unaudited balance sheets as of the close of such Fiscal Month and the
related statements of income and (consolidated) cash flows (relating solely to
depreciation, amortization and capital expenditures) for that portion of the
Fiscal Year ending as of the close of such Fiscal Month; (ii) unaudited
statements of income, if available, on a consolidated basis for such Fiscal
Month, setting forth in comparative form the figures for the corresponding
period in the prior year, all prepared in accordance with GAAP (subject to
normal year-end adjustments); (iii) a calculation of 15% of Consolidated Net
Tangible Assets as of the last day of that Fiscal Month, net of any "Secured
Debt" or "Attributable Debt" (in each case as defined in the Senior Note
Indenture), (iv) a calculation of amounts payable to consignors as of the last
day of that Fiscal Month and (v) a calculation of the aggregate unfunded
commitment of the Borrowers to make future Art Loans as of the last day of that
Fiscal Month. Such financial information shall be accompanied by the
certification of a Financial Officer of Borrower Representative that (i) such
financial information presents fairly (in the case of the consolidated Financial
Statements with respect to Holdings and its Subsidiaries, in accordance with
GAAP (subject to normal year-end adjustments)) the financial position and
results of operations of Borrowers and their Subsidiaries, on a consolidated
(with respect to Holdings and its Subsidiaries) and consolidating basis, in each
case as at the end of such Fiscal Month and for that portion of the Fiscal Year
then ended and (ii) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default has
occurred and is continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.
(b) Quarterly Financials. To Agent and Lenders, within forty-five (45)
days after the end of each Fiscal Quarter, consolidated (with respect to
Holdings and its Subsidiaries) and consolidating financial information,
certified by a Financial Officer of Borrower Representative, including (i)
unaudited balance sheets as of the close of such Fiscal Quarter and the related
statements of income and (consolidated) cash flow for that portion of the Fiscal
Year ending as of the close of such Fiscal Quarter and (ii) unaudited statements
of income for such Fiscal Quarter, in each case setting forth in comparative
form the figures for the corresponding period in the prior year. All such
consolidated Financial Statements shall be prepared in accordance with GAAP
(subject to normal year-end adjustments). Such financial information shall be
accompanied by (A) a statement in reasonable detail (each, a "Compliance
Certificate") showing the calculations used in determining compliance with each
of the Financial Covenants
E-1
that is tested on a quarterly basis and (B) the certification of a Financial
Officer of Borrower Representative that (i) such financial information presents
fairly (in the case of the consolidated Financial Statements with respect to
Holdings and its Subsidiaries, in accordance with GAAP (subject to normal
year-end adjustments)) the financial position, results of operations and
statements of cash flows of Borrowers and their Subsidiaries, on both a
consolidated (with respect to Holdings and its Subsidiaries) and consolidating
basis, as at the end of such Fiscal Quarter and for that portion of the Fiscal
Year then ended and (ii) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default has
occurred and is continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.
(c) Operating Plan. To Agent and Lenders, as soon as available, but
not later than thirty (30) days after the end of each Fiscal Year, an annual
operating plan for Holdings and its Subsidiaries on a consolidated basis for the
following Fiscal Year, which (i) includes a statement of all of the material
assumptions on which such plan is based, (ii) includes quarterly balance sheets,
income statements and statements of cash flows for the following year and (iii)
integrates sales, gross profits, operating expenses, operating profit, cash flow
projections, U.S. Borrowing Availability and U.K. Borrowing Availability
projections, all prepared on the same basis and in similar detail as that on
which operating results are reported (and in the case of cash flow projections,
representing management's good faith estimates of future financial performance
based on historical performance), and including plans for personnel, Capital
Expenditures and facilities. The income statements contained in such annual
operating plan shall be approved by the Board of Directors of Holdings.
(d) Annual Audited Financials. To Agent and Lenders, within ninety
(90) days after the end of each Fiscal Year, audited consolidated (with respect
to Holdings and its Subsidiaries) and unaudited consolidating Financial
Statements, consisting of balance sheets, statements of income and
(consolidated) statements of retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified
without qualification, by an independent certified public accounting firm of
national standing or otherwise acceptable to Agent. Such Financial Statements
shall be accompanied by (i) a statement prepared in reasonable detail showing
the calculations used in determining compliance with each of the Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred with
respect to the Financial Covenants (or specifying those Defaults and Events of
Default that they became aware of), it being understood that such audit
examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, and (iv) the certification of a Financial Officer of Borrowers that (x)
such financial information presents fairly (in the case of the consolidated
Financial Statements with respect to Holdings and its Subsidiaries, in
accordance with GAAP the financial position, results of operations and
statements of cash flows of Borrowers and their Subsidiaries, on both a
consolidated (with respect to Holdings and its Subsidiaries) and consolidating
basis, as at the end
E-2
of such Fiscal Year and for the period then ended, and (y) there was no Default
or Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.
(e) Management Letters. To Agent, within five (5) Business Days after
receipt thereof by Holdings, copies of all management letters, exception reports
or similar letters or reports received by Holdings from its independent
certified public accountants, except to the extent such accountants shall
restrict the ability of Holdings to deliver such documents to Agent.
(f) Default Notices. To Agent and Lenders, as soon as practicable, and
in any event within five (5) Business Days after an executive officer of any
Borrower has actual knowledge of the existence of any Default, Event of Default
or other event that has had a Material Adverse Effect, telephonic or telecopied
notice specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day.
(g) SEC Filings and Press Releases. To Agent and Lenders, promptly
upon their becoming available, copies of: (i) all Financial Statements, reports,
notices and proxy statements made publicly available by Holdings to its security
holders; (ii) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Holdings with any securities exchange or with
the Securities and Exchange Commission or any governmental or private regulatory
authority in any jurisdiction; and (iii) all press releases and other statements
made available by Holdings to the public concerning material changes or
developments in the business of any such Person.
(h) Senior Notes, York Avenue Sale-Leaseback and Equity Notices. To
Agent, as soon as practicable, copies of all material written notices given or
received by any Sotheby Entity with respect to the York Avenue Sale-Leaseback or
the Senior Notes, and, within two (2) Business Days after any Sotheby Entity
obtains knowledge of any matured or unmatured event of default with respect to
the Senior Notes or the York Avenue Sale-Leaseback, notice of such event of
default.
(i) Supplemental Schedules. To Agent, supplemental disclosures, if
any, required by Section 5.6.
(j) Litigation. To Agent in writing, as soon as practicable upon
learning thereof, notice of any Litigation commenced or threatened against any
Sotheby Entity that (i) seeks damages in excess of $1,000,000, (ii) seeks
injunctive relief, (iii) is asserted or instituted against any Plan, its
fiduciaries or its assets or against any Sotheby Entity or ERISA Affiliate in
connection with any Plan, (iv) alleges criminal misconduct by any Sotheby
Entity, (v) alleges the violation of any law regarding, or seeks remedies in
connection with, any Environmental Liabilities, (vi) involves any product recall
or (vii) alleges, or seeks remedies in connection with, any violation of any
antitrust law or similar law of any jurisdiction (including, without limitation,
any Litigation commenced or threatened by any Person that opted out of any class
action Litigation giving rise to the Antitrust Litigation Liabilities).
E-3
(k) Insurance Notices. To Agent, disclosure of losses or casualties
required by Section 5.4.
(l) Lease Default Notices. To Agent, (i) within two (2) Business Days
after receipt thereof, copies of any and all default notices received under or
with respect to any leased location or public warehouse where Collateral
(including any Work of Art securing repayment of any Art Loan) is located, and
(ii) such other notices or documents as Agent may reasonably request.
(m) Hedging Agreements. To Agent, within five (5) Business Days after
its request therefor, copies of any interest rate, commodity or currency hedging
agreements or amendments thereto entered into by any Sotheby Entity.
(n) U.K. Pension Plans. To Agent in writing, promptly upon learning
thereof, notice of (i) any Litigation commenced or threatened against any
Sotheby Entity in relation to the U.K. Pensions Plans or (ii) any requirement to
materially increase funding levels of the U.K. Pension Plans.
(o) Other Documents. To Agent and Lenders, such other financial and
other information respecting any Sotheby Entity's business or financial
condition as Agent or any Lender shall from time to time reasonably request.
E-4
ANNEX F (Section 4.1(b))
to
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrowers shall deliver or cause to be delivered the following:
(a) To Agent, upon its request, and in any event no less frequently
than fourteen (14) days (or if the 14th day of any Fiscal Month is not a
Business Day, the next succeeding Business Day) after the end of (i) if the
Revolving Loan Outstandings and the outstanding balance of the Swing Line Loan,
in the aggregate, are greater than zero as of the last day of such Fiscal Month,
each Fiscal Month or (ii) otherwise, each Fiscal Quarter, each of the following
reports, each of which shall be prepared by the Borrowers as of the last day of
the immediately preceding Fiscal Month or Fiscal Quarter, as applicable, or the
date two (2) days prior to the date of any such request:
(i) a Borrowing Base Certificate, accompanied by such supporting
detail and documentation as shall be requested by Agent in its reasonable
discretion; and
(ii) an Art Loan Receivables Report, accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion.
(b) To Agent, at the time of delivery of each of the monthly Financial
Statements delivered pursuant to Annex E:
(i) a reconciliation of the Art Loans Receivables Report to the
most recent Borrowing Base Certificate, general ledger and monthly
Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(ii) a reconciliation of the outstanding Loans as set forth in
the monthly Loan Account statement provided by Agent to each Borrower's
general ledger and monthly Financial Statements delivered pursuant to Annex
E, in each case accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;
(c) To Agent, at the time of delivery of each of the quarterly
Financial Statements delivered pursuant to Annex E, a list of any applications
for the registration of any Patent, Trademark or Copyright filed by any Sotheby
Entity with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in the prior Fiscal Quarter,
except any Trademark registered by a Sotheby Entity at the direction of the
purchaser of Sotheby's International Realty, Inc., a Michigan corporation, as
contemplated by Disclosure Schedule (3.15).
(d) Each Borrower, at its own expense, shall deliver to Agent the
results of each physical verification, if any, that such Borrower or any of its
Subsidiaries may in their
F-1
discretion have made, or caused any other Person to have made on their behalf,
of all or any portion of the Collateral (including, without limitation, any
Works of Art securing repayment of Art Loans) (and, if a Default or an Event of
Default has occurred and is continuing, each Borrower shall, upon the request of
Agent, conduct, and deliver the results of, such physical verifications as Agent
may require);
(e) The Borrowers shall deliver, at their own expense, not less
frequently than once during each calendar quarter, unless Agent shall otherwise
consent, a certificate of good standing for each U.S. Credit Party from its
state of incorporation or organization.
(f) Such other reports, statements and reconciliations with respect to
the Borrowing Bases, Collateral or Obligations of any or all of the Credit
Parties as Agent shall from time to time request in its reasonable discretion.
F-2
ANNEX G (Section 6.10)
to
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrowers shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:
(a) Maximum Capital Expenditures. Holdings and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures (other than portions of
such Capital Expenditures financed by the Lenders hereunder) in excess of
$10,000,000 during any Fiscal Year.
(b) Minimum Fixed Charge Coverage Ratio. Holdings and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter (beginning
with the Fiscal Quarter ending June 30, 2004), a Fixed Charge Coverage Ratio for
the four Fiscal-Quarter period then ended of not less than 1.0.
Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrowers, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrowers' and their Subsidiaries' financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"Accounting Changes" means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (ii)
changes in accounting principles concurred in by any Borrower's certified public
accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (iv) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If Agent,
Borrowers and Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying Accounting Change
with respect thereto has been implemented, any reference to GAAP contained in
the Agreement or in
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any other Loan Document shall, only to the extent of such Accounting Change,
refer to GAAP, consistently applied after giving effect to the implementation of
such Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree
upon the required amendments within thirty (30) days following the date of
implementation of any Accounting Change, then all Financial Statements delivered
and all calculations of financial covenants and other standards and terms in
accordance with the Agreement and the other Loan Documents shall be prepared,
delivered and made without regard to the underlying Accounting Change. For
purposes of Section 8.1, a breach of a Financial Covenant contained in this
Annex G shall be deemed to have occurred as of any date of determination by
Agent or as of the last day of any specified measurement period, regardless of
when the Financial Statements reflecting such breach are delivered to Agent.
G-2
ANNEX H (Section 9.9(a))
to
CREDIT AGREEMENT
WIRE TRANSFER INFORMATION
Name: General Electric Capital Corporation
Bank: Deutsche Bank Trust Company Americas
New York, New York
ABA #: 021001033
Account #: 50232854
Account Name: GECC/CAF Depository
Reference: CFC _______________
H-1
ANNEX I (Section 11.10)
to
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
21 Merritt Seven
Norwalk, CT 06856
Attention: Sameer
Telecopier No.: (203) 956-4237
Telephone No.: (203) 956-4112
with a copy to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel - Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(B) If to any Borrower, to Borrower Representative, at
Sotheby's Holdings, Inc.
1334 York Avenue
New York, NY 10021
Attention: Chief Financial Officer
Telecopier No.: (212) 606-7372
Telephone No.: (212) 606-7132
with a copy to:
Sotheby's Holdings, Inc.
1334 York Avenue
New York, NY 10021
Attention: General Counsel
Telecopier No.: (212) 606-7533
Telephone No.: (212) 606-7574
I-1
ANNEX J (from Annex A - Commitments definition)
to
CREDIT AGREEMENT
Commitment Lender(s)
- ---------- ---------
$100,000,000 General Electric Capital Corporation
Swing Line Commitment Lender
- --------------------- ------
$20,000,000 General Electric Capital Corporation
J-1
INDEX OF APPENDICES
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Closing Checklist
Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A - Commitments as of Closing Date
Commitments definition)
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii)-A - Form of Revolving Note (U.S. Borrowers)
Exhibit 1.1(a)(ii)-B - Form of Revolving Note (U.K. Borrowers)
Exhibit 1.1(b)(ii) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(A) - Form of Borrowing Base Certificate
Exhibit 4.1(B) - Form of Art Loan Receivables Report
Exhibit 9.1(a) - Form of Assignment Agreement
Exhibit B - Application for Standby Letter of Credit
Schedule 1.1 - Agent's Representatives
Disclosure Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule 3.1 - Type of Entity; State of Organization
Disclosure Schedule 3.2 - Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4(a) - Financial Statements
Disclosure Schedule 3.4(b) - Projections
Disclosure Schedule 3.4(c) - Secured Debt and Attributable Debt
Disclosure Schedule 3.6 - Real Estate and Leases
Disclosure Schedule 3.7 - Labor Matters
Disclosure Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule 3.11 - Tax Matters
Disclosure Schedule 3.12(a) - ERISA Plans
Disclosure Schedule 3.12(c) - U.K. Pension Plans
Disclosure Schedule 3.13(a) - Litigation
Disclosure Schedule 3.13(b) - Antitrust Litigation Liabilities
Disclosure Schedule 3.15 - Intellectual Property
Disclosure Schedule 3.17 - Hazardous Materials
Disclosure Schedule 3.18 - Insurance
Disclosure Schedule 3.19 - Deposit and Disbursement Accounts
Disclosure Schedule 3.20 - Government Contracts
Disclosure Schedule 3.21 - Bonds; Patent, Trademark Licenses
v
Disclosure Schedule 5.1 - Trade Names
Disclosure Schedule 5.15(c) - Real Estate Trademarks
Disclosure Schedule 5.17 - Immaterial Subsidiaries
Disclosure Schedule 5.18 - U.K. Mortgaged Properties
Disclosure Schedule 6.2 - Planned Investments
Disclosure Schedule 6.3 - Indebtedness
Disclosure Schedule 6.4(a ) - Transactions with Affiliates
Disclosure Schedule 6.7 - Existing Liens
Disclosure Schedule 6.8 - Assets to be Disposed
vi
STATEMENT OF DIFFERENCES
The British pound sterling sign shall be expressed as........................'L'
The section symbol shall be expressed as....................................'SS'