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CREDIT AGREEMENT
DATED AS OF APRIL 30, 1996
Between
ARCADE, INC.
as Borrower
and
HELLER FINANCIAL, INC.
as Lender
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TABLE OF CONTENTS
SECTION 1
AMOUNTS AND TERMS OF LOANS...........................................1
1.1 Loans...........................................................................................1
1.2 Interest and Related Fees ......................................................................3
1.3 Other Fees and Expenses ...................................................................... 6
1.4 Payments .......................................................................................7
1.5 Prepayments ....................................................................................7
1.6 Term of the Agreement ..........................................................................8
SECTION 2
AFFIRMATIVE COVENANTS.............................................8
2.1 Compliance With Laws ...........................................................................8
2.2 Maintenance of Properties; Insurance ...........................................................9
2.3 Inspection; Lender Meeting ....................................................................10
2.4 Corporate Existence, Etc. .....................................................................10
2.5 Further Assurances ...........................................................10
SECTION 3
NEGATIVE COVENANTS..............................................11
3.1 Indebtedness ..................................................................................11
3.2 Liens and Related Matters......................................................................12
3.3 Investments; Joint Ventures ...................................................................14
3.4 Contingent Obligations ........................................................................15
3.5 Restricted Junior Payments ....................................................................17
3.6 Restriction on Fundamental Changes ............................................................18
3.7 Disposal of Assets or Subsidiary Stock ........................................................19
3.8 Transactions with Affiliates ..................................................................19
3.9 Management Fees and Compensation ..............................................................20
3.10 Conduct of Business ...........................................................................20
3.11 Changes Relating to Subordinated Indebtedness .................................................20
3.12 Press Release; Public Offering Materials ......................................................20
3.13 Subsidiaries ..................................................................................21
SECTION 4
FINANCIAL COVENANTS/REPORTING........................................21
4.1 Intentionally Omitted .........................................................................21
4.2 Intentionally Omitted .........................................................................21
4.3 EBIDAT ........................................................................................21
4.4 Fixed Charge Coverage .........................................................................21
4.5 Total Indebtedness to Operating Cash Flow Ratio................................................21
4.6 Financial Statements and Other Reports ........................................................21
4.7 Accounting Terms; Utilization of GAAP for Purposes
of Calculations Under Agreement ...............................................................25
SECTION 5
REPRESENTATIONS AND WARRANTIES .......................................25
5.1 Disclosure ....................................................................................25
5.2 No Material Adverse Effect ....................................................................25
5.3 No Default ....................................................................................26
5.4 Organization,Powers,Capitalization and Good Standing...........................................26
5.5 Financial Statements ..........................................................................27
5.6 Intellectual Property .........................................................................27
5.7 Investigations, Audits, Etc. ..................................................................27
5.8 Employee Matters ..............................................................................27
5.9 Solvency ......................................................................................28
SECTION 6
DEFAULT, RIGHTS AND REMEDIES.........................................28
6.1 Event of Default ..............................................................................28
6.2 Suspension of Commitments .....................................................................32
6.3 Acceleration ..................................................................................33
6.4 Performance by Agent ..........................................................................33
SECTION 7
CONDITIONS TO LOANS .............................................33
7.1 Conditions to Initial Loans ...................................................................33
7.2 Conditions to All Loans .......................................................................34
SECTION 8
ASSIGNMENT AND PARTICIPATION ........................................34
8.1 Assignment and Participation ..................................................................34
SECTION 9
MISCELLANEOUS ................................................35
9.1 Indemnities ...................................................................................35
9.2 Amendments and Waivers ........................................................................35
9.3 Notices .......................................................................................35
9.4 Failure of Indulgence Not Waiver; Remedies
Cumulative ....................................................................................36
9.5 Marshalling, Payments Set Aside ...............................................................36
9.6 Severability ..................................................................................37
9.7 Headings ......................................................................................37
9.8 Applicable Law ................................................................................37
9.9 Successors and Assigns ........................................................................37
9.10 No Fiduciary Relationship .....................................................................37
9.11 Construction ..................................................................................37
9.12 Confidentiality ...............................................................................37
9.13 Waiver of Jury Trial ..........................................................................38
9.14 Survival of Warranties and Certain Agreements .................................................38
9.15 Entire Agreement ..............................................................................39
SECTION 10
DEFINITIONS .................................................39
10.1 Certain Defined Terms .........................................................................39
10.2 Other Definitional Provisions .................................................................44
INDEX OF DEFINED TERMS
Defined Term Defined in Section
Additional Seller Notes ?10.1
Additional Senior Term Loan ?3.1
Affiliate ?10.1
Agreement ?10.1
Asset Disposition ?10.1
Bankruptcy Code ?10.1
Base Rate ?1.2(A)(1)
Base Rate Loans ?1.2(A)(1)
Borrower Preamble
Borrowing Base ?1.1(B)
Borrowing Base Certificate ?1.1(B)
Business Day ?10.1
Closing Date ?10.1
Collateral ?10.1
Contingent Obligation ?3.4
Default ?10.1
Event of Default ?6.1
Expiry Date ?10.1
Funding Date ?7.2
GAAP ?10.1
Heller Preamble
Holdings ?10.1
Indebtedness ?10.1
Interest Period ?1.2(A)(2)
Lender Guarantee ?1.1(C)
Liberty ?10.1
LIBOR Rate ?1.2(A)(2)
LIBOR Rate Breakage Fee ?1.3(C)
LIBOR Rate Loans ?1.2(A)(2)
Lien ?10.1
Loan(s) ?1.1(A)
Loan Documents ?10.1
Loan Party ?10.1
Material Adverse Effect ?10.1
Maximum Revolving Loan Balance ?1.1(B)
Note(s) ?10.1
Obligations ?10.1
Permitted Encumbrances ?3.2(A)
Person ?10.1
Refinanced Subordinated Indebtedness ?3.1(G)
Related Transactions ?10.1
Related Transactions Documents ?10.1
Responsible Officer ?10.1
Restricted Junior Payments ?3.5
Revolving Loan Commitment ?1.1(A)
Revolving Loans ?1.1(A)
SBA ?10.1
Security Documents ?10.1
Seller Notes ?10.1
Senior Term Loan ?10.1
Senior Term Loan Agreement ?10.1
Senior Term Loan Documents ?10.1
Senior Term Loan Notes ?10.1
Subordinated Indebtedness ?10.1
Subordinated Loan Documents ?10.1
Subsidiary ?10.1
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CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of April 30, 1996 and entered into
by and between ARCADE, INC., a Tennessee corporation ("BORROWER"), with its
principal place of business at 1815 E. Main Street, Chattanooga, Tennessee
37404 and HELLER FINANCIAL, INC., a Delaware corporation ("HELLER"), with
offices at 500 West Monroe Street, Chicago, Illinois 60661.
R E C I T A L S:
WHEREAS, Borrower and its Subsidiaries (as hereinafter defined in
Section 10) desire that Heller extend a certain revolving credit facility to
Borrower to fund the repayment of certain indebtedness of Borrower, to provide
working capital financing for Borrower and to provide funds for other general
corporate purposes of Borrower including the making of Investments (as
hereinafter defined in subsection 3.3) permitted hereunder; and
WHEREAS, Borrower desires to secure all of its Obligations (as
hereinafter defined in Section 10) under the Loan Documents (as hereinafter
defined in Section 10) by granting to Heller a security interest in and lien
upon certain of its personal and real property.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Heller agree as
follows:
SECTION 1
AMOUNTS AND TERMS OF LOANS
1.1 Loans. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Borrower contained
herein:
(A) Revolving Loan. Heller agrees to lend from the Closing
Date to the Expiry Date amounts up to a maximum of $15,000,000 (the "REVOLVING
LOAN COMMITMENT" or "COMMITMENT"). Advances or amounts outstanding under the
Revolving Loan Commitment will be called "REVOLVING LOANS" or "LOANS".
Revolving Loans may be repaid and reborrowed. The "MAXIMUM REVOLVING LOAN
BALANCE" will be the lowest of:
(1) the "BORROWING BASE" (as calculated on Exhibit
4.6(F), the "BORROWING BASE CERTIFICATE");
(2) the Revolving Loan Commitment less any
outstanding Lender Guarantees;
(3) the sum of the then outstanding principal
balances of the Senior Term Loan, Additional Senior Term Loan,
Subordinated Indebtedness held by SBA and, subject to the provisions
of subsection 3.1(G), Refinanced Subordinated Indebtedness, less any
outstanding Lender Guarantees; and
(4) sixty-six and two thirds percent (66-2/3%) of
the sum of (i) the then outstanding principal balances of the Senior
Term Loan, Additional Senior Term Loan, Subordinated Indebtedness held
by SBA and, subject to the provisions of subsection 3.1(G), Refinanced
Subordinated Indebtedness, plus (ii) $12,890,000, representing an
amount equal to the original cash equity investment, directly or
indirectly, by VILARC Capital, SBA and Liberty in Borrower, plus (iii)
additional cash equity invested by Vilarc Capital, SBA, Liberty or any
other Person in Borrower, directly or indirectly, after the date
hereof, less (iv) any outstanding Lender Guarantees.
If at any time the Revolving Loans exceed the Maximum
Revolving Loan Balance, Revolving Loans must be repaid immediately in an amount
sufficient to eliminate any excess. Heller may make Revolving Loans bearing
interest with reference to the Base Rate in any amount with one (1) Business
Day prior notice required for amounts greater than $5,000,000. For amounts less
than $5,000,000, telephonic notice must be provided by noon CST on the date of
the borrowing. All LIBOR Rate Loans require two (2) Business Days' notice. All
Loans requested telephonically must be confirmed in writing within one Business
Day.
(B) Lender Guarantees and Letters of Credit. At Borrower's
request, Heller will provide Lender Guarantees up to an aggregate amount of
$1,000,000 outstanding at any time. "LENDER GUARANTEE" means a letter of credit
issued by Heller or a guarantee by Heller to induce a bank, reasonably
acceptable to Heller, to issue a letter of credit, or any payment made by
Heller pursuant to any letter of credit subject to a Lender Guarantee which has
not been reimbursed by Borrower or charged as a Revolving Loan. In determining
the amount of outstanding Lender Guarantees, the maximum amount of any Heller
guarantee to a bank issuing letters of credit on behalf of Borrower will be
considered outstanding unless such bank reports daily activity to Heller
showing actual outstanding letters of credit subject to Heller's guarantee.
Lender Guarantees will only be provided for letters of credit which expire
within one (1) year after date of issuance and at least thirty (30) days prior
to the date set forth in clause (c) of the definition of the term "EXPIRY
DATE." Borrower shall give Heller five (5) Business Days prior written notice
for
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a letter of credit. Five (5) Business Days prior written notice is required
for the issuance of a letter of credit by a bank, provided that such five (5)
Business Day period may not commence until Heller and the bank that will be
issuing such letter of credit have entered into a Service and Letter of Credit
Guaranty Agreement or any similar agreement, in form and substance satisfactory
to Heller, which agreement will govern Heller's guaranty of all letters of
credit to be issued by such bank for the benefit of Borrower. Borrower is
irrevocably and immediately responsible to Heller for reimbursement of any
amount paid by Heller under any Lender Guarantee except to the extent such
1payments were made as a result of Heller's gross negligence or willful
misconduct. Subject to the provisions of the last paragraph of subsection 1.4,
this reimbursement shall occur by the making of a Revolving Loan without prior
notice to Borrower. The Borrower shall (i) maintain an operating account at the
issuing bank or (ii) be directly charged by the issuing bank for settlement of
letters of credit and any related fees.
1.2 Interest and Related Fees.
(A) Interest. From the date the Loans are made and the other
Obligations become due and payable in accordance with the terms of this
Agreement and the other Loan Documents, the Obligations shall bear interest at
the sum of the Base Rate plus one percent (1.0%) per annum and/or, with respect
to any LIBOR Rate Loan, the sum of the LIBOR Rate plus two and three quarters
percent (2.75%) per annum. "BASE RATE" means a variable rate of interest per
annum equal to the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System in Federal Reserve statistical release
H.15 (519) entitled "SELECTED INTEREST RATES" as the Bank prime loan rate. Base
Rate also includes rates published in any successor publications of the Federal
Reserve System reporting the Bank prime loan rate or its equivalent. The
statistical release generally sets forth a Bank prime loan rate for each
business day. The applicable Bank prime loan rate for any date not set forth
shall be the rate set forth for the last preceding date. In the event the Board
of Governors of the Federal Reserve System ceases to publish a Bank Prime loan
rate or equivalent, the term "BASE RATE" shall mean a variable rate of interest
per annum equal to the highest of the "PRIME RATE," "REFERENCE RATE," "BASE
RATE" or other similar rate as determined by Heller announced from time to time
by any of Bankers Trust Company, The Chase Manhattan Bank, National Association
and Chemical Bank (with the understanding that any such rate may merely be a
reference rate and may not necessarily represent the lowest or best rate
actually charged to any customer by such bank). "BASE RATE LOANS" means Loans
bearing interest at rates determined by reference to the Base Rate.
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"LIBOR RATE" means, for each Interest Period, a rate equal to: (a) the rate of
interest reasonably determined by Heller at which deposits in U.S. dollars for
the relevant Interest Period are offered based on information presented on the
Reuters Screen LIBO Page as of 11:00 a.m. (London time) on the day which is two
(2) Business Days prior to the first day of such Interest Period, provided that
if at least two such offered rates appear on the Reuters Screen LIBO Page in
respect of such Interest Period, the arithmetic mean of all such rates will be
the rate used, provided, further, that if fewer than two offered rates appear
or if Reuters ceases to provide LIBOR quotations, such rate shall be the rate
of interest at which deposits in U.S. dollars are offered for the relevant
Interest Period by any of Bankers Trust Company, The Chase Manhattan Bank,
National Association or Chemical Bank to prime banks in the London interbank
market, 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 which is two (2) Business Days prior to the
beginning of such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto, as now and from time to
time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) which are required to
be maintained by a member bank of the Federal Reserve System; such rate to be
rounded upward to the next whole multiple of one-sixteenth of one percent
(.0625%). "LIBOR RATE LOANS" means Loans bearing interest at rates determined
by reference to the LIBOR Rate.
LIBOR Rate Loans may be obtained for a one, two, three, or six month
period (each being an "Interest Period") provided that: (a) the interest is
calculated from the date the Loan is made, (b) if the Interest Period expires
on a day that is not a Business Day, then it will expire on the next Business
Day, (c) no Interest Period shall extend beyond the date set forth in clause
(c) of the definition of the term "EXPIRY DATE."
If the introduction of or the interpretation of any law, rule, or
regulation would increase the reserve requirement and as a result there would
be an increase in the cost of making or maintaining a LIBOR Rate Loan, then
Heller shall submit a certificate demonstrating the impact of the increased
cost and require payment thereof within ten (10) days from the Borrower. There
are no limitations on the number of times such certificate may be submitted.
4
(B) Commitment Fee. From the Closing Date, Borrower shall pay
a fee in an amount equal to
(1) the Revolving Loan Commitment less the average
daily balance of the Revolving Loan less the average daily amount of
outstanding Lender Guarantees during the preceding month, multiplied
by
(2) one half of one percent (0.5%) per annum.
Such fee is payable monthly in arrears on the first day of the
subsequent month.
(C) Lender Guarantee Fee. From the Closing Date, Borrower
shall pay a fee for each Lender Guarantee from the date of issuance of the
Lender Guarantee to the date of termination thereof. The fee is equal to the
average daily outstanding amount of the Lender Guarantee multiplied by two and
three quarters percent (2.75%) per annum, such fees payable monthly in arrears
on the first day of each subsequent month. Borrower shall also reimburse Heller
for any and all fees and expenses paid to the issuer of any letter of credit
that are in any way related to a Lender Guarantee.
(D) Computation of Interest and Related Fees. Interest on all
Loans and any other Obligations and the related fees set forth in this
subsection 1.2 shall be calculated daily on the basis of a three hundred sixty
(360) day year for the actual number of days elapsed in the period during which
it accrues. The date of funding a Base Rate Loan, the first day of an Interest
Period with respect to a LIBOR Rate Loan and the date of conversion of a LIBOR
Rate Loan to a Base Rate Loan shall be included in the calculation. The date of
payment of a Base Rate Loan, the last day of an Interest Period with respect to
a LIBOR Rate Loan and the date of conversion of a Base Rate Loan to a LIBOR
Rate Loan shall be excluded in the calculation. Interest on all Base Rate Loans
is payable in arrears on the first day of each month and on the Expiry Date,
whether by acceleration or otherwise. Interest on LIBOR Rate Loans shall be
payable on the last day of the applicable Interest Period, unless the period is
greater than ninety (90) days, in which case interest will be payable on the
ninetieth (90th) day of the Interest Period and the last day of the Interest
Period. In addition, interest on LIBOR Rate Loans is due on the Expiry Date,
whether by acceleration or otherwise.
(E) Default Rate of Interest. At the election of Heller,
after the occurrence of an Event of Default and for so long as it continues,
the Loans and other Obligations which are
5
then due and payable shall bear interest at a rate that is one percent (1%) in
excess of the rates otherwise payable under this Agreement. Furthermore, during
any period in which any Event of Default exists, and is continuing, as the then
current Interest Periods for LIBOR Rate Loans expire such Loans shall be
converted into Base Rate Loans and the LIBOR Rate election will not be
available to the Borrower until all Events of Default are cured or waived.
(F) Excess Interest. Under no circumstances will the rate of
interest chargeable be in excess of the maximum amount permitted by law. If
excess interest is charged and paid in error, then the excess amount will be
promptly refunded.
(G) LIBOR Rate Election. All Loans made on the Closing Date
shall be Base Rate Loans and remain so for ten (10) Business Days. Thereafter,
Borrower may request that Revolving Loans to be made be LIBOR Rate Loans and
that portions of outstanding Loans be converted to LIBOR Rate Loans. Any such
request, which will be made by submitting a LIBOR Rate Loan request, in the
form of Exhibit 1.2(G), to Heller, shall pertain to Loans in an aggregate
minimum amount of $500,000 and integral multiples of $10,000 in excess thereof.
Once given, a LIBOR Rate Loan request shall be irrevocable and Borrower shall
be bound thereby. Upon the expiration of an Interest Period, in the absence of
a new LIBOR Rate Loan request submitted to Heller not less than two (2)
Business Days prior to the end of such Interest Period, the LIBOR Rate Loan
then maturing shall be automatically converted to a Base Rate Loan. There may
be no more than eight (8) LIBOR Rate Loans outstanding at any one time.
1.3 Other Fees and Expenses.
(A) LIBOR Breakage Fee. Upon any payment or prepayment of a
LIBOR Rate Loan on any day that is not the last day of the Interest Period
applicable to that Loan (regardless of the source of such prepayment and
whether voluntary or otherwise), or, if for any reason (other than a default by
Heller) a borrowing of a LIBOR Rate Loan does not occur on a date specified in
a request for an advance of a LIBOR Rate Loan or in a LIBOR Rate Loan Request,
Borrower shall pay Heller, upon Heller's written request therefor (which
request shall set forth in reasonable detail the computation of the amount
requested) an amount equal to the reasonable losses (including, without
limitation, any such loss sustained by Heller in connection with the
reemployment of funds) that Heller sustains as a result of such payment,
prepayment or failure to borrow ("LIBOR RATE BREAKAGE FEE").
(B) Expenses and Attorneys Fees. Borrower agrees to
6
promptly pay all reasonable fees, costs and expenses (including those of
attorneys) incurred by Heller in connection with the examination, review, due
diligence investigation, documentation, negotiation and closing of the
transactions contemplated herein and in connection with any amendments,
modifications, and waivers with respect to the Loan Documents. Borrower agrees
to pay all reasonable fees, costs and expenses incurred by Heller in connection
with any action to enforce any Loan Document or to collect any payments due
from Borrower. The reasonable fees, costs and expenses of attorneys may include
allocated costs of internal counsel unless objected to by Borrower, in which
event any such work proposed to be performed by internal counsel may be
performed by external counsel at Borrower's expense. All fees, costs and
expenses for which Borrower is responsible under this subsection 1.3(B) shall
be deemed part of the Obligations when incurred, payable within thirty (30)
days after demand therefor if no Event of Default exists or, if an Event of
Default exists, immediately upon demand, and shall be secured by the
Collateral.
(C) Facility Fee. Borrower shall pay to Heller a
nonrefundable facilities fee of $37,500 per annum, in advance, with the first
payment due on the Closing Date.
1.4 Payments. All payments by Borrower of the Obligations shall be
made in same day funds and delivered to Heller by wire transfer to the
following account or such other place as Heller may from time to time
designate.
ABA No. 0710-0001-3
Account Number 55-00540
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Reference: Heller Corporate Finance Group
for the benefit of ARCADE
Borrower shall receive credit for such funds if received by 1:00 p.m. CST on
such day. In the absence of timely notice and receipt, such funds shall be
deemed to have been paid on the next Business Day. Whenever any payment to be
made hereunder shall be stated to be due on a day that is not a Business Day,
the payment may be made on the next succeeding Business Day and such extension
of time shall be included in the computation of the amount of interest and fees
due hereunder.
Borrower hereby authorizes Heller to make a Revolving Loan for the
payment of interest, facility fees pursuant to subsection
7
1.3(C), commitment fees and Lender Guarantee fees payable pursuant to
subsections 1.2(B) and 1.2(C), LIBOR Rate Breakage Fees and Lender Guarantee
payments. Heller agrees to use its best efforts to provide to Borrower notice
prior to so making a Revolving Loan; provided, however, the failure to provide
such notice shall not affect or impair the authorization granted pursuant to
the preceding sentence. Prior to an Event of Default, other fees, costs and
expenses (including those of attorneys) reimbursable to Heller pursuant to
subsection 1.3(B) or elsewhere in any Loan Document may be debited to the
Revolving Loan account after thirty (30) days notice to Borrower. During the
continuance of an Event of Default, no notice is required.
1.5 Term of the Agreement. The Agreement shall be effective until the
earlier of (a) the date on which the Loans are paid in full and all other
Obligations (other than contingent Obligations not then due and payable) have
been satisfied and Heller has no further obligation to lend hereunder and (b)
the Expiry Date. Upon the termination of the effectiveness of this Agreement,
any unpaid Obligations shall be immediately due and payable without notice or
demand by Heller. Notwithstanding any type of termination, until all
Obligations (other than contingent Obligations not then due and payable) have
been fully paid and satisfied, Heller shall be entitled to retain the security
interests in all Collateral granted under the Security Documents.
1.6 Borrower's Loan Account. Heller will maintain loan account records
for (a) all Loans, interest charges and payments thereof, (b) all Lender
Guarantees, (c) the charging and payment of all fees, costs and expenses and
(d) all other debits and credits pursuant to this Agreement. The balance in the
loan accounts shall be presumptive evidence of the amounts due and owing to
Heller absent manifest error, provided that any failure to so record shall not
limit or affect the Borrower's obligation to pay. Within five (5) days of the
first of each month, Heller shall provide a statement for each loan account
setting forth the principal of each account and interest due thereon. Borrower
must deliver a written objection within thirty (30) days after the end of each
of its fiscal years or the statements delivered with respect to each month
during each such fiscal year will be presumed as binding evidence of the
obligation absent manifest error. After the occurrence and during the
continuance of an Event of Default, Borrower irrevocably waives the right to
direct the application of any and all payments and Borrower hereby irrevocably
agrees that Heller shall have the continuing exclusive right to apply and
reapply payments in any manner it deems appropriate.
8
SECTION 2
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as the Revolving Loan
Commitment is in effect and until payment in full of all Obligations (excluding
contingent Obligations not then due and payable) and termination of all Lender
Guarantees, unless Heller shall otherwise give its prior written consent,
Borrower shall perform and comply with, shall cause each of its Subsidiaries to
perform and comply with, and shall use its best efforts to cause Holdings to
perform and comply with, all covenants in this Section 2 applicable to such
Person.
2.1 Compliance With Laws.
(A) Borrower will comply with and will cause each of its
Subsidiaries to comply with (i) the requirements of all applicable laws, rules,
regulations and orders of any governmental authority (including , without
limitation, laws, rules regulations and orders relating to taxes, employer and
employee contributions, securities, employee retirement and welfare benefits,
environmental protection matters and employee health and safety) as now in
effect and which may be imposed in the future in all jurisdictions in which
Borrower or its Subsidiaries are now doing business or may hereafter be doing
business, and (ii) the obligations, covenants and conditions contained in any
Contractual Obligations of Borrower and the Loan Parties, other than (1) those
laws, rules, regulations, orders and Contractual Obligations the noncompliance
with which would not have, either individually or in the aggregate, a Material
Adverse Effect; or (2) those laws, rules, regulations, orders and Contractual
obligations being contested in good faith by appropriate proceedings diligently
prosecuted provided such contest would not have, either individually or in the
aggregate, a Material Adverse Effect;
"CONTRACTUAL OBLIGATIONS" as applied to any Person, means any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject
including, without limitation, the Related Transaction Documents.
(B) Borrower will maintain or obtain and will cause each of
its Subsidiaries to maintain or obtain, all licenses and permits now held or
hereafter required by Borrower and its Subsidiaries, if the loss, suspension,
revocation or failure to obtain or renew, would have a Material Adverse Effect
or unless being contested in good faith by appropriate proceedings
9
diligently prosecuted, provided such contest would not have, either
individually or in the aggregate, a Material Adverse Effect. This subsection
2.1 shall not preclude the Borrower or any Subsidiary from contesting any taxes
or other payments, if they are being diligently contested in good faith and if
appropriate expense provisions have been recorded in conformity with GAAP.
(C) Borrower represents and warrants that as of the date
hereof, it (i) is in compliance and each of its Subsidiaries is in compliance
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority as now in effect, and Contractual Obligations, the
non-compliance with which would have, either individually or in the aggregate,
a Material Adverse Effect, and (ii) maintains and each of its Subsidiaries
maintains, all licenses and permits required to be maintained by Borrower and
its Subsidiaries except (x) where the failure to maintain would not have a
Material Adverse Effect or (y) where being contested in good faith by
appropriate proceeding diligently prosecuted, provided such contest does not
have, either individually or in the aggregate, a Material Adverse Effect.
2.2 Maintenance of Properties; Insurance.
(A) Borrower will maintain or cause to be maintained in good
repair, working order and condition (ordinary wear and tear excepted) all
material properties used in the business of Borrower and its Subsidiaries and
will make or cause to be made all appropriate repairs, renewals and
replacements thereof.
(B) Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, public liability, property damage
and, to the extent available on commercially reasonable terms, business
interruption insurance with respect to its business and properties and the
business and properties of its Subsidiaries against loss or damage of the kinds
customarily carried or maintained by corporations of established reputation
engaged in similar businesses and located in similar locations, and taking into
account the outstanding Indebtedness of Borrower and its Subsidiaries, and will
deliver evidence thereof to Heller.
(C) Borrower represents and warrants that it and each of its
Subsidiaries currently maintains all material properties as set forth above and
maintains all insurance described above.
2.3 Inspection; Lender Meeting. Upon reasonable notice to the Chairman
of Borrower and at Heller's expense (unless an Event of Default exists, in
which event the same shall be at Borrower's
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expense), Borrower shall with reasonable frequency (and in any event on no less
than one occasion per calendar year) permit a reasonable number of authorized
representatives of Heller to examine and make copies of and abstracts from the
records and books of account of, and to visit and inspect the properties of,
Borrower and its Subsidiaries, and to discuss the affairs, finances and
accounts of Borrower and its Subsidiaries with a Responsible Officer and
independent accountants of Borrower and its Subsidiaries; provided that if an
Event of Default exists, Borrower shall permit Heller and its authorized
representatives to examine and make copies of and abstracts from the records
and books of account of, to visit and inspect the properties of, and to discuss
the affairs, finances and accounts of Borrower and its Subsidiaries with a
Responsible Officer and independent accountants of Borrower or its Subsidiaries
without observing the procedures set forth above. Heller's delivery of an
executed copy of this Agreement to Borrower's independent public accounts (to
which Borrower hereby consents) shall constitute Borrower's consent to its
independent public accountants to engage in such discussions.
2.4 Corporate Existence, Etc. Except as otherwise permitted by
subsection 3.6, Borrower will, and will cause each of its Subsidiaries to, at
all times preserve and keep in full force and effect its corporate existence
and all rights and franchises material to its business.
2.5 Further Assurances.
(A) Borrower shall and shall cause each of its Subsidiaries
other than Scent Seal, Inc. to, from time to time, execute such guaranties,
financing statements, documents, security agreements and pledge agreements as
Heller at any time may reasonably request to evidence, perfect or otherwise
implement the security for repayment of the Obligations provided for in the
Loan Documents.
(B) At Heller's request, Borrower shall cause any
Subsidiaries (other than Scent Seal, Inc.) of Borrower promptly to guaranty the
Obligations and to grant to Heller, a security interest in the real, personal
and mixed property of such Subsidiary to secure the Obligations. The
documentation for such guaranty or security shall be substantially similar to
the Loan Documents executed concurrently herewith with such modifications as
are reasonably requested by Heller.
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SECTION 3
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as the Revolving Loan
Commitment is in effect and until payment in full of all Obligations (excluding
contingent Obligations not then due and payable) and termination of all Lender
Guarantees, unless Heller shall otherwise give its prior written consent,
Borrower shall comply with, shall cause each of its Subsidiaries to comply with
and shall use its best efforts to cause Holdings to comply with, all covenants
in this Section 3 applicable to such Person.
3.1 Indebtedness. Borrower will not and will not permit any of its
Subsidiaries directly or indirectly to create, incur, assume, guaranty, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness except:
(A) the Obligations;
(B) intercompany Indebtedness among Borrower and its Subsidiaries;
provided that if Borrower is the obligor, the obligations of Borrower shall be
subordinated in right of payment to the Obligations from and after such time as
any portion of the Obligations shall become due and payable (whether at stated
maturity, by acceleration or otherwise);
(C) Subordinated Indebtedness evidenced by the Subordinated Loan
Documents;
(D) Indebtedness secured by purchase money Liens, Indebtedness
incurred with respect to capital leases and Indebtedness evidenced by the
Additional Seller Notes, not to exceed $7,500,000 in the aggregate;
(E) Indebtedness evidenced by the Seller Notes;
(F) Term Indebtedness evidenced by the Senior Term Note plus
additional term Indebtedness (the "Additional Senior Term Loan") not to exceed
$5,000,000 provided (1) at the time of incurrence thereof, no Default or Event
of Default shall exist and be continuing or shall arise from the incurrence
thereof; and (2) the Additional Senior Term Loan is (a) provided by SBA; (b) on
substantially the same terms and conditions as the "Conditional Senior Term
Loan" (as defined in the Senior Term Loan Agreement); and (c) is subject to the
terms and conditions of the Intercreditor Agreement. Borrower shall not be
permitted to incur any revolving loan Indebtedness pursuant to the Senior Term
Loan Documents; and
(G) Subordinated Indebtedness incurred to refinance
Subordinated Indebtedness held by SBA provided all of the
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following conditions are satisfied ("Refinanced Subordinated Indebtedness"):
(i) The Subordinated Indebtedness is on terms and
conditions reasonably acceptable to Heller;
(ii) the Person providing such Subordinated
Indebtedness is reasonably acceptable to Heller;
(iii) the Subordinated Indebtedness is subordinated
to the Obligations, the Senior Term Loan and Additional Senior Term
Loan on terms and conditions acceptable to Heller;
(iv) Heller and SBA shall have entered into
amendments to the Intercreditor Agreement on terms and conditions
acceptable to Heller including, without limitation, amendments to or
elimination of Heller standstill provisions and amendments to payment
blockage provisions; and
(v) at the time of such refinancing, no Default or
Event of Default shall exist and be continuing or arise as a result
thereof.
3.2 Liens and Related Matters.
(A) No Liens. Borrower will not and will not permit any of
its Subsidiaries directly or indirectly to create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument with respect to goods or accounts receivable) of
Borrower or any of its Subsidiaries, whether now owned or hereafter acquired,
or any income or profits therefrom, except Permitted Encumbrances. "PERMITTED
ENCUMBRANCES" means the following:
(1) Liens for taxes, assessments or other
governmental charges not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently
prosecuted and if appropriate expense provisions have been recorded in
conformity with GAAP;
(2) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen and other similar liens imposed
by law, which are incurred in the ordinary course of business for sums
not more than thirty (30) days delinquent or which are being contested
in good faith; provided that a reserve or other appropriate provision
shall have been made
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therefor and the aggregate amount of such Liens is than $1,000,000;
(3) Liens (other than any Lien imposed by the
Employee Retirement Income Security Act of 1974 or any rule or
regulation promulgated thereunder) incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety,
stay, customs and appeal bonds, bids, leases, government contracts,
trade contracts, performance and return of money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(4) deposits, in an aggregate amount not to exceed
$500,000, made in the ordinary course of business to secure liability
to insurance carriers;
(5) Liens for purchase money obligations; provided
that: (a) the Indebtedness secured by any such Lien is permitted under
subsection 3.1; and (b) any such Lien encumbers only the asset so
purchased;
(6) any attachment or judgment Lien not constituting
an Event of Default under subsection 6.1(I);
(7) leases or subleases granted to others not
interfering in any material respect with the business of Borrower or
any of its Subsidiaries;
(8) easements, rights of way, restrictions, and
other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Borrower or any
of its Subsidiaries;
(9) any interest or title of a lessor or sublessor
under any lease;
(10) Liens arising from filing financing statements
regarding leases not prohibited by this Agreement;
(11) Liens in favor of Heller;
(12) subject to the terms and provisions of
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the Intercreditor Agreement, Liens securing the Senior Term Loan,
Additional Senior Term Loan and Subordinated Notes, which Liens are
set forth on Schedule 3.2(A)(12) hereto;
(13) Liens securing the Seller Notes and solely encumbering
the trademark "Scent Seal", all right, title and interest of Borrower
in the License Agreement dated June 9, 1995 between Borrower and
Thermedics, Inc., all other license or use agreements of Borrower in
connection with the trademark "Scent Seal" and all proceeds of the
foregoing;
(14) Liens granted to the issuer/seller of reverse repurchase
agreements provided such Liens encumber only the securities subject to
such reverse repurchase agreement; and
(15) Liens in favor of NationsBanc Leasing Corporation
created pursuant to that certain Security Agreement dated September
21, 1995 encumbering the equipment described therein.
(B) No Negative Pledges. Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to enter into or assume
any agreement (other than the Loan Documents, Senior Term Loan Documents and
Subordinated Loan Documents) prohibiting the creation or assumption of any Lien
upon its properties or assets, whether now owned or hereafter acquired.
(C) No Restrictions on Subsidiary Distributions to Borrower.
Except as provided herein, in the Senior Term Loan Documents and in the
Subordinated Loan Documents, Borrower will not and will not permit any of its
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary's capital stock owned by Borrower or any
Subsidiary of Borrower; (2) pay any Indebtedness owed to Borrower or any other
Subsidiary; (3) make loans or advances to Borrower or any other Subsidiary; or
(4) transfer any of its property or assets to Borrower or any other Subsidiary.
3.3 Investments; Joint Ventures. Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to make or own any
Investment in any Person except:
(A) Borrower and its Subsidiaries may make and own
15
Investments in Cash Equivalents;
(B) Borrower and its Subsidiaries may make intercompany loans
to the extent permitted under subsection 3.1;
(C) Borrower and its Subsidiaries may make loans and advances
to employees for moving, entertainment, travel and other similar expenses in
the ordinary course of business not to exceed $500,000 in the aggregate at any
time outstanding; and
(D) Borrower and its Subsidiaries may make acquisitions
(including acquisitions of other businesses or business units or product lines
and patents, licenses or other individual assets of another Person) and may
make Investments in joint ventures; provided (1) that at the time of such
Investment, no Default or Event of Default shall exist and be continuing or
arise as a result thereof (including, without limitation, subsection 3.10) and
(2) after giving effect to such Investment, outstanding Revolving Loans do not
exceed Maximum Revolving Loan Balance.
"INVESTMENT" means amounts paid or agreed to be paid by
Borrower or any of its Subsidiaries for stock, securities, liabilities or
assets of, or loaned, advanced or contributed to, other Persons. The term
Investment shall not include any increase or decrease in the assets of any
Person derived from the earnings or losses thereof or any assets purchased or
licensed in the ordinary course of business, but shall include the acquisition
of a company, business or product line by Borrower or any of its Subsidiaries.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to
such Investment.
"CASH EQUIVALENTS" means: (i) direct obligations of the
United States of America or any state thereof ; (ii) prime commercial paper;
(iii) certificates of deposit issued by any commercial bank having capital and
surplus in excess of $100,000,000; (iv) money market funds of nationally
recognized institutions investing solely in obligations described in clauses
(i), (ii) and (iii) above; and (v) overnight reverse repurchase agreements from
any commercial bank having capital and surplus in excess of $100,000,000.
3.4 Contingent Obligations. Borrower will not and will not permit any
of its Subsidiaries directly or indirectly to create or become or be liable
with respect to any Contingent Obligation except those:
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(A) resulting from endorsement of negotiable instruments for
collection in the ordinary course of business;
(B) arising under the Security Documents;
(C) existing on the Closing Date and described in Schedule
3.4 annexed hereto;
(D) arising under indemnity agreements to title insurers to
cause such title insurers to issue to Heller mortgagee title insurance
policies;
(E) arising with respect to customary indemnification and
purchase price adjustment obligations incurred in connection with Asset
Dispositions;
(F) incurred in the ordinary course of business with respect
to surety and appeal bonds, return-of-money bonds and other similar obligations
not exceeding at any time outstanding $100,000 in aggregate liability;
(G) incurred in the ordinary course of business with respect
to performance bonds not exceeding at any time outstanding $3,000,000 in
aggregate liability;
(H) incurred with respect to Indebtedness permitted by
subsection 3.1;
(I) foreign exchange contracts and currency swap agreements,
the notional amount of which does not exceed $10,000,000 (U.S. Dollars) in the
aggregate at any time; and
(J) not permitted by clauses (A) through (I) above, so long
as any such Contingent Obligations, in the aggregate at any time outstanding,
do not exceed $750,000.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person: (i) with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; (ii) with respect to any letter of credit issued for the account of
that Person (other than any letter of credit with respect to which a Lender
Guarantee
17
has been issued by Heller) or as to which that Person is otherwise
liable for reimbursement of drawings; or (iii) under any foreign exchange
contract, currency swap agreement, interest rate swap agreement or other
similar agreement or arrangement designed to alter the risks of that Person
arising from fluctuations in currency values or interest rates. Contingent
Obligations shall include (a) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of
the obligation of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement, and (c) any liability of such Person for the obligations of
another through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
3.5 Restricted Junior Payments. Borrower will not and will not permit
any of its Subsidiaries directly or indirectly to declare, order, pay, make or
set apart any sum for any Restricted Junior Payment except:
(A) Borrower may make payments and distributions to Holdings
to permit Holdings to pay federal and state income taxes then due and owing,
franchise taxes and other similar licensing expenses incurred in the ordinary
course of business; provided, however, Borrower's contribution to taxes as a
result of the filing of a consolidated return by Holdings shall not be greater,
nor the receipt of tax benefits less, then they would have been had Borrower
not filed a consolidated return with Holdings;
(B) Subsidiaries of Borrower may make Restricted Junior
Payments to Borrower;
(C) Borrower may make required payments of principal and
interest with respect to the Senior Term Loan, Additional Senior Term Loan and
Subordinated Indebtedness held by SBA, as required in accordance with the terms
thereof but only to the extent permitted in the Intercreditor Agreement;
provided, however, Borrower may make optional prepayments with respect to the
Senior Term Loan, Additional Senior Term Loan and Subordinated Indebtedness
held by SBA if (1) at the time of such prepayment, required payments of
principal and interest are permitted to be paid pursuant to the Intercreditor
Agreement and (2) after giving
18
effect to such prepayment, the Maximum Revolving Loan Balance exceeds the sum
of outstanding principal balance of the Revolving Loans plus outstanding Lender
Guarantees, by not less than $5,000,000; provided, further, however, Borrower
may refinance the Subordinated Indebtedness held by SBA with Refinanced
Subordinated Indebtedness in accordance with subsection 3.1(G);
(D) Borrower may make required payments of principal and
interest with respect to the Indebtedness evidenced by the Seller Notes
provided at the time of such payment and after giving effect thereto, no Event
of Default under subsection 6.1(A) or 6.1(C) (as it relates to a failure to
perform or comply with subsections 4.3, 4.4 or 4.5 hereof) exists or would
arise as a result thereof;
(E) Borrower may make dividend payments to Holdings solely to
permit Holdings to make dividend payments on account of preferred stock of
Holdings held by SBA provided at the time of such payment and after giving
effect thereto, no Default or Event of Default under subsection 6.1(A) or
6.1(C) (as it relates to a failure to perform or comply with subsections 4.3,
4.4 or 4.5 hereof) exists or would arise as a result thereof;
(F) Borrower may make payments and distributions to Holdings,
not to exceed $100,000 in the aggregate in any fiscal year, to permit Holdings
to pay board of director fees and expenses and other out-of-pocket expenses;
(G) Borrower and its Subsidiaries may make required payments
with respect to the Additional Seller Notes provided at the time of such
payment and after giving effect thereto, no Default or Event of Default exists
or would arise as a result thereof; and
(H) Borrower may make required payments of interest with
respect to the Refinanced Subordinated Indebtedness as required in accordance
with the terms thereof but only to the extent permitted in the subordination
agreement entered into with respect thereto.
"RESTRICTED JUNIOR PAYMENT" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of Borrower or any of its Subsidiaries now or hereafter outstanding,
except a dividend payable solely in shares of that class of stock to the
holders of that class; (ii) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock of Borrower or any of
its Subsidiaries now or hereafter outstanding; (iii) any
19
payment or prepayment of principal of, premium, if any, redemption, conversion,
exchange, purchase, retirement, defeasance, sinking fund or similar payment
with respect to, any Subordinated Indebtedness, the Additional Senior Term
Loan, the Senior Term Loan, Seller Notes or Additional Seller Notes; and (iv)
any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of
Borrower or any of its Subsidiaries now or hereafter outstanding.
3.6 Restriction on Fundamental Changes. Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to: (a) amend, modify or
waive any term or provision of its articles of incorporation or by-laws unless
required by law other than such immaterial amendments or modifications which do
not and will not adversely affect Heller, the ability of Heller to enforce its
rights and remedies under the Loan Documents or to realize upon the Collateral
or which otherwise would have a Material Adverse Effect; (b) enter into any
transaction of merger or consolidation except any Subsidiary of Borrower may be
merged with or into Borrower (provided that Borrower is the surviving entity)
or any other Subsidiary of Borrower; or (c) liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution).
3.7 Disposal of Assets or Subsidiary Stock. Borrower will not and will
not permit any of its Subsidiaries directly or indirectly to: convey, sell,
lease, sublease, transfer or otherwise dispose of, or grant any Person an
option to acquire, in one transaction or a series of transactions any of its
property, business or assets, or the capital stock of or other equity interests
in any of its Subsidiaries, whether now owned or hereafter acquired except for
(a) bona fide sales of Inventory to customers for fair value in the ordinary
course of business and dispositions of obsolete equipment not used or useful in
the business and (b) Asset Dispositions if all of the following conditions are
met: (i) the market value of assets sold or otherwise disposed of in any single
transaction or series of related transactions does not exceed $5,000,000 and
the aggregate market value of assets sold or otherwise disposed of in any
fiscal year of Borrower does not exceed $5,000,000; (ii) the consideration
received is at least equal to the fair market value of such assets; (iii) after
giving effect to the sale or other disposition of the assets included within
the Asset Disposition and the repayment of Indebtedness with the proceeds
thereof, Borrower is in compliance on a pro forma basis with the covenants set
forth in Section 4 recomputed for the most recently ended month for which
information is available and is in compliance with all other terms and
conditions contained in this Agreement; and (iv) no Default or Event of Default
shall result from such sale or
20
other disposition.
3.8 Transactions with Affiliates. Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to enter into or permit
to exist any transaction (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate or with any
director, officer or employee of any Loan Party (excluding the payment of
compensation, bonuses and other incentive compensation in the ordinary course
of business to officers and other employees in the ordinary course of business
for actual services rendered), except (a) payment for services rendered by
VILARC, Inc. in the ordinary course of business provided such payment is
approved by Liberty, (b) as set forth on Schedule 3.8 or (c) transactions in
the ordinary course of and pursuant to the reasonable requirements of the
business of Borrower or any of its Subsidiaries and upon fair and reasonable
terms which are fully disclosed to Heller and are no less favorable to Borrower
or such Subsidiary than would be obtained in a comparable arm's length
transaction with a Person that is not an Affiliate. Notwithstanding the
foregoing, no payments may be made with respect to item 2 set forth on Schedule
3.8 in excess of the amount set forth on Schedule 3.8 or upon the occurrence
and during the continuation of a Default or Event of Default under subsection
6.1(A) or 6.1(C) (as it relates to a failure to perform or comply with
subsection 4.3, 4.4 or 4.5).
3.9 Management Fees and Compensation. Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to pay any management,
consulting or similar fees to any Affiliate or to any director, officer or
employee of any Loan Party (excluding the payment of compensation, bonuses and
other incentive compensation in the ordinary course of business to officers and
other employees in the ordinary course of business for actual services
rendered) except (a) payment for services rendered by VILARC, Inc. in the
ordinary course of business provided such payment is approved by Liberty or (b)
as set forth on Schedule 3.9. Notwithstanding the foregoing, no payments may be
made with respect to item 1 set forth on Schedule 3.9 in excess of the amount
set forth on Schedule 3.9 or upon the occurrence and during the continuation of
a Default or Event of Default under subsection 6.1(A) or 6.1(C) (as it relates
to a failure to perform or comply with subsection 4.3, 4.4 or 4.5).
3.10 Conduct of Business. Borrower will not and will not permit any of
its Subsidiaries directly or indirectly to engage in any business other than
businesses of the type described on Schedule 3.10, unless otherwise agreed to
by Heller, which consent shall not be unreasonably withheld.
21
3.11 Changes Relating to Indebtedness. Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to change or amend the
terms of any Subordinated Indebtedness, the Additional Senior Term Loan, the
Senior Term Loan, Seller Notes or Additional Seller Notes if the effect of such
amendment is to: (a) increase the principal amount of the Indebtedness (other
than the incurrence of the Additional Senior Term Loan under the conditions
specified in subsection 3.1) or the interest rate on such Indebtedness; (b)
shorten the dates upon which payments of principal or interest are due on such
Indebtedness; (c) change in any manner adverse to the Borrower, or add, any
event of default or any covenant with respect to such Indebtedness; (d) change
the redemption or prepayment provisions of such Indebtedness; (e) change the
subordination provisions thereof (or the subordination terms of any guaranty
thereof), including, without limitation, subordinating such Indebtedness to
other Indebtedness; (f) shorten the maturity date or otherwise to alter the
repayment terms in a manner adverse to Borrower; or (g) change or amend any
other term if such change or amendment would materially increase the
obligations of the obligor or confer additional material rights on the holder
of such Indebtedness in a manner adverse to Borrower, any of its Subsidiaries
or Heller.
3.12 Press Release; Public Offering Materials. Neither Borrower nor
Heller will, or will permit any of its Subsidiaries to, disclose the name of
the other party in any press release, any marketing or promotional material or
in any prospectus, proxy statement or other materials filed with any
governmental entity relating to a public offering of the capital stock of any
Loan Party without the other party's prior written consent which shall not be
unreasonably withheld but in no event shall the name Victor Barnett be used by
Heller in such material.
3.13 Subsidiaries. Borrower will not and will not permit any of its
Subsidiaries directly or indirectly to establish, create or acquire any new
Subsidiary without at least five (5) days' prior written notice to Heller.
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SECTION 4
FINANCIAL COVENANTS/REPORTING
Borrower covenants and agrees that so long as the Revolving Loan
Commitment remains in effect and until payment in full of all Obligations
(excluding contingent Obligations not then due and payable) and termination of
all Lender Guarantees, unless Heller shall otherwise give its prior written
consent, Borrower shall comply with, shall cause each of its Subsidiaries to
comply with and shall use its best efforts to cause Holdings to comply with,
all covenants in this Section 4 applicable to such Person.
4.1 Intentionally Omitted.
4.2 Intentionally Omitted.
4.3 EBIDAT. Borrower shall not permit EBIDAT for the twelve (12) month
period ending on the last day of each month to be less than $8,000,000.
"EBIDAT" will be calculated as illustrated on Exhibit 4.6(C).
4.4 Fixed Charge Coverage. Borrower shall not permit Fixed Charge
Coverage for the twelve (12) month period ending on the last day of each month
to be less than 1.0. "FIXED CHARGE COVERAGE" will be calculated as illustrated
on Exhibit 4.6(C).
4.5 Total Indebtedness to Operating Cash Flow Ratio. Borrower shall
not permit the ratio of Total Indebtedness calculated as of the last day of
each month to Operating Cash Flow for the twelve (12) month period ending on
such day to be greater than 6.0. "TOTAL INDEBTEDNESS" and "OPERATING CASH FLOW"
will be calculated as illustrated as Exhibit 4.6(C).
4.6 Financial Statements and Other Reports. Borrower will maintain,
and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP (it being
understood that monthly financial statements (a) are not required to have
footnote disclosures, (b) are subject to normal year-end adjustments for
recurring accruals and (c) show depreciation, amortization and management fees
as deductions from operating income rather than deductions in computing
operating income). Borrower will deliver to Heller each of the financial
statements and other reports described below.
(A) Monthly Financials. As soon as available and in
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any event within thirty (30) days after the end of each month, Borrower will
deliver (1) the consolidated balance sheet of Borrower, as at the end of such
month and the related consolidated statements of income and cash flow for such
month and for the period from the beginning of the then current fiscal year of
Borrower to the end of such month and (2) a schedule of the outstanding
Indebtedness for borrowed money of Borrower and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan.
(B) Year-End Financials. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of Borrower,
Borrower will deliver (1) the consolidated balance sheet of Borrower as at the
end of such year and the related consolidated statements of income,
stockholders' equity and cash flow for such fiscal year, (2) a schedule of the
outstanding Indebtedness for borrowed money of Borrower and its Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and
the principal amount and amount of accrued and unpaid interest with respect to
each such debt issue or loan and (3) a report with respect to the financial
statements from a "big six" independent certified public accounting firm
selected by Borrower, which report shall be prepared in accordance with
Statement of Auditing Standards No. 58 (the "STATEMENT") entitled "REPORTS ON
AUDITED FINANCIAL STATEMENTS" and such report shall be "UNQUALIFIED" (as such
term is defined in such Statement).
(C) Borrower Compliance Certificate. Together with each
delivery of financial statements of Borrower and its Subsidiaries pursuant to
subsections 4.6(A) and 4.6(B) above, Borrower will deliver a fully and properly
completed Compliance Certificate (in substantially the same form as Exhibit
4.6(C)) signed by a Responsible Officer of Borrower.
(D) Indebtedness Notices. Borrower shall promptly deliver
copies of all notices given or received by Borrower with respect to any
non-compliance with any term or condition related to any Indebtedness, and
shall notify Heller promptly after a responsible officer of Borrower obtains
knowledge thereof of any potential or actual event of default with respect to
any Indebtedness.
(E) Accountants' Reports. Promptly upon receipt thereof,
Borrower will deliver copies of all significant reports submitted by Borrower's
firm of certified public accountants in connection with each annual audit or
review and, if an Event of Default exists at the time of submission, each
interim or special audit or review, of any type of the financial statements or
24
related internal control systems of Borrower made by such accountants,
including any comment letter submitted by such accountants to management in
connection with their services.
(F) Borrowing Base Certificate. As soon as available and in
any event within thirty (30) days after the end of each month, and from time to
time upon the request of Heller, Borrower will deliver to Heller a Borrowing
Base Certificate (in substantially the same form as Exhibit 4.6(F)) as at the
last day of such period.
(G) Intentionally Omitted.
(H) Appraisals. From time to time, if obtaining appraisals
is necessary in order to comply with applicable laws or regulations, Heller
will obtain appraisal reports in form and substance and from appraisers
satisfactory to Heller stating the then current fair market values of all or
any portion of the real estate owned by Borrower or any of its Subsidiaries.
Such appraisals will be obtained at Heller's expense unless an Event of Default
exists, in which event such appraisals will be at Borrower's expense.
(I) Annual Budget. As soon as available and in any event no
later than the last day of Borrower's fiscal year, Borrower will deliver an
annual operating budget prepared on a monthly basis and an annual capital
budget, for Borrower and its Subsidiaries for the succeeding fiscal year and,
within 30 days after any monthly period in which there is a material adverse
deviation from the annual budgets, a certificate from Borrower's chief
financial officer or chief operating officer explaining the deviation and what
action Borrower has taken, is taking and proposes to take with respect thereto.
(J) SEC Filings and Press Releases. Promptly upon their
becoming available, Borrower will deliver copies of (1) all financial
statements, reports, notices and proxy statements sent or made available by
Holdings, Borrower or any of their respective Subsidiaries to their security
holders, (2) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Holdings, Borrower or any of their
respective Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority, and
(3) all press releases and other statements made available by Holdings,
Borrower or any of their respective Subsidiaries to the public concerning
developments in the business of any such Person.
(K) Events of Default, Etc. Promptly upon a
25
Responsible Officer obtaining knowledge of any of the following events or
conditions, Borrower shall deliver copies of all notices given or received by
Borrower with respect to any such event or condition and a certificate of
Borrower's chief operating officer specifying the nature and period of
existence of such event or condition and what action Borrower has taken, is
taking and proposes to take with respect thereto: (1) any condition or event
that constitutes an Event of Default or Default; (2) any notice that any Person
has given to Borrower or any of its Subsidiaries or any other action taken with
respect to a material claimed default or event or condition of the type
referred to in subsection 6.1(B); or (3) any event or condition that would
result in any Material Adverse Effect.
(L) Litigation. Promptly upon a Responsible Officer of
Borrower obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Heller or (2) any material adverse development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which, in
each case, would have a Material Adverse Effect, Borrower will promptly give
notice thereof to Heller and provide such other information as may be
reasonably available to them to enable Heller and its counsel to evaluate such
matter.
(M) Notice of Corporate Changes. Borrower shall provide
written notice to Heller of (1) all jurisdictions in which a Loan Party becomes
qualified after the Closing Date to transact business, (2) any material change
after the Closing Date in the authorized and issued capital stock or other
equity interests of any Loan Party or any of their respective Subsidiaries or
any other material amendment to their charter, by-laws or other organization
documents and (3) any Subsidiary created or acquired by any Loan Party after
the Closing Date, such notice, in each case, to identify the applicable
jurisdictions, capital structures or Subsidiaries, as applicable.
(N) Other Information. With reasonable promptness, Borrower
will deliver such other information and data with respect to any Loan Party or
any Subsidiary of any Loan Party as from time to time may be reasonably
requested by Heller.
26
4.7 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements furnished to Heller
pursuant to subsection 4.6 shall be prepared in accordance with GAAP as in
effect at the time of such preparation except monthly financial statements (a)
lack footnote disclosures, (b) are subject to normal year-end adjustments for
recurring accruals and (c) show depreciation, amortization and management fees
as deductions from operating income rather than deductions in computing
operating income. No "ACCOUNTING CHANGES" (as defined below) shall affect
financial covenants, standards or terms in this Agreement; provided, that
Borrower shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "ACCOUNTING CHANGES" means: (i)
changes in accounting principles required by GAAP and implemented by Borrower;
and (ii) changes in accounting principles recommended by Borrower's certified
public accountants and implemented by Borrower.
SECTION 5
REPRESENTATIONS AND WARRANTIES
In order to induce Heller to enter into this Agreement, to make Loans
and to issue Lender Guarantees, Borrower represents and warrants to Heller that
the following statements are and, after giving effect to the funding of Loans
on the Closing Date, will be true, correct and complete:
5.1 Disclosure. No representation or warranty of Borrower, any of its
Subsidiaries or any other Loan Party contained in this Agreement, the financial
statements referred to in subsection 5.5, the other Loan Documents or any other
document, certificate or written statement furnished to Heller by or on behalf
of any such Person for use in connection with the Loan Documents contains, as
of the date made, any untrue statement of a material fact or omitted, omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made.
5.2 No Material Adverse Effect. As of the Closing Date,
27
there have been no events or changes in facts or circumstances affecting any
Loan Party since February 29, 1996, which individually or in the aggregate have
had or would have a Material Adverse Effect and that have not been disclosed
herein or in the attached Schedules.
5.3 No Default. The execution, delivery and performance of the Loan
Documents do not and will not violate, conflict with, result in a breach of, or
constitute a default (with due notice or lapse of time or both) under any
contract of any Loan Party except if such violations, conflicts, breaches or
defaults have either been waived on or before the Closing Date and are
disclosed on Schedule 5.3 or would not have, either individually or in the
aggregate, a Material Adverse Effect.
5.4 Organization, Powers, Capitalization and Good Standing.
(A) Organization and Powers. Each of the Loan Parties is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation (which jurisdiction is set forth on
Schedule 5.4(A)). Each of the Loan Parties has all requisite corporate power
and authority to own and operate its properties, to carry on its business as
now conducted and proposed to be conducted, to enter into each Loan Document to
which it is a party and to carry out the transactions contemplated hereby.
(B) Capitalization. The authorized capital stock of each of
the Loan Parties is as set forth on Schedule 5.4(B). All issued and outstanding
shares of capital stock of each of the Loan Parties, are duly authorized and
validly issued, fully paid, nonassessable, free and clear of all Liens other
than those in favor of SBA, and such shares were issued in compliance with all
applicable state and federal laws concerning the issuance of securities. The
capital stock of each of the Loan Parties, is owned by the stockholders and in
the amounts set forth on Schedule 5.4(B). No shares of the capital stock of any
Loan Party, other than those described above, are issued and outstanding.
Except as set forth on Schedule 5.4(B), there are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition from any Loan Party, of any
shares of capital stock or other securities of any such entity.
(C) Binding Obligation. This Agreement and the other Related
Transactions Documents are the legally valid and binding obligations of the
applicable Loan Parties, each enforceable against the Loan Parties in
accordance with their respective terms.
28
(D) Qualification. Each of the Loan Parties is duly qualified
and in good standing wherever necessary to carry on its business and
operations, except in jurisdictions in which the failure to be qualified and in
good standing would not have a Material Adverse Effect. All jurisdictions in
which each Loan Party is qualified to do business are set forth on Schedule
5.4(D).
5.5 Financial Statements. All financial statements concerning Borrower
and its Subsidiaries furnished by Borrower and its Subsidiaries to Heller
pursuant to this Agreement, including those listed below, have been prepared in
accordance with GAAP consistently applied (except as noted herein or disclosed
therein), and all financial statements delivered by Borrower to Heller present
fairly in all material respects the financial condition of the corporations
covered thereby as at the dates thereof and the results of their operations for
the periods then ended:
(A) The consolidated balance sheets at June 30, 1995 and the
related statement of income of Holdings and its Subsidiaries, for the fiscal
year then ended, certified by Coopers & Lybrand.
(B) The consolidated balance sheet at February 29, 1996 and
the related statement of income of Borrower and its Subsidiaries for the
eight (8) months then ended .
5.6 Intellectual Property. Borrower and each of its Subsidiaries owns,
is licensed to use or otherwise has the right to use, all patents, trademarks,
trade names, copyrights, technology, know-how and processes used in or
necessary for the conduct of its business as currently conducted that are
material to the condition (financial or other), business or operations of
Borrower or its Subsidiaries (collectively called "INTELLECTUAL PROPERTY") and
all such Intellectual Property is identified on Schedule 5.6 and fully
protected and/or duly and properly registered, filed or issued in the
appropriate office and jurisdictions for such registrations, filing or
issuances. Except as disclosed in Schedule 5.6, the use of such Intellectual
Property by Borrower and its Subsidiaries does not and has not been alleged by
any Person to infringe on the rights of any Person.
5.7 Investigations, Audits, Etc. Except as set forth on Schedule 5.7,
to Borrower's knowledge, neither Borrower nor any of its subsidiaries is the
subject of any review or audit by the Internal Revenue Service or any
governmental investigation concerning the violation or possible violation of
any law.
29
5.8 Employee Matters. Except as set forth on Schedule 5.8, (a) no Loan
Party nor any of their respective employees is subject to any collective
bargaining agreement, (b) the majority of all hourly employees of Borrower (but
not its Subsidiaries) are unionized and (c) as of the Closing Date, there are
no strikes, slowdowns, work stoppages or controversies pending or, to the best
knowledge of Borrower after due inquiry, threatened between any Loan Party and
its respective employees, other than employee grievances and contract
negotiations regarding a new collective bargaining agreement at or prior to the
end of any existing collective bargaining agreement, all of which are arising
in the ordinary course of business which would not have, either individually or
in the aggregate, a Material Adverse Effect.
5.9 Solvency. As of and from and after the date of this Agreement and
after giving effect to the consummation of the transactions contemplated by
this Agreement and the funding of the initial advance of the Loan, Borrower:
(a) owns and will own, in the reasonable opinion of Borrower, assets the fair
saleable value on a going concern basis of which are (i) greater than the total
amount of liabilities (including contingent liabilities) of Borrower and (ii)
greater than the amount that will be required to pay the probable liabilities
of Borrower's then existing debts as they become absolute and matured
considering all financing alternatives and potential asset sales reasonably
available to Borrower; (b) has capital that is not unreasonably small in
relation to its business as presently conducted or any contemplated or
undertaken transaction; and (c) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due.
SECTION 6
DEFAULT, RIGHTS AND REMEDIES
6.1 Event of Default. "EVENT OF DEFAULT" shall mean the occurrence of
any one or more of the following:
(A) Payment. Failure to pay the Revolving Loan when due, or
to repay Revolving Loans to reduce their balance to the Maximum Revolving Loan
Balance or to reimburse Heller for any payment made by Heller under or in
respect of any Lender Guarantee when due or failure to pay, within five (5)
days after the due date, any interest on any Loan or any other amount due under
this Agreement or any of the other Loan Documents; or
(B) Default in Other Agreements. (1) Failure of
30
Holdings, Borrower or any of its Subsidiaries to pay when due or within any
applicable grace period any principal or interest on Indebtedness (other than
the Loans, Subordinated Indebtedness held by SBA, Senior Term Loan or
Additional Senior Term Loan,) or any Contingent Obligations, or breach or
default of Holdings, Borrower or any of its Subsidiaries, or the occurrence of
a default, with respect to any Indebtedness (other than the Loans, Subordinated
Indebtedness held by SBA, Senior Term Loan or Additional Senior Term Loan,) or
any Contingent Obligations, if the effect of such failure to pay, default or
breach is to cause or to permit the holder or holders then to cause,
Indebtedness and/or Contingent Obligations having an aggregate principal amount
in excess of $1,000,000 to become or be declared due prior to their stated
maturity, unless such failure to pay, default or breach is cured or irrevocably
waived in writing by the holder of holders thereof; or
(2) Failure of Holdings, Borrower or any of its
Subsidiaries to pay when due or within any applicable grace period any
principal or interest with respect to Subordinated Indebtedness held by SBA,
Senior Term Loan or Additional Senior Term Loan, or breach or default of
Holdings, Borrower or any of its Subsidiaries, or the occurrence of a default,
with respect to Subordinated Indebtedness held by SBA, Senior Term Loan or
Additional Senior Term Loan, if the effect of such failure to pay, default or
breach is to cause SBA to declare such Indebtedness due prior to its stated
maturity; or
(C) Breach of Certain Provisions. (1) Failure of Borrower to
perform or comply with any term or condition contained in that portion of
subsection 2.2 relating to Borrower's obligation to maintain insurance, Section
3 or Section 4 (other than subsection 4.5); or (2) failure of Borrower to
perform or comply with any term or condition contained in subsection 4.5 which
continues for sixty (60) days after the last day of the twelve (12) month
period referred to therein; or
(D) Breach of Warranty. Any written representation, warranty
or certification made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by such Person in writing pursuant
or in connection with any Loan Document is false in any material respect on the
date made; or
(E) Other Defaults Under Loan Documents. Borrower or any
other Loan Party defaults in the performance of or compliance with any term
contained in this Agreement or the other Loan Documents and such default is not
remedied or waived within thirty (30) days after receipt by Borrower of notice
from Heller of such default (other than occurrences described in other
provisions of
31
this subsection 6.1 for which a different grace or cure period is
specified or which constitute immediate Events of Default); provided, however,
if such default is susceptible of cure but not within thirty (30) days after
notice, no Event of Default shall be deemed to have occurred under this clause
(E) if Borrower shall have commenced and is diligently prosecuting such cure
and such cure is effected within one hundred eighty (180) days after receipt by
Borrower of such notice from Heller; or
(F) Involuntary Bankruptcy; Appointment of Receiver, Etc. (1)
A court enters a decree or order for relief with respect to Holdings, Borrower
or any of its Subsidiaries in an involuntary case under the Bankruptcy Code,
which decree or order is not stayed or other similar relief is not granted
under any applicable federal or state law; or (2) the continuance of any of the
following events for sixty (60) days unless dismissed, bonded or discharged:
(a) an involuntary case is commenced against Holdings, Borrower or any of its
Subsidiaries, under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or (b) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Holdings, Borrower or any of its
Subsidiaries, or over all or a substantial part of its property, is entered; or
(c) an interim receiver, trustee or other custodian is appointed without the
consent of Holdings, Borrower or any of its Subsidiaries, for all or a
substantial part of the property of Holdings, Borrower or any such Subsidiary;
or
(G) Voluntary Bankruptcy; Appointment of Receiver, Etc. (1)
An order for relief is entered with respect to Holdings, Borrower or any of its
Subsidiaries or Holdings, Borrower or any of its Subsidiaries commences a
voluntary case under the Bankruptcy Code, or consents to the entry of an order
for relief in an involuntary case or to the conversion of an involuntary case
to a voluntary case under any such law or consents to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or (2) Holdings, Borrower or any of its
Subsidiaries makes any assignment for the benefit of creditors; or (3) the
Board of Directors of Holdings, Borrower or any of its Subsidiaries adopts any
resolution or otherwise authorizes action to approve any of the actions
referred to in this subsection 6.1(G); or
(H) Intentionally Omitted.
(I) Judgment and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving an amount in the aggregate
at any time in excess of $2,500,000 (not
32
adequately covered by insurance as to which the insurance company has
acknowledged coverage) is entered or filed against Holdings, Borrower or any of
its Subsidiaries or any of their respective assets and remains undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days or in any
event later than five (5) Business Days prior to the date of any proposed sale
thereunder; or
(J) Dissolution. Any order, judgment or decree is entered
against Holdings, Borrower or any of its Subsidiaries decreeing the dissolution
or split up of Holdings, Borrower or that Subsidiary and such order remains
undischarged or unstayed for a period in excess of fifteen (15) days; or
(K) Intentionally Omitted.
(L) Injunction. Holdings, Borrower or any of its Subsidiaries
is enjoined, restrained or in any way prevented by the order of any court or
any administrative or regulatory agency from conducting all or any material
part of its business and such order continues for more than forty-five (45)
days if the same would have a Material Adverse Effect; or
(M) ERISA; Pension Plans. (1) Any Loan Party fails to make
full payment when due of all amounts which, under the provisions of any
employee benefit plans or any applicable provisions of the Internal Revenue
Code as amended from time to time ("IRC"), any Loan Party is required to pay as
contributions thereto and such failure results in a Material Adverse Effect; or
(2) an accumulated funding deficiency in excess of $500,000 occurs or exists,
whether or not waived, with respect to any employee benefit plans, for which
Borrower is liable; or (3) any employee benefit plans lose their status as a
qualified plan under the IRC which results in a Material Adverse Effect; or
(N) EPA. Failure to: obtain or maintain any operating
licenses or permits required by environmental authorities; begin, continue or
complete any remediation activities as required by any environmental
authorities; store or dispose of any hazardous materials in accordance with
applicable environmental laws and regulations; or comply with any other
environmental laws, if any such failure would have a Material Adverse Effect;
or
(O) Invalidity of Loan Documents. Any of the Loan Documents
for any reason, other than a partial or full release in accordance with the
terms thereof, ceases to be in full force and effect or is declared to be null
and void, or any Loan Party denies that it has any further liability under any
Loan Documents to which it is party, or gives notice to such effect; or
33
(P) Damage, Casualty. Any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any embargo,
condemnation, act of God or public enemy, or other casualty which causes, for
more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of Borrower or any
of its Subsidiaries if any such event or circumstance would have a Material
Adverse Effect; or
(Q) Strike. Any strike, lockout or labor dispute which
causes, for more than sixty (60) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of Borrower or any
of its Subsidiaries if any such event or circumstance would have a Material
Adverse Effect; or
(R) Failure of Security. (1) SBA does not have or ceases to
have a valid and perfected first priority security interest (or, in the event
Heller has a first priority security interest, a second priority security
interest) in the Collateral (subject to Permitted Encumbrances) pursuant to the
Senior Term Loan Documents; or (2) Heller does not have or ceases to have a
valid and perfected first or second priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case in clause (2), for
any reason other than the failure of Heller to take any action within its
control; or
(S) Business Activities. Holdings engages in any type of
business activity other than the ownership of stock of Borrower and performance
of its obligations under the Loan Documents to which it is a party; or
(T) Change in Control. (1) SBA, Liberty and VILARC Capital,
collectively, cease to beneficially own and control, directly or indirectly, at
least fifty-one percent (51%) of the issued and outstanding shares of each
class of capital stock of Holdings entitled (without regard to the occurrence
of any contingency) to vote for the election of a majority of the members of
the boards of directors of Holdings; or (2) any of SBA, Liberty and VILARC
Capital ceases to beneficially own and control at least sixty-six and
two-thirds percent (66-2/3%) of the aggregate number of shares of Holdings
capital stock owned by it on the Closing Date; or (3) Holdings ceases to
directly own and control one hundred percent (100%) of the issued and
outstanding capital stock of Borrower; or
(U) Ownership of Indebtedness. SBA ceases to hold one hundred
percent (100%) of the outstanding Senior Term Loan,
34
Subordinated Indebtedness evidenced by the Subordinated Notes (unless the same
is refinanced as permitted pursuant to subsection 3.1(G)) and, if applicable,
the Additional Senior Term Loan; or
(V) Liberty as Agent. Liberty Partners, L.P. ceases to act as
agent and attorney-in-fact for SBA in connection with the Subordinated
Indebtedness held by SBA, Additional Senior Term Loan or Senior Term Loan.
6.2 Suspension of Commitments. Upon the occurrence and during the
continuance of any Default or Event of Default, Heller, without notice or
demand, may immediately cease making additional Loans and issuing Lender
Guarantees and the Revolving Loan Commitment shall be suspended; provided that,
in the case of a Default, if the subject condition or event is waived or
removed by Heller or cured by Borrower within any applicable grace or cure
period, the Revolving Loan Commitment shall be reinstated, effective upon such
waiver, cure or removal. Heller, in its sole discretion, may alternatively
suspend only a portion of the Revolving Loan Commitment.
Notwithstanding the foregoing, in the event all conditions to the
obligation of Heller to make Loans set forth in Section 7 hereof have been
satisfied but Heller does not make the Loan, Heller shall not be entitled to
declare a Default or an Event of Default as a result of Borrower being unable
to perform any of its covenants, liabilities or obligations hereunder or under
the other Loan Documents as a direct result of Heller's failure to make a Loan.
6.3 Acceleration. Upon the occurrence of any Event of Default
described in the foregoing subsections 6.1(F) or 6.1(G), the unpaid principal
amount of and accrued interest and fees on the Revolving Loan, payments under
the Lender Guarantees and all other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other requirements of any kind,
all of which are hereby expressly waived by Borrower, and the Revolving Loan
Commitment shall thereupon terminate. Upon the occurrence and during the
continuance of any other Event of Default, Heller may by written notice to
Borrower (a) declare all or any portion of the Loans and all or some of the
other Obligations to be, and the same shall forthwith become, immediately due
and payable together with accrued interest thereon, and the Revolving Loan
Commitment shall thereupon terminate and (b) demand that Borrower immediately
deposit with Heller an amount equal to the Lender Guarantees to enable Heller
to make payments under the Lender Guarantees when required and such amount
shall become immediately due and payable.
35
6.4 Performance by Heller. If Borrower shall fail to perform any
covenant, duty or agreement contained in any of the Loan Documents, Heller may
perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower after the expiration of any cure or grace periods set forth herein. In
such event, Heller shall give to Borrower written notice of the action promptly
thereafter and Borrower shall, at the request of Heller, promptly pay any
amount reasonably expended by Heller in such performance or attempted
performance to Heller, together with interest thereon at the rate of interest
in effect upon the occurrence of an Event of Default as specified in subsection
1.2(D) from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly agreed that Heller shall not have any liability or
responsibility for the performance of any obligation of Borrower under this
Agreement or any other Loan Document.
SECTION 7
CONDITIONS TO LOANS
The obligations of Heller to make Loans and to issue Lender Guarantees
are subject to satisfaction of all of the applicable conditions set forth
below.
7.1 Conditions to Initial Loans. The obligations of Heller to make the
initial Loans and to issue any Lender Guarantees on the Closing Date are, in
addition to the conditions precedent specified in subsection 7.2, subject to
the delivery of all documents listed on Schedule 7.1, all in form and substance
satisfactory to Heller.
7.2 Conditions to All Loans. The obligations of Heller to make Loans
or the obligation of Heller to issue Lender Guarantees on any date ("FUNDING
DATE") are subject to the further conditions precedent set forth below.
(A) Heller shall have received, in accordance with the
provisions of subsection 1.1, a notice requesting an advance of a Revolving
Loan or issuance of a Lender Guarantee.
(B) The representations and warranties contained in Section 5
of this Agreement and elsewhere herein and in the other Loan Documents shall be
(and each request by Borrower for a Loan [a request for continuation of a LIBOR
Rate Loan as a LIBOR Rate Loan, conversion of a Base Rate Loan to a LIBOR Rate
Loan and conversion of a LIBOR Rate Loan to a Base Rate Loan shall not
36
constitute a request by Borrower for a Loan] or a Lender Guarantee shall
constitute a representation and warranty by Borrower that such representations
and warranties are) true, correct and complete in all material respects on and
as of that Funding Date to the same extent as though made on and as of that
date, except for any representation or warranty limited by its terms to a
specific date and taking into account any amendments to the Schedules as a
result of any disclosures made in writing by Borrower to Heller after the
Closing Date.
(C) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated (or notice
requesting issuance of a Lender Guarantee) that would constitute an Event of
Default or a Default.
(D) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain Heller from making
any Loans or issuing any Lender Guarantees.
SECTION 8
ASSIGNMENT AND PARTICIPATION
8.1 Assignment and Participation. Heller has no present intention of
assigning or selling participations in all or any part of the Loans or the
Revolving Loan Commitment; provided, upon not less than seventy-five (75) days
prior notice to Borrower, Heller may assign its rights and delegate its
obligations under this Agreement and further may assign, or sell participations
in, all or any part of its Loans or its Revolving Loan Commitment with the
prior written consent of Borrower, which consent shall not be unreasonably
withheld or delayed; provided, however, Borrower's consent shall not be
required for any assignment or participation required by any governmental or
regulatory agency or authority. Notwithstanding the provisions of subsection
1.3(B), if Heller chooses to assign or sell participations in a portion of the
Loans or the Revolving Loan Commitment, absent a request by Borrower to
increase the aggregate Revolving Loan Commitment beyond $20,000,000, then
Heller and the Borrower are responsible for their respective costs.
SECTION 9
MISCELLANEOUS
9.1 Indemnities. Borrower agrees to indemnify, pay, and hold Heller,
its officers, directors, employees, agents, and
37
attorneys (the "INDEMNITEES" harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits and claims
(collectively, "LOSSES") of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Indemnitee as a result of Heller being
a party to this Agreement; provided that Borrower shall have no obligation to
an Indemnitee hereunder with respect to liabilities arising from the gross
negligence or willful misconduct of that Indemnitee as determined by a court of
competent jurisdiction or for Losses to the extent imposed, incurred by or
asserted against Heller as a result of a breach or default by SBA or Heller
under the Intercreditor Agreement. This Section and Agreement shall survive the
termination of this Agreement.
9.2 Amendments and Waivers. No amendment, modification, or
termination, or waiver of any provision of this Agreement or any Loan
Documents, shall be effective unless the same shall be in writing and signed by
Heller.
9.3 Notices. Any notice or other communication required shall be in
writing, shall be executed by an authorized signatory of a party addressed to
the respective party as set forth below and may be personally served,
telecopied (except that only notices relating to requests to borrow may be
given by telecopy unless otherwise agreed by a Responsible Officer), sent by
overnight courier service or U.S. certified or registered mail, return receipt
requested and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. CST, or, if not, on the next
succeeding Business Day; (c) if delivered by overnight courier, two (2) days
after delivery to courier properly addressed, or (d) if delivered by U.S. mail,
four (4) Business Days after deposit with postage prepaid and properly
addressed.
Notices shall be addressed as follows:
If to Borrower: c/o Victor Barnett
895 Park Avenue
New York, New York 10021
Telecopy: (212) 288-0230
with a copy to: Arcade, Inc.
P. O. Box 3196
1815 E. Main Street
Chattanooga, Tennessee 37404
ATTN: Chief Operating Officer
Telecopy: (423) 697-7126
38
with a copy to: Liberty Partners
1177 Avenue of the Americas
New York, New York 10036
ATTN: Michael J. Kluger
Telecopy: (212) 354-0336
with a copy to: Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
ATTN: Susan K. Reiter, Esq.
Telecopy: (312) 876-7934
If to Heller: HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Marcia Perkins
Portfolio Manager
Portfolio Organization
Corporate Finance Group
Telecopy: (312) 441-7367
With a copy to: HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Legal Department
Portfolio Organization
Corporate Finance Group
Telecopy: (312) 441-7367
9.4 Failure of Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of Heller to exercise, or any partial exercise of, any
power, right, or privilege hereunder or under any other Loan Documents shall
impair such power, right, or privilege or be construed to be a waiver of any
Default or Event of Default. All rights and remedies existing hereunder or
under any other Loan Document are cumulative to and not exclusive of any rights
or remedies otherwise available.
9.5 Marshalling, Payments Set Aside. Heller shall not be under any
obligation to marshall any assets in payment of any or all of the Obligations.
To the extent that the Borrower makes a payment(s) or Heller enforces its Liens
or exercises its right of set-off, and such payment(s) or the proceeds of such
enforcement or set off is subsequently invalidated, declared to be fraudulent
or preferential, set aside, or required to be repaid by anyone, then to the
extent of such recovery, the Obligations or part
39
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or set off had not occurred.
9.6 Severability. The invalidity, illegality, or unenforceability in
any jurisdiction of any provision under the Loan Documents shall not affect or
impair the remaining provisions in the Loan Documents.
9.7 Headings. Section and subsection headings are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purposes or be given substantive effect.
9.8 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
9.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns except that Borrower may not assign its rights or obligations
hereunder.
9.10 No Fiduciary Relationship. No provision in the Loan Documents and
no course of dealing between the parties shall be deemed to create any
fiduciary duty by Heller to Borrower.
9.11 Construction. Heller and Borrower acknowledge that each of them
has had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review the Loan Documents with its legal counsel and that the
Loan Documents shall be constructed as if jointly drafted by Heller and
Borrower.
9.12 Confidentiality. Heller agrees to take and to cause its
Affiliates, employees and agents to take, normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information provided
to it by the Borrower, and neither Heller nor any of its Affiliates, employees
or agents shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents; except to the
extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by Heller, or (ii) was or becomes
available on a non-confidential basis from a source other than the Borrower,
Liberty or Persons known to Heller to be the Borrower's agents, lawyers or
independent auditors, provided that such source is not bound by a
confidentiality agreement with the Borrower known to Heller;
40
provided, however, that Heller may disclose such information (A) at the request
or pursuant to any requirement of any governmental authority to which Heller is
subject or in connection with an examination of Heller by any such authority;
(B) pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable requirement of law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which Heller or its Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to Heller's independent auditors and other
professional advisors; and (G) to any financial institution or institutional
investor purchasing a participation or to which any Loans and Commitments are
assigned, actual or potential, provided that such participant or assignee,
actual or potential, agrees in writing to keep such information confidential to
the same extent required of Heller hereunder.
9.13 Waiver of Jury Trial. BORROWER AND HELLER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. BORROWER AND HELLER
ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR
THIS WAIVER, BE REQUIRED OF LENDERS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. BORROWER AND HELLER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.
BORROWER AND HELLER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE LOANS, OR THE LENDER GUARANTEES. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.14 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement, the making
41
of the Loans, issuances of Lender Guarantees and the execution and delivery of
the Notes. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower set forth in subsections 1.3(B) and 9.1
shall survive the payment of the Loans and the termination of this Agreement.
9.15 Entire Agreement. This Agreement, the Notes and the other Loan
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, understandings, whether oral or written, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous or subsequent oral agreements or discussions of the
parties hereto.
SECTION 10
DEFINITIONS
10.1 Certain Defined Terms. The terms defined below are used in this
Agreement as so defined. Terms defined in the preamble and recitals to this
Agreement are used in this Agreement as so defined.
"ADDITIONAL SELLER NOTES" means one or more promissory notes
of Borrower or any of its Subsidiaries representing all or a part of
the deferred purchase price of a business, business unit or product
line acquired by Borrower or any of its Subsidiaries from the obligee
of such note.
"AFFILIATE" means any Person (other than Heller): (a)
directly or indirectly controlling, controlled by, or under common
control with, Borrower; (b) directly or indirectly owning or holding
five percent (5%) or more of any equity interest in Borrower; or (c)
five percent (5%) or more of whose voting stock or other equity
interest is directly or indirectly owned or held by Borrower. For
purposes of this definition, "CONTROL" (including with correlative
meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession directly or indirectly of the
power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities or by
contract or otherwise.
"AGREEMENT" means this Credit Agreement (including all
schedules, exhibits, annexes and appendices
42
hereto).
"ASSET DISPOSITION" means the disposition whether by sale,
lease, transfer, loss, damage, destruction, condemnation or otherwise
of any of the following: (a) any of the stock of any of Borrower's
Subsidiaries or (b) any or all of the assets of Borrower or any of its
Subsidiaries other than sales of inventory in the ordinary course of
business.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "BANKRUPTCY", as amended from time to time or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect
and all rules and regulations promulgated thereunder.
"BUSINESS DAY" means (a) for all purposes other than as
covered by clause (b) below, any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the Commonwealth of
Pennsylvania or the State of Illinois, or is a day on which banking
institutions located in any such states are closed, and (b) with
respect to all notices, determinations, fundings and payments in
connection with Loans bearing interest at the LIBOR Rate, any day that
is a Business Day described in clause (a) above and that is also a day
for trading by and between banks in Dollar deposits in the applicable
interbank LIBOR market.
"CLOSING DATE" means _______ __, 1996.
"COLLATERAL" means, collectively: (a) all capital stock and
other property, if any, pledged pursuant to the Security Documents;
(b) all "COLLATERAL" as defined in the Security Documents; (c) all
real property mortgaged pursuant to the Security Documents; and (d)
any property or interest provided in addition to or in substitution
for any of the foregoing.
"DEFAULT" means a condition or event that, after notice or
lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable
grace or cure period.
"EXPIRY DATE" means the earlier of (a) the suspension
(subject to reinstatement) of the Revolving Loan Commitment pursuant
to subsection 6.2, (b) the acceleration of the Obligations pursuant to
subsection
43
6.3 or (c) November 30, 1998, as such date may be extended by mutual
agreement of Heller and Borrower.
"GAAP" means generally accepted accounting principles as set
forth in statements from Auditing Standards No. 69 entitled "THE
MEANING OF 'PRESENT FAIRLY IN CONFORMANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES IN THE INDEPENDENT AUDITORS REPORTS'" issued by
the Auditing Standards Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board that are applicable to the circumstances as
of the date of determination.
"HOLDINGS" means Arcade Holding Corporation, a Delaware
corporation.
"INDEBTEDNESS", as applied to any Person, means: (a) all
indebtedness for borrowed money; (b) that portion of obligations with
respect to capital leases that is properly classified as a liability
on a balance sheet in conformity with GAAP; (c) notes payable and
drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money; (d) any obligation owed
for all or any part of the deferred purchase price of property or
services if the purchase price is due more than six (6) months from
the date the obligation is incurred or is evidenced by a note or
similar written instrument; and (e) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless
of whether the indebtedness secured thereby shall have been assumed by
that Person or is nonrecourse to the credit of that Person.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor
Agreement of even date herewith among Heller, SBA, Borrower and
Holdings.
"LIBERTY" means Liberty Partners Holdings 4, LLC.
"LIEN" means any lien, levy, assessment, mortgage, pledge,
security interest, charge or encumbrance of any kind, whether
voluntary or involuntary, (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).
"LOAN DOCUMENTS" means this Agreement, the Notes,
44
the Security Documents and all other instruments, documents and
agreements executed by or on behalf of any Loan Party and delivered
concurrently herewith or at any time hereafter to or for the benefit
of Heller in connection with the Loans and other transactions
contemplated by this Agreement, all as amended, supplemented or
modified from time to time, but excluding all Senior Term Loan
Documents and Subordinated Loan Documents but including that certain
side letter of even date herewith by Heller to Borrower with respect
to eligible accounts, which side letter will be delivered by Heller
to Borrower on the Closing Date.
"LOAN PARTY" means, collectively, Holdings, Borrower,
Borrower's Subsidiaries and any other Person (other than Heller or
SBA) which is or becomes a party to any Loan Document.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect
upon the business, operations, properties, assets or financial
condition of the Loan Parties taken as a whole or (b) the material
impairment of the ability of any Loan Party to perform its obligations
under any Loan Document to which it is a party or of Heller to enforce
any Loan Document or collect any of the Obligations. In determining
whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if
the cumulative effect of such event and all other then existing events
would result in a Material Adverse Effect.
"NOTE" or "NOTES" means one or more of the notes of Borrower
substantially in the form of Exhibit 10.1(A), or any combination
thereof.
"OBLIGATIONS" means all obligations, liabilities and
indebtedness of every nature of each Loan Party from time to time owed
to Heller under the Loan Documents including the principal amount of
all debts, claims and indebtedness, accrued and unpaid interest and
all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to
time hereafter owing, due or payable whether before or after the
filing of a proceeding under the Bankruptcy Code by or against
Borrower or its Subsidiaries.
45
"PERSON" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof and their
respective permitted successors and assigns (or in the case of a
governmental person, the successor functional equivalent of such
Person).
"RELATED TRANSACTIONS" means the execution and delivery of
the Related Transactions Documents, the funding of all Loans on the
Closing Date, the repayment of the any Indebtedness identified on
Schedule 10.1(A) which is to be paid in full on the Closing Date, and
the payment of all fees, costs and expenses associated with all of the
foregoing.
"RELATED TRANSACTIONS DOCUMENTS" means the Loan Documents,
the Senior Term Loan Documents, the Subordinated Loan Documents, and
all other agreements, instruments and documents executed or delivered
in connection with the Related Transactions.
"RESPONSIBLE OFFICER" means the Chairman, President
or Chief Operating Officer of Borrower.
"SBA" means State Board of Administration of Florida.
"SECURITY DOCUMENTS" means all instruments, documents and
agreements executed by or on behalf of any Loan Party to guaranty or
provide collateral security with respect to the Obligations including,
without limitation, any security agreement or pledge agreement, any
guaranty of the Obligations, any mortgage, and all instruments,
documents and agreements executed pursuant to the terms of the
foregoing.
"SELLER NOTES" means that certain Promissory Note dated as of
June 9, 1995 in the original principal amount of $1,877,000 and that
certain Conditional Promissory Note dated as of June 9, 1995 in the
original principal amount of $1,750,000, each made by Borrower to
Elaine Trebek-Kares.
46
"SENIOR TERM LOAN" means that certain term loan in the
original principal amount of $21,400,000 evidenced by the Senior Term
Note.
"SENIOR TERM LOAN AGREEMENT" means that certain Senior Loan
Agreement dated as of November 4, 1993 between Borrower and SBA, as
amended by Amendment No. 1 to Senior Loan Agreement of even date
herewith and as subsequently amended as permitted herein.
"SENIOR TERM LOAN DOCUMENTS" means the Senior Term Loan
Agreement, Senior Term Note, and all other documents, instruments and
agreements executed in connection therewith, as any of the same may be
subsequently amended as permitted herein.
"SENIOR TERM NOTE" means that certain Senior Term Note dated
as of April 30, 1996 in the original principal amount of $16,411,000,
made by Borrower to SBA, which Senior Term Note consolidates and
restates that certain Senior Term Note dated November 5, 1993 in the
original principal amount of $21,400,000, and those certain
Conditional Senior Term Notes dated August 2, 1994 and June 30, 1995
in the original aggregate principal amounts of $4,000,000, each made
by Borrower to SBA, as it may subsequently be amended as permitted
herein.
"SUBORDINATED INDEBTEDNESS" means the Indebtedness evidenced
by the Subordinated Notes, the Refinanced Subordinated Indebtedness
and all other Indebtedness of Borrower or any of its Subsidiaries
which is subordinated in right of payment to the Obligations.
"SUBORDINATED LOAN DOCUMENTS" means that certain Subordinated
Loan Agreement dated November 4, 1993, as amended by Amendment No. 1
to Subordinated Loan Agreement of even date herewith, each between
Borrower and SBA, Subordinated Notes and all documents, instruments
and agreements executed in connection therewith, as any of the same
may be subsequently amended as permitted herein.
"SUBORDINATED NOTES" means, jointly and severally, that
certain Subordinated Promissory Note I dated November 5, 1993 in the
original principal amount of $23,000,000, that certain Subordinated
Promissory Note II dated November 5, 1993 in the original principal
amount of $7,000,000, and those certain notes executed
47
and delivered by Borrower to SBA pursuant to Section 2.03(a) of the
Subordinated Loan Agreement dated November 4, 1993, as amended, each
made by Borrower to SBA. as hereafter amended as permitted herein.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, association or other business entity of
which more than fifty percent (50%) of the total voting power of
shares of stock (or equivalent ownership or controlling interest)
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination
thereof.
10.2 Other Definitional Provisions. References to "SECTIONS",
"SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 10.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, "HEREOF," "HEREIN," "HERETO," "HEREUNDER"
and the like mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears;
words importing any gender include the other gender; references to "WRITING"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "INCLUDING," "INCLUDES" and "INCLUDE" shall be
deemed to be followed by the words "WITHOUT LIMITATION"; references to
agreements and other contractual instruments shall be deemed to include
subsequent amendments, assignments, and other modifications thereto, but only
to the extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Loan Document;
references to Persons include their respective permitted successors and assigns
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 same and any successor statutes and
regulations.
48
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
HELLER FINANCIAL, INC.
By: /s/ Craig Gallehugh
------------------------
Title: Vice President
ARCADE, INC.
By: /s/ Gordon Jones
---------------------------
Title: Chief Operating Officer
49
LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit 1.2(G) - LIBOR Rate Loan Request
Exhibit 4.6(C) - Compliance Certificate
Exhibit 4.6(F) - Borrowing Base Certificate
Exhibit 10.1(A) - Notes
Schedules
Schedule 3.2(A)(12) - Liens
Schedule 3.4 - Contingent Obligations
Schedule 3.8 - Affiliate Transactions
Schedule 3.9 - Management Fees and Compensation
Schedule 3.10 - Business Description
Schedule 5.3 - Violations, Conflicts, Breaches
and Defaults
Schedule 5.4(A) - Jurisdictions of Organization
Schedule 5.4(B) - Capitalization
Schedule 5.4(D) - Foreign Qualifications
Schedule 5.6 - Intellectual Property
Schedule 5.7 - Investigations and Audits
Schedule 5.8 - Employee Matters
Schedule 7.1 - List of Closing Documents
Subschedule A-12 - Litigation
Subschedule A-13 - Employee Benefit Plans
Subschedule A-14 - Closing Fees
Subschedule A-15 - Investments
Subschedule A-16 - Derivatives
Schedule 10.1(A) - Indebtedness to be Repaid
50
FIRST AMENDMENT TO CREDIT AGREEMENT,
ASSUMPTION AND MASTER REAFFIRMATION
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, ASSUMPTION AND MASTER
REAFFIRMATION (this Amendment ) is entered into as of December 12, 1997, by and
among ARCADE HOLDING CORPORATION, a Delaware corporation ( Holdings ), ARCADE,
INC., a Tennessee corporation (the Borrower ), and HELLER FINANCIAL, INC., a
Delaware corporation ( Heller ).
W I T N E S S E T H:
WHEREAS, Borrower and Heller have entered into that certain Credit
Agreement dated as of April 30, 1996 (as the same may be amended, modified,
restated or otherwise supplemented from time to time, the Credit Agreement );
and
WHEREAS, pursuant to that certain Stock Purchase Agreement dated as of
November 14, 1997 (the Stock Purchase Agreement ) by and among AHC I
Acquisition Corp., a Delaware corporation ( Acquisition Corp. ), Holdings and
the parties identified therein as Sellers , as amended by that certain First
Amendment to Stock Purchase Agreement dated as of December 2, 1997, Acquisition
Corp. has agreed to purchase, or cause a wholly-owned subsidiary to purchase,
from Sellers, and Sellers have agreed to sell to Acquisition Corp. or such
wholly-owned subsidiary, all of the outstanding equity securities of Holdings
(the Acquisition ); and
WHEREAS, Acquisition Corp. has designated and expects to cause AHC I
Merger Corp., a Delaware corporation ( Merger Co.), a wholly owned subsidiary
of Acquisition Corp., to purchase such outstanding equity securities; and
WHEREAS, simultaneously with the Acquisition, it is contemplated that
(a) Merger Co. shall merge with and into Holdings and (b) Borrower shall merge
with and into Holdings, in each instance, with Holdings as the surviving
corporation and to be renamed Arcade Marketing, Inc., which surviving
corporation shall be a Delaware corporation (together, the Mergers ); and
WHEREAS, the parties to the Credit Agreement desire to amend the
Credit Agreement to, among other things, increase the Revolving Loan
Commitment, all on the terms and subject to the
1
conditions set forth herein; and
WHEREAS, the Loan Parties have previously executed and delivered to
Heller various Loan Documents; and
WHEREAS, each of the Loan Parties will derive both direct and indirect
benefits from the Loans and other financial accommodations made pursuant to the
Credit Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
R E C I T A L S:
1. Definitions; Recitals. Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Credit Agreement. The
foregoing recitals are hereby incorporated herein by this reference thereto.
2. Amendments. The Credit Agreement is amended as set forth below:
(a) SUBSECTION 1.1(A). The first paragraph of subsection
1.1(A) of the Credit Agreement is deleted in its entirety and the
following substituted therefor:
(A) Revolving Loan. Heller agrees to lend from the
Closing Date to the Expiry Date amounts up to a maximum of
$20,000,000 (the Revolving LOAN COMMITMENT or Commitment ).
Advances or amounts outstanding under the Revolving Loan
Commitment will be called REVOLVING LOANS or LOANS .
Revolving Loans may be repaid and reborrowed. The MAXIMUM
REVOLVING LOAN BALANCE will be the lower of:
2
(1) the BORROWING BASE (as calculated on
Exhibit 4.6(F), the BORROWING BASE CERTIFICATE);
and
(2) the Revolving Loan Commitment less any
outstanding Lender Guarantees.
(b) SUBSECTION 1.2(A). Subsection 1.2(A) is amended as
follows:
(i) the first sentence of that subsection
is hereby deleted and the following substituted
therefor:
(A) Interest. From the date the Loans are made and
the other Obligations become due and payable in accordance
with the terms of this Agreement and the other Loan
Documents, the Obligations shall bear interest at the sum of
the Base Rate plus three quarters of one percent (0.75%) per
annum and/or, with respect to any LIBOR Rate Loan, the sum
of the LIBOR Rate plus two and one-half percent (2.50%) per
annum.
(ii) the phrase Ache Chase Manhattan Bank,
National Association and Chemical Bank in each of
the first and second paragraphs are deleted and the
phrase The Chase Manhattan Bank and Citibank, N.A.
is substituted therefor.
(c) SUBSECTION 1.2(C). Subsection 1.2(C) is hereby amended by
deleting the phrase Two and three quarters percent (2.75%) and
substituting the phrase Two and one-half percent (2.50%) therefor.
(d) SUBSECTION 1.3(C). Subsection 1.3(C) is deleted in its
entirety.
(e) INTENTIONALLY OMITTED.
3
(f) SUBSECTION 3.1. Subsection 3.1 is deleted in its entirety
and the following substituted therefor:
3.1 Indebtedness. Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to
create, incur, assume, guaranty, or otherwise become or
remain directly or indirectly liable with respect to any
Indebtedness except:
(A) the Obligations;
(B) intercompany Indebtedness among
Borrower and its Subsidiaries; provided that if
Borrower is the obligor, the obligations of Borrower
shall be subordinated in right of payment to the
Obligations from and after such time as any portion
of the Obligations shall become due and payable
(whether at stated maturity, by acceleration or
otherwise);
(C) to the extent permitted under the
Bridge Notes documentation or Refinanced Bridge
Indebtedness documentation, as applicable,
Indebtedness secured by purchase money Liens,
Indebtedness incurred with respect to capital leases
and Indebtedness evidenced by the Additional Seller
Notes, not to exceed $7,500,000 in the aggregate;
(D) Indebtedness evidenced by the Bridge
Notes;
(E) Indebtedness of Borrower incurred to
refinance the Bridge Notes and the PIK Note
(Refinanced BRIDGE INDEBTEDNESS) provided all of the
following conditions are satisfied:
4
(i) the maximum Refinanced Bridge
Indebtedness shall not exceed, in the
aggregate at any time outstanding, the
lesser of (i) the sum of (A) the
outstanding principal amount of and accrued
interest and accreted discount on the
Bridge Notes and PIK Note being refinanced
and (B) reasonable and customary fees,
expenses and underwriting discounts
incurred in connection with such
refinancing and (ii) $165,000,000, and
shall be unsecured;
(ii) the Person providing such
Indebtedness (or, in the case of
Indebtedness to be provided by means of a
public offering or an offering made
pursuant to Rule 144A under the Securities
Act of 1933, as amended, the lead manager
in respect of such offering) is Donaldson
Lufkin & Jeanrette Securities Corporation
or another Person reasonably acceptable to
Heller and such Refinanced Bridge
Indebtedness is on market terms and
conditions; and
(iii) after giving effect to such
incurrence, Borrower is in compliance on a
proforma basis with the covenants set forth
in subsections 4.3, 4.4 and 4.5, recomputed
for the most recent month for which
financial statements have been delivered;
(F) Indebtedness evidenced by the Seller
Notes; and
(G) to the extent permitted under the
Bridge Notes documentation or Refinanced Bridge
Indebtedness documentation, as applicable, unsecured
Indebtedness not permitted under clauses (A) through
(F) above in an aggregate principal amount not to
exceed $3,000,000 in the aggregate at any time
outstanding.
(g) SUBSECTION 3.2(A). Subsection 3.2(A) is amended by
deleting clause (A)(12) of that subsection.
(h) SUBSECTION 3.2(B). Subsection 3.2(B) is amended by
deleting the phrase
5
Senior Term Loan Documents and Subordinated Loan Documents and
substituting therefor the phrase Ache Securities Purchase Agreement
in respect of the Bridge Notes, any indenture, instrument or other
document entered into in connection with the Indebtedness permitted
under subsections 3.1(E) and (F) and, solely with respect to the
assets financed with Indebtedness permitted under subsection 3.1(C),
agreements, instruments and other documents entered into in respect
of such Indebtedness
(i) SUBSECTION 3.4. Subsection 3.4 is amended by adding the
phrase ; provided, however, in no event may Subsidiaries of Borrower
guaranty the obligations of Borrower with respect to Indebtedness
permitted pursuant to subsection 3.1(D) or 3.1(E) unless Heller shall
have received a first priority pledge of one hundred percent (100%) of
the issued and outstanding capital stock of such Subsidiaries and such
Subsidiaries shall have guaranteed the Obligations and granted
security interests in their real, personal and mixed property in
accordance with subsection 2.5 (including Scent Seal, Inc., if Scent
Seal, Inc. guarantees the obligations of Borrower with respect to
Indebtedness permitted pursuant to subsection 3.1(D) or 3.1(E)) at the
end of clause (H) thereof.
(j) SUBSECTION 3.5. Subsection 3.5 is amended by
(i) deleting clauses (C), (D) and (E) thereof;
(ii) deleting Clause (H) and substituting the
following therefor:
(H) Borrower may make distributions to
Holdings solely to permit Holdings to redeem from
officers, directors and employees of Holdings, the
Borrower or Subsidiaries of the Borrower (or their
heirs or estates) shares of Holdings capital stock
provided all of the following conditions are
satisfied:
(i) no Default or Event of Default
has occurred and is continuing or would
arise as a result of such distribution or
redemption;
(ii) after giving effect to such
distribution and redemption, Borrower is in
compliance on a pro forma basis with the
covenants
6
set forth in subsections 4.3, 4.4 and 4.5,
recomputed for the most recent month for
which financial statements have been
delivered;
(iii) the aggregate distributions
permitted (x) in any fiscal year of
Borrower shall not exceed $500,000 and (y)
during the term of this Agreement shall not
exceed $1,500,000; and
(iv) after giving effect to such
redemption, the Maximum Revolving Loan
Balance exceeds the aggregate outstanding
principal balance of Revolving Loans by not
less than $3,000,000; and
(I) Provided no Default or Event of Default
has occurred and is continuing, Borrower may make
distributions to Holdings solely to permit Holdings
to pay, without duplication of any amounts paid by
Borrower, the management or advisory fee described
in subsection 3.8(a) and
(iii) deleting the phrase , Seller Notes on the
thirteenth line of the definition of Restricted Junior
Payment contained therein.
(k) SUBSECTION 3.8. Subsection 3.8 is amended by (i) deleting
clauses (a) and (b) of such subsection and substituting the following
therefor:
(a) without duplication of amounts which may be
paid by Holdings, payment of a management or advisory fee to
DLJ not to exceed, in the aggregate, $250,000 per year,
payable quarterly in arrears on the first day of each
quarter, commencing April 1, 1998, (b) to make any Restricted
Junior Payments permitted under subsection 3.5, (c) to enter
into and perform their respective obligations under
arrangements with DLJ and its affiliates for underwriting,
investment banking and advisory services on standard and
customary terms and conditions which are disclosed in writing
to Heller, or (d) as set forth in Schedule 3.8.; and
7
(ii) deleting the last sentence thereof and
substituting the following:
Notwithstanding the foregoing, no payments may be
made with respect to the management or advisory fee described
in clause (a) above upon the occurrence and during the
continuation of a Default or an Event of Default.
(l) SUBSECTION 3.9. Subsection 3.9 is amended by deleting
clause (a) thereof and the last sentence thereof.
(m) SUBSECTION 3.11 Subsection 3.11 is amended by adding the
phrase, Indebtedness evidenced by the Bridge Notes, the Refinanced
Bridge Indebtedness immediately after the phrase Subordinated
Indebtedness on the third line thereof.
(n) SUBSECTION 4.3. Subsection 4.3 is deleted in its entirety
and the following substituted therefor:
4.3 EBIDAT.
(a) Borrower shall not permit EBIDAT for
any period set forth below to be less than the
amount set forth below for such period:
Period Amount
January 1, 1998 through March 31, 1998 $ 5,600,000
January 1, 1998 through June 30, 1998 $11,200,000
January 1, 1998 through September 30, 1998 $16,800,000
January 1, 1998 through December 31, 1998 $22,400,000
(b) Borrower shall not permit EBIDAT for
the twelve (12)
8
month period ending on the last day of any month,
commencing January 31, 1999, during the periods set
forth below to be less than the amount set forth
below for such period:
Period Amount
January 1, 1999 through June 30, 1999 $23,200,000
July 1, 1999 through December 31, 1999 $25,500,000
January 1, 2000 through June 30, 2000 $27,800,000
July 1, 2000 through December 31, 2000 $28,800,000
January 1, 2001 through June 30, 2001 $29,800,000
July 1, 2001 through June 30, 2002 $32,000,000
July 1, 2002 and thereafter $34,300,000
EBIDAT will be calculated as illustrated on Exhibit 4.6(C).
(o) SUBSECTION 4.4. Subsection 4.4 is deleted in its entirety
and the following substituted therefor:
4.4 Fixed Charge Coverage.
(a) Borrower shall not permit Fixed Charge Coverage
for any period set forth below to be less than the amount set
forth below for such period:
Period Coverage
January 1, 1998 through March 31, 1998 1.0
January 1, 1998 through June 30, 1998 1.0
January 1, 1998 through September 30, 1998 1.0
January 1, 1998 through December 31, 1998 1.0
(b) Borrower shall not permit Fixed Charge Coverage
for the twelve (12) month period ending on the last day of
each month, commencing January 31, 1999, to be less than (i)
for periods ending on or prior to June 30, 1999, 1.05, (ii)
for
9
periods ending from July 1, 1999 through June 30, 2002,
1.10 and (iii) thereafter, 1.15. FIXED CHARGE COVERAGE will
be calculated as illustrated on Exhibit 4.6(C).
(p) SUBSECTION 4.5. Subsection 4.5 is deleted in its entirety
and the following substituted therefor:
4.5 Total Indebtedness to Operating Cash Flow Ratio.
(a) Borrower shall not permit the ratio of Total
Indebtedness calculated as of the last day of any period set
forth below to an amount equal to (x) (i) in the case of the
period January 1, 1998 through March 31,1998, EBIDAT for such
period multiplied by four, (ii) in the case of the period
January 1, 1998 through June 30, 1998, EBIDAT for such period
multiplied by two and (iii) in the case of the period January
1, 1998 through September 30, 1998, EBIDAT for such period
multiplied by 4/3 less (y) in each case, Unfinanced Capital
Expenditures and Other Capitalized Costs (other than Capital
Expenditures and fees and expenses capitalized with respect
to the Related Transactions) for the period of four fiscal
quarters ended on the last day of such period, to be greater
than the amount set forth below for such period:
Period Ratio
January 1, 1998 through March 31, 1998 9.0
January 1, 1998 through June 30, 1998 9.0
January 1, 1998 through September 30, 1998 9.0
January 1, 1998 through December 31, 1998 9.0
(b) Borrower shall not permit the ratio of Total
Indebtedness calculated as of the last day of any month
during the periods set forth below to Operating Cash Flow for
the twelve (12) month period ending on such day to be greater
than the amount set forth below for such period:
Period Ratio
January 1, 1999 through June 30, 1999 8.75
July 1, 1999 through December 31, 1999 7.9
10
January 1, 2000 through June 30, 2000 7.2
July 1, 2000 through December 31, 2000 6.9
January 1, 2001 through June 30, 2001 6.7
July 1, 2001 through June 30, 2002 6.20
July 1, 2002 and thereafter 5.75
TOTAL INDEBTEDNESS, OPERATING CASH FLOW, UNFINANCED CAPITAL
EXPENDITURES AND OTHER CAPITALIZED COSTS will be calculated as illustrated as
Exhibit 4.6(C).
(q) SUBSECTION 5.4. Subsection 5.4(B) is amended by adding
the following sentence at the end thereof, to the extent this
representation applies to Holdings, such representation shall only
apply to Holdings as of the date of the consummation of the Mergers,
provided, however, Borrower agrees to provide to Heller from time to
time, upon written request therefor, an updated capitalization
schedule.
(r) SUBSECTION 6.1. Subsection 6.1 is amended as follows:
(i) subclause (2) of clause (B) of Subsection 6.1
is deleted in its entirety;
(ii) Clause (C) of Subsection 6.1 is deleted in its
entirety and the following substituted therefor:
(C) Breach of Certain Provisions. Failure
of Borrower to perform or comply with any term or
condition contained in that portion of subsection
2.2 relating to Borrower = s obligation to maintain
insurance, Section 3 or Section 4; or
(iii) Clause (R) of Subsection 6.1 is deleted in its
entirety and the following substituted therefor:
(R) Failure of Security. Heller does not
have or ceases to have a valid and perfected first
priority security interest in the Collateral
(subject to Permitted Encumbrances) or any
substantial portion thereof, in each case, for any
reason other than the failure of Heller to take any
action within its control; or
(iv) Clause (S) of Subsection 6.1 is amended by (i)
replacing the word Loan with the phrase Related Transactions
on the third line thereof and (ii) adding the following at
the end of such clause:
unless Heller shall have received a first priority
pledge of one hundred percent (100%) of the issued
and outstanding capital stock of Borrower
11
(v) Clause (T) of Subsection 6.1 is deleted in its
entirety and the following substituted therefor:
(T) Change in Control. (1) (i) prior to the
acquisition, if any, by Hoak Communications Partners, L. P.
(Hoak) (or any Person controlled by Hoak) of capital stock
of Holdings, DLJ ceases to beneficially own and control,
directly and indirectly, at least fifty-one percent (51%) of
the issued and outstanding shares of each class of capital
stock of Holdings entitled (without regard to the occurrence
of any contingency) to vote for the election of a majority of
the members of the board of directors of Holdings determined
on a fully diluted basis (assuming the full exercise of all
securities exercisable convertible or exchangeable for or
into capital stock of Holdings) or (ii) subsequent to the
acquisition, if any, by Hoak (or any Person controlled by
Hoak) of capital stock of Holdings, DLJ and Hoak (or any
Person controlled by Hoak), together, cease to beneficially
own and control, directly and indirectly, at least fifty-one
percent (51%) of the issued and outstanding shares of each
class of capital stock of Holdings entitled (without regard
to the occurrence of any contingency) to vote for the
election of a majority of the members of the board of
directors of Holdings determined on a fully diluted basis
(assuming the full exercise of all securities exercisable
convertible or exchangeable for or into capital stock of
Holdings); or (2) Holdings ceases to directly own and
control, free and clear of all Liens other than Liens in
favor of Heller, one hundred percent (100%) of the issued and
outstanding capital stock of Borrower; or
(vi) Clause (U) of Subsection 6.1 is deleted in its
entirety.
(vii) Clause (V) of Subsection 6.1 is deleted in its
entirety.
(s) SUBSECTION 9.1. Subsection 9.1 is hereby amended by
deleting the phrase or for Losses to the extent imposed, incurred by
or asserted against Heller as a result of a breach or default by SBA
or Heller under the Intercreditor Agreement .
(t) SUBSECTION 9.2. Subsection 9.3 is amended by (i) deleting
the parenthetical clause in the fourth, fifth and sixth lines of the
first paragraph and (ii) deleting the second paragraph and
substituting the following therefor:
Notices shall be addressed as follows:
If to Borrower: Arcade Marketing, Inc.
P. O. Box 3156
1815 E. Main Street
Chattanooga, Tennessee 37404
ATTN: Chief Operating Officer
12
Telecopy: (423) 697-7126
With a copy to: DLJ Merchant Banking II, Inc.
277 Park Avenue, 19th Floor
New York, New York 10172
ATTN: David Wittels
Telecopy: (212) 892-7272
With a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
ATTN: Lawrence E. Wieman
Telecopy: (212) 450-4800
If to Heller: HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN:Account Manager
Corporate Finance Group
Telecopy: (312) 441-7367
With a copy to: HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Legal Department
Corporate Finance Group
Telecopy: (312) 441-7367
(u) SUBSECTION 9.12. Subsection 9.12 is amended by
substituting the phrase DLJ for the word Liberty on the eleventh line
thereof.
(v) SUBSECTION 10.1. (i) Subsection 10.1 is amended by
substituting the following definitions in lieu of the current version
of such definitions:
EXPIRY DATE means the earlier of (a) the
suspension (subject to reinstatement) of the Revolving Loan
Commitment pursuant to subsection 6.2, (b) the acceleration
of the Obligations pursuant to subsection 6.3 or (c) December
31, 2002, as such date may be extended by mutual agreement of
Heller and Borrower.
13
HOLDINGS means AHC I Acquisition Corp., a Delaware
corporation.
RELATED TRANSACTIONS means the execution and
delivery of the Related Transactions Documents, the funding
of all Loans on the Closing Date, the Acquisition, the
Mergers, the repayment of any Indebtedness identified on
Schedule 10.1(A) which is to be paid in full on the Closing
Date, and the payment of all fees, costs and expenses
associated with all of the foregoing.
RELATED TRANSACTION DOCUMENTS means (i) the Loan
Documents and the Stock Purchase Agreement; (ii) until such
time as the Bridge Notes shall have been refinanced in full,
the Bridge Notes and the Securities Purchase Agreement; (iii)
until such time as the PIK Notes shall have been refinanced
in full, the PIK Notes and (iv) until such time as such
agreements, instruments or documents shall have expired or
been terminated by their express terms or by mutual agreement
of the parties thereto, all other agreements, instruments and
documents executed or delivered in connection with the
Related Transactions.
SUBORDINATED INDEBTEDNESS means all Indebtedness of
Borrower or any of its Subsidiaries which is subordinated in
right of payment to the Obligations.
(ii) Subsection 10.1 and the relevant
provisions of the Credit Agreement and other Loan
Documents are further amended by deleting the
following definitions and all references to such
terms throughout the Credit Agreement and other Loan
Documents, including, without limitation,
subsections 3.2, 3.11, 6.1 and 10.1 of the Credit
Agreement:
ADDITIONAL SENIOR TERM LOAN
INTERCREDITOR AGREEMENT
LIBERTY
14
REFINANCED SUBORDINATED INDEBTEDNESS
SBA
SENIOR TERM LOAN
SENIOR TERM LOAN AGREEMENT
SENIOR TERM LOAN DOCUMENTS
SENIOR TERM NOTE
SUBORDINATED LOAN DOCUMENTS
SUBORDINATED NOTES
(iii) Subsection 10.1 is further amended by
adding the following definitions:
BRIDGE NOTES means those certain Senior Increasing
Rate Notes dated December 15, 1997 in the original aggregate
principal amount not to exceed $125,000,000, issued by AHC I
Merger Corp., a Delaware corporation, to Scratch & Sniff
Funding, Inc., which notes were, or will be, issued pursuant
to the Securities Purchase Agreement, a true, correct and
complete copy of which has been delivered to Heller.
15
DLJ means DLJ Merchant Banking II, Inc. and its
affiliates.
PIK NOTE means that certain Floating Rate
Exchangeable PIK Note Due 2009 dated December 15, 1997 in the
original principal amount of $30,000,000, issued by Holdings
to DLJ, a true, correct and complete copy of which has been
delivered to Heller.
REFINANCED BRIDGE INDEBTEDNESS has the meaning set
forth in clause (E) of Subsection 3.1.
SECURITIES PURCHASE AGREEMENT means that certain
Securities Purchase Agreement dated as of December 15, 1997
by and among Holdings, AHC I Merger Corp. and Scratch & Sniff
Funding, Inc.
(aa) Schedule 3.2(A)(12) is deleted.
(bb) Schedule 3.8 attached to the Credit
Agreement is amended by deleting item 2 therein and
adding the items set forth on Schedule 3.8 hereto.
(cc) Schedule 3.9 attached to Credit
Agreement is deleted in its entirety and Schedule
3.9 attached hereto is substituted therefor.
(dd) Schedule 4.6(C) attached to the Credit
Agreement is deleted in its entirety and Exhibit
4.6(C) attached hereto is substituted therefor.
(ee) Exhibit 4.6(F) attached to the Credit
Agreement is deleted in its entirety and Exhibit
4.6(F) attached hereto is substituted therefor.
16
3. Assumption. Arcade Holding Corporation, a Delaware
corporation, (which corporation shall be renamed Arcade Marketing,
Inc., simultaneously with the effectiveness of the Merger) hereby
assumes and agrees to keep, pay and perform all of the Obligations of
Arcade, Inc., a Tennessee corporation, under the Credit Agreement and
other Loan Documents. All references in the Credit Agreement and other
Loan Documents to Arcade, Inc., a Tennessee corporation, shall be
deemed to be references to Arcade Marketing, Inc., a Delaware
corporation (the successor by merger of Arcade, Inc., a Tennessee
corporation with and into Arcade Holding Corporation, a Delaware
corporation), and Arcade Marketing Inc., a Delaware corporation, shall
be deemed to be the Borrower, Pledgor or Debtor , as applicable, under
the Loan Documents. Without limiting the generality of the foregoing,
Arcade Holding Corporation, a Delaware corporation, hereby grants to
Heller, a continuing security interest in and to all of its right,
title and interest in the Collateral (as defined in the Security
Agreement dated as of April 30, 1996) as security for the Obligations,
as amended hereby.
4. Reaffirmation. Each of the Loan Parties as debtors,
grantors, pledgors, guarantors, assignors, or in other similar
capacities in which such Loan Parties grant liens or security
interests in their properties or otherwise act as accommodation
parties or guarantors, as the case may be, hereby ratifies and
reaffirms all of its payment and performance obligations, contingent
or otherwise, under each of the Loan Documents to which it is a party
and, to the extent such Loan Party granted liens on or security
interests in any of its properties pursuant to any such Loan Document
as security for or otherwise guaranteed Obligations under or with
respect to the Loan Documents, each hereby ratifies and reaffirms such
guarantee and grant of security interests and liens and confirms and
agrees that such security interests and liens hereafter secure all of
the Obligations as amended hereby. Each of the Loan Parties hereby
consents to this Amendment and acknowledges that each of the Loan
Documents remains in full force and effect and is hereby ratified and
reaffirmed. The execution of this Amendment shall not operate as a
waiver of any right, power or remedy of Heller, constitute a waiver of
any provision of any of the Loan Documents or serve to effect a
novation of the Obligations.
5. Representations and Warranties. Arcade, Inc., a Tennessee
corporation and Arcade Holding Corporation, a Delaware corporation,
hereby represent and warrant to Heller as follows:
(a) After giving effect to the Acquisition and
Merger, the authorized
17
capital stock of each of the Loan Parties is as set forth on
Schedule 5.4(B) attached hereto (which schedule is hereby
substituted for Schedule 5.4(B) attached to the Credit
Agreement). All issued and outstanding shares of capital
stock of each of the Loan Parties are duly authorized and
validly issued, fully paid, non-assessable, free and clear
of all Liens (other than, with respect to capital stock
of Holdings, transfer restrictions contained in the
Stockholders Agreement dated December 12, 1997 among
Holdings and the stockholders of Holdings party thereto and
Liens granted by management stockholders to Holdings to
secure loans made by Holdings to such stockholders to enable
them to purchase Holdings capital stock), and such shares
were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. The
issued and outstanding capital stock of each of the Loan
Parties is owned by the stockholders and in the amounts set
forth in Schedule 5.4(B) attached hereto. No shares of the
capital stock of any Loan Party, other than those described
above, are issued and outstanding. Except as set forth in
Schedule 5.4(B), there are no pre-emptive or other
outstanding rights, options, warrants, conversion rights or
similar agreements or understandings for the purchase or
acquisition from any Loan Party, of any shares of capital
stock or other securities of any such entity.
(b) Each of the Loan Parties has all requisite power
and authority to enter into each Loan Document and Related
Transaction Document to which it is a party and to carry out
the transactions contemplated thereby. The execution,
delivery and performance by each Loan Party of each Loan
Document and Related Transaction Documents to which it is a
party has been duly authorized by all necessary action. Each
Related Transaction Document has been duly executed and
delivered by the applicable Loan Parties and constitutes the
legally valid and binding obligations of the applicable Loan
Parties, each enforceable against the Loan Parties in
accordance with their respective terms. The execution,
delivery and performance of the Related Transaction Documents
and the consummation of the related transactions does not
violate any law, ordinance, rule, regulation, order or other
legal requirement of any governmental authority.
(c) The representations and warranties of Arcade
Holding Corporation set forth in the Stock Purchase Agreement
are true and correct in all material respects as of the date
hereof and such representations and warranties are hereby
incorporated herein by this reference with the same affect as
those set forth in their entirety herein.
6. Conditions. This Amendment shall not become effective
unless and until all
18
of the following conditions have been satisfied:
(a) Borrower shall have delivered to Heller an
amended and substituted revolving note in the amount of
$20,000,000 duly executed by Borrower (whereupon Heller shall
return to Borrower the revolving note previously executed and
delivered to Heller) and the other documents identified in
the Closing Agenda, a copy of which is attached, all of which
shall be in form and substance satisfactory to Heller;
(b) Borrower shall have paid to Heller,
individually, a non-refundable closing fee of $300,000; and
(c) the Acquisition shall have closed in accordance
with the terms of the Stock Purchase Agreement and the
Mergers shall have been consummated in accordance with
applicable law.
7. Consent. Provided the conditions set forth in Section 6
hereof have been satisfied, Heller hereby consents to the Acquisition
and the Mergers and agrees that the consummation thereof shall not
constitute a breach or default under subsections 3.6, 3.7 and 3.8.
8. No Amendment. Except as amended hereby, the Credit
Agreement and other Loan Documents remain unmodified and in full force
and effect. All references in the Loan Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as
amended hereby. All references to the Revolving Note shall refer to
the amended and substituted revolving note to be delivered to Heller
pursuant to Section 6 above. All references to the Obligations shall
refer to the Obligations as amended hereby.
9. Counterparts. This Amendment may be executed by one or
more of the parties to this Amendment in any number of separate
counterparts, each of which when so executed, shall be deemed an
original and all said counterparts when taken together shall be deemed
to constitute but one and the same instrument.
19
[Remainder of this page intentionally left blank.]
20
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth above.
HELLER FINANCIAL, INC., a Delaware corporation
By: /s/ Craig Gallehugh
--------------------------
Title: Vice President
ARCADE, INC., a Tennessee corporation
By: /s/ Gordon Jones
--------------------------
Title: Chief Operating Officer
ARCADE HOLDING CORPORATION, a Delaware corporation
By: /s/ David Wittels
--------------------------
Title: Vice President
21
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment") is made and
entered into this 30th day of October, 1998 by and between AKI, Inc., formerly
known as Arcade, Inc. ("Borrower") and Heller Financial, Inc.
("Lender").
WHEREAS, Lender and Borrower are parties to a certain Credit Agreement
dated April 30, 1996 and all amendments thereto (as such agreement has from
time to time been amended, supplemented or otherwise modified, the
"Agreement"); and
WHEREAS, the parties desire to amend the Agreement as hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Agreement.
2. Amendments. Subject to the conditions set forth below, the
Agreement is amended as follows:
(a) Subsection 4.3 is amended by deleting such subsection in
its entirety and inserting the following in lieu thereof:
"4.3 EBIDAT.
(a) Borrower shall not permit EBIDAT for any period
set forth below to be less than the amount set forth below
for such period:
Period Amount
January 1, 1998 through September 30, 1998 $12,000,000
January 1, 1998 through December 31, 1998 $16,000,000
(b) Borrower shall not permit EBIDAT for the twelve
(12) month period ending on the last day of any month,
commencing January 31, 1999, during the periods set forth
below to be less than the amount set forth below for such
period:
Period Amount
January 1, 1999 through March 31, 1999 $18,000,000
April 1, 1999 through April 30, 1999 $19,000,000
May 1, 1999 through June 30, 1999 $20,000,000
July 1, 1999 through December 31, 1999 $25,500,000
January 1, 2000 through June 30, 2000 $27,800,000
July 1, 2000 through December 31, 2000 $28,800,000
January 1, 2001 through June 30, 2001 $29,800,000
July 1, 2001 through June 30, 2002 $32,000,000
July 1, 2002 and thereafter $34,300,000
"EBIDAT" will be calculated as illustrated on Exhibit 4.6(C)."
(b) Subsection 4.5 is amended by deleting such subsection in
its entirety and inserting the following in lieu thereof:
"4.5 Total Indebtedness to Operating Cash Flow Ratio.
(a) Borrower shall not permit the ratio of Total
Indebtedness calculated as of the last day of any period set
forth below to an amount equal to in the case of the period
January 1, 1998 through September 30, 1998, EBIDAT for such
period multiplied by 4/3 less, Unfinanced Capital
Expenditures and Other Capitalized Costs (other than Capital
Expenditures and fees and expenses capitalized with respect
to the Related Transactions) for the period of four fiscal
quarters ended on the last day of such period, to be greater
than the amount set forth below for such period:
Period Ratio
January 1, 1998 through September 30, 1998 8.7
January 1, 1998 through December 31, 1998 8.3
(b) Borrower shall not permit the ratio of Total
Indebtedness calculated as of the last day of any month
during the periods set forth below to Operating Cash Flow for
the twelve (12) month period ending on such day to be greater
than the amount set forth below for such period:
Period Ratio
January 1, 1999 through March 31, 1999 8.0
April 1, 1999 through June 30, 1999 7.2
July 1, 1999 through December 31, 1999 7.9
January 1, 2000 through June 30, 2000 7.2
July 1, 2000 through December 31, 2000 6.9
January 1, 2001 through June 30, 2001 6.7
July 1, 2001 through June 30, 2002 6.20
July 1, 2002 and thereafter 5.75
"Total Indebtedness," "Operating Cash Flow,"
"Unfinanced Capital Expenditures" and "Other Capitalized
Costs" will be calculated as illustrated as Exhibit 4.6(C)."
3. Conditions. The effectiveness of this Amendment is subject to the
following conditions precedent (unless specifically waived in writing by
Lender):
(a) Borrower shall have executed and delivered this
Amendment, and such other documents and instruments as Lender may
require shall have been executed and/or delivered to Lender;
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and
other legal matters incident thereto shall be satisfactory to Lender
and its legal counsel; and
(c) No Default or Event of Default shall have occurred and be
continuing.
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4. Representations and Warranties. To induce Lender to enter into this
Amendment, Borrower represents and warrants to Lender that the execution,
delivery and performance of this Amendment has been duly authorized by all
requisite corporate action on the part of Borrower and that this Amendment has
been duly executed and delivered by Borrower.
5. Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6. References. Any reference to the Agreement contained in any
document, instrument or agreement executed in connection with the Agreement
shall be deemed to be a reference to the Agreement as modified by this
Amendment.
7. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
8. Ratification. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions of the
Agreement and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
HELLER FINANCIAL, INC. AKI, INC.
By: /s/ Mary Harrigan By: /s/ Kenneth A. Budde
-------------------------- -----------------------------
Title: Senior Vice President Title: Chief Financial Officer
AKI HOLDING CORP.
By: /s/ Kenneth A. Budde
-----------------------------
Title: Chief Financial Officer
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