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EXHIBIT 10.1
CREDIT AGREEMENT
DATED AS OF APRIL 30, 1999
Among
CHEROKEE INTERNATIONAL, LLC
as Borrower
and
HELLER FINANCIAL, INC.
as Agent and as a Lender
and
the Lenders from time to
time party hereto
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TABLE OF CONTENTS
Page
----
SECTION 1 AMOUNTS AND TERMS OF LOANS.............................................................................1
1.1 Loans...........................................................................................1
1.2 Interest and Related Fees.......................................................................7
1.3 Other Fees and Expenses........................................................................11
1.4 Payments.......................................................................................12
1.5 Prepayments....................................................................................13
1.6 Maturity.......................................................................................14
1.7 Loan Accounts..................................................................................14
1.8 Capital Adequacy and Other Adjustments.........................................................15
1.10 Optional Prepayment/Replacement of Lenders.....................................................17
SECTION 2 AFFIRMATIVE COVENANTS.................................................................................18
2.1 Compliance With Laws and Contractual Obligations...............................................19
2.2 Maintenance of Properties; Insurance...........................................................19
2.3 Inspection; Lender Meeting.....................................................................20
2.4 Corporate Existence............................................................................21
2.5 Further Assurances.............................................................................21
2.6 Environmental Matters..........................................................................21
2.7 Licenses and Permits...........................................................................22
SECTION 3 NEGATIVE COVENANTS....................................................................................22
3.1 Indebtedness...................................................................................23
3.2 Liens and Related Matters......................................................................24
3.3 Investments; Joint Ventures....................................................................27
3.4 Contingent Obligations.........................................................................29
3.5 Restricted Junior Payments.....................................................................30
3.6 Restriction on Fundamental Changes.............................................................31
3.7 Disposal of Assets or Subsidiary Stock.........................................................32
3.8 Transactions with Affiliates...................................................................32
3.9 Conduct of Business............................................................................32
3.10 Changes Relating to Indebtedness...............................................................32
3.11 Fiscal Year....................................................................................33
3.12 Press Release; Public Offering Materials.......................................................33
3.13 Subsidiaries...................................................................................33
3.14 Bank Accounts..................................................................................33
SECTION 4 FINANCIAL COVENANTS/REPORTING.........................................................................33
4.1 Capital Expenditure Limits.....................................................................34
4.2 [Intentionally Omitted]........................................................................34
i
4.3 Fixed Charge Coverage..........................................................................34
4.6 Financial Statements and Other Reports.........................................................35
4.7 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement................................................................38
SECTION 5 REPRESENTATIONS AND WARRANTIES........................................................................39
5.1 Disclosure.....................................................................................39
5.2 No Material Adverse Effect.....................................................................39
5.3 No Default.....................................................................................39
5.4 Organization, Powers, Capitalization and Good Standing.........................................40
5.5 Financial Statements and Projections...........................................................40
5.6 Intellectual Property..........................................................................41
5.7 Investigations, Audits, Etc....................................................................41
5.8 Employee Matters...............................................................................41
5.9 Solvency.......................................................................................42
5.10 Year 2000......................................................................................42
5.11 Use of Proceeds; Margin Regulations............................................................42
SECTION 6 DEFAULT, RIGHTS AND REMEDIES..........................................................................43
6.1 Event of Default...............................................................................43
6.2 Suspension of Commitments......................................................................46
6.3 Acceleration...................................................................................46
6.4 Performance by Agent...........................................................................46
SECTION 7 CONDITIONS TO LOANS...................................................................................47
7.1 Conditions to Initial Loans....................................................................47
7.2 Conditions to All Loans........................................................................48
SECTION 8 ASSIGNMENT AND PARTICIPATION..........................................................................48
8.1 Assignments and Participations in Loans and Notes..............................................49
8.2 Agent..........................................................................................50
8.3 Amendments, Consents and Waivers for Certain Actions...........................................55
8.4 Set Off and Sharing of Payments................................................................56
8.5 Disbursement of Funds..........................................................................56
8.6 Disbursements of Advances; Payment.............................................................57
SECTION 9 MISCELLANEOUS.........................................................................................59
9.1 Indemnities....................................................................................59
9.2 Amendments and Waivers.........................................................................60
9.3 Notices........................................................................................61
9.4 Failure or Indulgence Not Waiver; Remedies Cumulative..........................................62
9.5 Marshalling; Payments Set Aside................................................................62
9.6 Severability...................................................................................62
9.7 Lenders' Obligations Several; Independent Nature of Lenders' Rights............................62
9.8 Headings.......................................................................................62
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9.9 Applicable Law.................................................................................62
9.10 Successors and Assigns.........................................................................63
9.11 No Fiduciary Relationship......................................................................63
9.12 Construction...................................................................................63
9.13 Confidentiality................................................................................63
9.14 CONSENT TO JURISDICTION........................................................................63
9.15 WAIVER OF JURY TRIAL...........................................................................63
9.16 Survival of Warranties and Certain Agreements..................................................64
9.17 Entire Agreement...............................................................................64
9.18 Counterparts; Effectiveness....................................................................64
SECTION 10 DEFINITIONS..........................................................................................64
10.1 Certain Defined Terms..........................................................................64
10.2 Other Definitional Provisions..................................................................71
iii
INDEX OF DEFINED TERMS
Defined Term Defined in Section
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Acquisition Loans ss.1.1(C)
Additional Amounts ss.1.9(A)
Adjustment Date ss.1.2(A)
Affected Lender ss.1.10
Affiliate ss.10.1
Agent ss.10.1
Agreement ss.10.1
Asset Disposition ss.10.1
Bankruptcy Code ss.10.1
Base Rate ss.1.2(A)
Base Rate Loans ss.1.2(A)
Base Rate Margin ss.1.2(A)
Borrower Preamble &ss.10.1
Borrowing Base ss.1.1(B)(1)
Borrowing Base Availability ss.1.1(B)(2)
Borrowing Base Certificate ss.1.1(B)(1)
Business Day ss.10.1
Capex Limit ss.4.1
Capitalization/Acquisition Documents ss.10.1
Cash Equivalents ss.3.3
Certificate of Exemption ss.1.9(C)
Cherokee Investor Partners ss.10.1
Closing Date ss.10.1
Collateral ss.10.1
Contingent Obligation ss.3.4
Contractual Obligation ss.2.1
Default ss.10.1
Determination Date ss.1.2(A)
Domestic Subsidiary ss.10.1
Event of Default ss.6.1
Expiry Date ss.10.1
Federal Funds Effective Rate ss.10.1
Foreign Lender ss.1.9(C)
Foreign Subsidiary ss.10.1
Funding Date ss.7.2
GAAP ss.10.1
Heller Preamble
Indebtedness ss.10.1
Indemnitee ss.9.1
Intellectual Property ss.5.6
iv
Interest Period ss.1.2(A)
Investment ss.3.3
IRC ss.10.1
Lender(s) ss.10.1
Assignment and Acceptance Agreement ss.10.1
Lender Letter of Credit ss.1.1(D)
LIBOR ss.1.2(A)
LIBOR Breakage Fee ss.1.3(B)
LIBOR Loans ss.1.2(A)
LIBOR Margin ss.1.2(A)
Lien ss.10.1
Loan(s) ss.10.1
Loan Documents ss.10.1
Loan Party ss.10.1
Material Adverse Effect ss.10.1
Maximum Revolving Loan Balance ss.1.1(B)(1)
Members ss.10.1
Net Proceeds ss.10.1
Note(s) ss.10.1
Obligations ss.10.1
Operating Cash Flow ss.4.6(d)
Overadvance Revolving Loans ss.1.1(B)(2)
Permitted Acquisition ss.3.3(D)
Permitted Encumbrances ss.3.2(A)
Person ss.10.1
Post-Closing Documents ss.10.1
Pro Forma ss.10.1
Pro Rata Share ss.10.1
Projections ss.10.1
Related Transactions ss.10.1
Related Transactions Documents ss.10.1
Replacement Lender ss.1.10
Requisite Lenders ss.10.1
Restricted Junior Payment ss.3.5
Revolving Loan Commitment ss.1.1(B)
Revolving Loans ss.1.1(B)(1)
Risk Participation Agreement ss.1.1(D)
Risk Participation Liability ss.10.1
Scheduled Installments ss.1.1(A)
Security Documents ss.10.1
Settlement Date ss.8.6
Subordinated Notes ss.10.1
Subsidiary ss.10.1
Target ss.1.1(C)
Target Purchase Price ss.1.1(C)(3)
v
Taxes ss.1.9(A)
Term Loan ss.1.1(A)
Total Indebtedness ss.1.2(A)
Total Indebtedness to Pro Forma EBITDA Ratio ss.1.2(A)
Unutilized Commitment ss.1.2(B)
vi
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of April 30, 1999 and entered
into by and among CHEROKEE INTERNATIONAL, LLC, a California limited liability
company ("Borrower"), with its principal place of business at 2841 Dow Avenue,
Tustin, California 92780, and HELLER FINANCIAL, INC., a Delaware corporation (in
its individual capacity "Heller"), with offices at 500 West Monroe Street,
Chicago, Illinois 60661, as a Lender (as hereinafter defined in Section 10), and
as agent for all Lenders, and such financial institutions who are or hereafter
become parties to this Agreement as Lenders.
R E C I T A L S:
WHEREAS, Borrower desires that Lenders extend a certain term
credit facility and revolving credit facility to Borrower to partially fund a
distribution of $150,000,000 to its Members, to provide ongoing working capital
financing for Borrower, to provide funds for other general business purposes of
Borrower, including acquisitions, and to pay certain costs and expenses
associated herewith and with the offering of the Subordinated Notes (as
hereinafter defined in Section 10); 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 pledging to Agent, for the benefit of Agent and
Lenders, a portion of the capital stock of its Subsidiaries and by granting to
Agent, for the benefit of Agent and Lenders, 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, Lenders and
Agent 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) TERM LOAN. Each Lender agrees, severally and not jointly, to
lend to Borrower in one draw, on the Closing Date, its Pro Rata Share of the
aggregate amount of $50,000,000 (the "Term Loan"). Borrower shall repay the Term
Loan through periodic payments
1
on the dates and in the amounts indicated below ("Scheduled Installments").
Amounts borrowed under this subsection 1.1(A) and repaid may not be reborrowed.
DATE SCHEDULED INSTALLMENT
September 30, 1999 $ 625,000
December 31, 1999 $ 625,000
March 31, 2000 $ 625,000
June 30, 2000 $ 625,000
September 30, 2000 $1,500,000
December 31, 2000 $1,500,000
March 31, 2001 $1,500,000
June 30, 2001 $1,500,000
September 30, 2001 $2,000,000
December 31, 2001 $2,000,000
March 31, 2002 $2,000,000
June 30, 2002 $2,000,000
September 30, 2002 $2,250,000
December 31, 2002 $2,250,000
March 31, 2003 $2,250,000
June 30, 2003 $2,250,000
September 30, 2003 $2,750,000
December 31, 2003 $2,750,000
March 31, 2004 $2,750,000
June 30, 2004 $2,750,000
September 30, 2004 $3,375,000
December 31, 2004 $3,375,000
March 31, 2005 $3,375,000
April 30, 2005 The remaining unpaid principal balance of the
Term Loan
(B) REVOLVING LOANS. (1) Each Lender agrees, severally and not
jointly, to lend to Borrower from the Closing Date to the Expiry Date its Pro
Rata Share of the loans requested by Borrower to be made by Lenders under this
subsection 1.1(B), up to an aggregate maximum for all Lenders of $25,000,000 (as
the same may be reduced from time to time hereunder, the "Revolving Loan
Commitment"). Advances or amounts outstanding under the Revolving Loan
Commitment will be called "Revolving Loans". Revolving Loans may be repaid and
reborrowed. The Revolving Loans shall be repaid in full on the Expiry Date. The
"Maximum Revolving Loan Balance" will be the lesser of (a) the "Borrowing Base"
(as calculated on Exhibit 4.6(F), the "Borrowing Base Certificate") less
outstanding Risk Participation Liability or (b) the Revolving Loan Commitment
less outstanding Risk Participation Liability. If at any time the outstanding
Revolving Loans exceed the Maximum Revolving Loan Balance (as it may be deemed
increased from time to time pursuant to subsection 1.1(B)(2)), Lenders shall not
be obligated to make
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Revolving Loans and issue Lender Letters of Credit and Risk Participation
Agreements, and Revolving Loans must be repaid immediately in an amount
sufficient to eliminate any excess. Revolving Loans may be requested in any
amount with one (1) Business Day prior notice required for amounts equal to or
greater than $5,000,000. For amounts less than $5,000,000, written or telephonic
notice must be provided by noon Chicago time on the day on which the Loan is to
be made. All LIBOR Loans require three (3) Business Days notice. All Loans
requested telephonically must be confirmed in writing within twenty-four (24)
hours. Neither Agent nor any Lender shall incur any liability to Borrower for
acting upon any telephonic notice that Agent believes in good faith to have been
given by a duly authorized officer or other person authorized to borrow on
behalf of Borrower.
(2) If Borrower requests that Lenders make, or permit to remain
outstanding, Revolving Loans in an aggregate amount in excess of the Borrowing
Base less outstanding Risk Participation Liability (hereinafter, "Borrowing Base
Availability"), Lenders having sixty-six and two-thirds percent (66-2/3%) or
more of the Revolving Loan Commitment may in their discretion elect to cause all
Lenders having a Revolving Loan Commitment to make, or permit to remain
outstanding, such excess Revolving Loans (such Revolving Loans in excess of
Borrowing Base Availability being referred to as "Overadvance Revolving Loans"),
PROVIDED, HOWEVER, that such Lenders may not cause all Lenders having a
Revolving Loan Commitment to make, or permit to remain outstanding, (a)
Revolving Loans in excess of the Revolving Loan Commitment less outstanding Risk
Participation Liability or (b) Overadvance Revolving Loans in excess of 10% of
the Revolving Loan Commitment. If Overadvance Revolving Loans are made, or
permitted to remain outstanding, pursuant to the preceding sentence, then (a)
the Maximum Revolving Loan Balance shall be deemed increased by the amount of
such permitted Overadvance Revolving Loans, but only for so long as Lenders
having sixty-six and two-thirds percent (66-2/3%) or more of the Revolving Loan
Commitment allow such Overadvance Revolving Loans to be outstanding and (b) all
Lenders that have committed to make Revolving Loans shall be bound to make, or
permit to remain outstanding, such Overadvance Revolving Loans based upon their
Pro Rata Shares in accordance with the terms of this Agreement. If Overadvance
Revolving Loans remain outstanding for more than ninety (90) days during any
180-day period, Revolving Loans must be repaid immediately in an amount
sufficient to eliminate all of such Overadvance Revolving Loans.
C. ACQUISITION LOANS. Subject to the satisfaction of the terms and
conditions set forth herein and in reliance upon the representations and
warranties set forth herein, each Lender agrees, severally and not jointly, to
lend to Borrower from the Closing Date to the Expiry Date its Pro Rata Share of
the loans requested by Borrower (upon not less than ten (10) days prior written
notice to Agent) to be made by Lenders under this subsection 1.1(C) (the
"Acquisition Loans"). An Acquisition Loan shall be made only upon the
acquisition by Borrower of all of the issued and outstanding capital stock of
another Person, or of all or substantially all of the assets of another Person
or of a division of another Person (a "Target") and shall be limited in amount
to the purchase price of such acquisition, plus reasonable costs associated
therewith and the proceeds of the Acquisition Loan may be used only to fund such
purchase price and reasonable
3
costs associated therewith. Any amount borrowed under this subsection 1.1(C)
shall be a Revolving Loan, shall constitute a utilization of the Revolving Loan
Commitment, shall reduce (subject to reinstatement upon repayment) the same
accordingly, and shall in addition to the requirement of this Section 1.1(C)
also be subject to all the conditions otherwise applicable hereunder to the
borrowing of a Revolving Loan. The obligations of Lenders to make any
Acquisition Loan are further subject to the following conditions precedent:
(1) At least ten (10) Business Days prior to the
acquisition of the subject Target, Agent shall have received a certificate
demonstrating compliance with subsections 1.1(C)(3), (4), (5) and (6);
(2) Agent shall have received such financial and other
relevant information concerning the subject Target as Agent may reasonably
request;
(3) Requisite Lenders shall have approved the acquisition
of the subject Target, provided, however, that such approval shall not be
required if the purchase price for the subject Target ("Target Purchase Price")
is not greater than $15,000,000;
(4) The subject Target's EBITDA (as defined in Exhibit
4.6(D)) during the twelve (12) months immediately preceding the acquisition of
the subject Target, plus those expenses deducted in calculating such earnings
that would be eliminated upon such acquisition (as agreed to by Requisite
Lenders), shall have been positive, and the Requisite Lenders shall have
consented to an amendment to Schedule 2 of Exhibit 4.6(D) to reflect the
trailing twelve (12) months proforma EBITDA for the subject Target;
(5) Based upon the financial performance of both Borrower
and the subject Target during the twelve (12) months immediately preceding the
acquisition of the subject Target, the combined financial performance of
Borrower and the subject Target (taking into account any expenses of the Target
that would have been eliminated if such acquisition had been consummated on the
first day of such twelve (12) month period (as agreed to by Requisite Lenders))
would comply with the financial covenants set forth in Article 4 hereof after
giving effect to the Acquisition Loan;
(6) The Maximum Revolving Loan Balance immediately after
giving effect to the Acquisition Loan must exceed the Revolving Loans then
outstanding by not less than $10,000,000 (taking into account any assets of the
Target eligible for inclusion in the Borrowing Base immediately after such
transaction is consummated) (as agreed to by the Requisite Lenders).
(7) The subject Target shall be in the same or similar type
of business as Borrower;
4
(8) No event shall have occurred and be continuing or would
result from the acquisition of the subject Target or the Acquisition Loan which
would reasonably be expected to cause a Material Adverse Effect;
(9) No event shall have occurred and be continuing or would
result from the acquisition of the subject Target or the Acquisition Loan that
would constitute an Event of Default or a Default; and
(10) Such Target shall be organized under the laws of a
state of the United States of America, provided that this condition need not be
met if: (i) the Target Purchase Price is less than $3,000,000 and (ii) the sum
of all Target Purchase Prices paid for Targets not in compliance with this
Section 1.1(C)(10) since the Closing Date plus the proposed Target Purchase
Price not in such compliance, is less than $9,000,000.
(D) LETTERS OF CREDIT AND RISK PARTICIPATION AGREEMENTS. The
Revolving Loan Commitment may, in addition to advances as Revolving Loans, be
utilized, upon the request of Borrower, for (i) the issuance of standby and
commercial letters of credit for the account of Borrower by Agent (each such
letter of credit, a "Lender Letter of Credit") or (ii) the issuance by Agent of
risk participation agreements (each such agreement, a "Risk Participation
Agreement") to confirm payment to banks which issue letters of credit for the
account of Borrower.
(1) MAXIMUM AMOUNT. The aggregate amount of Risk
Participation Liability with respect to all Lender Letters of Credit and Risk
Participation Agreements outstanding for the account of Borrower at any time
shall not exceed $3,000,000.
(2) REIMBURSEMENT. Borrower shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Agent for all out-of-pocket amounts
paid by Agent with respect to a Lender Letter of Credit or a Risk Participation
Agreement issued for the account of Borrower, including fees, costs and expenses
paid by Agent to any bank that issues letters of credit. Borrower hereby
authorizes and directs Agent, at Agent's option, to make a Revolving Loan in the
amount of any payment made by Agent with respect to any Lender Letter of Credit
or any Risk Participation Agreement. All amounts paid by Agent with respect to
any Lender Letter of Credit or Risk Participation Agreement that are not
immediately repaid by Borrower with the proceeds of a Revolving Loan or
otherwise shall bear interest at the interest rate applicable to Revolving Loans
calculated using the Base Rate. Each Lender agrees to fund its Pro Rata Share of
any Revolving Loan made pursuant to this subsection 1.1(D)(2). If no such
Revolving Loan is made, each Lender agrees to purchase, and shall be deemed to
have purchased, a participation in such Lender Letter of Credit or Risk
Participation Agreement, as the case may be, in an amount equal to its Pro Rata
Share of the Risk Participation Liability of such Lender Letter of Credit or
Risk Participation Agreement, as the case may be, and each Lender agrees to pay
to Agent such Lender's Pro Rata Share of any payments made by Agent under such
Lender Letter of Credit and Risk Participation
5
Agreement. The obligation of each Lender to deliver to Agent an amount equal to
its respective Pro Rata Share pursuant to the preceding two (2) sentences shall
be absolute and unconditional and such remittance shall be made notwithstanding
the occurrence or continuation of an Event of Default or Default or the failure
to satisfy any condition set forth in subsection 7.2. If any Lender fails to
make available to Agent the amount of such Lender's Pro Rata Share of any
payments made by Agent in respect of such Lender Letter of Credit or Risk
Participation Agreement as provided in this subsection 1.1(D)(2), Agent shall be
entitled to recover such amount on demand from such Lender together with
interest at the Base Rate.
(3) CONDITIONS OF ISSUANCE OF LETTERS OF CREDIT OR RISK
PARTICIPATION AGREEMENTS. In addition to all other terms and conditions set
forth in this Agreement, the issuance by Agent of any Lender Letter of Credit or
Risk Participation Agreement shall be subject to the conditions precedent that
the Lender Letter of Credit, the Risk Participation Agreement or the letter of
credit for which Borrower requests a Risk Participation Agreement shall support
a transaction entered into in the ordinary course of Borrower's business and
shall be in such form, be for such amount, and contain such terms and conditions
as are reasonably satisfactory to Agent. The expiration date of each Lender
Letter of Credit and each letter of credit to be issued under a Risk
Participation Agreement shall be on a date which is the earlier of (a) one year
from its date of issuance, or (b) the thirtieth (30th) day before the date set
forth in clause (c) of the definition of the term Expiry Date. Each Risk
Participation Agreement shall provide that the agreement terminates and all
demands or claims for payment must be presented by a date certain, which date
will be at least thirty (30) days before the date set forth in clause (c) of the
definition of the term Expiry Date.
(4) REQUEST FOR LENDER LETTERS OF CREDIT OR RISK
PARTICIPATION AGREEMENTS. Borrower shall give Agent at least three (3) Business
Days prior notice specifying the date a Lender Letter of Credit is requested to
be issued, identifying the beneficiary and describing the nature of the
transactions proposed to be supported thereby. Upon Borrower's request, Agent
shall use reasonable efforts to arrange Risk Participation Agreements. After the
issuance of a Risk Participation Agreement in favor of a bank that will issue
letters of credit on behalf of Borrower, Borrower shall give Agent at least two
(2) Business Days prior written notice specifying the date a letter of credit is
to be issued under a Risk Participation Agreement, identifying the beneficiary
and describing the nature of the transactions proposed to be supported thereby.
Any notice described in this paragraph shall be accompanied by the form of the
Lender Letter of Credit or the letter of credit to which such Risk Participation
Agreement relates.
(E) NOTES. Borrower shall execute and deliver to each Lender (i) a
Note to evidence the Revolving Loans, such Note to be in the principal amount of
such Lender's Pro Rata Share of the Revolving Loan Commitment and (ii) a Note to
evidence the Term Loan, such Notes to be in the principal amount of such
Lender's Pro Rata Share of the Term Loan. In the event of an assignment under
subsection 8.1, Borrower shall, upon surrender of the assigning Lender's Notes,
issue new Notes to reflect the interests of the assigning Lender and the Person
to which interests are to be assigned.
6
(F) FUNDING AUTHORIZATION. The proceeds of all Loans made pursuant
to this Agreement subsequent to the Closing Date are to be funded by wire
transfer to the following account of Borrower:
Bank: Wells Fargo Bank
ABA No.: 121-000-248
Bank Address: 2030 Main Street, Suite 900, Irvine, CA 92614
Account No.: 4159-418938
Reference: Cherokee International
Borrower shall provide Agent with written notice of any change in the foregoing
instructions at least three (3) Business Days before the desired effective date
of such change.
1.2 INTEREST AND RELATED FEES.
(A) INTEREST. From the date the Loans are made and the date the
other Obligations become due, depending upon Borrower's election from time to
time, as permitted herein, to have portions of the Loans accrue interest
determined by reference to the Base Rate ("Base Rate Loans") or the LIBOR
("LIBOR Loans"), the Loans and the other Obligations shall bear interest at the
applicable rates set forth below:
(1) The Revolving Loan and all other Obligations (other than the
principal portion of the Term Loan) shall bear interest as follows:
(a) If a Base Rate Loan, then at the sum of the Base Rate
PLUS the Base Rate Margin applicable to Revolving Loans.
(b) If a LIBOR Loan, then at the sum of the LIBOR PLUS the
LIBOR Margin applicable to Revolving Loans.
(2) The Term Loan shall bear interest as follows:
(a) If a Base Rate Loan, then at the sum of the Base Rate
PLUS the Base Rate Margin applicable to the Term Loan.
(b) If a LIBOR Loan then at the sum of the LIBOR PLUS the
LIBOR Margin applicable to the Term Loan.
"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
7
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 Agent announced from time to time by any of Bankers Trust Company,
The Chase Manhattan Bank or Citibank, N.A. (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 MARGIN" shall mean (i) as of the Closing Date, 1.50%
per annum, and (ii) thereafter, on August 1, 1999 and as of the first day of
each October, January, April and July thereafter of each year (each, an
"Adjustment Date"), the Base Rate Margin shall be adjusted, if necessary, to the
applicable percent per annum set forth in the pricing table below opposite the
Total Indebtedness to Pro Forma EBITDA Ratio calculated as of the last day of
the most recently completed calendar month prior to the applicable Adjustment
Date (the "Determination Date").
"LIBOR" means, for each Interest Period, a rate equal to: (a) the
rate of interest determined by Agent 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 or Citibank,
N.A. 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.
"LIBOR MARGIN" shall mean (i) as of the Closing Date, 2.75% per
annum, and (ii) thereafter on each Adjustment Date, the LIBOR Margin shall be
adjusted, if necessary, to the applicable percent per annum set forth in the
pricing table below opposite the Total Indebtedness to Pro Forma EBITDA ratio
calculated as of the most recent Determination Date.
"TOTAL INDEBTEDNESS TO PRO FORMA EBITDA RATIO" means, as of
any Determination Date, the ratio of (i) the sum of (a) the average daily
principal balance of the Revolving Loans for the three consecutive calendar
months ending on the Determination Date, PLUS (b) the outstanding principal
balance of the Term Loan as of the Determination Date PLUS
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(c) all other Indebtedness of the Borrower and its Subsidiaries on a
consolidated basis as of the Determination Date ("TOTAL INDEBTEDNESS"), to (ii)
Pro Forma EBITDA (calculated as illustrated on Exhibit 4.6(D)) for the
immediately preceding twelve calendar month period of the Borrower ending on the
Determination Date.
PRICING TABLE
Base Rate Margin LIBOR Margin
Total Indebtedness ------------------- -------------------
to Pro Forma EBITDA Revolving Loans and Revolving Loans and
Ratio Term Loan Term Loan
------------------- ------------------- -------------------
Greater than or equal to 1.75% 3.00%
5.50:1
Greater than or equal to 1.50% 2.75%
4.75:1 but less than 5.50:1
Greater than or equal to 1.25% 2.50%
4.00:1 but less than 4.75:1
Greater than or equal to 1.00% 2.25%
3:25:1 but less than 4.00:1
Less than 3.25:1 0.75% 2.00%
If Borrower shall fail to deliver a Compliance Certificate by the
date required pursuant to subsection 4.6(D) or a Pricing Certificate by the date
required pursuant to Section 4.6(B), effective as of the tenth Business Day
following the date on which such Compliance Certificate or Pricing Certificate
was due, each applicable Base Rate Margin and each applicable LIBOR Margin shall
be conclusively presumed to equal the highest applicable Base Rate Margin and
the highest applicable LIBOR Margin specified in the pricing table set forth
above until the date of delivery of the Compliance Certificate.
Each LIBOR Loan may be obtained for a one, two, three or six month
period (each being an "Interest Period"). With respect to all LIBOR Loans: (a)
the Interest Period will commence on the date that the LIBOR Loan is made or the
date on which a Base Rate Loan is converted into a LIBOR Loan, as applicable, or
in the case of immediately successive Interest Periods, each successive Interest
Period shall commence on the day on which the next preceding Interest Period
expires, (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 for
Revolving Loans shall extend beyond the date set forth in clause (c) of the
definition of the term "Expiry Date" and (d) no Interest Period for any portion
of the Term Loan shall extend beyond the date of the final Scheduled Installment
thereof.
(B) COMMITMENT FEE. From the Closing Date, Borrower shall pay
Agent, for the benefit of all Lenders committed to make Revolving Loans (based
upon their respective Pro
9
Rata Shares), a fee in an amount equal to (1) (a) the Revolving Loan Commitment
LESS (b) the sum of (i) the average daily balance of the Revolving Loans PLUS
(ii) the average daily aggregate amount of outstanding Risk Participation
Liability, in each case during the preceding quarter (except in the case of the
first such payment which shall be computed for the period from the Closing Date
to the first Adjustment Date) (such remainder being herein referred to as the
"Unutilized Commitment"), MULTIPLIED BY 0.50% per annum. Such fee is to be paid
in arrears on each Adjustment Date.
(C) RISK PARTICIPATION FEE. From the Closing Date, Borrower shall
pay Agent, for the benefit of all Lenders committed to make Revolving Loans
(based upon their respective Pro Rata Shares), a fee for each Lender Letter of
Credit and each Risk Participation Agreement from the date of issuance to the
date of termination equal to the average daily aggregate amount of outstanding
Risk Participation Liability multiplied by the LIBOR Margin (calculated on a per
annum basis) then applicable to the Revolving Loans. Such fee is to be paid in
arrears on each Adjustment Date. Borrower shall also reimburse Agent for any and
all fees and expenses paid by Agent to the issuer of any letter of credit that
is supported by a Risk Participation Agreement.
(D) COMPUTATION OF INTEREST AND RELATED FEES. Interest on all
Loans and all other Obligations and any 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 and the first day of an Interest Period with
respect to a LIBOR Loan shall be included in the calculation of interest. The
date of payment of a Base Rate Loan and the last day of an Interest Period with
respect to a LIBOR Loan shall be excluded from the calculation of interest. If a
Loan is repaid on the same day that it is made, one (1) days' interest shall be
charged. Interest on all Base Rate Loans is payable in arrears on each
Adjustment Date and on the maturity of such Loans, whether by acceleration or
otherwise. Interest on LIBOR Loans shall be payable on the last day of the
applicable Interest Period, unless the Interest Period is greater than three (3)
months, in which case interest will be payable on the last day of each three (3)
month interval. In addition, interest on LIBOR Loans is due on the maturity of
such Loans, whether by acceleration or otherwise.
(E) DEFAULT RATE OF INTEREST. At the election of Agent or
Requisite Lenders, after the occurrence of an Event of Default and for so long
as it continues, the Loans and other Obligations (including, to the extent
permitted by applicable law, interest on past due interest, but excluding
interest not yet due and payable) shall bear interest at a rate that is two
percent (2%) in excess of the rates otherwise payable under this Agreement.
Furthermore, during any period in which any Event of Default is continuing, as
the Interest Periods for LIBOR Loans then in effect expire, such Loans shall be
converted into Base Rate Loans and the LIBOR election will not be available to
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.
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(G) LIBOR RATE ELECTION. All Loans made on the Closing Date shall
be Base Rate Loans and remain so for three (3) days. Borrower may request that
Revolving Loans to be made be LIBOR Loans, that outstanding portions of the Term
Loan be converted to LIBOR Loans and that all or any portion of a LIBOR Loan be
continued as a LIBOR Loan upon expiration of the applicable Interest Period. Any
such request will be made by submitting a LIBOR Loan request in the form of
Exhibit 1.2(G). Once given, a LIBOR 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 Loan request submitted to Agent not less than three
(3) Business Days prior to the end of such Interest Period, the LIBOR Loan then
maturing shall be automatically converted to a Base Rate Loan. There may be no
more than six (6) LIBOR Loans outstanding at any one time. Loans which are not
the subject of a LIBOR Loan request shall be Base Rate Loans. Agent will notify
Lenders, by telephonic or facsimile notice, of each LIBOR Loan request received
by Agent not less than two (2) Business Days prior to the first day of the
Interest Period of the LIBOR Loan requested thereby.
1.3 OTHER FEES AND EXPENSES.
(A) CERTAIN FEES. Borrower shall pay to Heller, individually, on
the Closing Date and on each anniversary thereof, the fees specified in that
certain letter agreement dated April 9, 1999 between Borrower and Heller.
(B) LIBOR BREAKAGE FEE. Upon (i) any failure by Borrower in making
any borrowing of, conversion into or continuation of any LIBOR Loan following
Borrower's delivery to Agent of any LIBOR Loan request in respect thereof or
(ii) any payment of a LIBOR Loan on any day that is not the last day of the
Interest Period applicable thereto (regardless of the source of such prepayment
and whether voluntary, by acceleration or otherwise), Borrower shall pay Agent,
for the benefit of all Lenders, an amount (the "LIBOR Breakage Fee") equal to
the amount of any losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) in connection with the
re-employment of such funds) that any Lender may sustain as a result of such
failure or such payment. For purposes of calculating amounts payable to a Lender
under this subsection, each Lender shall be deemed to have actually funded its
relevant LIBOR Loan through the purchase of a deposit bearing interest at the
LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a
maturity and repricing characteristics comparable to the relevant Interest
Period; provided, however, that each Lender may fund each of its LIBOR Loans in
any manner it sees fit, and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this subsection.
(C) EXPENSES AND ATTORNEYS FEES. Borrower agrees to promptly pay
all reasonable fees, costs and expenses (including those of attorneys) incurred
by Agent in connection with any matters contemplated by or arising out of the
Loan Documents, in connection with the examination, review, due diligence
investigation, documentation, negotiation, closing and syndication of the
transactions contemplated herein and in connection with the continued
administration of the Loan Documents including any amendments, modifications and
waivers.
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Borrower agrees to promptly pay all reasonable fees, costs and expenses incurred
by Agent and Lenders in connection with any action to enforce any Loan Document
or to collect any payments due from Borrower or any other Loan Party. All fees,
costs and expenses for which Borrower is responsible under this subsection
1.3(C) shall be deemed part of the Obligations when incurred, payable in
accordance with the final two sentences of subsection 1.4 and secured by the
Collateral.
1.4 PAYMENTS. All payments by Borrower of the Obligations shall be
made in same day funds and delivered to Agent, for the benefit of Agent and
Lenders, as applicable, by wire transfer to the following account or such other
place as Agent 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 Cherokee International, LLC
Borrower shall receive credit on the day of receipt for funds received by Agent
by 1:00 p.m. Chicago time. In the absence of timely 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 Lenders to make Revolving Loans, on the
basis of their Pro Rata Shares, for the payment of Scheduled Installments,
interest, commitment fees, Risk Participation Liability fees, LIBOR Breakage
Fees and Risk Participation Liability payments. Prior to an Event of Default,
other fees, costs and expenses (including those of attorneys) reimbursable to
Agent pursuant to subsections 1.3(A) and (C) or elsewhere in any Loan Document
may be debited to the Revolving Loan after fifteen (15) days notice from Agent
to Borrower. After the occurrence of an Event of Default, no notice will be
required.
1.5 PREPAYMENTS.
(A) VOLUNTARY PREPAYMENT OF TERM LOAN. At any time, Borrower may
prepay the Term Loan, in whole or in part, but with LIBOR Breakage Fees, if
applicable. Payments shall be applied in accordance with subsection 1.5(E) or as
otherwise may be agreed by Requisite Lenders.
(B) PREPAYMENTS FROM EXCESS CASH FLOW. Within one hundred thirty
(130) days after the end of each of its fiscal years, Borrower shall prepay the
Term Loan in an amount equal
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to seventy five percent (75%) of the Excess Cash Flow for such fiscal year
determined pursuant to the calculation on Exhibit 1.5(B) provided that, if the
Total Indebtedness to EBITDA Ratio for such fiscal year (calculated as specified
in Section 1.2(A) on the last day of such fiscal year) is less than 4.00 to
1.00, then said annual mandatory prepayment requirement shall be reduced to 50%
of said Excess Cash Flow. The calculation shall be based on the audited
financial statements for Borrower. The payments shall be applied in accordance
with subsection 1.5(E).
(C) PREPAYMENTS FROM ASSET DISPOSITIONS. Immediately upon receipt
of the Net Proceeds in excess of $1,000,000 for any single transaction or series
of related transactions, Borrower shall repay the outstanding principal balance
of the Term Loan by the amount of such Net Proceeds. In lieu of prepayment of
the Term Loan Borrower or any Subsidiary may elect to reinvest said Net Proceeds
of such Asset Disposition, within one year, in productive assets of a kind then
used or usable in the business of Borrower and its Subsidiaries. If Borrower
does not intend to so reinvest such Net Proceeds or if the period set forth in
the immediately preceding sentence expires without Borrower having reinvested
such Net Proceeds, Borrower shall prepay the Term Loan in an amount equal to
said Net Proceeds (or the remaining portion not so reinvested). The payments
shall be applied in accordance with subsection 1.5(E).
(D) PREPAYMENT FROM ISSUANCE OF SECURITIES. Immediately upon the
receipt by Borrower or any of its Subsidiaries of the proceeds of the issuance
of equity securities (other than (1) proceeds of the issuance of equity
securities received on or before the Closing Date, (2) proceeds from the
issuance of equity securities to members of the management of Borrower and per
option and other employee plans (not to exceed ten percent (10%) of the
membership interests of Borrower) and (3) proceeds of the issuance of equity
securities to Borrower or any Subsidiary of Borrower permitted by Section 3.3
hereof), Borrower shall prepay the Term Loan in an amount equal to such proceeds
net of underwriting discounts and commissions and other reasonable costs
associated therewith, provided that before August 30, 2002, the Borrower may use
the net proceeds from the initial issuance of its equity securities which are
registered pursuant to the Securities Act of 1933, to prepay in the aggregate up
to $35,000,000 of the Subordinated Notes if (x) such prepayment occurs within
120 days of the issuance of such securities (y) no Default or Event of Default
has occurred and its continuing, and (z) no Default or Event of Default will
occur as a result of the making of such prepayment. Notwithstanding the
foregoing no such prepayment shall be required if the proceeds of such issuance
are used simultaneously to effect a Permitted Acquisition. The payments shall be
applied in accordance with subsection 1.5(E).
(E) APPLICATION OF PROCEEDS. With respect to the prepayments
described in subsections 1.5(A), 1.5(B), 1.5(C) and 1.5(D), such prepayments
shall first be applied in payment of the Term Loan pro rata against all
remaining Scheduled Installments.
1.6 MATURITY. All of the Obligations shall become due and payable
as otherwise set forth herein, but in any event, all of the remaining
Obligations shall become due and payable on the date set forth in clause (c) of
the definition of the term "Expiry Date." Until all
13
Obligations have been fully paid and satisfied, the Revolving Loan Commitment
has been terminated and all Lender Letters of Credit and Risk Participation
Agreements have been terminated, Agent, for the benefit of Agent and Lenders,
shall be entitled to retain the security interests in the Collateral granted
under the Security Documents and the ability to exercise all rights and remedies
available to them under the Loan Documents and applicable laws; provided,
however, that the security interests of the Agent, for the benefit of Agent and
Lenders, in the Collateral may be released prior to such time in accordance with
Section 8.2(H).
1.7 LOAN ACCOUNTS. Agent will maintain loan account records for
(a) all Loans, interest charges and payments thereof, (b) all Risk Participation
Liability, (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 Lenders,
PROVIDED that any failure by Agent to so record shall not limit or affect the
Borrower's obligation to pay. Within five (5) days of the first of each month,
Agent 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 sixty (60) days after receipt of the statement or the
statement will be presumptive evidence of the Obligations absent manifest error.
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 Agent shall have the continuing exclusive right to apply
and reapply payments in any manner it deems appropriate.
1.8 CAPITAL ADEQUACY AND OTHER ADJUSTMENTS.
(A) In the event that any Lender shall have determined that the
adoption after the date hereof of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by any
Lender or any corporation controlling such Lender with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) from any central bank or governmental agency or
body having jurisdiction does or shall have the effect of increasing the amount
of capital, reserves or other funds required to be maintained by such Lender or
any corporation controlling such Lender and thereby reducing the rate of return
on such Lender's or such corporation's capital as a consequence of its
obligations hereunder, then Borrower shall from time to time within fifteen (15)
days after notice and demand from such Lender (together with the certificate
referred to in the next sentence and with a copy to Agent) pay to Agent, for the
account of such Lender, additional amounts sufficient to compensate such Lender
for such reduction. A certificate as to the amount of such cost and showing the
basis of the computation of such cost submitted by such Lender to Borrower and
Agent shall, absent manifest error, be final, conclusive and binding for all
purposes.
In the case of any LIBOR Loan or requested LIBOR Loan affected by
the circumstances described in the immediately preceding paragraph, the Borrower
may, if any
14
LIBOR Loan is then outstanding, require the affected Lender to convert each such
LIBOR Loan into a Base Rate Loan at the end of the applicable Interest Period or
such earlier time as may be required by law, in each case by giving the Agent
notice thereof on the Business Day that the Borrower was notified by the Lender
pursuant to the immediately preceding paragraph; PROVIDED, HOWEVER, that all
lenders whose LIBOR Loans are affected by the circumstances described in the
immediately preceding paragraph shall be treated in the same manner under this
paragraph.
(B) CHANGES IN LAWS. In the event that, subsequent to the Closing
Date, (1) any changes in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (2) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or (3)
compliance by Agent or any Lender with any request or directive (whether or not
having the force of law) from any governmental authority, agency or
instrumentality:
(a) does or shall subject Agent or any Lender to any tax of
any kind whatsoever with respect to this Agreement, the other Loan
Documents or any Loans made or Lender Letters of Credit or Risk
Participation Agreements issued hereunder, or change the basis of
taxation of payments to Agent or such Lender of principal, fees, interest
or any other amount payable hereunder (except for net income taxes, or
franchise taxes imposed in lieu of net income taxes, imposed generally by
federal, state, local or foreign taxing authorities with respect to
interest or commitment or other fees payable hereunder or changes in the
rate of tax on the overall net income of Agent or such Lender); or
(b) does or shall impose on Agent or any Lender any other
condition or increased cost in connection with the transactions
contemplated hereby or Participations herein;
and the result of any of the foregoing is to increase the cost to Agent or any
such Lender of issuing any Lender Letter of Credit or Risk Participation
Agreement or making or continuing any Loan hereunder, as the case may be, or to
reduce any amount receivable hereunder, then, in any such case, Borrower shall
promptly pay to Agent or such Lender, upon its demand, any additional amounts
necessary to compensate Agent or such Lender, on an after-tax basis, for such
additional cost or reduced amount receivable, as determined by Agent or such
Lender with respect to this Agreement or the other Loan Documents. If Agent or
such Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify Borrower of the event by reason of which
Agent or such Lender has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent or such
Lender to Borrower and Agent shall, absent manifest error, be final, conclusive
and binding for all purposes.
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1.9 TAXES.
(A) NO DEDUCTIONS. Any and all payments or reimbursements made
hereunder or under the Notes shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto (all such taxes, levies,
imposts, deductions, charges or withholdings and all liabilities with respect
thereto excluding such taxes imposed on net income (or franchise taxes imposed
in lieu of net income taxes), herein "Tax Liabilities"), excluding, however,
taxes imposed on the net income of a Lender or Agent. If Borrower shall be
required by law to deduct any such amounts from or in respect of any sum payable
hereunder to any Lender or Agent, then the sum payable hereunder shall be
increased as may be necessary so that, after making all required deductions,
such Lender or Agent receives an amount equal to the sum it would have received
had no such deductions been made ("Additional Amounts").
(B) Each Lender (including for purposes of this Section 1.9, a
Person acquiring a participation in this Agreement) that is not a United States
person within the meaning of Section 7701 of the IRC (a "FOREIGN LENDER") shall
deliver to Borrower and Agent, no later than the Closing Date (or if such
Foreign Lender becomes a party (or a participant) to this Agreement after the
Closing Date, the date upon which the Foreign Lender becomes a party hereto),
two (2) complete, duly executed original IRS Forms 4224 (or IRS Forms W-8ECI) or
IRS Form 1001 (or IRS Forms W-8BEN), or any successors thereto, indicating that
such Foreign Lender is on the date of delivery thereof entitled to receive any
and all payments from Borrower hereunder or under the Notes free from
withholding of United States federal income tax and shall, from time to time,
deliver updated or corrected IRS Forms 4224 (or IRS Forms W-8ECI) or IRS Forms
1001 (or IRS Forms W-8BEN), or any successor forms thereto, to Borrower and
Agent to the extent and in the manner required under United States federal tax
law. Borrower shall not be required to pay any Additional Amounts under this
Section 1.9 as a result of a Foreign Lender's failure to comply with the
requirements under this Section 1.9.
(C) Each Lender agrees that it will (i) take all reasonable
actions requested by Borrower that are without cost, risk or an undue
administrative burden to such Lender to maintain all exemptions, if any,
available to it from withholding taxes (whether available by treaty or existing
administrative waiver) and (ii) to the extent reasonable and without cost, risk
or an undue administrative burden to it, otherwise cooperate with Borrower to
minimize any amounts payable by Borrower under this Section 1.9, including,
without limitation, designating another lending office. If the Borrower pays any
Tax Liability (including penalties and interest with respect thereto) it shall
deliver official tax receipts or certified copies thereof, evidencing that
payment to the Lender or Agent on whose account such withholding was made (with
a copy to the Agent if not the recipient of the original) on or before the
thirtieth day after payment. If any Lender or the Agent determines that it has
received or been granted a credit against or relief or remission for, or
repayment of, any taxes paid or payable by it because of any taxes paid or
payable by it directly attributable to any taxes, penalties or interest paid by
the Borrower and evidenced by such a tax receipt, such Lender or Agent shall, to
the extent it can do so without prejudice to the
16
retention of the amount of such credit, relief, remission or repayment, pay to
the Borrower such amount as such Lender or Agent determines is attributable to
such deduction or withholding and which will leave such Lender or Agent (after
such payment) in no better or worse position than it would have been in if the
Borrower had not been required to make such deduction or withholding. Nothing in
this Agreement shall interfere with the right of each Lender and Agent to
arrange its tax affairs in whatever manner it thinks fit nor oblige any Lender
or Agent to disclose any information relating to its tax affairs or any
computations in connection with such taxes.
1.10 OPTIONAL PREPAYMENT/REPLACEMENT OF LENDERS. Within fifteen
(15) days after receipt by Borrower of written notice and demand from any Lender
for payment pursuant to subsection 1.8 or 1.9 or, as provided in subsection
8.3(C), in the case of certain refusals by any Lender to consent to certain
proposed amendments, modifications, terminations or waivers with respect to this
Agreement that have been approved by Requisite Lenders (any such Lender
demanding such payment or refusing to consent being referred to herein as an
"Affected Lender"), Borrower may, at its option, notify Agent and such Affected
Lender of its intention to do one of the following:
(A) Borrower may obtain, at Borrower's expense, a replacement
Lender ("Replacement Lender") for such Affected Lender, which Replacement Lender
shall be reasonably satisfactory to Agent. In the event Borrower obtains a
Replacement Lender that will refinance all outstanding Obligations owed to such
Affected Lender and assume its Revolving Loan Commitment hereunder within thirty
(30) days following notice of Borrower's intention to do so, the Affected Lender
shall sell and assign all of its rights and delegate all of its obligations
under this Agreement to such Replacement Lender in accordance with the
provisions of subsection 8.1, PROVIDED that Borrower has reimbursed such
Affected Lender for any administrative fee payable pursuant to subsection 8.1
and, in any case where such replacement occurs as the result of a demand for
payment pursuant to subsection 1.8 or 1.9, paid all amounts required to be paid
to such Affected Lender pursuant to subsection 1.8 or 1.9 through the date of
such sale and assignment; or
(B) Borrower may prepay in full all outstanding Obligations owed
to such Affected Lender and terminate such Affected Lender's Pro Rata Share of
the Revolving Loan Commitment, in which case the Revolving Loan Commitment will
be reduced by the amount of such Pro Rata Share. Borrower shall, within ninety
(90) days following notice of its intention to do so, prepay in full all
outstanding Obligations owed to such Affected Lender (including, in any case
where such replacement occurs as the result of a demand for payment for
increased costs, such Affected Lender's increased costs for which it is entitled
to reimbursement under this Agreement through the date of such prepayment), and
terminate such Affected Lender's obligations under the Revolving Loan
Commitment.
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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 (other than
contingent indemnification obligations to the extent no unsatisfied claim giving
rise thereto has been asserted) and termination of all Lender Letters of Credit
and Risk Participation Agreements, unless Requisite Lenders shall otherwise give
their prior written consent, Borrower shall perform and comply with, and shall
cause each of the other Loan Parties to perform and comply with, all covenants
in this Section 2 applicable to such Person.
2.1 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. Borrower
will (a) 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 all Contractual Obligations of Borrower or such
Subsidiary, as applicable, other than those laws, rules, regulations, orders and
provisions of such Contractual Obligations the noncompliance with which could
not be reasonably expected to have, either individually or in the aggregate, a
Material Adverse Effect, and (b) maintain or obtain and will cause each of its
Subsidiaries to maintain or obtain, all licenses, qualifications and permits now
held or hereafter required to be held by Borrower and its Subsidiaries, for
which the loss, suspension, revocation or failure to obtain or renew, could
reasonably be expected to have 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 in a manner
which stays enforcement thereof and if appropriate expense provisions have been
recorded in conformity with GAAP. 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 other than those laws,
rules, regulations, orders and provisions of such Contractual Obligations, the
noncompliance with which could not be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect and (ii) maintains
and each of its Subsidiaries maintains all licenses, qualifications and permits
referred to above.
"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 Transactions Documents.
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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. Borrower will maintain or cause to be maintained, with financially
sound and reputable insurers, public liability and property damage 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 similarly situated and in amounts reasonably acceptable to Agent and
will deliver evidence thereof to Agent. Borrower will maintain business
interruption insurance providing coverage for a period of at least six months
and in an amount not less than $20,000,000. Borrower shall cause Agent, pursuant
to endorsements and/or assignments in form and substance reasonably satisfactory
to Agent, to be named as lender's loss payee in the case of casualty insurance,
additional insured in the case of all liability insurance and assignee in the
case of all business interruption insurance, in each case for the benefit of
Lenders. 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. In the event Borrower fails to provide Agent with
evidence of the insurance coverage required by this Agreement, Agent may, upon
providing reasonable notice to Borrower, purchase insurance at Borrower's
expense to protect Agent's interests in the Collateral in such amounts not to
exceed the coverage specified herein. The coverage purchased by Agent may not
pay any claim made by Borrower or any claim that is made against Borrower in
connection with the Collateral. Borrower may later cancel any insurance
purchased by Agent, but only after providing Agent with evidence that Borrower
has obtained insurance as required by this Agreement. If Agent purchases
insurance for the Collateral, Borrower will be responsible for the costs of that
insurance, including interest and other charges imposed by Agent in connection
with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may be
added to the Obligations. The costs of the insurance may be more than the cost
of insurance Borrower is able to obtain on its own.
(B) Borrower will maintain or cause to be maintained not less than
$10,000,000 of key man life insurance on the life of Ganpat I. Patel, with an
insurer acceptable to the Agent, naming the Borrower as beneficiary. If Borrower
notifies the Agent that such insurance coverage has become commercially
unreasonable, the Agent shall be given the opportunity to obtain replacement
insurance for the account of Borrower. If no commercially reasonable replacement
insurance can be obtained, than either (i) the Agent shall reduce the amount of
required insurance so that the cost thereof is once again commercially
reasonable, or (ii) in the absence of a reduction pursuant to clause (i), the
Borrower's obligation to maintain such insurance shall be suspended until such
time as said insurance once again is commercially reasonable.
2.3 INSPECTION; LENDER MEETING. Borrower shall permit any
authorized representatives of Agent to visit and inspect any of the properties
of Borrower or any of its
19
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and business with its and their officers and certified public
accountants, at such reasonable times during normal business hours upon
reasonable notice and as often as may be reasonably requested, provided,
however, that unless an Event of Default shall have occurred and be continuing,
such an inspection shall be at the expense of Agent and Lenders. Representatives
of each Lender will be permitted to accompany representatives of Agent during
each visit, inspection and discussion referred to in the immediately preceding
sentence. Without in any way limiting the foregoing, Borrower will participate
and will cause its key management personnel to participate in a meeting with
Agent and Lenders once during each year in the absence of any Default or Event
of Default and at Lenders' request from time to time following the occurrence
and during the continuance of a Default or an Event of Default, which meetings
shall be held at such time and such place as may be reasonably requested by
Agent.
2.4 CORPORATE EXISTENCE. 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) In addition to the requirements of Section 2.8 hereof,
Borrower shall and shall cause each Loan Party to, from time to time, execute
such guaranties, financing statements, documents, security agreements and
reports as Agent or Requisite Lenders at any time may reasonably request to
evidence, perfect or otherwise implement the guaranties and security for
repayment of the Obligations contemplated by the Loan Documents.
(B) At Agent's or Requisite Lenders' request, Borrower shall cause
any Subsidiaries of Borrower promptly to guaranty the Obligations and to grant
to Agent, for the benefit of Agent and Lenders, a perfected, first priority
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 Agent.
(C) Borrower shall from time to time take all actions necessary to
cause its present and future members or other equity holders to grant to the
Agent, for the benefit of Agent and Lenders, a perfected first priority security
interest in its membership interests (or other equity interests of Borrower)
pursuant to documentation substantially similar to the Loan Documentation
executed by the Members concurrently herewith with such modifications as are
reasonably requested by Agent, provided that the foregoing shall not be deemed
to require a pledge of any equity interests (i) granted pursuant to any employee
stock option plan or employment agreement (not to exceed ten percent (10%) of
the membership interests of Borrower) or (ii) issued pursuant to the initial
issuance of its equity securities which are registered pursuant to the
Securities Act of 1933.
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2.6 ENVIRONMENTAL MATTERS. Borrower will, and will cause its
Subsidiaries to: (1) obtain and maintain all operating licenses and permits
required by environmental authorities; (2) begin, continue and complete any
remediation activities as required by any environmental authorities; (3) store
or dispose of all hazardous materials in accordance with applicable
environmental laws and regulations; and (4) comply with all environmental laws;
unless the Borrower's failure to comply with the foregoing could not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.
2.7 LICENSES AND PERMITS. Borrower will, and will cause its
Subsidiaries to obtain and maintain (1) all licenses and permits and (2) all
registrations, filings and issuances of Intellectual Property required in
connection with the business of Borrower and its Subsidiaries in full force and
effect unless the Borrower's or its Subsidiaries' failure to obtain and maintain
any such licenses, permits, registrations, filings and issuances in full force
and effect could not, individually or in the aggregate, be reasonably expected
to have a Material Adverse Effect.
2.8 SUBSIDIARY SECURITY.
(A) On the Closing Date, with regard to any Domestic Subsidiary in
existence on the Closing Date, and within thirty (30) days of the Borrower
creating or acquiring or otherwise having any other Domestic Subsidiary, the
Borrower will cause such Domestic Subsidiary to provide and grant to the Agent,
for the benefit of the Lenders, a (i) guaranty of the Obligations, and (ii)
first priority security interest in the real, personal and mixed property of
such Domestic Subsidiary, securing the Obligations and such Domestic
Subsidiary's obligations under such guaranty.
(B) On the Closing Date, with regard to any Foreign Subsidiary in
existence on the Closing Date, and within thirty (30) days of the Borrower
creating or acquiring or otherwise having any other Foreign Subsidiary, the
Borrower will provide, or cause to be provided, to the Agent, for the benefit of
the Lenders, as security for the Obligations a perfected, first priority pledge
of 65% of the capital stock (or similar equity interest) of each Foreign
Subsidiary. If Borrower or any Domestic Subsidiary can at any time pledge more
than 66 2/3rds of the capital stock of any Foreign Subsidiary as security for
the Obligations, or a Foreign Subsidiary can (i) pledge any notes issued to it
by the Borrower or any other Subsidiary, (ii) grant a security interest on its
assets to the Agent for the benefit of the Lenders to secure the Obligations, or
(iii) guaranty the Obligations, in each case without causing the undistributed
earnings of such Foreign Subsidiary (as determined for Federal income tax
purposes) to be treated as a deemed dividend to the Borrower for Federal income
tax purposes or without resulting in any other material adverse tax
consequences, then Borrower, or such Domestic Subsidiary, as applicable, shall
make such pledge and/or such Foreign Subsidiary shall execute and deliver
documents sufficient to grant such security interest and/or make such guaranty,
as applicable. All grants of security interests, pledges and guaranties
contemplated by this Section 2.8 shall be made pursuant to documentation in form
and substance reasonably satisfactory to the Agent.
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2.9 POST-CLOSING ITEMS. Within thirty (30) days of the Closing
Date the Borrower will deliver to the Agent the items numbered 2 and 3 in the
definition of Post-Closing Documents and within sixty (60) days of the Closing
Date the Borrower will deliver to the Agent the items numbered 1 and 4 in the
definition of Post-Closing Documents.
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 (other than
contingent indemnification obligations to the extent no unsatisfied claim giving
rise thereto has been asserted) and termination of all Lender Letters of Credit
and Risk Participation Agreements, unless Requisite Lenders shall otherwise give
their prior written consent, Borrower shall perform and comply with, and shall
cause each of the other Loan Parties to perform and 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, or otherwise
become or remain directly or indirectly liable with respect to any Indebtedness
(other than pursuant to a Contingent Obligation) except:
(A) the Obligations;
(B) Indebtedness owing: (x) by the Borrower to a Subsidiary; (y)
by a Domestic Subsidiary to the Borrower or a Subsidiary; and (z) by a Foreign
Subsidiary to the Borrower or any Domestic Subsidiary in an aggregate amount not
to exceed $7,500,000; PROVIDED, HOWEVER, that upon the request of Agent at any
time, such Indebtedness shall be evidenced by promissory notes having terms
reasonably satisfactory to Agent and Requisite Lenders, the sole originally
executed counterparts of which shall be delivered to Agent, for the benefit of
Agent and Lenders, as security for the Obligations;
(C) Indebtedness of Borrower evidenced by the Subordinated Notes
in the principal amount of $100,000,000 (provided that any such Indebtedness
repaid may not be reborrowed);
(D) Indebtedness not to exceed $7,500,000 in the aggregate at any
time outstanding secured by purchase money Liens or incurred with respect to
capital leases;
(E) unsecured Indebtedness not to exceed $5,000,000 in the
aggregate at any time outstanding which is subordinated to the Obligations in a
manner satisfactory to Agent and Requisite Lenders;
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(F) Indebtedness described on Schedule 3.1, and any extensions,
renewals or refinancings of such existing Indebtedness so long as (i) the
principal amount of such Indebtedness after such renewal, extension or
refinancing shall not exceed the principal amount of such Indebtedness which was
outstanding immediately prior to such renewal, extension or refinancing and (ii)
such Indebtedness shall not be secured by any assets other than assets securing
such indebtedness, if any, prior to such renewal, extension or refinancing;
(G) Indebtedness constituting obligations to reimburse worker's
compensation insurance companies for claims paid by such companies on Borrower's
or any of its Subsidiaries' behalf in accordance with the policies issued to
Borrower or such Subsidiary of Borrower;
(H) Indebtedness secured by the Liens permitted by clauses (1) and
(2) of Section 3.2(A);
(I) Indebtedness of a Subsidiary of Borrower acquired after the
Closing Date and Indebtedness of a Person merged or consolidated with or into
Borrower or a Subsidiary of Borrower after the Closing Date, which Indebtedness
in each case exists at the time of such acquisition, merger or consolidation and
was not created or incurred in contemplation of such acquisition, merger or
consolidation and where such acquisition, merger or consolidation is not
prohibited under this Agreement; and
(J) Indebtedness in addition to the Indebtedness described in the
foregoing clauses (A) through (I) in an aggregate amount not exceeding
$2,000,000 at any time outstanding.
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 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 or payable;
(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 diligently
contested in good faith in a manner which stays enforcement of such
Liens, provided that appropriate provisions shall have been established
therefor in accordance with GAAP and the aggregate amount of
liabilities secured by such Liens does not exceed $1,000,000 at any
time;
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(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 and capital
leases; PROVIDED that: (a) the purchase, construction or refurbishing
of the asset subject to any such Lien is permitted under subsection
4.1; (b) the Indebtedness secured by any such Lien is permitted under
subsection 3.1; and (c) any such Lien encumbers only the asset so
purchased, leased, constructed or refurbished;
(6) any attachment or judgment Lien not constituting
an Event of Default under subsection 6.1(I);
(7) 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;
(8) any interest or title of a lessor or sublessor
under any lease permitted by subsection 4.2;
(9) Liens in favor of Agent, for the benefit of Agent and
Lenders;
(10) Liens existing on the date hereof and renewals
and extensions thereof, which Liens are set forth on Schedule
3.2(A)(10) hereto;
(11) Liens on the fixed or capital assets of a
corporation which becomes a Subsidiary after the date hereof; PROVIDED
that (i) such Liens existed at the time such corporation became a
Subsidiary and were not created in anticipation thereof, (ii) any such
Lien is not spread to cover any additional assets of such corporation
after the time such corporation becomes a Subsidiary, (iii) the
obligations secured thereby would not, when aggregated with existing
Indebtedness, cause a violation of Section 3.1(D), and (iv) the
obligations secured thereby are not increased;
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(12) Liens against equipment arising from
precautionary UCC financing statement filings regarding operating
leases entered into by Borrower or another Loan Party in the ordinary
course of business;
(13) nonconsensual Liens in favor of banking
institutions arising as a matter of law and encumbering the deposits
(including right of set-off) held by such banking institutions in the
ordinary course of business; and
(14) Liens in favor of customs and revenue
governmental authorities arising by operation of law.
(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) prohibiting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter acquired,
except pursuant to (i) licenses and leases entered into in the ordinary course
of business or (ii) agreements relating to capital leases or purchase money
indebtedness permitted under this Agreement.
(C) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWER.
Except as provided herein, 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,
except pursuant to (i) non-assignment provisions of licenses and leases entered
into in the ordinary course of business, (ii) agreements relating to capital
leases or purchase money indebtedness permitted hereunder, (iii) requirements
imposed by applicable law, or (iv) encumbrances or restrictions imposed pursuant
to agreements entered into for the sale or disposition of capital stock or
assets, to the extent such sale or disposition is not prohibited under this
Agreement.
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 Investments in
Cash Equivalents; PROVIDED that such Cash Equivalents are not subject to
setoff rights;
(B) Borrower and its Subsidiaries may make intercompany loans
among themselves to the extent such Indebtedness is permitted pursuant to
subsection 3.1(B);
25
(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;
(D) Borrower and its Subsidiaries may acquire the assets or
capital stock of one or more corporations or other Persons (any such
acquisition pursuant to this clause, a "PERMITTED ACQUISITION"): (i) if
the acquisition is funded by an Acquisition Loan in accordance with
subsection 1.1(C); or (ii) if (a) each such acquisition and all
transactions related thereto shall be consummated in accordance with
applicable requirements of law, (b) the total consideration for any such
acquisition shall not exceed $15,000,000, (c) each such acquisition
shall, in the case of a Permitted Acquisition of capital stock, result in
such corporation or Person becoming a Subsidiary; and (d) each of the
conditions set forth in clauses (1), (2), (4), (7), (8), (9) and (10) of
subsection 1.1(C) shall have been satisfied with respect thereto; and in
the case of acquisitions under both clauses (i) and (ii), and without
limiting Section 2.5 hereof, Agent, for the benefit of Lenders, will (a)
be granted a first priority perfected security interest (subject only to
Permitted Encumbrances) in all assets being acquired pursuant to such
Permitted Acquisition (and, in the case of an acquisition involving the
purchase of the acquired Person's capital stock, Borrower or its
acquiring Subsidiary shall pledge a first priority perfected security
interest in all of the shares of capital stock of such acquired Person
owned by it (or, with respect to Persons organized in a jurisdiction
outside the United States, 65% of the capital stock of such acquired
Person owned by it) to Agent for the benefit of Lenders, and shall cause
such acquired Person to guarantee the Obligations and to grant to Agent,
for the benefit of Lenders, a first priority perfected security interest
(subject only to Permitted Encumbrances) in such Person's assets) and (b)
be provided such other documents and instruments as Agent shall request
to perfect or maintain the perfection of its security interest in said
assets and capital stock.
(E) Borrower and its Subsidiaries may make Investments in Domestic
Subsidiaries so long as such Domestic Subsidiary has issued the
guarantee, and granted the security interest, contemplated by Section 2.8
hereof;
(F) Borrower and its Subsidiaries may make Investments in joint
ventures in an amount not to exceed $2,000,000, in the aggregate, through
the Expiry Date.
(G) Borrower and its Subsidiaries may acquire and own Investments
of any Person received in connection with the bankruptcy or
reorganization of suppliers and customers and in connection with the
settlement of delinquent obligations of, and disputes with, customers and
suppliers arising in the ordinary course of business;
(H) Investments received in connection with Asset Dispositions or
other sales, dispositions or transfers of property not prohibited
hereunder;
26
(I) Investments existing on the Closing Date and disclosed on
Schedule 3.3;
(J) Investments of a Person that becomes a Domestic Subsidiary of
Borrower following the Closing Date or is merged or consolidated with or
into or transfers all or substantially all of its assets to or is
liquidated into Borrower or any Domestic Subsidiary of Borrower; and
(K) Investments other than those described in the foregoing
clauses (A) through (J) if the aggregate amount thereof never exceeds
$2,000,000 at any time.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Borrower or any of its Subsidiaries of any beneficial interest
in, including stock, partnership interest or other equity securities of, or
ownership interest in, any other Person; and (ii) any direct or indirect loan,
advance or capital contribution by Borrower or any of its Subsidiaries to any
other Person, including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. 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) marketable direct obligations issued
or unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition thereof;
(ii) commercial paper maturing no more than one (1) year from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; (iii)
certificates of deposit or bankers' acceptances maturing within one (1) year
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000; (iv) time deposits
maturing no more than thirty (30) days from the date of creation thereof with
commercial banks having membership in the Federal Deposit Insurance Corporation
in amounts not exceeding the lesser of $100,000 or the maximum amount of
insurance applicable to the aggregate amount of Borrower's deposits at such
institution; and (v) deposits or investments in mutual or similar funds offered
or sponsored by brokerage or other companies having membership in the Securities
Investor Protection Corporation in amounts not exceeding the lesser of $100,000
or the maximum amount of insurance applicable to the aggregate amount of
Borrower's deposits at such institution.
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:
(A) Risk Participation Liability;
27
(B) those resulting from endorsement of negotiable instruments for
collection in the ordinary course of business;
(C) those existing on the Closing Date and described in Schedule
3.4 annexed hereto;
(D) those arising under indemnity agreements to title insurers to
cause such title insurers to issue to Agent mortgagee title insurance
policies;
(E) those arising with respect to customary indemnification
obligations incurred in connection with Asset Dispositions;
(F) those incurred in the ordinary course of business with respect
to surety and appeal bonds, performance and return-of-money bonds and
other similar obligations not exceeding at any time outstanding $500,000
in aggregate liability;
(G) those incurred with respect to Indebtedness permitted by
subsection 3.1; and
(H) any other Contingent Obligation not expressly permitted by
clauses (A) through (G) above, so long as any such other Contingent
Obligations, in the aggregate at any time outstanding, do not exceed
$2,000,000.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability of that Person: (i) with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
purpose or intent of the Person incurring such liability, or the 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 or as to which that Person is
otherwise liable for reimbursement of drawings; (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; (iv) to make take-or-pay or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement, or (v) pursuant to any agreement to purchase,
repurchase or otherwise acquire any 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. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
28
thereof (assuming such Person is required to perform thereunder) as determined
by the Agent in good faith.
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 that:
(A) Borrower may make Permitted Tax Distributions and Permitted
Distributions for Pre-Closing Tax Liabilities;
(B) Wholly-owned Subsidiaries of Borrower may make Restricted
Junior Payments to Borrower or wholly-owned Subsidiaries of Borrower.
(C) Borrower may make any prepayment of the Subordinated Notes
permitted by Section 1.5(D);
(D) Borrower may make payments (but not prepayments) of scheduled
interest and principal in accordance with the terms of the Subordinated
Notes;
(E) Borrower may make distributions that are used to repurchase,
redeem or otherwise acquire for value any membership interest of the
Borrower held by any member of the Borrower's or a Subsidiary's
management pursuant to any management equity subscription agreement or
stock option agreement or similar agreement, or otherwise upon their
death, disability, retirement or termination of employment or departure
from the Management of the Borrower or any Subsidiary not in excess of
the lesser of (i) $1,000,000 in the aggregate in any twelve month period,
or (ii) $5,000,000 in the aggregate since the Closing Date; provided that
no Default or Event of Default exists at the time of any such Restricted
Junior Payment described in this paragraph (E) or would occur as a result
thereof; and
(F) Contemporaneously with the payment of a Restricted Junior
Payment allowed under clause (B) of this Section 3.5, a Subsidiary of
Borrower that is not a wholly-owned Subsidiary may make a Restricted
Junior Payment to a Person other than Borrower or a wholly-owned
Subsidiary of Borrower, provided that (i) no Default or Event of Default
exists at the time of such Restricted Junior Payment or would result
therefrom and, (ii) the Restricted Junior Payment made to such Person is
proportionate to the contemporaneous Restricted Junior Payment made under
such clause (B).
"RESTRICTED JUNIOR PAYMENT" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
or other equity security of, or ownership interest in, 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
29
acquisition for value, direct or indirect, of any shares of any class of stock
or other equity security of, or ownership interest in, Borrower or any of its
Subsidiaries now or hereafter outstanding; (iii) any payment or prepayment of
interest on, principal of, premium, if any, redemption, conversion, exchange,
purchase, retirement, defeasance, sinking fund or similar payment with respect
to, any Indebtedness subordinated to the Obligations; 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 or other equity security
of, or ownership interest in, 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 organizational documents, including
without limitation its articles of incorporation, certificates of designation
pertaining to preferred stock, by-laws, partnership agreement or members'
agreement unless required by law if any such action would have a Material
Adverse Effect; (b) enter into any transaction of merger or consolidation
except, upon not less than five (5) Business Days prior written notice to Agent,
any Subsidiary of Borrower may be merged with or into Borrower (PROVIDED that
Borrower is the surviving entity) or any other Subsidiary of Borrower; (c)
liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution)
except a Subsidiary of Borrower may liquidate wind-up or dissolve if (i) its
property is transferred to Borrower or a wholly-owned Subsidiary of Borrower and
(ii) the Loan Party acquiring such property complies with its obligations under
Section 2.5 following such transfer; or (d) acquire by purchase or otherwise all
or any substantial part of the business or assets of any other Person, other
than Permitted Acquisitions.
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 $3,000,000 in any
fiscal year of Borrower; (ii) the consideration received is at least equal to
the fair market value of such assets; (iii) the sole consideration received is
cash; (iv) the Net Proceeds of such Asset Disposition are applied as required by
subsection 1.5(C); (v) after giving effect to 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
(vi) no Default or Event of Default then exists or shall result from such Asset
Disposition.
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3.8 TRANSACTIONS WITH AFFILIATES. Except as otherwise specified
herein, 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
management, consulting, investment banking, advisory or other similar services)
with any Affiliate or with any director, officer or employee of any Loan Party,
except (a) as set forth on Schedule 3.8, (b) 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 Agent 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, (c) payment of reasonable compensation to officers and
employees for services actually rendered to Borrower or such Subsidiary; (d)
payment of reasonable and customary directors' fees and (e) transactions between
or among Borrower and wholly-owned Domestic Subsidiaries.
3.9 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 conducted by Borrower and its Subsidiaries on the Closing
Date and such other businesses as are reasonably related thereto.
3.10 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 of (i) its Indebtedness evidenced by the Subordinated Notes if the
effect of such change or amendment is to: (a) increase the interest rate on such
Indebtedness; (b) change the dates upon which payments of principal or interest
are due on such Indebtedness; (c) change any event of default or add or make
more restrictive any covenant with respect to such Indebtedness; (d) change the
prepayment provisions of such Indebtedness; (e) change the subordination
provisions thereof (or the subordination terms of any guaranty thereof); or (f)
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 Lenders or (ii) all other of its Indebtedness, if such change or
amendment materially adversely affects the rights or remedies of the Lenders.
3.11 FISCAL YEAR. Neither Borrower nor any Subsidiary of Borrower
shall change its fiscal year.
3.12 PRESS RELEASE; PUBLIC OFFERING MATERIALS. Borrower will not
and will not permit any of its Subsidiaries to disclose the name of Agent or any
Lender in any press release 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 (other than the Offering Memorandum for the
Subordinated Notes and any proxy statement related thereto), unless required by
applicable law.
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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, except as permitted by Section 3.3.
3.14 BANK ACCOUNTS. Borrower will not and will not permit any of
its Subsidiaries to establish any new bank accounts without prior written notice
to Agent and unless Agent and the bank at which the account is to be opened
enter into an agreement in form and substance satisfactory to Agent regarding
such bank account.
SECTION 4
FINANCIAL COVENANTS/REPORTING
Borrower covenants and agrees that so long as the Revolving Loan
Commitment is in effect and until payment in full of all Obligations (other than
contingent indemnification obligations to the extent no unsatisfied claim giving
rise thereto has been asserted) and termination of all Lender Letters of Credit
and Risk Participation Agreements, unless Requisite Lenders shall otherwise give
their prior written consent, Borrower shall perform and comply with, and shall
cause each of the other Loan Parties to perform and comply with, all covenants
in this Section 4 applicable to such Person.
4.1 CAPITAL EXPENDITURE LIMITS. Borrower shall not permit the
aggregate amount of all Capital Expenditures of Borrower and its Subsidiaries to
exceed (the "Capex Limit"): (i) from the Closing Date through and including
December 31, 1999, $2,100,000, (ii) for each calendar year after 1999,
$4,000,000 annually plus 10% of the amount of EBITDA for such calendar year (and
NOT on Pro Forma EBITDA) in excess of $38 million.
4.2 [INTENTIONALLY OMITTED]
4.3 FIXED CHARGE COVERAGE. Borrower shall not permit the Fixed
Charge Coverage on the last day of any fiscal quarter ending during any of the
periods set forth below to be less than the Fixed Charge Coverage set forth
below for such period.
PERIOD Minimum Fixed
Charge Coverage
Closing Date through 1.05x
12/31/99
Thereafter 1.10x
"Fixed Charge Coverage" will be calculated as illustrated on
Exhibit 4.6(D).
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4.4 TOTAL INTEREST COVERAGE. Borrower shall not permit the Total
Interest Coverage on the last day of any fiscal quarter ending during any of the
periods set forth below to be less than the Total Interest Coverage set forth
below for such period:
PERIOD Minimum Total
Interest Coverage
Closing Date through 1.80x
12/31/99
1/1/00 - 6/30/00 2.10x
7/1/00 - 12/31/00 2.25x
1/1/01 - 12/31/01 2.50x
Thereafter 2.75x
"Total Interest Coverage" will be calculated as illustrated on
Exhibit 4.6(D).
4.5 TOTAL INDEBTEDNESS TO PRO FORMA EBITDA RATIO. Borrower shall
not permit the Total Indebtedness to Pro Forma EBITDA Ratio calculated as of the
last day of any fiscal quarter for any of the periods set forth below to be
greater than the Total Indebtedness to Pro Forma EBITDA Ratio set forth below
for such period:
PERIOD Maximum Total
Indebtedness to
Pro Forma
EBITDA Ratio
Closing through 9/30/99 5.25x
10/1/99 - 12/31/99 5.00x
1/1/00 - 6/30/00 4.50x
7/1/00 - 12/31/00 4.00x
1/1/01 - 6/30/01 3.50x
7/1/01 - 12/31/01 3.25x
Thereafter 3.00x
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 are not required to have footnote
disclosures). Borrower will deliver each of the financial statements and other
reports described below to Agent (and each Lender in the case of the financial
statements and other reports described in subsections (A), (B), (C), (D), (H),
(J), (K) and (L)).
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(A) MONTHLY FINANCIALS. As soon as available and in any event
within thirty (30) days after the end of each month (including the last month of
Borrower's fiscal year), Borrower will deliver the consolidated and
consolidating balance sheets of Borrower and its Subsidiaries, as at the end of
such month, and the related consolidated and consolidating statements of income,
stockholders' equity 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.
(B) PRICING CERTIFICATE. Together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to subsections 4.6(A) above
and 4.6(C) below for any month in which a Determination Date occurs, Borrower
will deliver a fully and properly completed Pricing Certificate in substantially
the form as Exhibit 4.6(B) signed by Borrower's chief executive officer or chief
financial officer.
(C) YEAR-END FINANCIALS. As soon as available and in any event
within one hundred twenty (120) days after the end of each fiscal year of
Borrower, Borrower will deliver (1) the consolidated and consolidating balance
sheet[S] of Borrower and its Subsidiaries, as at the end of such year, and the
related consolidated and consolidating 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 consolidated financial
statements from a firm of certified public accountants selected by Borrower and
reasonably acceptable to Agent, 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).
(D) COMPLIANCE CERTIFICATE. Together with each delivery of
financial statements of Borrower and its Subsidiaries pursuant to subsections
4.6(A) and 4.6(C) above, Borrower will deliver a fully and properly completed
Compliance Certificate (in substantially the same form as Exhibit 4.6(D)) signed
by Borrower's chief executive officer or chief financial officer. "Operating
Cash Flow" will be calculated as illustrated on Exhibit 4.6(D).
(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, interim or special
audit or review of any type of the financial statements or 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. Together with each delivery of
financial statements of Borrower and its Subsidiaries pursuant to Subsection
4.6(A) above, and from time to time upon the request of Agent, Borrower will
deliver a Borrowing Base Certificate (in
34
substantially the same form as Exhibit 4.6(F)) calculated as at the last day of
the period to which such financial statements relate.
(G) MANAGEMENT REPORT. Together with each delivery of a Compliance
Certificate for the months of March, June, September and December, Borrower will
deliver a management report (1) describing the operations and financial
condition of Borrower and its Subsidiaries for the month then ended and the
portion of the current fiscal year then elapsed (or for the fiscal year then
ended in the case of year-end financials), (2) setting forth in comparative form
the corresponding figures for the corresponding periods of the previous fiscal
year and the corresponding figures from the most recent Projections for the
current fiscal year delivered pursuant to subsection 4.6(J) and (3) discussing
the reasons for any significant variations. The information above shall be
presented in reasonable detail and shall be certified by the chief financial
officer of Borrower to the effect that such information fairly presents the
results of operations and financial condition of Borrower and its Subsidiaries
as at the dates and for the periods indicated.
(H) COLLATERAL VALUE REPORT. Upon the request of Agent, which may
be made at any time (but not more often than quarterly) while and so long as an
Event of Default shall be continuing, Borrower will obtain and deliver to Agent
a report of an independent collateral auditor satisfactory to Agent (which may
be, or be affiliated with, a Lender) with respect to the accounts and inventory
components included in the Borrowing Base, which report shall indicate whether
or not the information set forth in the Borrowing Base Certificate most recently
delivered is accurate and complete in all material respects based upon a review
by such auditors of the accounts (including verification with respect to the
amount, aging, identity and credit of the respective account debtors and the
billing practices of Borrower) and inventory (including verification as to the
value, location and respective types).
(I) APPRAISALS. From time to time, Borrower will, at the request
of the Agent or any Lender, obtain appraisal reports in form and substance and
from appraisers satisfactory to Agent stating the then current market values of
all or any portion of the real estate and personal property owned by Borrower or
any of its Subsidiaries. Any such appraisal report shall be at the expense of
the Lender(s) requesting such appraisal report, provided that the Borrower shall
pay for (i) the first such appraisal report requested after the occurrence and
during the continuance of a Default or Event of Default and (ii) any such
appraisal report required by a Lender or the Agent due to requirements of
applicable law or regulations.
(J) PROJECTIONS. As soon as available and in any event no later
than the last day of each of Borrower's fiscal years, Borrower will deliver
projections of Borrower and its Subsidiaries for the forthcoming three fiscal
years, year by year, and for the forthcoming fiscal year, month by month.
(K) SEC FILINGS AND PRESS RELEASES. Promptly upon their becoming
available, Borrower will deliver copies of (1) all financial statements,
reports, notices and proxy statements
35
sent or made available by Borrower or any of its Subsidiaries to their security
holders, (2) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Borrower or any of its 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 Borrower or any of its Subsidiaries to the
public concerning developments in the business of any such Person.
(L) EVENTS OF DEFAULT, ETC. Promptly upon any senior executive
officer of Borrower obtaining knowledge of any of the following events or
conditions, Borrower shall deliver copies of all notices given or received by
Borrower or any of its Subsidiaries with respect to any such event or condition
and a certificate of Borrower's chief executive 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 claimed default or event or condition of the type
referred to in subsection 6.1(B); or (3) any event or condition that could
reasonably be expected to result in any Material Adverse Effect.
(M) LITIGATION. Promptly upon any senior executive 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 Agent or (2) any material 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, could reasonably be expected to both have a Material Adverse Effect
and result in liability of such Loan Party for amounts which either individually
or in the aggregate with all other previously unreported matters is in excess of
$1,000,000, Borrower will promptly give notice thereof to Agent and provide such
other information as may be reasonably available to them to enable Agent and its
counsel to evaluate such matter.
(N) NOTICE OF CORPORATE AND OTHER CHANGES. Borrower shall provide
prompt written notice 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, (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, and (4) any
other event that occurs after the Closing Date which would cause any of the
representations and warranties in Section 5 of this Agreement or in any other
Loan Document to be untrue or misleading in any material respect.
36
(O) 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
Agent.
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 and other information
furnished to Agent pursuant to subsection 4.6 shall be prepared in accordance
with GAAP as in effect at the time of such preparation. 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: (a) changes in accounting principles required by GAAP and implemented by
Borrower; (b) changes in accounting principles recommended by Borrower's
certified public accountants and implemented by Borrower; and (c) changes in
carrying value of Borrower's or any of its Subsidiaries' assets, liabilities or
equity accounts resulting from (i) the application of purchase accounting
principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the Related
Transactions or (ii) as the result of any other adjustments that, in each case,
were applicable to, but not included in, the Pro Forma. All such adjustments
described in clause (c) above resulting from expenditures made subsequent to the
Closing Date (including, but not limited to, capitalization of costs and
expenses or payment of pre-Closing Date liabilities) shall be treated as
expenses in the period the expenditures are made.
SECTION 5
REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement, to make
Loans and to issue Lender Letters of Credit and Risk Participation Agreements,
Borrower represents and warrants to Agent and each Lender that the following
statements are and, after giving effect to the Related Transactions, will be
true, correct and complete in all material respects:
5.1 DISCLOSURE. To Borrower's knowledge, no representation or
warranty of Company or any Loan Party contained in this Agreement, the financial
statements referred to in subsection 5.5, the other Related Transactions
Documents or any other document, certificate or written statement furnished to
Agent or any Lender by or on behalf of any such Person for use in connection
with the Loan Documents or the Related Transactions Documents contains 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.
37
5.2 NO MATERIAL ADVERSE EFFECT. Since December 31, 1998 there have
been no events or changes in facts or circumstances affecting Borrower or
Cherokee Investor Partners which individually or in the aggregate have had or
could reasonably be expected to have a Material Adverse Effect and that have not
been disclosed herein or in the attached Schedules.
5.3 NO DEFAULT. The consummation of the Related Transactions does
not and will not violate or conflict with any laws, rules, regulations or orders
of any governmental authority or violate, conflict with, result in a breach of,
or constitute a default (with due notice or lapse of time or both) under any
Contractual Obligation of Borrower or any Loan Party except if such violations,
conflicts, breaches or defaults have either been waived on or before the Closing
Date or could not reasonably be expected to 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 trust,
a corporation or a limited liability company duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization (which jurisdiction is set forth on Schedule 5.4(A)). Each of the
Loan Parties has all 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 Related Transactions Document to which it is a party and to carry out
the Related Transactions.
(B) CAPITALIZATION. The membership interests of the Borrower and
Cherokee Investor Partners are as set forth on Schedule 5.4(B). All issued and
outstanding membership interests of the Borrower and Cherokee Investor Partners
are duly authorized and validly issued, fully paid, nonassessable, free and
clear of all Liens other than those in favor of Agent, for the benefit of Agent
and Lenders, and such membership interests were issued in compliance with all
applicable state and federal laws concerning the issuance of securities. The
membership interests of the Borrower and Cherokee Investor Partners are owned by
the Persons and in the amounts set forth on Schedule 5.4(B). No membership
interests of the Borrower and Cherokee Investor Partners other than those
described above, are issued and outstanding. There are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition from the Borrower or Cherokee
Investor Partners of any membership interests or other securities of any such
entity except as set forth on Schedule 5.4(B).
(C) BINDING OBLIGATION. This Agreement is, and the other Related
Transactions Documents when executed and delivered will be, the legally valid
and binding obligations of the Loan Parties thereto, each enforceable against
each of such parties, as applicable, in accordance with their respective terms,
except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement of creditors' rights and general
principles of equity.
38
(D) QUALIFICATION. The Borrower and Cherokee Investor Partners are
each duly qualified and in good standing wherever necessary to carry on their
respective business and opera tions, except in jurisdictions in which the
failure to be qualified and in good standing could not reasonably be expected to
have a Material Adverse Effect. All jurisdictions in which the Borrower and
Cherokee Investor Partners are qualified to do business are set forth on
Schedule 5.4(D).
5.5 FINANCIAL STATEMENTS AND PROJECTIONS. All financial statements
concerning the Borrower and its Subsidiaries which have been or will hereafter
be furnished to Agent pursuant to this Agreement, including those listed below,
have been or will be prepared in accordance with GAAP consistently applied
(except as disclosed therein) and do or will present fairly 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 December 31, 1998 and the
related statement of income of the Borrower and its Subsidiaries, for the
fiscal year then ended, audited by Deloitte & Touche LLP.
(B) The consolidated balance sheet at March 31, 1999 and the
related statement of income of Borrower and its Subsidiaries for the
three (3) months then ended.
The Projections delivered on or prior to the Closing Date and the updated
Projections delivered pursuant to subsection 4.6(J) represent and will represent
as of the date thereof the good faith estimate of Borrower and its senior
management of the financial conditions and performance of Borrower and its
Subsidiaries based on assumptions believed to be reasonable at the time made (it
being understood that the Projections are subject to significant uncertainties
and contingencies, many of which are beyond the control of the Loan Parties, and
that no assurance can be given that the Projections will be realized).
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 financial condition, business or operations of Borrower or its
Subsidiaries (collectively called "Intellectual Property"). All such
Intellectual Property is identified on Schedule 5.6. 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 where such infringement could reasonably be expected to
have a Material Adverse Effect.
5.7 INVESTIGATIONS, AUDITS, ETC. To the knowledge of senior
management of Borrower, except as set forth on Schedule 5.7, none of the Loan
Parties is the subject of any material review or audit by the Internal Revenue
Service or any governmental investigation concerning the material violation or
possible material violation of any law.
39
5.8 EMPLOYEE MATTERS. Except as set forth on Schedule 5.8, (a)
none of the Borrower, its Subsidiaries or any of their respective employees is
subject to any collective bargaining agreement, (b) no petition for
certification or union election is pending with respect to the employees of the
Borrower or its Subsidiaries and no union or collective bargaining unit has
sought such certification or recognition with respect to the employees of the
Borrower or its Subsidiaries and (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the best knowledge of Borrower after
due inquiry, threatened between the Borrower or its Subsidiaries and their
respective employees, other than employee grievances arising in the ordinary
course of business which could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 5.8, neither Borrower nor any of its Subsidiaries is party to an
employment contract.
5.9 SOLVENCY. Borrower: (a) owns and will own assets the value of
which as a going concern is (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 after giving effect to any contemplated 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.
5.10 YEAR 2000. Borrower and its Subsidiaries have made an
assessment of the microchip and computer-based systems and the software used in
their business and based upon such assessment believe that they will be "Year
2000 Compliant" by January 1, 2000, except to the extent that the failure to be
Year 2000 Compliant by such date would not have a Material Adverse Effect. For
purposes of this paragraph, "Year 2000 Compliant" means that all software,
embedded microchips and other processing capabilities utilized by, and material
to the business operations or financial condition of, Borrower and each
Subsidiary, respectively, are able to interpret, store, transmit, receive and
manipulate data on and involving all calendar dates correctly and without
causing any abnormal ending scenarios in relation to dates in and after the Year
2000. From time to time, at the request of Agent, Borrower and its Subsidiaries
shall provide to Lenders such updated information as is requested regarding the
status of its efforts to become Year 2000 Compliant.
5.11 USE OF PROCEEDS; MARGIN REGULATIONS. Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U or X of the Board of Governors of the Federal Reserve
System) and no part of the proceeds of any Loan will be used to acquire any
margin stock.
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SECTION 6
DEFAULT, RIGHTS AND REMEDIES
6.1 EVENT OF DEFAULT. "Event of Default" shall mean the occurrence
or existence of any one or more of the following:
(A) PAYMENT. (1) Failure to pay any installment or other payment
of principal of any Loan when due, or to repay Revolving Loans to reduce their
balance to the Maximum Revolving Loan Balance or to reimburse Agent for any
payment made by Agent under or in respect of any Lender Letters of Credit or
Risk Participation Agreements when due or (2) 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 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) or any Contingent
Obligations or (2) breach or default of Borrower or any of its Subsidiaries, or
the occurrence of any condition or event, with respect to any Indebtedness
(other than the Loans) or any Contingent Obligations, if the effect of such
failure to pay, breach, default or occurrence is to cause or to permit the
holder or holders then to cause, Indebtedness and/or Contingent Obligations
having an individual principal amount in excess of $1,000,000 or having an
aggregate principal amount in excess of $3,000,000 to become or be declared due
prior to their stated maturity; or
(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 2.9, Section 3
or Section 4; or
(D) BREACH OF WARRANTY. Any representation, warranty,
certification or other statement 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 to 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 Agent
or Requisite Lenders of such default (other than occurrences described in other
provisions of this subsection 6.1 for which a different grace or cure period is
specified or which constitute immediate Events of Default); or
(F) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) A
court enters a decree or order for relief with respect to any Loan Party in an
involuntary case under the Bankruptcy Code, which decree or order is not stayed
or other similar relief is not granted under
41
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 any Loan Party, 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 any
Loan Party, 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 any Loan Party, for all or a substantial part of the property of such
Loan Party; or
(G) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) any
Loan Party 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) any Loan Party makes any
assignment for the benefit of creditors; or (3) the any Loan Party adopts any
resolution or otherwise authorizes action to approve any of the actions referred
to in this subsection 6.1(G); or
(H) JUDGMENT AND ATTACHMENTS. Any money judgment, writ or warrant
of attachment, or similar process involving (1) an amount in any individual case
in excess of $1,000,000 or (2) an amount in the aggregate at any time in excess
of $3,000,000 (in either case to the extent not adequately covered by insurance
as to which the insurance company has acknowledged coverage) is entered or filed
against 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
(I) DISSOLUTION. (1) Any order, judgment or decree is entered
against any Loan Party decreeing the dissolution or split up of such Loan Party
and such order remains undischarged or unstayed for a period in excess of thirty
(30) days; or (2) any Loan Party voluntarily acts to effect the dissolution or
split up of such Loan Party or consents to any order, judgment or decree causing
the dissolution or split up of such Loan Party; or
(J) SOLVENCY. Borrower ceases to be solvent (as represented by
Borrower in subsection 5.9) or admits in writing its present or prospective
inability to pay its debts as they become due; or
(K) INJUNCTION. 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 for more than thirty (30) days; or
(L) ERISA; PENSION PLANS. (1) Borrower or any of its Affiliates
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 IRC, any such
Person is required to pay as contributions
42
thereto and such failure results in or is likely to result in a Material Adverse
Effect; or (2) an accumulated funding deficiency in excess of $3,000,000 occurs
or exists, whether or not waived, with respect to any such employee benefit
plans; or (3) any employee benefit plan loses its status as a qualified plan
under the IRC which results in or could reasonably be expected to result in a
Material Adverse Effect; or
(M) 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
(N) DAMAGE; STRIKE; CASUALTY. Any material damage to, or loss,
theft or destruction of, any Collateral, if not covered by insurance, or any
strike, lockout, labor dispute, 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 could reasonably be expected to have a Material Adverse Effect; or
(O) FAILURE OF SECURITY. Agent, for the benefit of Agent and
Lenders, 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 to secure the Obligations, in each case, for any
reason other than the failure of Agent to take any action within its control; or
(P) CHANGE IN CONTROL. (1) Cherokee Investor Partners ceases to
beneficially own and control, directly or indirectly, free and clear of all
Liens, other than Liens in favor of Agent, at least 51% of the membership
interests of the Borrower plus any additional membership interests of the
Borrower required (without regard to the occurrence of any contingency) to elect
or appoint a majority of the members of the management committee of Borrower or
(2) Oaktree Capital Management, LLC, ceases to exercise exclusive management and
control free and clear of all Liens of at least 51% of the membership interests
of Cherokee Investor Partners plus any additional membership interests of
Cherokee Investor Partners required (without regard to the occurrence of any
contingency) to elect or appoint a majority of the members of the management
committee of Cherokee Investor Partners; or
(Q) TRUSTS. Any Loan Party which is a trust removes or transfers
(through settlement or otherwise) any Collateral from its trust estate without
the prior written consent of the Requisite Lenders.
6.2 SUSPENSION OF COMMITMENTS. Upon the occurrence of any Default
or Event of Default, Agent and each Lender without notice or demand, may
immediately cease making additional Loans and issuing Lender Letters of Credit
and Risk Participation Agreements and cause its obligation to lend its Pro Rata
Share of the Revolving Loan Commitment to be suspended; PROVIDED that, in the
case of a Default, if the subject condition or event is waived,
43
cured or removed by Requisite Lenders within any applicable grace or cure
period, any suspended portion of the Revolving Loan Commitment shall be
reinstated. Each Lender may alternatively suspend only a portion of its
obligation to lend its Pro Rata Share of the Revolving Loan Commitment.
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 Term Loan and the Revolving
Loans, payments under the Lender Letters of Credit and Risk Participation
Agreements 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 obligations of Agent and
Lenders to make Revolving Loans and issue Lender Letters of Credit and Risk
Participation Agreements shall thereupon terminate. Upon the occurrence and
during the continuance of any other Event of Default, Agent may, and upon
written demand by Requisite Lenders shall, 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 obligations of Agent and Lenders to make
Revolving Loans and issue Lender Letters of Credit and Risk Participation
Agreements shall thereupon terminate and (b) demand that Borrower immediately
deposit with Agent an amount equal to the aggregate outstanding Risk
Participation Liability to enable Agent to make payments under the Lender
Letters of Credit and Risk Participation Agreements when required and such
amount shall become immediately due and payable.
6.4 PERFORMANCE BY AGENT. Upon the occurrence of an Event of
Default, if Borrower shall fail to perform any covenant, duty or agreement
contained in any of the Loan Documents, Agent 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, Borrower shall, at
the request of Agent, promptly pay any amount reasonably expended by Agent in
such performance or attempted performance to Agent, together with interest
thereon at the highest rate of interest in effect upon the occurrence of an
Event of Default as specified in subsection 1.2(E) from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly agreed
that Agent shall not have any liability or responsibility for the performance of
any obligation of Borrower under this Agreement or any other Loan Document.
6.5 FINANCIAL COVENANT DEFAULTS. In the event of a violation of
any of the financial covenants set forth in Sections 4.3, 4.4 and 4.5 herein,
unless the Requisite Lenders have waived such violation in writing, during the
15-day period immediately following the day on which Borrower was required to
deliver to Agent the financial statements and certificates for the quarter with
respect to which a violation occurred: (a) the Lenders shall not be required to
make any Loans to Borrower; (b) the Agent may not accelerate the repayment of
the Loans unless there exists any other Event of Default that has not been cured
or waived in writing by the Requisite Lenders; (c) the Requisite Lenders may at
their option exercise their right to impose default interest as provided for in
this Agreement; and (d) Borrower may cure any such financial covenant
44
default by arranging for its shareholders or other Persons to make an equity
contribution of cash to Borrower in an amount necessary to bring Borrower into
compliance with all financial covenants as of the last day of the quarter as of
which a violation occurred; provided, however, that the cure right set forth in
this clause (d) may only be exercised twice in any one calendar year and may
only be exercised four times prior to the Expiry Date. Any such equity
contribution shall be applied as a prepayment, to be applied first in prepayment
of the Term Loan, pro rata against all remaining scheduled installments, and if
the Term Loan shall have been repaid in full, then in prepayment of the
Revolving Loan. For purposes of this Section 6.5 only, any such equity
contribution of cash made within the 15-day period described above shall be
considered to constitute additional EBITDA during the immediately preceding
quarter. In the event Borrower does not cure all financial covenant violations
as provided in this Section 6.5, there shall exist an Event of Default unless
waived by the Requisite Banks in writing.
SECTION 7
CONDITIONS TO LOANS
The obligations of Lenders to make Loans and of Agent to issue
Lender Letters of Credit and Risk Participation Agreements are subject to
satisfaction of all of the applicable conditions set forth below.
7.1 CONDITIONS TO INITIAL LOANS. The obligations of Lenders to
make the initial Loans and of Agent to issue any Lender Letters of Credit and
Risk Participation Agreements on the Closing Date are, in addition to the
conditions precedent specified in subsection 7.2, subject to (a) receipt by the
Borrower of the gross proceeds of the Subordinated Notes in an amount not less
than $100,000,000, (b) evidence satisfactory to the Agent that the Members have
contributed an amount not less than $70,000,000 as equity in Cherokee Investor
Partners, and (c) the delivery of all documents listed on Schedule 7.1, all in
form and substance satisfactory to Agent. For purposes of determining compliance
with the conditions specified above, each Lender shall be deemed to be satisfied
with or to have consented to, approved or accepted each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lenders unless an officer of the Agent responsible for the
transactions contemplated by the Loan Documents shall have received written
notice from such lender prior to the Closing Date specifying its objection
thereto and such Lender shall not have made available to the Agent such lender's
Pro Rata Share of the Loans, Lender Letters of Credit or Risk Participation
Agreements made or issued on the Closing Date.
7.2 CONDITIONS TO ALL LOANS. The obligations of Lenders to
make Loans and of Agent to issue Lender Letters of Credit and Risk Participation
Agreements on any date ("Funding Date") are subject to the further conditions
precedent set forth below.
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(A) Agent 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 Letter of Credit or Risk Participation Agreement. No
notice shall be required for Loans made or Lender Letters of Credit or Risk
Participation Agreements issued on the Closing Date.
(B) The representations and warranties contained in Section 5
of this Agreement and elsewhere herein and in the Loan Documents shall be (and
each request by Borrower for a Loan or a Lender Letter of Credit and Risk
Participation Agreement 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 or Exhibits as a result of any disclosures made in
writing by Borrower to Agent after the Closing Date and approved by Agent in
writing.
(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 Letters of Credit and Risk Participation Agreement) 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 any Lender from
making any Loan or Agent from issuing any Lender Letter of Credit or Risk
Participation Agreement.
SECTION 8
ASSIGNMENT AND PARTICIPATION
8.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND NOTES. Each Lender
(including Heller) may from time to time assign, subject to the terms of an
Assignment and Acceptance Agreement, its rights and delegate its obligations
under this Agreement to another Person, PROVIDED that (a) such Lender (excluding
Heller) shall first obtain the written consent of Agent and, unless a Default or
Event of Default shall have occurred and be continuing, Borrower, which consent
shall not be unreasonably withheld or delayed; (b) the Pro Rata Share of the
Revolving Loan Commitment and Term Loan being assigned shall in no event be less
than the lesser of (i) $5,000,000 and (ii) the entire amount of the Pro Rata
Share of the Revolving Loan Commitment and Term Loan of the assigning Lender;
and (c) upon the consummation of each such assignment the assigning Lender shall
pay Agent an administrative fee of $3,500. The approval of the Agent and the
administrative fee referred to in clause (c) of the preceding sentence shall not
apply to an assignment from a Lender to an affiliate of such Lender. In the case
of an assignment authorized under this subsection 8.1, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were an initial Lender
46
hereunder. The assigning Lender shall be relieved of its obligations hereunder
with respect to its Pro Rata Share of the Revolving Loan Commitment or assigned
portion thereof. Borrower hereby acknowledges and agrees that any assignment
will give rise to a direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a "Lender."
Each Lender (including Heller) may sell participations in all or
any part of its Pro Rata Share of the Revolving Loan Commitment and the Term
Loan to another Person, PROVIDED that (a) such Lender (excluding Heller) shall
first obtain the prior written consent of Agent, which consent shall not be
unreasonably withheld; and (b) any such participation shall be in a minimum
amount of $5,000,000. Notwithstanding any such sale by a Lender of participating
interests to a participant, such Lender's rights and obligations under this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Note for all purposes under this Agreement (except as expressly provided below),
and Borrower and Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Borrower agrees that if any Obligations are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence and
during the continuance of an Event of Default, each participant shall be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement and any Note to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under this
Agreement or any Note, provided that such right of setoff shall be subject to
the obligations of such participant to share with the Lenders, and the Lenders
agree to share with such participant, as provided in Section 8.4. Borrower also
agrees that each participant shall be entitled to the benefits of subsections
1.8 and 1.9, such benefits being a direct obligation of Borrower to each
Participant. Each Lender agrees that any agreement between such Lender and any
such participant in respect of such participating interest shall not restrict
such Lender's right to agree to any amendment, supplement, waiver or
modification to this Agreement or any other Loan Document, except where the
result of any of the foregoing would be to (i) reduce the principal amount,
interest rate or fees payable with respect to any Loan in which such holder
participates; (ii) increase the aggregate principal amount of the Loans; (iii)
change the percentage of Lenders which shall be required for Lenders or any of
them to take any action hereunder; (iv) release all or substantially all of the
Collateral (except if the sale, disposition or release of such Collateral is
permitted under subsection 3.7 or 8.2 or any other Loan Document); (v) amend or
waive this subsection 8.1 or the definitions of the terms used in this
subsection 8.1 insofar as the definitions affect the substance of this
subsection 8.1; (vi) consent to the assignment, delegation or other transfer by
any Loan Party of any of its rights and obligations under any Loan Document;
(vii) change the form in which interest is required to be paid; and (viii)
increase any advance rate set forth in the Borrowing Base Certificate.
Except as otherwise provided in this subsection 8.1 no Lender
shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of a participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender. Each Lender may furnish any
information concerning Borrower and its Subsidiaries in the possession of that
Lender from time
47
to time to assignees and participants (including prospective assignees and
participants), subject to the provisions of subsection 9.13.
Borrower agrees that it will use commercially reasonable
efforts to assist and cooperate with Agent and any Lender in any manner
reasonably requested by Agent or such Lender to effect (i) the initial
syndication of the Obligations and (ii) any increase in the Revolving Loan
Commitments or restructuring of this Agreement, including without limitation
assistance in the preparation of appropriate disclosure documents or placement
memoranda.
Agent shall provide Borrower with written notice of the name
and address of any new Lender after the date hereof.
Notwithstanding anything contained in this Agreement to the
contrary, so long as the Requisite Lenders shall remain capable of making LIBOR
Loans, no Person shall become a "Lender" hereunder unless such Person shall also
be capable of making LIBOR Loans.
8.2 AGENT.
(A) APPOINTMENT. Each Lender hereby designates and appoints
Heller as its Agent under this Agreement and the other Loan Documents, and each
Lender hereby irrevocably authorizes Agent to take such action or to refrain
from taking such action on its behalf under the provisions of this Agreement and
the other Loan Documents and to exercise such powers as are set forth herein or
therein, together with such other powers as are reasonably incidental thereto.
Agent is authorized and empowered to amend, modify, or waive any provisions of
this Agreement or the other Loan Documents on behalf of Lenders subject to the
requirement that certain of Lenders' consent be obtained in certain instances as
provided in subsections 8.2, 8.3 and 9.2. Agent agrees to act as such on the
express conditions contained in this subsection 8.2. The provisions of this
subsection 8.2 are solely for the benefit of Agent and Lenders and neither
Borrower nor any Loan Party shall have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties under
this Agreement, Agent shall act solely as agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower or any other Loan Party. Agent may perform
any of its duties hereunder, or under the Loan Documents, by or through its
agents or employees.
(B) NATURE OF DUTIES. The duties of Agent shall be mechanical
and administrative in nature. Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Loan Documents, express or implied, is intended to or shall be
construed to impose upon Agent any obligations in respect of this Agreement or
any of the Loan Documents except as expressly set forth herein or therein. Each
Lender shall make its own independent investigation of the financial condition
and affairs of Borrower in connection with the extension of credit hereunder and
shall make its own appraisal of the creditworthiness of Borrower, and Agent
shall have no duty or responsibility,
48
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto (other than as expressly required
herein). If Agent seeks the consent or approval of any Lenders to the taking or
refraining from taking any action hereunder, then Agent shall send notice
thereof to each Lender. Agent shall promptly notify each Lender any time that
the Requisite Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
(C) RIGHTS, EXCULPATION, ETC. Neither Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted by them hereunder or under any of the Loan Documents, or
in connection herewith or therewith, except that Agent shall be liable with
respect to its own gross negligence or willful misconduct. Agent shall not be
liable for any apportionment or distribution of payments made by it in good
faith and if any such apportionment or distribution is subsequently determined
to have been made in error, the sole recourse of any Lender to whom payment was
due but not made shall be to recover from other Lenders any payment in excess of
the amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by
them). In performing its functions and duties hereunder, Agent shall exercise
the same care which it would in dealing with loans for its own account, but
Agent shall not be responsible to any Lender for any recitals, statements,
representations or warranties herein or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, or sufficiency of this
Agreement or any of the Loan Documents or the transactions contemplated thereby,
or for the financial condition of any Loan Party. Agent shall not be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any of the Loan Documents
or the financial condition of any Loan Party, or the existence or possible
existence of any Default or Event of Default. Agent may at any time request
instructions from Lenders with respect to any actions or approvals which by the
terms of this Agreement or of any of the Loan Documents Agent is permitted or
required to take or to grant, and if such instructions are promptly requested,
Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from any action or withholding any approval under any of
the Loan Documents until it shall have received such instructions from Requisite
Lenders or all of the Lenders, as applicable. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting under this Agreement, the Notes, or any
of the other Loan Documents in accordance with the instructions of Requisite
Lenders.
(D) RELIANCE. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, telex, telecopy or telegram) believed by
it in good faith to be genuine and correct and to have been signed, sent or made
by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the Loan Documents and its duties hereunder or thereunder,
upon advice of counsel selected
49
by it. Agent shall be entitled to rely upon the advice of legal counsel,
independent accountants, and other experts selected by Agent in its sole
discretion.
(E) INDEMNIFICATION. Lenders will reimburse and indemnify
Agent for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, reasonable attorneys' fees and expenses), advances or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Agent in any way relating to or arising out of this Agreement
or any of the Loan Documents or any action taken or omitted by Agent under this
Agreement or any of the Loan Documents, in proportion to each Lender's Pro Rata
Share, but only to the extent that any of the foregoing is not reimbursed by
Borrower; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, advances or disbursements resulting from Agent's gross
negligence or willful misconduct. If any indemnity furnished to Agent for any
purpose shall, in the reasonable opinion of Agent, be insufficient or become
impaired, Agent may call for additional indemnity and cease, or not commence, to
do the acts indemnified against until such additional indemnity is furnished.
The obligations of Lenders under this subsection 8.2(E) shall survive the
payment in full of the Obligations and the termination of this Agreement.
(F) HELLER INDIVIDUALLY. With respect to its obligations under
the Revolving Loan Commitment, the Loans made by it, and the Notes issued to it,
Heller shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or any
similar terms shall, unless the context clearly otherwise indicates, include
Heller in its individual capacity as a Lender or one of the Requisite Lenders.
Heller may lend money to, acquire equity or other ownership interests in, and
generally engage in any kind of banking, trust or other business with any Loan
Party as if it were not acting as Agent pursuant hereto.
(G) SUCCESSOR AGENT.
(1) RESIGNATION. Agent may resign from the performance of
all its agency functions and duties hereunder at any time by giving at least
thirty (30) Business Days' prior written notice to Borrower and the Lenders.
Such resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
(2) APPOINTMENT OF SUCCESSOR. Upon any such notice of
resignation pursuant to clause (1) above, Requisite Lenders shall, upon receipt
of Borrower's prior consent which shall not be unreasonably withheld, appoint a
successor Agent. If a successor Agent shall not have been so appointed within
the thirty (30) Business Day period, referred to in clause (1) above, the
retiring Agent, upon notice to Borrower, shall then appoint a successor Agent
who shall serve as Agent until such time, if any, as Requisite Lenders, upon
receipt of Borrower's prior written consent which shall not be unreasonably
withheld, appoint a successor Agent as
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provided above. Such successor Agent shall be a commercial bank or financial
institution organized or licensed under the laws of the United States or any
state thereof, having combined capital and surplus of at least One Hundred
Million Dollars ($100,000,000).
(3) SUCCESSOR AGENT. Upon the acceptance of any appointment
as Agent under the Loan Documents by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under the Loan Documents. After any
retiring Agent's resignation as Agent under the Loan Documents, the provisions
of this subsection 8.2 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under the Loan Documents.
(H) COLLATERAL MATTERS.
(1) RELEASE OF COLLATERAL. Lenders hereby irrevocably
authorize Agent, at its option and in its discretion, to release any Lien
granted to or held by Agent upon any property covered by the Security Documents
(i) upon termination of the Revolving Loan Commitment and payment and
satisfaction of all Obligations (other than contingent indemnification
obligations to the extent no claims giving rise thereto have been asserted);
(ii) constituting property being sold or disposed of if Borrower certifies to
Agent that the sale or disposition is made in compliance with the provisions of
this Agreement (and Agent may rely in good faith conclusively on any such
certificate, without further inquiry); (iii) constituting property leased to
Borrower under a lease which has expired or been terminated in a transaction
permitted under this Agreement or is about to expire and which has not been, and
is not intended by Borrower to be, renewed or extended; or (iv) in accordance
with the provisions of the succeeding sentence. Agent may release or compromise
any Collateral and the proceeds thereof having a value not greater than ten
percent (10%) of the total book value of all Collateral, either in a single
transaction or in a series of related transactions, with the consent of
Requisite Lenders, PROVIDED that in no event will Agent, acting under the
authority granted to it pursuant to this sentence, release or compromise
Collateral or the proceeds thereof having a total book value in excess of twenty
percent (20%) of the book value of all Collateral, as determined by Agent,
during any calendar year.
(2) CONFIRMATION OF AUTHORITY; EXECUTION OF RELEASES.
Without in any manner limiting Agent's authority to act without any specific or
further authorization or consent by Lenders (as set forth in subsection
8.2(H)(1)), each Lender agrees to confirm in writing, upon request by Agent or
Borrower, the authority to release any property covered by the Security
Documents conferred upon Agent under clauses (i) through (iii) of subsection
8.2(H)(1). Upon receipt by Agent of confirmation from the requisite percentage
of Lenders required by subsection 8.2(H)(1), if any, of its authority to release
or compromise any particular item or types of property covered by the Security
Documents, and upon at least ten (10) Business Days prior written request by
Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release or compromise
of the Liens
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granted to Agent, for the benefit of Agent and Lenders, upon such Collateral,
PROVIDED that (i) Agent shall not be required to execute any such document on
terms which, in Agent's opinion, would expose Agent to liability or create
any obligation or entail any consequence other than the release or compromise
of such Liens without recourse or warranty, and (ii) such release or
compromise shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of any Loan Party, in respect
of), all interests retained by any Loan Party, including (without limitation)
the proceeds of any sale, all of which shall continue to constitute part of
the property covered by the Security Documents.
(3) ABSENCE OF DUTY. Agent shall have no obligation
whatsoever to any Lender or any other Person to assure that the property covered
by the Security Documents exists or is owned by Borrower or is cared for,
protected or insured or has been encumbered or that the Liens granted to Agent
have been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this subsection 8.2(H) or in any of the Loan Documents, it
being understood and agreed that in respect of the property covered by the
Security Documents or any act, omission or event related thereto, Agent may act
in any manner it may deem appropriate, in its discretion, given Agent's own
interest in property covered by the Security Documents as one of the Lenders and
that Agent shall have no duty or liability whatsoever to any of the other
Lenders, PROVIDED that Agent shall exercise the same care which it would in
dealing with loans for its own account.
(I) AGENCY FOR PERFECTION. Agent and each Lender hereby appoint
each other Lender as agent for the purpose of perfecting Agent's security
interest in assets which, in accordance with ARTICLE 9 of the Uniform Commercial
Code in any applicable jurisdiction, can be perfected only by possession. Should
any Lender (other than Agent) obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor,
shall deliver such Collateral to Agent or in accordance with Agent's
instructions. Each Lender agrees that it will not have any right individually to
enforce or seek to enforce any Security Document or to realize upon any
collateral security for the Loans unless instructed to do so by Agent, it being
understood and agreed that such rights and remedies may be exercised only by
Agent.
(J) DISSEMINATION OF INFORMATION. Agent will use its best efforts
to provide Lenders with any information received by Agent from Borrower or any
other Loan Party which is required to be provided to a Lender hereunder,
PROVIDED that Agent shall not be liable to Lenders for any failure to do so,
except to the extent that such failure is attributable to Agent's gross
negligence or willful misconduct.
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8.3 AMENDMENTS, CONSENTS AND WAIVERS FOR CERTAIN ACTIONS.
(A) Except as otherwise provided in this subsection 8.3, in
subsection 9.2 or in any Assignment and Acceptance Agreement and except as to
matters set forth in other subsections hereof or in any other Loan Document as
requiring only Agent's consent, the consent of Requisite Lenders and Borrower
will be required to amend, modify, terminate, or waive any provision of this
Agreement or any of the other Loan Documents.
(B) In the event Agent requests the consent of a Lender and
does not receive a written consent or denial thereof within ten (10) Business
Days after such Lender's receipt of such request, then such Lender will be
deemed to have denied the giving of such consent.
(C) If, in connection with any proposed amendment,
modification, termination or waiver of any of the provisions of this Agreement
as contemplated by clauses (a) through (i) of the first proviso of subsection
9.2, the consent of Requisite Lenders is obtained but the consent of one or more
other Lenders whose consent is required is not obtained, then Borrower shall
have the right, so long as all non-consenting Lenders are treated as described
in clauses (A) or (B) below, to either (A) replace each such non-consenting
Lender with one or more Replacement Lenders pursuant to subsection 1.10(A) so
long as each such Replacement Lender consents to the proposed amendment,
modification, termination or waiver or (B) terminate such non-consenting
Lender's Pro Rata Share of the Revolving Loan Commitment and prepay in full its
Obligations to such non-consenting Lender, in accordance with subsection
1.10(B).
8.4 SET OFF AND SHARING OF PAYMENTS. In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, during the continuance of any Event of Default, each Lender is
hereby authorized by Borrower at any time or from time to time, with reasonably
prompt subsequent notice to Borrower (any prior or contemporaneous notice being
hereby expressly waived) to set off and to appropriate and to apply any and all
(A) balances held by such Lender at any of its offices for the account of
Borrower or any of its Subsidiaries (regardless of whether such balances are
then due to Borrower or its Subsidiaries), and (B) other property at any time
held or owing by such Lender to or for the credit or for the account of Borrower
or any of its Subsidiaries, against and on account of any of the Obligations;
except that no Lender shall exercise any such right without the prior written
consent of Agent. Any Lender exercising a right to set off shall, to the extent
the amount of any such set off exceeds its Pro Rata Share of the amount set off,
purchase for cash (and the other Lenders shall sell) interests in each such
other Lender's Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share such excess with each other Lender in accordance with their
respective Pro Rata Shares. Borrower agrees, to the fullest extent permitted by
law, that any Lender may exercise its right to set off with respect to amounts
in excess of its Pro Rata Share of the Obligations and upon doing so shall
deliver such excess to the Agent for the benefit of all Lenders in accordance
with their Pro Rata Shares.
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8.5 DISBURSEMENT OF FUNDS. Agent may, on behalf of Lenders,
disburse funds to Borrower for Loans requested. Each Lender shall reimburse
Agent on demand for all funds disbursed on its behalf by Agent, or if Agent
so requests, each Lender will remit to Agent its Pro Rata Share of any Loan
before Agent disburses same to Borrower. If Agent elects to require that each
Lender make funds available to Agent, prior to a disbursement by Agent to
Borrower, Agent shall advise each Lender by telephone or telecopy of the
amount of such Lender's Pro Rata Share of the Loan requested by Borrower no
later than 1:00 p.m. Chicago time on the Funding Date applicable thereto, and
each such Lender shall pay Agent such Lender's Pro Rata Share of such
requested Loan, in same day funds, by wire transfer to Agent's account on
such Funding Date. If any Lender fails to pay the amount of its Pro Rata
Share within one (1) Business Day after Agent's demand, Agent shall promptly
notify Borrower, and Borrower shall immediately repay such amount to Agent.
Any repayment required pursuant to this subsection 8.5 shall include interest
at the rate applicable to such Loan, but shall be without premium or penalty.
Nothing in this subsection 8.5 or elsewhere in this Agreement or the other
Loan Documents, including without limitation the provisions of subsection
8.6, shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its
commitments hereunder or to prejudice any rights that Agent or Borrower may
have against any Lender as a result of any default by such Lender hereunder.
8.6 DISBURSEMENTS OF ADVANCES; PAYMENT.
(A) REVOLVING LOAN ADVANCES, PAYMENTS AND SETTLEMENTS;
INTEREST AND FEE PAYMENTS.
(1) The Revolving Loan balance may fluctuate from day
to day through Agent's disbursement of funds to, and receipt of funds from,
Borrower. In order to minimize the frequency of transfers of funds between Agent
and each Lender notwithstanding terms to the contrary set forth in Section 1 or
subsection 8.5, Revolving Loan advances and payments will be settled among Agent
and Lenders according to the procedures described in this subsection 8.6.
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any advances made by Agent to Borrower will commence on the date such
advances are made by Agent. Such payments will be made by such Lender without
set-off, counterclaim or reduction of any kind.
(2) On the second (2nd) Business Day of each week, or
more frequently (including daily), if Agent so elects (each such day being a
"Settlement Date"), Agent will advise each Lender by telephone or telecopy of
the amount of each such Lender's Pro Rata Share of the Revolving Loan balance as
of the close of business of the (2nd) second Business Day immediately preceding
the Settlement Date. In the event that payments are necessary to adjust the
amount of such Lender's required Pro Rata Share of the Revolving Loan balance to
such Lender's actual Pro Rata Share of the Revolving Loan balance as of any
Settlement Date, the party from which such payment is due will pay the other, in
same day funds, by wire transfer to the other's account not later than 3:00 p.m.
Chicago time on the Business Day following the Settlement Date.
54
(3) For purposes of this subsection 8.6(A)(3), the
following terms and conditions will have the meanings indicated:
(a) "Daily Loan Balance" means an amount calculated
as of the end of each calendar day by subtracting (i) the cumulative
principal amount paid by Agent to a Lender on a Loan from the Closing
Date through and including such calendar day, from (ii) the
cumulative principal amount on a Loan advanced by such Lender to
Agent on that Loan from the Closing Date through and including
such calendar day.
(b) "Daily Interest Rate" means an amount calculated
by dividing the interest rate payable to a Lender on a Loan (as set
forth in subsection 1.2) as of each calendar day by three hundred sixty
(360).
(c) "Daily Interest Amount" means an amount
calculated by multiplying the Daily Loan Balance of a Loan by the
associated Daily Interest Rate on that Loan.
(d) "Interest Ratio" means a number calculated by
dividing the total amount of the interest on a Loan received by Agent
with respect to the immediately preceding month by the total amount of
interest on that Loan due from Borrower during the immediately
preceding month.
On the Business Day immediately following its receipt of an interest payment
from Borrower (each such date an "Interest Settlement Date"), Agent will advise
each Lender by telephone, telex, or telecopy of the amount of such Lender's Pro
Rata Share of interest and fees on each of the Loans as of the end of the last
day of the immediately preceding month. Provided that such Lender has made all
payments required to be made by it under this Agreement, Agent will pay to such
Lender, by wire transfer to such Lender's account (as specified by such Lender
on the signature page of this Agreement or the applicable Assignment and
Acceptance Agreement, as amended by such Lender from time to time after the date
hereof pursuant to the notice provisions contained herein or in the applicable
Assignment and Acceptance Agreement) not later than 3:00 p.m. Chicago time on
the next Business Day following the Interest Settlement Date, such Lender's Pro
Rata Share of interest and fees on each of the Loans. Such Lender's Pro Rata
Share of interest on each Loan will be calculated for that Loan by adding
together the Daily Interest Amounts for each calendar day of the prior month for
that Loan and multiplying the total thereof by the Interest Ratio for that Loan.
Such Lender's Pro Rata Share of each of the commitment fee described in
subsection 1.2(B) and the Risk Participation Liability fee described in
subsection 1.2(C) shall be paid and calculated in a manner consistent with the
payment and calculation of interest as described in this subsection 8.6(A).
(B) TERM LOAN PRINCIPAL PAYMENTS. Payments of principal of the
Term Loan will be settled on the date of receipt if received by Agent on the
first Business Day of a month and
55
on the Business Day immediately following the date of receipt if received by
Agent on any day other than the first Business Day of a month.
(C) AVAILABILITY OF LENDER'S PRO RATA SHARE.
(1) Unless Agent shall have received notice from a Lender
prior to a Funding Date that such Lender will not make available its Pro Rata
Share of a Loan requested by Borrower, Agent may assume that such Lender has
made such amount available to Agent on the Business Day following the next
Settlement Date. If a Lender has not in fact made its Pro Rata Share available
to the Agent on such date, then such Lender and Borrower severally agree to pay
to Agent forthwith on demand such amount without set-off, counterclaim or
deduction of any kind, together with interest thereon, for each day from and
including the Business Day following such Settlement Date to but excluding the
date of payment to Agent, at (a) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by Agent in accordance with
banking industry rules on interbank compensation or (b) in the case of Borrower,
the interest rate applicable under this Agreement with respect to such Loan.
Until any such amount is paid to Agent, Agent shall not be obligated to submit
to such Lender any payment made by Borrower to Agent with respect to any Loan or
any fees or other payments with respect thereto.
(2) Nothing contained in this subsection 8.6(C) will be
deemed to relieve a Lender of its obligation to fulfill its commitments or to
prejudice any rights Agent or Borrower may have against such Lender as a result
of any default by such Lender under this Agreement.
(3) Without limiting the generality of the foregoing, each
Lender shall be obligated to fund its Pro Rata Share of any Revolving Loan made
after any Event of Default or acceleration of the Obligations with respect to
any draw on a Lender Letter of Credit or a Risk Participation Agreement.
(D) RETURN OF PAYMENTS
(1) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrower and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind together with interest
thereon, for each day from and including the date such amount is made available
by Agent to such Lender to but excluding the date of repayment to Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by Agent in
accordance with banking industry rules on interbank compensation.
(2) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to Borrower or paid to
any other person pursuant to any requirement of law, court order or otherwise,
then, notwithstanding any other term or condition
56
of this Agreement, Agent will not be required to distribute any portion thereof
to any Lender. In addition, each Lender will repay to Agent on demand any
portion of such amount that Agent has distributed to such Lender, together with
interest at such rate, if any, as Agent is required to pay to Borrower or such
other Person, without set-off, counterclaim or deduction of any kind.
SECTION 9
MISCELLANEOUS
9.1 INDEMNITIES. Borrower agrees to indemnify, pay, and hold
Agent, each Lender and their respective officers, directors, employees, agents,
and attorneys (the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits
and claims of any kind or nature whatsoever that may be imposed on, incurred by,
or asserted against the Indemnitee as a result of its being a party to this
Agreement or the transactions consummated pursuant 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. This subsection
and other indemnification provisions contained within the Loan Documents shall
survive the termination of this Agreement.
9.2 AMENDMENTS AND WAIVERS. Except as otherwise provided herein,
no amendment, modification, termination or waiver of any provision of this
Agreement, the Notes or any of the other Loan Documents, or consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Requisite Lenders (or Agent, if
expressly set forth herein, in any Note or in any other Loan Document) and the
applicable Loan Party; PROVIDED, that except to the extent permitted by the
applicable Assignment and Acceptance Agreement, no amendment, modification,
termination or waiver shall, unless in writing and signed by (i) each Lender
affected by such amendment, modification, termination or waiver, in the case of
subclauses (a) and (b) below and (ii) all the Lenders, in the case of subclauses
(c) through (i) (both inclusive) below, do any of the following: (a) increase
any Lender's Pro Rata Share of the Revolving Loan Commitment; (b) reduce the
principal of, rate of interest on or fees payable with respect to any Loan; (c)
extend the Expiry Date, extend the date on which any Scheduled Installment is to
be paid or extend any date fixed for any payment of interest or fees or reduce
the amount of any scheduled payment; (d) change the percentage of Lenders which
shall be required for Lenders or any of them to take any action hereunder; (e)
release all or substantially all of the Collateral (except if the sale,
disposition or release of such Collateral is permitted under subsection 3.7 or
8.2 or any other Loan Document); (f) amend or waive this subsection 9.2 or the
definitions of the terms used in this subsection 9.2 insofar as the definitions
affect the substance of this subsection 9.2; (g) consent to the assignment,
delegation or other transfer by any Loan Party of any of its rights and
obligations under any Loan Document; (h) change the form in which interest is
required to be paid; (i) increase the advance rates set forth in the Borrowing
Base Certificate; and (j) permit any Restricted Junior Payment, the proceeds of
57
which are intended to be used, directly or indirectly, by a Member in payment of
all or a portion of its obligations under the Purchase Agreement; and PROVIDED,
FURTHER, that no amendment, modification, termination or waiver affecting the
rights or duties of Agent under any Loan Document shall in any event be
effective, unless in writing and signed by Agent, in addition to Lenders
required hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or waiver
of any provision of any Note shall be effective without the written concurrence
of the holder of that Note. No notice to or demand on Borrower or any other Loan
Party in any case shall entitle Borrower or any other Loan Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
subsection 9.2 shall be binding upon each holder of the Notes at the time
outstanding, each future holder of the Notes, and, if signed by a Loan Party, on
such Loan Party.
9.3 NOTICES. Any notice or other communication required shall be
in writing addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or U.S. mail
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. Chicago time, or the next
Business Day if after 4:00 p.m.; (c) if delivered by overnight courier, two (2)
days after delivery to the 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: Cherokee International, LLC
2841 Dow Avenue
Tustin, CA 92680
ATTN: Rita Patel
Telecopy: (714) 508-5888
With a copy to: Cherokee Investor Partners LLC
12121 Wilshire Blvd., Suite 1375
Los Angeles, CA 90025
ATTN: Ian Schapiro
Telecopy: (310) 442-0540
58
If to Agent or 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
If to a Lender: To the address set forth on the
signature page hereto or in the
applicable Assignment and
Acceptance Agreement
9.4 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of Agent or any Lender to exercise, nor 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. Neither Agent nor any Lender
shall be under any obligation to marshall any assets in payment of any or all of
the Obligations. To the extent that Borrower makes payment(s) or Agent enforces
its Liens or Agent or any Lender 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 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 LENDERS' OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS'
RIGHTS. The obligation of each Lender hereunder is several and not joint and no
Lender shall be responsible for the obligation or commitment of any other Lender
hereunder. In the event that any Lender at any time should fail to make a Loan
as herein provided, the Lenders, or any of them, at their
59
sole option, may make the Loan that was to have been made by the Lender so
failing to make such Loan. Nothing contained in any Loan Document and no action
taken by Agent or any Lender pursuant hereto or thereto shall be deemed to
constitute Lenders to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt.
9.8 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.
9.9 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that Borrower may not assign its rights or obligations
hereunder without the written consent of all Lenders.
9.11 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 owing to Borrower by Agent or any Lender.
9.12 CONSTRUCTION. Agent, each Lender 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 construed as if jointly drafted by Agent,
each Lender and Borrower.
9.13 CONFIDENTIALITY. Agent and each Lender agree to exercise
their best efforts to keep any non-public information delivered pursuant to the
Loan Documents confidential from Persons other than those employed by or engaged
by Agent or such Lender and those employed by or engaged by Agent's or such
Lender's assignees or participants, or potential assignees or participants. This
subsection shall not apply to disclosures required to be made by Agent or any
Lender to any regulatory or governmental agency or pursuant to legal process.
9.14 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON-CONVENIENS. BORROWER HEREBY WAIVES PERSONAL
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SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS
MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS AGREEMENT
AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN
POSTED.
9.15 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.
BORROWER, AGENT AND EACH LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE
OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
9.16 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, the making of the Loans, issuances of
Lender Letters of Credit and Risk Participation Agreements 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(C),
1.8, 1.9 and 9.1 shall survive the payment of the Loans.
9.17 ENTIRE AGREEMENT. This Agreement, the Notes and the other
Loan Documents referred to herein embody the entire agreement among the parties
hereto and supersede all prior commitments, agreements, representations, and
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.
9.18 COUNTERPARTS; EFFECTIVENESS. This Agreement and any
amendments, waivers, consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one in the same instrument.
This Agreement shall become effective upon the execution of a counterpart hereof
by each of the parties hereto.
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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, recitals and text
of this Agreement are used in this Agreement as so defined.
"AFFILIATE" means any Person: (a) directly or indirectly
controlling, controlled by, or under common control with, Borrower; (b) directly
or indirectly owning or holding ten percent (10%) or more of any equity interest
in Borrower; or (c) ten percent (10%) 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.
"AGENT" means Heller in its capacity as agent for the Lenders
under this Agreement and each of the other Loan Documents and any successor in
such capacity appointed pursuant to subsection 8.2.
"AGREEMENT" means this Credit Agreement (including all schedules
and exhibits hereto), as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"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 capital stock or other equity or ownership interest 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.
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" means an agreement among
Agent, a Lender and such Lender's assignee regarding their respective rights and
obligations with respect to assignments of the Loans, the Revolving Loan
Commitment and other interests under this Agreement and the other Loan
Documents.
"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.
"BORROWER" shall have the meaning ascribed to that term in the
preamble of this Agreement.
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"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, 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 U.S. Dollar deposits in the applicable interbank LIBOR
market.
"CHEROKEE INVESTOR PARTNERS" means Cherokee Investor Partners
L.L.C., a Delaware limited liability company.
"CLOSING DATE" means April 30, 1999.
"COLLATERAL" means, collectively: (a) all capital stock and other
property 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.
"DOMESTIC SUBSIDIARY" means a Subsidiary of the Borrower organized
in a jurisdiction within the United States of America.
"EXPIRY DATE" means the earlier of (a) the suspension (subject to
reinstatement) of the Lenders' obligations to make Revolving Loans
pursuant to subsection 6.2, (b) the acceleration of the Obligations pursuant to
subsection 6.3 or (c) April 30, 2005.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100th of 1%) of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100th of 1%) of the quotations for such day for such
transactions received by Agent from three Federal funds brokers of recognized
standing selected by it.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Borrower which is
not a Domestic Subsidiary.
"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
63
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.
"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.
"INDENTURE" means that certain Indenture, dated as of April 30,
1999, by and among Cherokee International, LLC and Cherokee International
Finance, Inc., as Issuers, and Firstar Bank of Minnesota, N.A., as Trustee.
"IRC" means the Internal Revenue Code of 1986, as amended from
time to time and all rules and regulations promulgated thereunder.
"LENDER" OR "LENDERS" means Heller and each other financial
institution listed on the signature pages hereof together with its their
successors and permitted assigns pursuant to subsection 8.1.
"LIEN" means any lien, mortgage, pledge, security interest,
charge, encumbrance or governmental levy or assessment of any kind, whether
voluntary or involuntary (including any conditional sale or other title
retention agreement and any lease in the nature thereof), and any agreement to
give any lien, mortgage, pledge, security interest, charge or encumbrance.
"LOAN" OR "LOANS" means an advance or advances under the Revolving
Loan Commitment or the Term Loan.
"LOAN DOCUMENTS" means this Agreement, the Notes, 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 Agent or any Lender in connection with the
Loans and other transactions contemplated by this Agreement, all as amended,
restated, supplemented or modified from time to time.
"LOAN PARTY" means, collectively, any of the Members, Borrower,
Borrower's Subsidiaries and any other Person (other than Agent and each Lender)
which is or becomes a party to any Loan Document or any Person which succeeds,
voluntarily or involuntarily to the rights
64
or obligations of any Loan Party under any Loan Document or with respect to any
property subject to a Loan Document.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect upon
the business, operations, properties, assets or financial condition of Borrower
or any of its Subsidiaries or (b) the impairment of the ability of any Loan
Party to perform its obligations under any Loan Document to which it is a party
or of Agent or any Lender 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.
"MEMBERS" means the members of the Borrower, as of the Closing
Date, including without limitation, Cherokee Investor Partners.
"NET PROCEEDS" means cash proceeds received by Borrower or any of
its Subsidiaries from any Asset Disposition (including insurance proceeds,
awards of condemnation, and payments under notes or other debt securities
received in connection with any Asset Disposition), net of (a) the costs of such
sale, lease, transfer or other disposition (including any transfer, sales or
similar taxes and any United States federal, state, local and foreign income or
franchise taxes, in each case incurred, as a direct result of such sale, lease
or transfer) and (b) amounts applied to repayment of Indebtedness (other than
the Obligations) secured by a Lien on the asset or property disposed.
"NOTE" OR "NOTES" means one or more of the promissory notes of
Borrower substantially in the form of Exhibit 10.1(A).
"OBLIGATIONS" means all obligations, liabilities and indebtedness
of every nature of each Loan Party from time to time owed to Agent or any Lender
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, any of its Subsidiaries or any other Loan Party.
"PERMITTED DISTRIBUTIONS FOR PRE-CLOSING TAX LIABILITIES" means
distributions in accordance with the Purchase Agreement made by the Borrower to
certain of its Members to cover such Member's income tax liability attributable
to income of the Borrower for the period from January 1, 1999 through the
Closing Date.
"PERMITTED TAX DISTRIBUTIONS" means, for any calendar year (or
portion thereof), a pro rata cash distribution by the Borrower to the Members
equal to (i) the amount of taxable income allocated to the Member of the
Borrower (the "Reference Member") with the greatest
65
share of the Borrower's taxable income (taking into consideration any prior
losses of the Borrower allocated to such Member to the extent such losses have
not been previously used to reduce such Member's allocable share of taxable
income of the Borrower for purposes of determining a Permitted Tax Distribution)
for such period multiplied by (ii) the applicable income tax rate (as defined
below) and, thereafter, (iii) divided by the Reference Member's Percentage
Interest (the "Tax Amount"), minus any aggregate amounts previously distributed
to the Members under this definition for such period. Permitted Tax
Distributions for estimated taxes of the Members may be made on or about the
last day of March, May, August and December of each year in an amount
not to exceed twenty-five percent (25%) of the Tax Amount for the calendar year
as estimated from time to time, in a writing delivered to the Agent by the chief
financial officer of the Borrower or other person serving in a similar capacity.
Notwithstanding the foregoing, to the extent Permitted Tax Distributions for
estimated taxes for any calendar year (or portion thereof) exceed the Tax Amount
for such period (an "Excess Tax Distribution"), Permitted Tax Distributions
(including Permitted Tax Distributions for estimated taxes) shall be reduced
until the Excess Tax Distribution is recovered. For purposes of this definition,
"applicable income tax rate" shall mean the highest marginal individual Federal
income tax rate imposed on ordinary income plus the highest marginal individual
California income tax rate; PROVIDED, HOWEVER, that the highest marginal
individual California income tax rate shall be appropriately reduced to reflect
the deductibility of such taxes from Federal taxable income.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, limited liability 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).
"POST-CLOSING DOCUMENTS" means (1) a pledge agreement, stock power
and all other documents necessary for the Agent to obtain, for the benefit of
Agent and Lenders, a perfected first priority security interest in the stock of
Borrower's Subsidiary in India,(2) a landlord waiver and consent for each of
Borrower's facilities in Tustin, CA, in form and substance acceptable to Agent,
(3) bank agency agreements with each institution at which Borrower and its
Domestic Subsidiaries maintain depository accounts, and (4) a partial release of
the lien filed against the Patel Family Trust with respect to the membership
interest of the Borrower held by such trust.
"PRO FORMA" means the unaudited consolidated and consolidating
balance sheet[s] of Borrower and its Subsidiaries prepared in accordance with
GAAP as of the Closing Date after giving effect to the Related Transactions. The
Pro Forma is annexed hereto as Schedule 10.1(A).
"PRO RATA SHARE" means (a) with respect to a Lender's obligation
to lend a portion of the Term Loan and receive payments of interest and
principal with respect thereto, the percentage obtained by dividing (i) such
Lender's commitment to make a portion of the Term
66
Loan, as set forth on the signature page of this Agreement opposite such
Lender's signature or in the most recent Assignment and Acceptance Agreement, if
any, executed by such Lender, by (ii) all such commitments of all Lenders to
make the Term Loan, (b) with respect to a Lender's obligation to make Revolving
Loans and receive payments of interest and principal with respect thereto (and
with respect to the related commitment fee described in subsection 1.2(B)) and
with respect to a Lender's obligation to share in Risk Participation Liability
(and with respect to the related Risk Participation Liability fee described in
subsection 1.2(C)), the percentage obtained by dividing (i) such Lender's
commitment to make Revolving Loans, as set forth on the signature
page of this Agreement opposite such Lender's signature or in the most recent
Assignment and Acceptance Agreement, if any, executed by such Lender, by (ii)
all such commitments of all Lenders to make Revolving Loans and (c) with respect
to all other matters (including without limitation the indemnification
obligations arising under subsection 8.2(E)), the percentage obtained by
dividing (i) the sum of the then outstanding portion of the Term Loan which was
funded by such Lender, PLUS the commitment of such Lender to make Revolving
Loans, as set forth on the signature page of this Agreement opposite such
Lender's signature or in the most recent Assignment and Acceptance Agreement, if
any, executed by such Lender, by (ii) the sum of the then outstanding Term Loan,
PLUS the aggregate Revolving Loan Commitment.
"PROJECTIONS" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a Subsidiary by
Subsidiary basis on a consistent basis with Borrower's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
"PURCHASE AGREEMENT" means that certain Unit Purchase Agreement
dated as of March 31, 1999 by and among Cherokee Investor Partners, as
Purchaser, and each of the members of Cherokee International, LLC, as Sellers.
"RELATED TRANSACTIONS" means the transactions contemplated by the
Purchase Agreement and the documents relating thereto, the Indenture and the
transactions related thereto (including the funding of the Subordinated Notes),
the execution and delivery of the Related Transaction Documents, the funding of
all Loans 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 and all
other agreements, instruments and documents executed or delivered in connection
with the Related Transactions.
"REQUISITE LENDERS" means Lenders having (a) sixty-six and
two-thirds percent (66-2/3%) or more of the sum of the Revolving Loan Commitment
and the outstanding principal balance of the Term Loan or, (b) if the Revolving
Loan Commitment has been terminated, sixty-six and two-thirds percent (66-2/3%)
or more of the aggregate outstanding principal balance of the Loans.
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"RISK PARTICIPATION LIABILITY" means, as to each Lender Letter
of Credit and each Risk Participation Agreement, all reimbursement
obligations of Borrower to the issuer of the Lender Letter of Credit or to
the issuer of the letter of credit with respect to the transaction for which
the Risk Participation Agreement was executed and delivered, consisting of
(a) the amount available to be drawn or which may become available to be
drawn; (b) all amounts which have been paid and made available by the issuing
bank to the extent not reimbursed by Borrower, whether by the making of a
Revolving Loan or otherwise; and (c) all accrued and unpaid interest, fees
and expenses with respect thereto. For purposes of determining the
outstanding amount of Risk Participation Liability, the maximum amount
potentially owing under any Risk Participation Agreement will be considered
outstanding unless the bank which is the beneficiary of such Risk
Participation Agreement reports daily activity to Agent showing actual
outstanding letters of credit subject to such Risk Participation Agreement in
which event the outstanding amount of Risk Participation Liability shall be
the amount of such actual outstanding letters of credit from time to time.
"SECURITY DOCUMENTS" means all instruments, documents and
agreements executed by or on behalf of any Person 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 or deed of trust, and all instruments, documents and
agreements executed pursuant to the terms of the foregoing.
"SUBORDINATED NOTES" means the $100,000,000 Cherokee
International, LLC, Cherokee International Finance, Inc., 10 1/2% Senior
Subordinated Notes, Due 2009, issued pursuant to the Indenture.
"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
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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.
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Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
Cherokee International, LLC
By: /s/ IAN SHAPIRO
-----------------------------
Title: Vice President
------------------------
HELLER FINANCIAL, INC., as
Agent and a Lender
By: /s/ PAT HENAHAN
-----------------------------
Title: Senior Vice President
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Commitment to make FLEET CAPITAL CORPORATION
Revolving Loans:
$5,000,000
Percentage of Revolving By: /s/ ALISA G. FREDERICK
Loan Commitment: -------------------------------
20% Alisa G. Frederick
Senior Vice President
Commitment to make
Term Loan:
$10,000,000
Percentage of Term Loan:
20%
Address: 15260 Ventura Boulevard
Suite 400
Sherman Oaks, CA 91403
Attn: Nancy E. Foote, Vice President
Telecopy: (818) 382-4292
71
Commitment to make FINOVA CAPITAL CORPORATION
Revolving Loans:
$3,333,333
Percentage of Revolving By: /s/ BRUCE J. METTEL
Loan Commitment: -------------------------------
13 1/3% Bruce J. Mettel
Authorized Signer
Commitment to make
Term Loan:
$6,666,667
Percentage of Term Loan:
13 1/3%
Address: 355 S. Grand Avenue
Suite 2400
Los Angeles, CA 90071
Attn: Jason Ito, Director
Telecopy: (213) 625-8147
Attn: Bruce Mettel, Director
Telecopy: (312) 322-7250
72
Commitment to make KEY CORPORATE CAPITAL INC.
Revolving Loans:
$3,333,333
Percentage of Revolving By: /s/ JAY R. MCKENNEY
Loan Commitment: -------------------------------
13 1/3% Vice President
Commitment to make
Term Loan:
$6,666,667
Percentage of Term Loan:
13 1/3%
Address: 66 South Pearl Street
6th Floor
Albany, NY 12207
Attn: Jay R. McKenney,
Vice President
Telecopy: (518) 488-5199
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Commitment to make U.S. BANK
Revolving Loans:
$3,333,334
Percentage of Revolving By: /s/ GERALD L. SORENSEN
Loan Commitment: -------------------------------
13 1/3% Title: Senior Vice President
Commitment to make
Term Loan:
$6,666,666
Percentage of Term Loan:
13 1/3%
Address: 1420 5th Avenue
11th Floor
Seattle, WA 98101
Attn: Gerald L. Sorensen,
Senior Vice President
Telecopy: (206) 344-2340
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LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBITS
Exhibit 1.2(G) - LIBOR Loan Request
Exhibit 1.5(B) - Excess Cash Flow Certificate
Exhibit 4.6(B) - Quarterly Pricing Certificate
Exhibit 4.6(D) - Compliance Certificate
Exhibit 4.6(F) - Borrowing Base Certificate
Exhibit 10.1(A) - Notes
SCHEDULES
Schedule 3.1 - Existing Debt
Schedule 3.2(A)(10) - Liens
Schedule 3.3 - Existing Investments
Schedule 3.4 - Contingent Obligations
Schedule 3.8 - Affiliate Transactions
Schedule 3.9 - Business Description
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
Schedule 10.1(A) - Pro Forma
Schedule 10.1(B) - Indebtedness to be Repaid