HAMPSHIRE GROUP, LIMITED
Note Purchase Agreement
DATED AS OF MAY 15, 1998
$15,000,000 7.05% SENIOR SECURED NOTES DUE JANUARY 2, 2008
<PAGE>
TABLE OF CONTENTS
PAGE
1. AUTHORIZATION OF NOTES 1
2. SALE AND PURCHASE OF NOTES 2
3. CLOSING 2
4. CONDITIONS TO CLOSING
2
4.1 Representations and Warranties
2
4.2
Performance; No Default
2
4.3 Compliance
Certificates
3
4.4 Opinions
of Counsel
3
4.5 Purchase
Permitted By Applicable Law, etc
3
4.6 Sale of
Other Notes
4
4.7 Payment of
Special Counsel Fees
4
4.8 Private
Placement Number
4
4.9 Changes in
Structure
4
4.10 Evidence of
Key-Person Life Insurance
4
4.11 Security
Agreement
4
4.12 Financing
Statements
5
4.13 UCC Searches
5
4.14 Insurance
5
4.15 Credit Agreement
5
4.16 lntercreditor
Agreement
6
4.17 Proceedings and
Documents
6
5. REPRESENTATIONS AND WARRANTIES OF THE
OBLIGORS
6
5.1
Organization; Power and Authority
6
5.2
Authorization, etc
6
5.3 Disclosure
7
5.4
Organization and Ownership of Shares of
Material Subsidiaries; Affiliates
8
5.5 Financial
Statements
8
5.6 Compliance
with Laws, Other Instruments, etc
9
5.7
Governmental Authorizations, etc
9
5.8
Litigation; Observance of Agreements, Statutes and Orders 9
5.9 Taxes
10
5.10 Title to
Property; Leases
10
5.11 Licenses,
Permits, etc
10
5.12 Pension Plans
11
5.13 Private Offering
by the Company
12
5.14 Use of Proceeds;
Margin Regulations
12
5.15 Existing Debt;
Future Liens
12
5.16 Foreign Assets
Control Regulations, etc
13
5.17 Status under
Certain Statutes
13
5.18 Environmental
Matters
13
<PAGE>
TABLE OF CONTENTS (cont.)
PAGE
5.19 Obligors
Interdependent
14
5.20 Other
Representations and Warranties
14
6. REPRESENTATIONS OF THE PURCHASER
14
6.1 Purchase
for Investment
14
6.2 Source of
Funds
14
7. INFORMATION AS TO COMPANY
16
7.1 Financial
and Business Information
16
7.2 Officer's
Certificate
19
7.3 Inspection
19
8. PREPAYMENT OF THE NOTES
20
8.1 Required
Prepayments
20
8.2 Optional
Prepayments of Notes with Make-Whole Amount
20
8.3 Allocation
of Note Partial Prepayments
20
8.4 Change in
Control
20
8.5 Maturity;
Surrender, etc.
22
8.6 Purchase
of Notes
23
8.7 Make-Whole
Amount
23
9. INTEREST ON THE NOTES
10.AFFIRMATIVE COVENANTS 24
10.1 Compliance with
Law
25
10.2 Insurance
25
10.3 Maintenance of
Properties
27
10.4 Payment of Taxes
and Claims
27
10.5 Corporate
Existence, etc
28
10.6 Pan Passu
Obligations
28
10.7 Guaranties of
Subsidiaries
28
10.8 Year 2000
29
10A. AFFIRMATIVE COVENANTS 29
10A.1
Compliance
with Law
30
10A.2
Insurance
30
10A.3
Maintenance of Properties
30
10A.4
Payment of
Taxes and Claims
30
11. NEGATIVE COVENANTS
31
11.1 Transactions
with Affiliates
31
11.2
Merger, Consolidation, etc
31
11.3
Consolidated Tangible Net Worth
32
<PAGE>
TABLE OF CONTENTS (cont.)
PAGE
11.4
Average Current Ratio
33
11.5
Fixed Charge Coverage
33
11.6
Funded Debt to Capitalization
33
11.7
Current Debt
33
11.8
Restricted Subsidiary Debt
33
11.9
Sale
of Assets, etc
34
11.10
Restricted
Payments and Restricted Investments
36
11.11
Liens
37
11.12
Line of
Business
41
12. EVENTS OF DEFAULT 42
13. REMEDIES ON DEFAULT, ETC
44
13.1 Acceleration
44
13.2 Other Remedies
45
13.3 Rescission
46
13.4 No Waivers or
Election of Remedies, Expenses, etc
46
14. REGISTRATION EXCHANGE; SUBSTITUTION OF
NOTES
46
14.1 Registration of
Notes
46
14.2 Transfer and
Exchange of Notes
46
14.3 Replacement of
Notes
47
15. PAYMENTS ON NOTES
47
15.1 Place of Payment
47
15.2 Home Office
Payment
48
16. EXPENSES, ETC
48
16.1 Transaction Expenses
48
16.2 Survival
48
17. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES;
ENTIRE AGREEMENT
49
18. AMENDMENT AND WAIVER
49
18.1 Requirements
49
18.2 Solicitation of
Holders of Notes
49
18.3 Binding Effect,
etc
50
18.4 Notes held by
Obligor, etc
50
19. NOTICES 51
20. REPRODUCTION OF DOCUMENTS
51
<PAGE>
TABLE OF CONTENTS (cont.)
PAGE
21. CONFIDENTIAL INFORMATION
52
22. SUBSTITUTION OF PURCHASER
53
23. GUARANTEE
53
23.1
Guaranteed Obligations
53
23.2
Performance under this Agreement and the Other Agreement
54
23.3
Waivers
54
23.4
Certain Waivers of Subrogation, Reimbursement and Indemnity55
23.5
Release
56
23.6
Marshaling
56
23.7 Liability
57
23.8
Character of Obligation
57
23.9
Election to Perform Obligations
58
23.10
No
Election
59
23.11
Severability
59
23.12
Other
Enforcement Rights
59
23.13
Delay or
Omission; No Waiver
59
23.14
Restoration of rights and Remedies
60
23.15
Cumulative
Remedies
60
23.16
Survival
60
23.17
Miscellaneous
60
24. MISCELLANEOUS
61
24.1
Successors and Assigns
61
24.2
Payments Due on Non-Business Days
61
24.3
Severability
61
24.4
Construction
61
24.5
Counterparts
61
24.6
Governing Law
62
25. COLLATERAL AGENT
62
25.1
Appointment
62
25.2
Distribution
63
25.3
Indemnification
64
25.4
Trustee
64
1. SECURITY INTEREST Exhibit 4.11
-(CSA)-1
2. OBLIGATIONS DEFINED Exhibit 4.11
-(CSA)-2
3. WARRANTIES AND COVENANTS Exhibit 4.11
-(CSA)-2
4. EVENTS OF DEFAULT Exhibit 4.11
-(CSA)-5
<PAGE>
TABLE OF CONTENTS (cont.)
5. RIGHTS AND REMEDIES Exhibit
4.11-(CSA)-5
6. MISCELLANEOUS Exhibit 4.11 -(CSA)-5
1. THE PLEDGE Exhibit 4.11 -(CPA)-1
1. SECURITY INTEREST Exhibit 4.1
1-(GSA)-1
2. OBLIGATIONS DEFINED Exhibit 4.11
-(GSA)-2
3. WARRANTIES AND COVENANTS Exhibit 4.11
-(GSA)-2
4. EVENTS OF DEFAULT Exhibit 4.11
-(GSA)-5
5. RIGHTS AND REMEDIES Exhibit 4.11
-(GSA)-5
6. MISCELLANEOUS Exhibit 4.11 -(GSA)-5 1.
THE PLEDGE Exhibit 4.11 -(GPA)-1
<PAGE>
TABLE OF CONTENTS (cont.)
SCHEDULES:
SCHEDULE A
--
Information Relating
to Purchasers
SCHEDULE B
-- Defined
Terms
SCHEDULE C
-- Payment
Instructions at Closing
SCHEDULE 5.1 --
Foreign
Qualification
SCHEDULE 5.3 --
Disclosure
Materials
SCHEDULE 5.4 --
Ownership of the
Company; Affiliates
SCHEDULE 5.5 --
Financial
Statements
SCHEDULE 5.8 --
Certain
Litigation
SCHEDULE 5.9 --
Taxes
SCHEDULE 5.11 -- Patents,
Etc.
SCHEDULE 5.12(a) -- Compliance
of Pension Plans
SCHEDULE 5.12(f) -- Certain
Pension Plans
SCHEDULE 5.14 -- Use of
Proceeds
SCHEDULE 5.15 -- Existing
Indebtedness; Liens
<PAGE>
TABLE OF CONTENTS (cont.)
EXHIBITS:
EXHIBIT 1
-- Form of 7.05%
Senior Secured Note due January 2, 2008
EXHIBIT 4.4(a) --
Form of Opinion of
Special Counsel for the Company
EXHIBIT 4.4(b) --
Form of Opinion of
Special Counsel for the Purchasers
EXHIBIT 4.1 1-(CSA) -- Form of Security Agreement for
Company
EXHIBIT 4.11 -(GSA) -- Form of Security Agreement for
Guarantor
EXHIBIT 4.11 -(CPA) -- Form of Pledge Agreement for
Company
EXHIBIT 4.11 .-(GPA)-- Form of Pledge Agreement for
Guarantor
EXHIBIT 4.16
-- Form of
Intercreditor Agreement
EXHIBIT 10.7
-- Form of Guarantee
Joinder Agreement
<PAGE>
HAMPSHIRE GROUP, LIMITED
215 Commerce Boulevard
Anderson, South Carolina 29622
$15,000,000 7.05% Senior Secured Notes Due January 2, 2008
Dated as of May 15,1998
[Separately addressed to each of the
Purchasers identified on Schedule A]
Ladies and Gentlemen:
HAMPSHIRE GROUP,
LIMITED, a Delaware corporation (together with its
permitted successors, the "Company"),
HAMPSHIRE DESIGNERS, INC., a corporation
organized under the laws of Delaware
(together with its permitted successors,
"HDI") and each of HAMPSHIRE INVESTMENTS,
LIMITED, a corporation organized under
the laws of Delaware (together with its
permitted successors, "HIL"), SEGUE
(AMERICA) LIMITED, a corporation organized
under the laws of Delaware (together
with its permitted successors, "Segue"),
GLAMOURETTE FASHION MILLS, INC., a
corporation organized under the laws of
Delaware (together with its permitted
successors, "Glamourette"), and SAN
FRANCISCO KNITWORKS, INC., a corporation
organized under the laws of Delaware
(together with its permitted successors,
"SF Knitworks") (the foregoing Persons
other than the Company together with each
other Person becoming a Guarantor hereunder
pursuant to Section 10.7 being
referred to herein individually as a
"Guarantor" and collectively as the
"Guarantors"; the Company and the
Guarantors (other than HIL) being referred to
herein individually as an "Obligor" and
collectively as the "Obligors"), hereby
agree, jointly and severally, with you as
follows:
1. AUTHORIZATION OF NOTES.
The Company will
authorize the issue and sale of $15,000,000 aggregate
principal amount of its 7.05% Senior
Secured Notes due January 2, 2008 (the
"Notes"). The term "Notes" as used in this
Agreement shall include each Note
delivered pursuant to this Agreement and
the Other Agreement (as hereinafter
defined) and any such notes issued in
substitution therefor pursuant to Section
14 of this Agreement or the Other
Agreement. The Notes shall be substantially in
the form set out in Exhibit 1, with such
changes therefrom, if any, as may be
approved by you and the Company. Certain
capitalized terms used in this
Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a
Schedule or an Exhibit attached to this
Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the
terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase
from the Company, at the Closing
provided for in Section 3, Notes in the
principal amount specified below your
name in Schedule A at the purchase price of
100% of the principal amount
thereof. Contemporaneously with entering
into this Agreement, the Company is
entering into another separate Note
Purchase Agreement (the "Other Agreement")
identical with this Agreement with the
other purchaser named in Schedule A (the
"Other Purchaser"), providing for the sale
at such Closing to the Other
Purchaser of Notes in the principal amount
specified below its name in Schedule
A. Your obligation hereunder and the
obligations of the Other Purchaser under
the Other Agreement are several and not
joint obligations and you shall have no
obligation under the Other Agreement and no
liability to any Person for the
performance or non-performance by the Other
Purchaser thereunder.
3. CLOSING.
The sale and
purchase of the Notes to be purchased by you and the Other
Purchaser shall occur at the offices of
Willkie, Farr & Gallagher, at 10:00
a.m., local time, at a closing (the
"Closing") on June 4,1998 or on such other
Business Day thereafter as may be agreed
upon by the Company and you and the
Other Purchaser. At the Closing the Company
will deliver to you the Notes to be
purchased by you in the form of a single
Note (or such greater number of Notes
in denominations of at least $500,000 as
you may request), dated the date of the
Closing and registered in your name (or in
the name of your nominee), against
delivery by you to the Company or its order
of immediately available funds in
the amount of the purchase price therefor
by wire transfer of immediately
available funds for the account of the
Company as indicated on Schedule C. If at
the Closing the Company shall fail to
tender such Notes to you as provided above
in this Section 3, or any of the conditions
specified in Section 4 shall not
have been fulfilled to your satisfaction,
you shall, at your election, be
relieved of all further obligations under
this Agreement, without thereby
waiving any rights you may have by reason
of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation
to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to
your satisfaction, prior to or at the
Closing, of the following conditions:
4.1 Representations and Warranties.
The
representations and warranties of the Obligors and HIL in the
Financing
Documents shall be correct when made and at
the time of the Closing.
4.2 Performance; No Default.
Each Obligor and
HIL shall have performed and complied with all agreements
and conditions contained in the Financing
Documents required to be performed or
complied with by it prior to or at the
Closing and, after giving effect to the
issue and sale of the Notes (and the
application of the proceeds thereof as
contemplated by Schedule 5.14) no Default
or Event of Default shall have
occurred and be continuing. Neither any
Obligor nor HIL shall have entered into
any transaction since February 18, 1998
that would have been prohibited by
Section 11.1 had such Section applied since
such date.
4.3 Compliance Certificates.
(a) Obligor's Officer's Certificates. Each Obligor and HIL shall
have
delivered to you
an Officer's Certificate, dated the date of the Closing,
certifying that
the conditions specified in Section 4.1, Section 4.2 and
Section 4.9 have
been fulfilled.
(b) Obligor Secretary's Certificates. Each Obligor and HIL shall
have
delivered to you
a certificate of its Secretary or one of its Assistant
Secretaries,
dated the date of the Closing, certifying as to the
resolutions
attached thereto and other proceedings relating to the
authorization,
execution and delivery of the Financing Documents to which
it is a
party.
4.4 Opinions of Counsel.
You shall have
received opinions in form and substance satisfactory to you,
dated the date of the Closing,
(a) from Willkie, Farr & Gallagher, counsel for the
Company,
substantially in
the form set out in Exhibit 4.4(a) and covering such
matters incident
to the transactions contemplated hereby as you or your
counsel may
reasonably request (and the Company hereby instructs its
counsel to
deliver such opinion to you), and
(b) from Hebb & Gitlin, your special counsel in connection with
the
transactions
contemplated hereby, substantially in the form set out in
Exhibit 4.4(b)
and covering such other matters incident to the transactions
contemplated
hereby as you may reasonably request.
The Company
hereby instructs its counsel named in clause (a) above to
deliver such opinion to you.
4.5 Purchase Permitted By Applicable
Law, etc.
On the date of
the Closing, your purchase of Notes shall (a) be permitted
by the laws and regulations of each
jurisdiction to which you are subject,
without recourse to provisions (such as
section 1405(a)(8) of the New York
Insurance Law) permitting limited
investments by insurance companies without
restriction as to the character of the
particular investment, (b) not violate
any applicable law or regulation
(including, without limitation, Regulation U, T
or X of the Board of Governors of the
Federal Reserve System) and (c) not
subject you to any tax, penalty or
liability under or pursuant to any applicable
law or regulation, which law or regulation
was not in effect on the date of your
execution and delivery of this Agreement.
If requested by you, you shall have
received an Officer's Certificate
certifying as to such matters of fact as you
may reasonably specify to enable you to
determine whether such purchase is so
permitted.
4.6 Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the
Other
Purchaser and the Other Purchaser shall
purchase the Notes to be purchased by
them at the Closing as specified in
Schedule A.
4.7 Payment of Special Counsel
Fees.
Without limiting
the provisions of Section 16.1, the Company shall have
paid on or before the Closing the fees,
charges and disbursements of your
special counsel referred to in Section 4.4
to the extent reflected in a
statement of such counsel rendered to the
Company at least one Business Day
prior to the date of the Closing.
4.8 Private Placement Number.
A Private
Placement Number issued by Standard & Poor's CUSIP Service
Bureau
(in cooperation with the Securities
Valuation Office of the National Association
of Insurance Commissioners) shall have been
obtained for the Notes.
4.9 Changes in Structure.
The Obligors and
HIL shall not have changed their jurisdiction of
incorporation or organization or been a
party to any merger or consolidation and
shall not have succeeded to all or any
substantial part of the liabilities of
any other entity, at any time following the
date of the most recent financial
statements referred to in Schedule 5.5.
4.10 Evidence of Key-Person Life
Insurance.
The Company
shall have delivered to you a copy of the Key-Person Policy and
collateral assignments thereof, which
Policy and assignments shall be reasonably
satisfactory to you and the Other
Purchaser. The Company shall have delivered to
you evidence that all premiums in respect
of the Key-Person Policy have been
paid.
4.11 Security Agreement.
(a) Security Agreements. A Security Agreement (as may be
amended,
restated or
otherwise modified from time to time, the "Company's Security
Agreement"),
substantially in the form of Exhibit 4.11 (CSA), shall have
been duly
authorized, executed and delivered by the Company, shall be in
full force and
effect, and you shall have received an original executed
counterpart
thereof. A Security Agreement (as may be amended, restated or
otherwise
modified from time to time, a "Guarantor's Security
Agreement"),
substantially in
the form of Exhibit 4.11 -(GSA), shall have been duly
authorized,
executed and delivered by each of the Guarantors (other than
HIL), shall be
in full force and effect, and you shall have received an
original
executed counterpart thereof.
(b) Pledge Agreements. A Pledge Agreement (as may be amended,
restated
or otherwise
modified from time to time, the "Company's Pledge Agreement"),
substantially in
the form of Exhibit 4.11 (CPA), shall have been duly
authorized,
executed and delivered by the Company, shall be in full force
and effect, and
you shall have received an original executed counterpart
thereof. All
stock certificates and stock powers required to be delivered
to the
Collateral Agent under the Pledge Agreement in respect of each
of
the Subsidiaries
owned by the Company shall have been so delivered. A
Pledge Agreement
(as may be amended, restated or otherwise modified from
time to time, a
"Guarantor's Pledge Agreement"), substantially in the form
of Exhibit 4.11
-(GPA), shall have been duly authorized, executed and
delivered by
each of the Guarantors (other than HIL), shall be in full
force and
effect, and you shall have received an original executed
counterpart
thereof. All stock certificates and stock powers required to be
delivered to the
Collateral Agent under each such Guarantor's Pledge
Agreement in
respect of each of the Subsidiaries owned by such Guarantor
shall have been
so delivered.
4.12 Financing Statements.
Each financing
statement required to be filed, registered or recorded in
connection with the transactions
contemplated by this Agreement and the other
Financing Documents shall have been
properly filed, registered or recorded in
each office in each jurisdiction required
in order to create in favor of the
Collateral Agent, for the ratable benefit
of you and the Other Purchaser, a
valid and/or perfected first priority Lien
(subject only to the Liens permitted
under the lntercreditor Agreement) in and
to the Collateral and the Pledged
Stock Collateral; the Collateral Agent and
you shall have received such evidence
satisfactory to the Collateral Agent that
all such filings, registrations and
recordations have been made; and all
necessary filing, recording and other
similar fees, and all taxes and other
charges related to such filings,
registrations and recordations (including
such other taxes and charges requested
by you), shall have been paid in full.
4.13 UCC Searches
Uniform
Commercial Code financing statement, judgment lien and Federal
income tax lien searches in such central
and local recording offices as you
shall have identified to the Company shall
have been delivered to you or your
special counsel and shall be satisfactory
to you in your sole discretion.
4.14 Insurance.
Certificates of
insurance evidencing the insurance policies and
endorsements required to be delivered
pursuant to Section 3D of the Security
Agreements shall have been delivered to you
and the Other Purchaser.
4.15 Credit Agreement.
You shall have
received a copy of the Credit Agreement and such other
documents related thereto as you may
reasonably request, the Credit Agreement
and such other documents shall be in form
and substance reasonably satisfactory
to you.
4.16 Intercreditor Agreement
An lntercreditor
Agreement (as may be amended, restated or otherwise
modified from time to time, the
"Intercreditor Agreement"), substantially in the
form of Exhibit 4.16, shall have been duly
authorized, executed and delivered by
the lenders and agent under the Credit
Agreement, the Other Purchaser, each of
the Guarantors and the Company, shall be in
full force and effect, and you shall
have received an original executed
counterpart thereof.
4.17 Proceedings and Documents.
All corporate
and other proceedings in connection with the transactions
contemplated by the Financing Documents and
all documents and instruments
incident to such transactions shall be
satisfactory to you and your special
counsel, and you and your special counsel
shall have received all such
counterpart originals or certified or other
copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND
WARRANTIES OF THE OBLIGORS.
Each Obligor and
HIL, jointly and severally, represents and warrants to
you, as of the date of the Closing,
that:
5.1 Organization; Power and
Authority.
Each Obligor and
HIL is a corporation, duly organized, validly existing and
in good standing under the laws of its
jurisdiction of incorporation, and each
is duly qualified as a foreign corporation
and is in good standing (to the
extent such concept is recognized) in each
jurisdiction in which such
qualification is required by law, other
than those jurisdictions as to which the
failure to be so qualified or in good
standing could not, individually or in the
aggregate, reasonably be expected to have a
Material Adverse Effect. Each
Obligor and HIL has the corporate power and
authority to own or hold under lease
the properties it purports to own or hold
under lease, to transact the business
it transacts and proposes to transact, to
execute and deliver the Financing
Documents to which it is a party and to
perform the provisions hereof and
thereof.
5.2 Authorization, etc.
(a) The Company. The Financing Documents to which the Company is
a
party have been
duly authorized by all necessary corporate action on the
part of the
Company, and this Agreement constitutes, and each of such other
Financing
Documents, upon execution and delivery thereof, will
constitute,
a legal, valid
and binding obligation of the Company enforceable against
the Company in
accordance with its terms, except as such enforceability may
be limited by
(i) applicable bankruptcy, insolvency, reorganization,
fraudulent
conveyance, moratorium or other similar laws affecting the
enforcement of creditors'
rights generally and (ii) general principles of
equity
(regardless of whether such enforceability is considered in a
proceeding in
equity or et law).
(b) The Guarantors. Each Financing Document has been duly
authorized
by all necessary
corporate action on the part of each Guarantor that is a
party thereto,
and each such Financing Document constitutes a legal, valid
and binding
obligation of each such Guarantor, enforceable against each
such Guarantor
in accordance with its terms, except as such enforceability
may be limited
by (i) applicable bankruptcy, insolvency, reorganization,
fraudulent
conveyance, moratorium or other similar laws affecting the
enforcement of
creditors' rights generally and (ii) general principles of
equity
(regardless of whether such enforceability is considered in a
proceeding in
equity or at law).
(c) Solvency of Guarantors. None of the Guarantors intends to
incur
any obligations
hereunder or otherwise make any transfers in connection
herewith, with
actual intent to hinder, delay or defraud either present or
future
creditors. Before, and after giving effect to, the consummation
of
the transactions
contemplated hereby, without limitation, the issuance of
the Notes and
the delivery of the Guarantees:
(i) the assets of each Guarantor at a fair valuation thereof on
a
going concern basis will not be less than the amount that will
be
required to pay the probable liability with respect to its
debts
(including, without limitation, contingent, subordinated,
unmatured
and unliquidated liabilities on existing debts, as such
liabilities
may become absolute and matured), in each case both prior to and
after
giving effect to the transactions contemplated by this
Agreement,
(ii) no Guarantor is currently engaged in or about to engage in
a
business or transaction for which the property remaining in its
respective hands is an unreasonably small capital and
(iii) each Guarantor will be able to pay its respective debts
as
they mature.
5.3 Disclosure.
The financial
statements referred to in Schedule 5.5 do not, nor does any
Financing Document or any written statement
furnished by or on behalf of any
Obligor and HIL to you in connection with
the negotiation or the closing of the
sale of the Notes, contain any untrue
statement of a material fact or omit a
material fact necessary to make the
statements contained therein not misleading
when viewed in the aggregate. There is no
fact that the Company has not
disclosed to you in writing that has had
or, so far as the Company can now
reasonably foresee, could reasonably be
expected to have a Material Adverse
Effect. Except as expressly described in
Schedule 5.3, or in one of the
documents, certificates or other writings
identified therein, or in the
financial statements listed in Schedule
5.5, since December 31,1997, there has
been no change in the financial condition,
operations, business, properties or
prospects of the Obligors except changes
that individually or in the aggregate
could not reasonably be expected to have a
Material Adverse Effect. There is no
fact known to a Senior Financial Officer of
the Company that could reasonably be
expected to have a Material Adverse Effect
that has not been set forth herein,
in the other Financing Documents or in any
other written statement delivered to
you by or on behalf of any Obligor or HIL
specifically for use in connection
with the transactions contemplated hereby.
In connection with the foregoing, the
Company hereby discloses to you and you
acknowledge such disclosure that the
Company incurred losses of approximately
$1,150,000 in its fiscal quarter ended
March 31, 1998.
5.4 Organization and Ownership of
Shares of Material Subsidiaries; Affiliates.
(a) Schedule 5.4
contains (except as noted therein) complete and correct
lists (i) of the Company's Subsidiaries,
showing, as to each Subsidiary, the
correct name thereof, whether such
Subsidiary is a Restricted Subsidiary or an
Unrestricted Subsidiary, the jurisdiction
of its organization and the percentage
of shares of each class of its capital
stock or similar equity interests
outstanding owned by the Company and each
other Subsidiary, (ii) of the
Company's Affiliates, other than
Subsidiaries and other than Persons that are
Affiliates solely as a consequence of being
controlled by one or more Acceptable
Control Persons (which Affiliates are
unrelated to the business of the Company
and its Subsidiaries), and (iii) of the
Company's directors and senior officers.
All of the Company's Restricted
Subsidiaries (other than Keynote) are
Guarantors.
(b) All of the
outstanding shares of capital stock of each Subsidiary shown
in Schedule 5.4 as being owned by the
Company and its Subsidiaries have been
validly issued, are fully paid and
nonassessable and are owned by the Company or
another Subsidiary free and clear of any
Lien (except as otherwise disclosed in
Schedule 5.4).
(c) Each
Subsidiary identified in Schedule 5.4 is a corporation or other
legal entity duly organized, validly
existing and in good standing (to the
extent such concept is recognized) under
the laws of its jurisdiction of
organization, and is duly qualified as a
foreign corporation or other legal
entity and is in good standing (to the
extent such concept is recognized) in
each jurisdiction in which such
qualification is required by law, other than
those jurisdictions as to which the failure
to be so qualified or in good
standing could not, individually or in the
aggregate, reasonably be expected to
have a Material Adverse Effect. Each such
Subsidiary has the corporate or other
power and authority to own or hold under
lease the properties it purports to own
or hold under lease and to transact the
business it transacts and proposes to
transact.
(d) No
Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than
this Agreement, the other Financing
Documents, the agreements listed on
Schedule 5.4 and customary limitations
imposed by corporate law statutes)
restricting the ability of such Subsidiary to
pay dividends out of profits or make any
other similar distributions of profits
to the Company or any of its Subsidiaries
that owns outstanding shares of
capital stock or similar equity interests
of such Subsidiary.
5.5 Financial Statements.
The Company has
delivered to you and the Other Purchaser copies of the
financial statements of the Company and its
Subsidiaries listed on Schedule 5.5.
All of said financial statements (including
in each case the related schedules
and notes) fairly present, in all material
respects, the consolidated financial
position of the Company and its
Subsidiaries as of the respective dates
specified in such Schedule and the
consolidated results of their operations and
cash flows for the respective periods so
specified and have been prepared in
accordance with GAAP consistently applied
throughout the periods involved except
as set forth in the notes thereto (subject,
in the case of any interim financial
statements, to normal year-end
adjustments).
5.6 Compliance with Laws, Other
Instruments, etc.
The execution,
delivery and performance by the Company of the Notes and by
the Obligors and HIL of the other Financing
Documents will not
(a) contravene, result in any breach of, or constitute a
default
under, or result
in the creation of any Lien in respect of any property of
any Obligor or
HIL under, any indenture, mortgage, deed of trust, loan,
purchase or
credit agreement, lease, corporate charter, bylaws or other
constitutive
document, or any other material agreement or instrument to
which such Obligor or
HIL is bound or by which such Obligor or HIL or any
of their
respective properties may be bound or affected,
(b) conflict with or result in a breach of any of the terms,
conditions or
provisions of any order, judgment, decree, or ruling of any
court,
arbitrator or Governmental Authority applicable to any Obligor
or
HIL, or
(c) violate any provision of any statute or other rule or
regulation
of any
Governmental Authority applicable to any Obligor or HIL.
5.7 Governmental Authorizations,
etc.
No consent,
approval or authorization of, or registration, filing or
declaration with, any Governmental
Authority is required in connection with the
execution, delivery or performance of the
Notes by the Company or the other
Financing Documents by the Obligors or HIL
(other than the filing of financing
and/or continuation statements as
contemplated by the Financing Documents).
5.8 Litigation; Observance of
Agreements, Statutes and Orders.
(a) Except as
disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of
the Obligors, threatened against or
affecting any Obligor or any property of
any Obligor in any court or before any
arbitrator of any kind or before or by any
Governmental Authority that,
individually or in the aggregate, would
reasonably be expected to have a
Material Adverse Effect.
(b) No Obligor
is in default under any term of any agreement or instrument
to which it is a party or by which it is
bound, or any order, judgment, decree
or ruling of any court, arbitrator or
Governmental Authority or is in violation
of any applicable law, ordinance, rule or
regulation (including, without
limitation, Environmental Laws) of any
Governmental Authority, which default or
violation, individually or in the
aggregate, would reasonably be expected to
have a Material Adverse Effect.
5.9 Taxes.
The Obligors
have filed all tax returns that are required to have been
filed in any jurisdiction, and have paid
all taxes shown to be due and payable
on such returns and all other taxes and
assessments levied upon them or their
properties, assets, income or franchises,
to the extent such taxes and
assessments have become due and payable and
before they have become delinquent,
except for any taxes and assessments (a)
the amount of which is not individually
or in the aggregate Material or (b) the
amount, applicability or validity of
which is currently being contested in good
faith by appropriate proceedings and
with respect to which such Obligor has
established adequate reserves in
accordance with GAAP. The Obligors know of
no basis for any other tax or
assessment that could reasonably be
expected to have a Material Adverse Effect.
The charges, accruals and reserves on the
books of the Company and its
Subsidiaries in respect of Federal, state
or other taxes for all fiscal periods
are adequate. Other than with respect to a
currently on-going Internal Revenue
Service audit of one or more of the
Obligors (which audit has not been
completed), there are no other continuing
or open audits with respect to any
Obligor.
HIL has filed
all Federal income tax returns that are required to have been
filed and has paid all such taxes shown to
be due and payable on such returns,
to the extent such taxes have become due
and payable and before they have become
delinquent, except for any taxes the amount
of which is not individually or in
the aggregate Material or the amount,
applicability or validity of which is
currently being contested in good faith by
appropriate proceedings and with
respect to which HIL has established
adequate reserves in accordance with GAAP.
HIL knows of no basis for any other Federal
income tax that could reasonably be
expected to have a Material Adverse Effect.
The charges, accruals and reserves
on the books of HIL in respect of Federal
income taxes for all fiscal periods
are adequate.
5.10 Title to Property; Leases.
The Obligors
have good and sufficient title to their respective properties
that individually or in the aggregate are
Material, including all such
properties reflected in the most recent
audited balance sheet referred to in
Section 5.5 or purported to have been
acquired by any Obligor after said date
(except as sold or otherwise disposed of in
the ordinary course of business), in
each case free and clear of Liens
prohibited by this Agreement. All leases that
individually or in the aggregate are
Material are valid and subsisting and are
in full force and effect in all material
respects.
5.11 Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Obligors possess all licenses, permits, franchises,
authorizations,
patents, copyrights, service marks, trademarks and trade
names, or rights
thereto, that individually or in the aggregate are
Material,
without known conflict with the rights of others;
(b) to the best knowledge of the Obligors, no product or practice
of
any Obligor
infringes in any material respect any license, permit,
franchise,
authorization, patent, copyright, service mark, trademark,
trade
name or other
right owned by any other Person, which, individually or in
the aggregate,
could reasonably be expected to have a Material Adverse
Effect; and
(c) to the best knowledge of the Obligors, there is no material
violation by any
Person of any right of any Obligor with respect to any
patent,
copyright, service mark, trademark, trade name or other right
owned
or used by such
Person which, individually or in the aggregate, could
reasonably be
expected to have a Material Adverse Effect.
5.12 Pension Plans. Except as disclosed in
Schedule 5.12,
(a) the Company and each ERISA Affiliate have operated and
administered
each Plan (other than any Multiemployer Plan) in compliance
with all
applicable laws except for such instances of noncompliance as
have
not resulted in
and could not reasonably be expected to result in a
Material Adverse
Effect. Neither the Company nor any ERISA Affiliate has
incurred any
liability in the nature of a penalty, excise tax or fine
pursuant to
Title I of ERISA, any liability under Title IV of ERISA or any
liability under
sections 4971 through 4980E of the Code, and no event,
transaction or
condition has occurred or exists that could reasonably be
expected to
result in the incurrence of any such liability by the Company
or any ERISA
Affiliate, or in the imposition of any Lien on any of the
rights,
properties or assets of the Company or any ERISA Affiliate, in
either case
pursuant to Title I or IV of ERISA or pursuant to sections 4971
through 4980E of
the Code or pursuant to section 401 (a)(29) or 412 of the
Code, other than
such liabilities or Liens as would not, individually or in
the aggregate,
result in a Material Adverse Effect;
(b) the present value of the aggregate benefit liabilities under
all
of the Plans
subject to Title IV of ERISA (other than Multiemployer Plans),
determined as of
the end of each such Plan's most recently ended plan year
on the basis of
the actuarial assumptions specified for funding purposes in
such Plan's most
recent actuarial valuation report, did not exceed the
aggregate current
value of the assets of all such Plans by an amount that
is Material. The
term "benefit liabilities" has the meaning specified in
section 4001 of
ERISA and the terms "current value" and "present value"
have the meaning
specified in section 3 of ERISA;
(c) the Company and its ERISA Affiliates have not incurred
withdrawal
liabilities (and
are not subject to contingent withdrawal liabilities)
under section
4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or
in the aggregate are Material;
(d) the unfunded expected postretirement benefit obligation
(determined as
of the last day of the Company's most recently ended fiscal
year in
accordance with Financial Accounting Standards Board Statement
No.
106, without
regard to liabilities attributable to continuation coverage
mandated by
section 4980B of the Code) of the Company and its Subsidiaries
is not
Material;
(e) the execution and delivery of this Agreement and the issuance
and
sale of the
Notes hereunder will not involve any transaction that is
subject to the
prohibitions of section 406(a) of ERISA or in connection
with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of
the Code. The
representation by the Obligors in the first sentence of this
Section 5.12(e)
is made in reliance upon and subject to the accuracy of
your
representation in Section 6.2 as to the sources of the funds used
to
pay the purchase price
of the Notes to be purchased by you;
(f) the Multiemployer Plans in respect of which any Obligor or
any
ERISA Affiliate
makes contributions or has any liability or obligation are
set forth on
Schedule 5.12(f). The Plans constituting "defined benefit
plans" (as
defined in section (3)(35) of ERISA) are set forth on Schedule
5.12(f).
5.13 Private Offering by the Company.
Neither the
Obligors nor HIL nor anyone acting on their behalf has offered
the Notes or any similar securities for
sale to, or solicited any offer to buy
any of the same from, or otherwise
approached or negotiated in respect thereof
with, any Person other than you, the Other
Purchaser and not more than 1 other
Institutional Investor, which has been
offered the Notes at a private sale for
investment. Neither any of the Obligors nor
HIL nor anyone acting on their
behalf has taken, or will take, any action
that would subject the issuance or
sale of the Notes to the registration
requirements of section 5 of the
Securities Act.
5.14 Use of Proceeds; Margin
Regulations.
The Company will
apply the proceeds of the sale of the Notes as set forth
in Schedule 5.14. No part of the proceeds
from the sale of the Notes hereunder
will be used, directly or indirectly, for
the purpose of buying or carrying any
margin stock within the meaning of
Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for
the purpose of buying or carrying or
trading in any securities under such
circumstances as to involve the Company in
a violation of Regulation X of said Board
(12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of
said Board (12 CFR 220). Margin
stock does not constitute more than 20% of
the value of the consolidated assets
of the Obligors and HIL, and the Obligors
and HIL do not have any present
intention that margin stock will constitute
more than 20% of the value of such
assets. As used in this Section, the terms
"margin stock" and "purpose of buying
or carrying" shall have the meanings
assigned to them in said Regulation U.
5.15 Existing Debt; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a
complete
and correct list
of all outstanding Debt of the Obligors as of December 31,
1997, since
which date there has been no Material change in the amounts,
interest rates,
sinking funds, installment payments or maturities of the
Debt of the
Obligors except as described in Schedule 5.15. No Obligor is in
default, and no
waiver of default is currently in effect, in the payment of
any principal or
interest on any Debt of any Obligor, and no event or
condition exists
with respect to any such Debt of any Obligor that would
permit (or that
with notice or the lapse of time, or both, would permit)
one or more
Persons to cause such Debt to become due and payable before its
stated maturity
or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, no Obligor has agreed
or
consented to
cause or permit in the future (upon the happening of a
contingency or
otherwise) any of its property, whether now owned or
hereafter
acquired, to be subject to a Lien not permitted by Section
11.11.
5.16 Foreign Assets Control Regulations,
etc.
Neither the sale
of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading
with the Enemy Act, as amended, or any
of the foreign assets control regulations
of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V,
as amended) or any enabling
legislation or executive order relating
thereto.
5.17 Status under Certain Statutes.
Neither any
Obligor nor HIL is subject to regulation under the Investment
Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935,
as amended, the Transportation Acts (49
U.S.C.), as amended (which would require
any approval or registration of the issuing
of Notes or the granting of the
Collateral), or the Federal Power Act, as
amended.
5.18 Environmental Matters.
No Obligor has
knowledge of any claim or has received any written notice of
any claim, and no proceeding has been
instituted against any Obligor raising any
claim against any Obligor or any of its
real properties now or formerly owned,
leased or operated by any of them or other
assets, alleging any damage to the
environment or violation of any
Environmental Laws, except, in each case, such
as would not reasonably be expected to
result in a Material Adverse Effect.
Except as otherwise disclosed to you in
writing,
(a) no Obligor has knowledge of any facts which would give rise to
any
claim, public or
private, against any Obligor of the violation of
Environmental
Laws or damage to the environment emanating from, occurring
on or in any way
related to real properties now or formerly owned, leased
or operated by
any of them or to other assets or their use, except, in each
case, such as
would not reasonably be expected to result in a Material
Adverse
Effect;
(b) no Obligor has stored any Hazardous Materials on real
properties
now or formerly
owned, leased or operated by any of them in a manner
contrary to any
Environmental Laws and has not disposed of any Hazardous
Materials in a
manner contrary to any Environmental Laws in each case in
any manner that
could reasonably be expected to result in a Material
Adverse Effect;
and
(c) all buildings on all real properties now owned, leased or
operated
by any Obligor
are in compliance with applicable Environmental Laws, except
where failure to
comply would not reasonably be expected to result in a
Material Adverse
Effect.
5.19 Obligors Interdependent.
The Company and
the Guarantors are directly dependent upon each other for
and in connection with their borrowing
activities. Each Guarantor will receive
direct and indirect economic, financial and
other benefits from the indebtedness
incurred hereunder and under the Notes by
the Company, and under the Guarantee
of each Guarantor, and the incurrence of
such indebtedness is in the best
interests of the Company and each
Guarantor. The Company and the Guarantors have
explicitly induced you and the Other
Purchaser to purchase the Notes based on
and in reliance on the consolidated
financial condition of the Company and the
Guarantors.
5.20 Other Representations and
Warranties.
The
representations and warranties of the Company set forth in the
other
Financing
Documents are true and correct as of the
date of Closing
6. REPRESENTATIONS OF THE
PURCHASER.
6.1 Purchase for Investment.
You represent
that you are purchasing the Notes for your own account or for
one or more separate accounts maintained by
you or for the account of one or
more pension or trust funds (or commingled
pension trust funds) or for the
account of one or more "accredited
investors" within the meaning of Regulation D
under the Securities Act for whom you are
acting as investment manager, agent or
investment adviser, and not with a view to
the distribution thereof, provided
that the disposition of your or their
property shall at all times be within your
or their control. You understand that the
Notes have not been registered under
the Securities Act and may be resold only
if registered pursuant to the
provisions of the Securities Act or if an
exemption from registration is
available, except under circumstances where
neither such registration nor such
an exemption is required by law, and that
the Company is not required to
register the Notes.
6.2 Source of Funds.
You represent
that at least one of the following statements is an accurate
representation as to each source of funds
(a "Source") to be used by you to pay
the purchase price of the Notes to be
purchased by you hereunder:
(a) the Source is an "insurance company general account" as defined
in
Department of
Labor Prohibited Transaction Exemption ("PTE") 95-60 (60 FR
35925, July
12,1995) and in respect thereof you represent that there is no
"employee
benefit plan" (as defined in section 3(3) of ERISA and section
4975(e)(1) of
the Code, treating as a single plan all plans maintained by
the same
employer or employee organization or affiliate thereof) with
respect to which
the amount of the general account reserves and liabilities
of all contracts
held by or on behalf of such plan exceed 10% of the total
reserves and
liabilities of such general account (exclusive of separate
account
liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed
with your state of domicile; or
(b) if you are an insurance company, the Source does not
include
assets allocated
to any separate account maintained by you in which any
employee benefit
plan (or its related trust) has any interest, other than a
separate account
that is maintained solely in connection with your fixed
contractual
obligations under which the amounts payable, or credited, to
such plan and to
any participant or beneficiary of such plan (including any
annuitant) are
not affected in any manner by the investment performance of
the separate
account; or
(c) the Source is either (i) an insurance company pooled
separate
account, within
the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank
collective investment fund, within the meaning of the PTE 91-38
(issued July 12,
1991) and, except as you have disclosed to the Company in
writing pursuant
to this paragraph (c), no employee benefit plan or group
of plans
maintained by the same employer, affiliate of such employer or
employee
organization beneficially owns more than 10% of all assets
allocated to
such pooled separate account or collective investment fund; or
(d) (i) the Source constitutes assets of an "investment fund"
(within
the meaning of
Part V of the QPAM Exemption) managed by a "qualified
professional
asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption),
(ii) no employee benefit plan's assets that are included
in such
investment fund, when combined with the assets of all other
employee benefit
plans established or maintained by the same employer or by
an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption)
of such employer
or by the same employee organization and managed by such
QPAM, exceed 20%
of the total client assets managed by such QPAM, (iii) the
conditions of
Part 1(c) and (g) of the QPAM Exemption are satisfied, (iv)
neither the QPAM
nor a person controlling or controlled by the QPAM
(applying the
definition of "control" in Section V(e) of the QPAM
Exemption) owns
a 5% or more interest in any Obligor or HIL and (v) the
identity of such
QPAM and the names of all employee benefit plans whose
assets are
included in such investment fund have been disclosed to the
Company in
writing pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a
separate
account or trust
fund comprised of one or more employee benefit plans, each
of which has
been identified to the Company in writing pursuant to this
paragraph (f);
or
(g) the Source does not include assets of any employee benefit
plan,
other than a
plan exempt from the coverage of ERISA.
As used in this
Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest"
and "separate account" shall have the
respective meanings assigned to such terms
in section 3 of ERISA.
7. INFORMATION AS TO
COMPANY.
7.1 Financial and Business
Information.
The Company shall deliver to each holder of
Notes:
(a) Quarterly
Statements --within 60 days after the end of each quarterly
fiscal period in each fiscal year of the
Company (other than the last quarterly
fiscal period of each such fiscal year),
duplicate copies of
(i)
consolidated balance sheets of (x) the Company and its
Subsidiaries,
and (y) the Company and the Restricted Subsidiaries, as at
the end of such
quarter, and
(ii) consolidated statements of operations, stockholders' equity
and
cash flows for (x) the
Company and its Subsidiaries, and (y) the Company
and the
Restricted Subsidiaries, for such quarter and (in the case of
the
second and third
quarters) for the portion of the fiscal year ending with
such quarter,
setting forth in each case in comparative form the figures
for the
corresponding periods in the previous fiscal year of the
Company,
all in
reasonable detail, prepared in accordance with GAAP applicable
to
quarterly
financial statements generally, and certified by a Senior
Financial
Officer of the Company as fairly presenting, in all material
respects, the
financial position of the companies being reported on and
their results of
operations and cash flows, subject to changes resulting
from year-end
adjustments, provided that delivery within the time period
specified above
of copies of the Company's Quarterly Report on Form 10-Q
prepared in
compliance with the requirements therefor and filed with the
Securities and
Exchange Commission shall be deemed to satisfy the
requirements of
Section 7.1 (a)(i)(x) and Section 7.1 (a)(ii)(x);
(b) Annual
Statements -- within 120 days after the end of each fiscal year
of the Company, duplicate copies of
(i) a consolidated balance sheet of (x) the Company and its
Subsidiaries,
and (y) the Company and the Restricted Subsidiaries, as at
the end of such
year, and
(ii) consolidated statements of operations, stockholders' equity
and
cash flows of
(x) the Company and its Subsidiaries, and (y) the Company and
the Restricted
Subsidiaries, for such year, setting forth in each case in
comparative form
the figures for the previous fiscal year, all in
reasonable
detail, prepared in accordance with GAAP, and accompanied
(A) in the case
of the consolidated balance sheet referred to in Section
7.1 (b)(i)(x) above and the consolidated
statements of operations, stockholders'
equity and cash flows referred to in
Section 7.1 (b)(ii)(x) above, by an opinion
thereon of independent certified public
accountants of recognized national
standing, which opinion shall state that
such financial statements present
fairly, in all material respects, the
financial position of the companies being
reported upon and the results of their
operations and cash flows and have been
prepared in conformity with GAAP, and that
the examination of such accountants
in connection with such financial
statements has been made in accordance with
generally accepted auditing standards, and
that such audit provides a reasonable
basis for such opinion in the
circumstances,
(B) in the case
of the consolidated balance sheet referred to in Section
7.1 (b)(i)(y) above and the consolidated
statements of operations, stockholders'
equity and cash flows referred to in
Section 7.1 (b)(ii)(y) above, a certificate
of a Senior Financial Officer, which
certificate shall state that such financial
statements present fairly, in all material
respects, the financial position of
the companies being reported upon and the
results of their operations and cash
flows and have been prepared in conformity
with GAAP, and
(C) by a
certificate of such accountants stating that they have reviewed
this Agreement and stating further whether,
in making their audit, they have
become aware of any condition or event that
then constitutes a Default or an
Event of Default, and, if they are aware
that any such condition or event then
exists, specifying the nature and period of
the existence thereof (it being
understood that such accountants shall not
be liable, directly or indirectly,
for any failure to obtain knowledge of any
Default or Event of Default unless
such accountants should have obtained
knowledge thereof in making an audit in
accordance with generally accepted auditing
standards or did not make such an
audit), provided that the delivery within
the time period specified above of the
Company's Annual Report on Form 10-K for
such fiscal year (together with the
Company's annual report to shareholders, if
any, prepared pursuant to Rule 1
4a-3 under the Exchange Act) prepared in
accordance with the requirements
therefor and filed with the Securities and
Exchange Commission, together with
the accountant's certificate described in
clause (B) above, shall be deemed to
satisfy the requirements of Section 7.1
(b)(i)(x) and Section 7.1 (b)(ii)(x);
(c) SEC and
Other Reports -- promptly upon their becoming available, one
copy of (i) each financial statement,
report, notice or proxy statement sent by
the Company or any Subsidiary to public
securities holders generally, and (ii)
each regular or periodic report, each
registration statement (without exhibits
except as expressly requested by such
holder), and each prospectus and all
amendments thereto filed by the Company or
any Subsidiary with the Securities
and Exchange Commission and of all press
releases and other statements made
available generally by the Company or any
Subsidiary to the public concerning
developments that are Material;
(d) Notice of
Default or Event of Default -- promptly, and in any event
within 5 days after a Responsible Officer
becoming aware of the existence of any
Default or Event of Default or that any
Person has given any notice or taken any
action with respect to a claimed default
hereunder or that any Person has given
any notice or taken any action with respect
to a claimed default of the type
referred to in Section 12(f), a written
notice specifying the nature and period
of existence thereof and what action the
Company is taking or proposes to take
with respect thereto;
(e) ERISA
Matters -- promptly, and in any event within 5 days after a
Responsible Officer becoming aware of any
of the following, a written notice
setting forth the nature thereof and the
action, if any, that the Company or an
ERISA Affiliate proposes to take with
respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in
section 4043 of
ERISA and the regulations thereunder, for which notice
thereof has not
been waived pursuant to such regulations as in effect on
the date hereof;
or
(ii) the taking by the PBGC of steps to institute, or the
threatening
by the PBGC of
the institution of, proceedings under section 4042 of ERISA
for the
termination of, or the appointment of a trustee to administer,
any
Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer
Plan that such action has been taken by the PBGC with
respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the
incurrence of
any liability by the Company or any ERISA Affiliate pursuant
to Title I or IV
of ERISA or the penalty or excise tax provisions of the
Code relating to
employee benefit plans, or in the imposition of any Lien
on any of the
rights, properties or assets of the Company or any ERISA
Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise
tax
provisions, if
such liability or Lien, taken together with any other such
liabilities or
Liens then existing, could reasonably be expected to have a
Material Adverse
Effect;
(f) Notices from
Governmental Authority -- promptly, and in any event
within 10 days of receipt thereof by a
Responsible Officer, copies of any notice
to the Company or any Subsidiary from any
Federal or state Governmental
Authority relating to any order, ruling,
statute or other law or regulation that
could reasonably be expected to have a
Material Adverse Effect; and
(g) Requested
Information -- with reasonable promptness, such other data
and information relating to the business,
operations, affairs, financial
condition, assets or properties of the
Company or any of its Subsidiaries or
relating to the ability of the Company to
perform its obligations under this
Agreement, the Other Agreement, the Notes
and the other Financing Documents as
from time to time may be reasonably
requested by any such holder of Notes.
7.2 Officer's Certificate.
Each set of
financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) hereof
shall be accompanied by a certificate of
a Senior Financial Officer of the Company
setting forth: a Covenant Compliance
-- the information (including detailed
calculations) required in order to
establish whether the Company was in
compliance with the requirements of Section
11.2 through Section 11.11, inclusive,
during the quarterly or annual period
covered by the statements then being
furnished (including with respect to each
such Section, where applicable, the
calculations of the maximum or minimum
amount, ratio or percentage, as the case
may be, permissible under the terms of
such Sections, and the calculation of the
amount, ratio or percentage then in
existence); and
(b) Event of Default -- a statement that such officer has reviewed
the
relevant terms
hereof and has made, or caused to be made, under his or her
supervision, a
review of the transactions and conditions of the Obligors
and HIL from the
beginning of the quarterly or annual period covered by the
statements then
being furnished to the date of the certificate and that
such review
shall not have disclosed the existence during such period of
any condition or event
that constitutes a Default or an Event of Default
or, if any such
condition or event existed or exists, specifying the nature
and period of
existence thereof and what action the Obligors or HIL shall
have taken or
propose to take with respect thereto.
7.3 Inspection.
The Company
shall permit the representatives of each holder of Notes that
is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists,
at
the expense of
such holder and upon reasonable prior notice to the Company,
to visit any one
or more of the principal executive offices of the Company,
to discuss the
affairs, finances and accounts of the Company and the
Subsidiaries
with the Company's officers, and (with the consent of the
Company, which
consent will not be unreasonably withheld) its independent
public
accountants, and (with the consent of the Company, which
consent
will not be
unreasonably withheld) to visit the other offices and
properties of
the Company and each Subsidiary, all at such reasonable times
and as often as
may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at
the
expense of the
Company, to visit and inspect upon reasonable prior notice
to the Company
any of the offices or properties of the Company or any
Subsidiary, to
examine all their respective books of account, records,
reports and
other papers, to make copies and extracts therefrom, and to
discuss their
respective affairs, finances and accounts with their
respective
officers and independent public accountants (and by this
provision the
Company authorizes said accountants to discuss the affairs,
finances and
accounts of the Company and its Subsidiaries), all at such
reasonable times
and as often as may be reasonably requested.
8. PREPAYMENT OF THE NOTES.
8.1 Required Prepayments.
On January 2,
2002 and on each January 2 thereafter to and including
January 2, 2007, the Company will prepay
$2,142,857.15 principal amount (or such
lesser principal amount as shall then be
outstanding) of the Notes at par and
without payment of the Make-Whole Amount or
any premium, provided that upon any
partial prepayment of the Notes pursuant to
Section 8.4, the principal amount of
each required prepayment of the Notes
becoming due under this Section 8.1 on and
after the date of such prepayment shall be
reduced in the same proportion as the
aggregate unpaid principal amount of the
Notes is reduced as a result of such
prepayment. On January 2, 2008, all of the
Notes then outstanding shall mature
and become due and payable.
8.2 Optional Prepayments of Notes with
Make-Whole Amount.
The Company may,
at its option, upon notice as provided below, prepay at
any time all, but not less than all, of the
Notes then outstanding at 100% of
the principal amount thereof and accrued
interest thereon to the date of
prepayment, plus the Make-Whole Amount
determined in respect of such date of
prepayment. The Company will give each
holder of Notes to be prepaid under this
Section 8.2 written notice of such optional
prepayment not less than 30 days and
not more than 60 days prior to the date
fixed for such prepayment (which shall
be a Business Day). Each such notice shall
specify such date, the aggregate
principal amount of the Notes held by such
holder and to be prepaid on such
date, and the interest to be paid on the
prepayment date with respect to such
principal amount being prepaid, and shall
be accompanied by a certificate of a
Senior Financial Officer of the Company as
to the estimated Make-Whole Amount
due in connection with such prepayment
(calculated as if the date of such notice
were the date of the prepayment), setting
forth the details of such computation.
Two Business Days prior to such prepayment,
the Company shall deliver to each
holder of Notes a certificate of a Senior
Financial Officer of the Company
specifying the calculation of the
Make-Whole Amount in respect of such Notes as
of the specified prepayment date.
8.3 Allocation of Note Partial
Prepayment.
Except as
provided in Section 8.4 with respect to payments pursuant to
that
Section accepted by any holder of Notes, in
the case of any partial prepayment
of Notes, as required under Section 8.1,
the principal amount of the Notes to be
prepaid shall be allocated among all of the
Notes at the time outstanding in
proportion, as nearly as practicable, to
the respective unpaid principal amounts
thereof not theretofore called for
prepayment.
8.4 Change in Control.
(a) Notice of Change In Control or Control Event. The Company
will,
within three
Business Days after any Responsible Officer has knowledge of
the occurrence
of any Change in Control or Control Event, give written
notice of such
Change in Control or Control Event to each holder of Notes
(by telecopy
transmission and, simultaneously with the sending of such
telecopied
notice, by sending a copy of such notice to each such holder
via
an overnight
courier of national reputation) unless notice in respect of
such Change in
Control (or the Change in Control contemplated by such
Control Event)
shall have been given previously pursuant to clause (b) of
this Section
8.4. If a Change in Control has occurred, such notices shall
contain and
constitute an offer to prepay Notes as described in clause (c)
of this Section
8.4 and shall be accompanied by the certificate described
in clause (g) of
this Section 8.4. In the case of any such notice
containing and
constituting such an offer to prepay Notes, if the Company
shall not have
received a written response to such first notice from each
holder of Notes
within 10 days after the transmission of such telecopy
thereof, then
the Company will immediately send a second such written
notice via an
overnight courier of national reputation to each holder of
Notes who shall
have not previously responded to the Company.
(b) Condition to Action. Neither the Company nor any other Obligor
nor
HIL will take
any action that consummates or finalizes a Change in Control
unless (i) at
least 30 days prior to such action the Company shall have
given to each
holder of Notes written notice containing and constituting an
offer to prepay
Notes as described in clause (c) of this Section 8.4,
accompanied by
the certificate described in clause (g) of this Section 8.4,
and (ii)
contemporaneously with such action, the Company prepays all
Notes
required to be
prepaid in accordance with this Section 8.4.
(c) Offer to Prepay Notes. The offer to prepay Notes contemplated
by
clauses (a) and
(b) of this Section 8.4 shall be a written offer to prepay,
in accordance
with and subject to this Section 8.4, all, but not less than
all, the Notes
held by each holder (in this case only, "holder" in respect
of any Note
registered in the name of a nominee for a disclosed beneficial
owner shall mean
such beneficial owner) on a date specified in such offer
(the "Proposed
Prepayment Date"). If such Proposed Prepayment Date is in
connection with
an offer contemplated by clause (a) of this Section 8.4,
such date shall
be not less than 30 days and not more than 60 days after
the date of the
first notice that constitutes an offer to prepay the Notes
referred to in
clause (a) of this Section 8.4 (if the Proposed Prepayment
Date shall not
be specified in such first notice, the Proposed Prepayment
Date shall be
the 30th day after the date of such notice).
(d) Acceptance, Rejection. A holder of Notes may accept the offer
to
prepay made
pursuant to this Section 8.4 by causing a notice of such
acceptance to be
delivered to the Company at least 10 days prior to the
Proposed
Prepayment Date. A failure by a holder of Notes to respond (by
such time) to an
offer to prepay made pursuant to this Section 8.4 shall be
deemed to
constitute an acceptance of such offer by such holder.
(e) Prepayment. Prepayment of the Notes to be prepaid pursuant to
this
Section 8.4
solely because of the satisfaction of clause (a) or clause (b)
of the
definition of "Change in Control" in Schedule B shall be at 100%
of
the principal
amount of such Notes, together with interest on such Notes
accrued to the
date of prepayment and Make-Whole Amount determined with
respect to such
principal amount. Prepayment of the Notes to be prepaid
pursuant to this
Section 8.4 solely because of the satisfaction of clause
(c) of the
definition of "Change in Control" in Schedule B shall be at
100%
of the principal
amount of such Notes, at par and without payment of any
Make-Whole
Amount or any premium, together with interest on such Notes
accrued to the
date of prepayment. Each such prepayment shall be made on
the Proposed
Prepayment Date except as provided in clause (f) of this
Section 8.4.
(f) Deferral Pending Change in Control. The obligation of the
Company
to prepay Notes
pursuant to the offers required by clause (b) and accepted
in accordance
with clause (d) of this Section 8.4 is subject to the
occurrence of
the Change in Control in respect of which such offers and
acceptances
shall have been made. In the event that such Change in Control
does not occur
on the Proposed Prepayment Date in respect thereof, the
prepayment shall
be deferred until and shall be made on the date on which
such Change in
Control occurs. The Company shall keep each holder of Notes
reasonably and
timely informed of (i) any such deferral of the date of
prepayment, (ii)
the date on which such Change in Control and the
prepayment are
expected to occur, and (iii) any determination by the
Company that
efforts to effect such Change in Control have ceased or been
abandoned (in
which case the offers and acceptances made pursuant to this
Section 8.4 in
respect of such Change in Control shall be deemed
rescinded). In
the event that such Change in Control is deferred for 60 or
more days after
the Proposed Prepayment Date, the offers and acceptances
made pursuant to
this Section 8.4 in respect of such Change in Control
shall be deemed
rescinded. If any such offers and acceptances are deemed
rescinded
pursuant to this clause (f), then all requirements of this
Section 8.4
(including, without limitation, the requirement to give notice
and make offers
pursuant to clauses (a) and (b)) with respect to any Change
in Control
(including, without limitation, with respect to such deferred
Change in
Control) occurring after such rescission shall be reinstated.
(g) Officer's Certificate. Each offer to prepay the Notes pursuant
to
this Section 8.4
shall be accompanied by a certificate, executed by a
Senior Financial
Officer of the Company and dated the date of such offer,
specifying: (i)
the Proposed Prepayment Date; (ii) that such offer is made
pursuant to this
Section 8.4; (iii) the principal amount of each Note
offered to be
prepaid; (iv) the interest that would be due on each Note
offered to be
prepaid, accrued to the Proposed Prepayment Date; (vi) the
calculation of
the estimated Make-Whole Amount (if any) due in respect
thereof
(calculated as if the date of such notice were the date of the
prepayment) and
setting forth the details of such computation; (v) that the
conditions of
this Section 8.4 have been fulfilled; and (vi) in reasonable
detail, the
nature and date or proposed date of the Change in Control. In
addition to the
foregoing requirement, 2 Business Days prior to any such
prepayment
(other than a prepayment of the Notes solely pursuant to the
satisfaction of
clause (c) of the definition of "Change in Control" in
Schedule B), the
Company shall deliver to each holder of a Note to be
prepaid under
this Section 8.4 a certificate of a Senior Financial Officer
of the Company
specifying the calculation of the Make-Whole Amount in
respect of such
Notes as of the specified prepayment date and setting forth
the details of
such computation.
8.5 Maturity; Surrender, etc.
In the case of
each prepayment of Notes pursuant to this Section 8, the
principal amount of each such Note to be
prepaid shall mature and become due and
payable on the date fixed for such
prepayment, together with interest on such
principal amount accrued to such date and
the applicable Make-Whole Amount, if
any. From and after such date, unless the
Company shall fail to pay such
principal amount when so due and payable,
together with the interest and Make
Whole Amount, if any, as aforesaid,
interest on such principal amount shall
cease to accrue. Any Note paid or prepaid
in full shall be surrendered to the
Company and canceled and shall not be
reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any
Note.
8.6 Purchase of Notes.
The Company will
not and will not permit any Subsidiary to purchase,
redeem, prepay or otherwise acquire,
directly or indirectly, any of the
outstanding Notes except upon the payment
or prepayment of the Notes in
accordance with the terms of this Agreement
and the Notes. The Company will
promptly cancel all Notes acquired by it or
any Subsidiary pursuant to any
payment, prepayment or purchase of Notes
pursuant to any provision of this
Agreement and no Notes may be issued in
substitution or exchange for any such
Notes.
8.7 Make-Whole Amount.
The term
"Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the
Discounted Value with respect to the Called
Principal of such Note over the amount of
such Called Principal, provided that
the Make-Whole Amount may in no event be
less than zero. For the purposes of
determining the Make-Whole Amount, the
following terms have the following
meanings: "Called Principal" means, with
respect to any Note, the principal of
such Note that is to be prepaid pursuant to
Section 8.2 or Section 8.4 or has
become or is declared to be immediately due
and payable pursuant to Section
13.1, as the context requires.
"Discounted
Value" means, with respect to the Called Principal of any Note,
the amount obtained by discounting all
Remaining Scheduled Payments with respect
to such Called Principal from their
respective scheduled due dates to the
Settlement Date with respect to such Called
Principal, in accordance with
accepted financial practice and at a
discount factor (applied on the same
periodic basis as that on which interest on
the Notes is payable) equal to the
Reinvestment Yield with respect to such
Called Principal.
"Reinvestment
Yield" means, with respect to the Called Principal of any
Note, the sum of (a) 0.50% per annum plus
(b) the yield to maturity implied by
(I) the yields reported, as of 10:00 a.m.
(New York City time) on the second
Business Day preceding the Settlement Date
with respect to such Called
Principal, on the display designated as
"Page 678" on the Dow Jones Market
Service (or such other display as may
replace Page 678 on Dow Jones Market
Service) for actively traded U.S. Treasury
securities having a maturity equal to
the Remaining Average Life of such Called
Principal as of such Settlement Date,
or (ii) if such yields are not reported as
of such time or the yields reported
as of such time are not ascertainable
(including by interpolation), the Treasury
Constant Maturity Series Yields reported,
for the latest day for which such
yields have been so reported as of the
second Business Day preceding the
Settlement Date with respect to such Called
Principal, in Federal Reserve
Statistical Release H.1 5 (519) (or any
comparable successor publication) for
actively traded U.S. Treasury securities
having a constant maturity equal to the
Remaining Average Life of such Called
Principal as of such Settlement Date. Such
implied yield will be determined, if
necessary, by (1) converting U.S. Treasury
bill quotations to bond-equivalent yields
in accordance with accepted financial
practice and (2) interpolating linearly
between (A) the actively traded U.S.
Treasury security with the maturity closest
to and greater than the Remaining
Average Life and (B) the actively traded
U.S. Treasury security with the
maturity closest to and less than the
Remaining Average Life.
"Remaining
Average Life" means, with respect to any Called Principal, the
number of years (calculated to the nearest
one-twelfth year) obtained by
dividing (a) such Called Principal into (b)
the sum of the products obtained by
multiplying (i) the principal component of
each Remaining Scheduled Payment with
respect to such Called Principal by (ii)
the number of years (calculated to the
nearest one-twelfth year) that will elapse
between the Settlement Date with
respect to such Called Principal and the
scheduled due date of such Remaining
Scheduled Payment.
"Remaining
Scheduled Payments" means, with respect to the Called Principal
of any Note, all payments of such Called
Principal and interest thereon that
would be due after the Settlement Date with
respect to such Called Principal if
no payment of such Called Principal were
made prior to its scheduled due date,
provided that if such Settlement Date is
not a date on which interest payments
are due to be made under the terms of the
Notes, then the amount of the next
succeeding scheduled interest payment will
be reduced by the amount of interest
accrued to such Settlement Date and
required to be paid on such Settlement Date
pursuant to Section 8.2, 8.4 or 13.1.
"Settlement
Date" means, with respect to the Called Principal of any Note,
the date on which such Called Principal is
to be prepaid pursuant to Section 8.2
or Section 8.4 or has become or is declared
to be immediately due and payable
pursuant to Section 13.1, as the context
requires.
9. INTEREST ON THE NOTES.
Interest
(computed on the basis of a 360-day year of twelve 30-day
months)
shall accrue on the unpaid principal
balance of the Notes at 7.05% per annum
from the date of each Note, and shall be
payable to the holders thereof
semi-annually, on January 2 and July 2 in
each year, commencing with the later
of July 2,1998 and the payment date next
succeeding the date of such Note, until
the principal thereof shall have become due
and payable, and, to the extent
permitted by law in respect of any Note, on
any overdue payment of principal,
any overdue payment of interest and any
overdue payment of Make-Whole Amount
with respect thereto, payable, on demand,
at a rate per annum equal to the
Default Rate.
10. AFFIRMATIVE COVENANTS.
For so long as
any of the Notes are outstanding, each Obligor covenants as
set forth below:
10.1 Compliance with Law.
The Company will
and will cause each of its Restricted Subsidiaries to
comply with all laws, ordinances or
governmental rules or regulations to which
each of them is subject, including, without
limitation, Environmental Laws, and
will obtain and maintain in effect all
licenses, certificates, permits,
franchises and other governmental
authorizations necessary to the ownership of
their respective properties or to the
conduct of their respective businesses, in
each case to the extent necessary to ensure
that non-compliance with such laws,
ordinances or governmental rules or
regulations or failure to obtain or maintain
in effect such licenses, certificates,
permits, franchises and other
governmental authorizations would not,
individually or in the aggregate,
reasonably be expected to have a Material
Adverse Effect, provided that nothing
in this Section 10.1 shall affect or reduce
the obligations of the Company under
section 3R of the Security Agreements with
respect to the Collateral.
10.2 Insurance.
The Company will
and will cause each of its Restricted Subsidiaries to,
maintain, with financially sound and
reputable insurers, insurance with respect
to their respective properties and
businesses against such casualties and
contingencies, of such types, on such terms
and in such amounts (including
deductibles) as is customary in the case of
entities of established reputations
engaged in the same or a similar business
and similarly situated, provided that
nothing in this Section 10.2 shall affect
or reduce the obligations of the
Company under section 3D of the Security
Agreements with respect to the
Collateral.
The Company will
obtain and maintain in full force and effect for so long
as any Notes are outstanding a key-person
life insurance policy (the "Key-Person
Policy") in an amount not less than
$5,000,000 on the life of Mr. Ludwig
Kuttner. The insurer and the form of the
Key-Person Policy shall be reasonably
satisfactory to the Required Holders. The
Company shall pay all premiums in
respect of the Key-Person Policy and shall
deliver a copy of the Key-Person
Policy and all endorsements and riders
thereto to the Collateral Agent. Except
as may be provided for in the lntercreditor
Agreement, the Collateral Agent
shall have the sole right
(a) to collect from the insurer under the Key-Person Policy the
proceeds of such
policy upon the death of Mr. Kuttner,
(b) to surrender said policy and receive the surrender value
thereof,
(c) to collect and receive all distributions, shares of
surplus,
dividends,
deposits or other similar payments in respect of the Key-Person
Policy, provided
that for so long as the Company shall not be in default
hereunder, under
any of the other Financing Documents or under the Credit
Agreement, such
distributions, shares, dividends, deposits and payments
shall be paid
to, or retained by, the Company, as the case may be,
(d) to exercise any options under the Key-Person Policy,
(e) to designate and change the beneficiary in respect of the
Key-Person
Policy and
(f) to elect any optional mode of settlement permitted by the
Key-Person
Policy.
The Company
shall execute a form of life insurance policy assignment
acceptable to the insurer under the
Key-Person Policy pursuant to which the
Key-Person Policy shall be assigned to the
Collateral Agent on behalf of the
holders of Notes; if requested by the
Collateral Agent, the Company shall cause
the sole named beneficiary of the
Key-Person Policy to be the Collateral Agent.
Any such assignment notwithstanding, the
Company shall continue to be obligated
to perform its undertakings in this Section
10.2. In order to induce you to
accept the Company's undertaking in respect
of obtaining and maintaining a
Key-Person Policy, the Company hereby
represents and warrants to you that it is
not aware of any reason why a Key-Person
Policy in respect of him would not be
issued.
If, at the time
of receipt of proceeds in respect of the Key-Person Policy,
an Actionable Event of Default shall exist
under, and as defined in, the
Intercreditor Agreement and enforcement
and/or foreclosure actions are being or
will be undertaken in respect of the
Collateral, the proceeds of the Key-Person
Policy shall be paid and distributed by the
Collateral Agent as provided for in
Section 3 of the lntercreditor
Agreement.
If, at the time
of receipt of proceeds in respect of the Key-Person Policy,
the lntercreditor Agreement shall no longer
be in effect and an Event of Default
shall exist hereunder and enforcement
and/or foreclosure actions are being or
will be undertaken in respect of the
Collateral, the proceeds of the Key-Person
Policy shall be applied by the Collateral
Agent to the obligations hereunder and
under the other Financing Documents.
If, at the time
of receipt of proceeds in respect of the Key-Person Policy,
there shall be in existence no Actionable
Event of Default (as defined above) or
Event of Default in respect of which
enforcement and/or foreclosure actions are
being or Will be undertaken with respect to
the Collateral, the proceeds of the
Key-Person Policy shall be paid by the
Collateral Agent (or, if for any reason
whatsoever, received by the Company or any
other Obligor, by the Company or such
Obligor) to the banks under the Credit
Agreement and the holders of Notes as
follows:
(1) in the case of each bank under the Credit Agreement, the
portion
of such proceeds
equal to the ratio that the aggregate principal amount
outstanding at
such time under the Credit Agreement and owing to such bank
bears to the
total of the aggregate principal amount outstanding at such
time and owing
to all banks under the Credit Agreement plus the aggregate
principal amount
of all Notes then outstanding, or
(2) in the case of each holder of Notes that shall have exercised
its
rights under
Section 8.4 in respect of the death of Mr. Kuttner prior to
the receipt of
such proceeds or after the receipt of such proceeds if such
exercise after
such receipt is in accordance with the requirements set
forth in Section
8.4, the lesser of (i) the amount otherwise payable to
such holder
under Section 8.4 and (ii) the portion of such proceeds equal
to the ratio
that the aggregate principal amount outstanding at such time
of the Notes of
such holder bears to the total of the aggregate principal
amount
outstanding at such time and owing to all banks under the
Credit
Agreement plus
the aggregate principal amount of all Notes then
outstanding.
To the extent
that any holder of Notes shall have exercised its rights
under Section 8.4 in respect of the death
of Mr. Kuttner and the proceeds
distributed to such holder under clause (2)
above are sufficient to fully pay
all obligations of the Company in respect
thereof, nothing contained in this
Section 10.2 shall limit or restrict the
obligations of the Company to make all
payments in respect thereof required by
Section 8.4. The collateral Agent may
make all payments to the banks provided for
above to the agent for the banks
under the Credit Agreement. the Company
shall cooperate with the collateral
Agent in connection with any payments under
this Section 10.3. To the extent
that proceeds from the Key-Person Policy
shall not have been paid to the banks
and/or any one or more holders of Notes and
are not subject to distribution
under Section 3 of the Intercreditor
Agreement, they shall be paid by the
Collateral Agent to the Company free and
clear of any Lien created by any
Financing Document.
10.3 Maintenance of Properties.
The Company will
and will cause each of its Restricted Subsidiaries to
maintain and keep, or cause to be
maintained and kept, their respective
properties in good repair, working order
and condition (other than ordinary wear
and tear), so that the business carried on
in connection therewith may be
properly conducted at all times, provided
that his Section shall not prevent the
Company or any Subsidiary from
discontinuing the operation and the maintenance
of any of its properties if such
discontinuance is desirable in the conduct of
its business and the Company has concluded
that such discontinuance would not,
individually or in the aggregate,
reasonably be expected to have a Material
Adverse Effect. Anything continued in this
Section 10.3 to the contrary
notwithstanding, nothing in this Section
10.3 shall affect or reduce the
obligations of the Company under Section 3E
of the Security Agreements with
respect to the Collaterals.
10.4 Payment of Taxes and Claims.
The Company will
and will cause each of its Restricted Subsidiaries to file
all tax returns required to be filed in any
jurisdiction and to pay and
discharge all taxes shown to be due and
payable on such returns and all other
taxes, assessments, governmental charges,
or levies imposed on them or any of
their properties, assets, income or
franchises, to the extent such taxes and
assessments have become due and payable and
before they have become delinquent
and all claims for which sums have become
due and payable that have or might
become a Lien on properties or assets of
the Company or any Restricted
Subsidiary (including, without limitation,
mechanic's liens or other similar
construction liens), provided that neither
the Company nor any Restricted
Subsidiary need pay any such tax or
assessment or claims if (a) the amount,
applicability or validity thereof is
contested by the Company or such Restricted
Subsidiary on a timely basis in good faith
and in appropriate proceedings, and
the Company or such Restricted Subsidiary
has established adequate reserves
therefor in accordance with GAAP on the
books of the Company or such Restricted
Subsidiary or (b) the nonpayment of all
such taxes and assessments and claims in
the aggregate would not reasonably be
expected to have a Material Adverse
Effect.
10.5 Corporate Existence, etc.
The Company will
at all times preserve and keep in full force and effect
its corporate existence. Subject to Section
11.2 and Section 11.9, each
Guarantor will at all times preserve and
keep in full force and effect its
respective corporate existence.
10.6 Pari Passu Obligations.
The Company
covenants that its obligations under the Notes and the other
Financing Documents do and will rank at
least pari passu in right of payment
with all its other present and future
secured and unsubordinated Debt. Each
Guarantor covenants that its obligations
under the Guarantee do and will rank at
least pari passu in right of payment with
all its other present and future
secured and unsubordinated Debt.
10.7 Guaranties of Subsidiaries.
(a) Additional Subsidiaries as Guarantors. If the Company or
any
Restricted
Subsidiary creates or otherwise acquires any Subsidiary at any
time after the
date of Closing (or if the book investment of the Obligors
and HIL in
Keynote reaches or exceeds $100,000), the Company shall
promptly
(and in any
event within 30 days) cause such Subsidiary to become a
Guarantor
hereunder and under the Other Agreement by delivering to each
holder of Notes
an instrument referring to this Agreement and the Other
Agreement
wherein such Subsidiary agrees to be bound by all of the terms
and conditions
applicable to a "Guarantor" under this Agreement and the
Other Agreement
as of the date thereof, which instrument shall be
substantially in
the form of Exhibit 10.7. In connection with the delivery
of such
instrument, the Company shall also deliver the following to each
of
the holders of
Notes:
(i) a certificate of the secretary or assistant secretary of
such
Subsidiary certifying the names and true signatures of the officers
of
such Subsidiary authorized to execute such instrument and the
proper
adoption of a resolution of the board of directors or stockholders
of
such Subsidiary approving the execution, delivery and performance
of
such instrument; and
(ii) a certificate executed by a Senior Financial Officer of
the
Company, dated as of the date of such instrument, stating that
(x)
except as to such exceptions as shall be set forth in writing
therein,
the representations and warranties contained in Section 5 are true
and
correct on and as of the date of such instrument to the extent
such
representations and warranties are applicable to such Subsidiary as
a
"Guarantor" or "Obligor" hereunder and (y) no Default or Event
of
Default exists as of the date of such instrument, and shall pledge
to
the Collateral Agent on behalf of the holders of Notes all of
the
stock of such Subsidiary, which stock shall also be made subject
to
the terms and provisions of the appropriate Pledge Agreement and
the
lntercreditor Agreement, and shall cause such Subsidiary to
execute
and deliver to the Collateral Agent on behalf of the holders of
Notes
a Guarantor's Security Agreement and a Guarantor's Pledge
Agreement
and to make all necessary filings and registrations in respect
thereof.
(b) Release of Guarantees of Subsidiaries. If, with respect to
any
Subsidiary that
is a Guarantor, all of the Company's and any Restricted
Subsidiary's
capital stock or other equity ownership interests in such
Guarantor is
Transferred in accordance with the requirements of Section
11.9, then the
Company may elect to cause the withdrawal of the Guarantee
of such
Guarantor hereunder and under the Other Agreement. Such
election
shall be
exercised by a Senior Financial Officer of the Company
informing,
in writing, each
holder of Notes of such election, certifying in such
writing that the
requirements of this Section 10.7 have been satisfied,
that no Default
or Event of Default exists and that the investment grade
rating of the
Notes has been confirmed by any nationally recognized credit
rating agency or
the Securities Valuation Office of the National
Association of
Insurance Commissioners after giving effect to such
withdrawal.
Thereafter, the Guarantee of such Guarantor shall be null and
void and without
effect and such Guarantor shall no longer be, or be deemed
to be, a party
to this Agreement or any of the Other Agreement or to any
other Financing
Document to which it is a party, provided that, if the
aforesaid
requirements under this Section 10.7
(b) shall not have been satisfied or any of the aforesaid
certifications
are not true, then the Guarantee of such Guarantor shall
continue in full
force and effect and such Guarantor shall continue to be a
party hereto and
to the Other Agreement and such other Financing Documents
notwithstanding
the delivery of such writing by the Company to each of the
holders of Notes
until all of such requirements shall have been satisfied.
10.8 Year 2000.
Any
reprogramming required to permit the proper functioning, in and
following the year 2000, of (a) the
Company's and the Subsidiaries' computer
systems and (b) equipment containing
embedded microchips (including systems and
equipment supplied by others or with which
the Company's and the Subsidiaries'
systems interface) and the testing of all
such systems and equipment, as so
reprogrammed, will be completed in a timely
manner and as soon as practicable.
The cost to the Company and the
Subsidiaries of such reprogramming and testing
and of the reasonably foreseeable
consequences of year 2000 to the Company and
the Subsidiaries (including, without
limitation, reprogramming errors and the
failure of others' systems or equipment)
will not result in an Event of Default
or otherwise reasonably be expected to have
a Material Adverse Effect. Except as
such of the reprogramming referred to in
the preceding sentence as may be
necessary, the computer and management
information systems of the Company and
the Subsidiaries are and, with ordinary
course upgrading and maintenance, will
continue for the term of this Agreement to
be, sufficient to permit the Company
and the Subsidiaries to conduct their
business without the reasonable likelihood
of a Material Adverse Effect as a result
thereof.
10A. AFFIRMATIVE COVENANTS.
For so long as
any of the Notes are outstanding, HIL covenants as set forth
below:
10A.1 Compliance with Law.
HIL will use its
best efforts to, and will cause each of its subsidiaries
to use their respective best efforts to,
comply with all laws, ordinances or
governmental rules or regulations to which
each of them is subject, including,
without limitation, Environmental Laws, and
will use their respective best
efforts to obtain and maintain in effect
all licenses, certificates, permits,
franchises and other governmental
authorizations necessary to the ownership of
their respective properties or to the
conduct of their respective businesses, in
each case to the extent necessary to ensure
that non-compliance with such laws,
ordinances or governmental rules or
regulations or failure to obtain or maintain
in effect such licenses, certificates,
permits, franchises and other
governmental authorizations would not,
individually or in the aggregate,
reasonably be expected to have a Material
Adverse Effect. 10A.2 Insurance.
NIL will use its
best efforts to, and will cause each of its subsidiaries
to use their respective best efforts to,
maintain, with financially sound and
reputable insurers, insurance with respect
to their respective properties and
businesses against such casualties and
contingencies, of such types, on such
terms and in such amounts (including
deductibles) as is customary in the case of
entities of established reputations engaged
in the same or a similar business
and similarly situated.
10A.3 Maintenance of Properties.
HIL will use its
best efforts to, and will cause each of its subsidiaries
to use their respective best efforts to,
maintain and keep, or cause to be
maintained and kept, their respective
properties in good repair, working order
and -condition (other than ordinary wear
and tear), so that the business carried
on in connection therewith may be properly
conducted at all times.
10A.4 Payment of Taxes and Claims.
HIL will use its
best efforts to, and will cause each of Its subsidiaries
to use their respective best efforts to,
file all tax returns required to be
filed in any jurisdiction and to pay and
discharge all taxes shown to be due and
payable on such returns and all other
taxes, assessments, governmental charges,
or levies imposed on them or any of their
properties, assets, income or
franchises, to the extent such taxes and
assessments have become due and payable
and before they have become delinquent and
all claims for which sums have become
due and payable that have or might become a
lien on properties or assets of NIL
or any of Its subsidiaries, provided that
neither HIL nor such subsidiary need
pay any such tax or assessment or claims if
(a) the amount, applicability or
validity thereof is contested by HIL or
such subsidiary on a timely basis in
good faith and in appropriate proceedings,
and NIL or such subsidiary has
established adequate reserves therefor in
accordance with GMP on the books of
HIL or such subsidiary or (b) the
nonpayment of all such taxes and assessments
and claims in the aggregate would not
reasonably be expected to have a Material
Adverse Effect.
11. NEGATIVE COVENANTS.
For so long as
any of the Notes are outstanding, each Obligor covenants as
set forth below:
11.1 Transactions With Affiliates.
The Company will
not and will not permit any Restricted Subsidiary to enter
into directly or indirectly any Material
transaction or Material group of
related transactions (including, without
limitation, the purchase, lease, sale
or exchange of properties of any kind or
the rendering of any service) with any
Affiliate (other than the Company or a
Restricted Subsidiary), except in the
ordinary course and pursuant to the
reasonable requirements of the Company's or
such Restricted Subsidiary's business and
upon fair and reasonable terms no less
favorable to the Company or such Restricted
Subsidiary than would be obtainable
in a comparable arm's-length transaction
with a Person not an Affiliate and
except that the Company may make loans and
provide equity capital to HIL from
time to time pursuant to the reasonable
requirements of HIL's and the Company's
businesses and upon such terms as the Board
of Directors have determined, in
good faith, are appropriate and in the best
interests of HIL and the Company.
11.2 Merger, Consolidation, etc.
(a) The Company will not and will not permit any of its
Restricted
Subsidiaries to
consolidate, amalgamate or merge with or into any other
Person or
convey, transfer or lease all or substantially all of its
assets
in a single
transaction or series of transactions to any Person (except
that (x) any
Restricted Subsidiary may consolidate or merge with or into,
or convey,
transfer or lease all or substantially all of its assets in a
single
transaction or series of transaction to, the Company or any
Wholly-Owned
Restricted Subsidiary and (y) any Restricted Subsidiary may
convey, transfer
or lease all or substantially all of its assets if
permitted
pursuant to Section 11.9(a)(iv) or (v)), provided that the
foregoing
restrictions do not apply to the consolidation or merger of the
Company with or
into, or the conveyance, transfer or lease of all or
substantially
all of the assets of the Company in a single transaction or
series of
transactions to, any person so long as:
(i) The successor formed by such consolidation or the
survivor or such merger or the Person that acquires by
conveyance, transfer or lease all or substantially all of the
assets of the Company as an entirety, as the case may be (as
used
in this Section 11.2(a), the "Successor Company"), shall be a
solvent corporation organized and existing under the laws of
the
United States of America or any State thereof (including,
without
limitation, the District of Columbia);
(ii) if the Company is not the successor Company, such
Successor Company shall have executed and delivered to each
holder of any Noes its assumption of the due and punctual
performance and observance of each covenant and condition of
this
Agreement, the Other Agreement, the Notes and the other
Financing
Documents to which the Company is subject and shall have caused
to be delivered to each holder of any Notes an opinion of
independent counsel reasonably satisfactory to the Required
Holders to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof and that all
actions, filings and registrations have been undertaken and
effected in order to continue the perfection and priority of
the
Liens and security interests of the Collateral Agent on behalf
of
the holders of Notes in and to the Collateral and the Pledged
Stock Collateral;
(iii) each Guarantor shall have confirmed to each holder of
Notes, in writing, its Guarantee and its other obligations
hereunder, under the Other Agreement and under the other
Financing Documents to which it is a party and shall have
caused
to be delivered to each holder of any Notes an opinion of
nationally recognized independent counsel, or other independent
counsel reasonably satisfactory to the Required Holders, to the
effect that such
confirmation is effective, such Guarantee
continues in full force and effect and that all actions,
filings
and registrations have been undertaken and effected in order to
continue the perfection and priority of the Liens and security
interests granted by such Guarantor, if any, to the Collateral
Agent on behalf of the holders of Notes in and to the
Collateral
and the Pledged Stock Collateral;
(iv) immediately after giving effect to such transaction, no
Default or Event of Default would exist; and
(v) immediately after giving effect to such transaction, the
investment grade rating of the Notes shall have been confirmed
by
any nationally recognized credit rating agency or the
Securities
Valuation Office of the National Association of Insurance
Commissioners.
(b) Except as expressly provided in Section 10.7(b), no such
conveyance,
transfer or lease of all or substantially all of the assets of
any Guarantor
under this Section 11.2 shall have the effect of releasing
such Guarantor
from its liability under this Agreement, the Other
Agreement, the
Notes and the other Financing Documents to which it is a
party.
11.3 Consolidated Tangible Net Worth.
The Company will
not at any time permit Consolidated Tangible Net Worth,
determined as of the end of the fiscal
quarter of the Company then most recently
ended, to be less than the sum of
(a) $34,000,000, plus
(b) the sum of the Fiscal Year Net Worth Increase Amounts for
all
fiscal years of
the Company the last day of which occurred during the
period beginning
January 1, 1998 and ending at such time.
As used in
Section 11.3, "Fiscal Year Net Worth Increase Amount" means,
for
any fiscal year of the Company, the greater
of
(i) 50% of Consolidated Net Income for such fiscal year and
(ii) $0.
11.4 Average Current Ratio.
The Company will
not at any time permit the Average Current Ratio,
determined at such time, to be less than
1.75 to 1.0.
11.5 Fixed Charge Coverage.
The Company will
not at any time permit the ratio of
(a) Consolidated Income Available for Fixed Charges for the period
of
4 consecutive
fiscal quarters of the Company then most recently ended to
(b) Consolidated Fixed Charges for such period to be less than 2.5
to
1.0.
11.6 Funded Debt to Capitalization.
The Company will
not at any time permit the ratio of
(a) Consolidated Funded Debt at such time to
(b) Consolidated Total Capitalization at such time to exceed .45
to
1.0.
11.7 Current Debt.
The Company will
not and will not permit any Restricted Subsidiary to have
outstanding or in any other manner be
liable in respect of any Current Debt of
the type described in clause (a) of the
definition of "Debt" (excluding, in any
case, from such Debt the Current Maturities
of Funded Debt) unless during the
period of 12 consecutive calendar months
then most recently ended there shall
have been a period of at least 45
consecutive days during which no Consolidated
Current Debt of the type described in
clause (a) of the definition of "Debt"
(excluding, in any case, from such Debt the
Current Maturities of Funded Debt)
shall have been outstanding on each day of
such period.
11.8 Restricted Subsidiary Debt.
The Company will
not permit any Restricted Subsidiary to have outstanding
or in any other manner be liable in respect
of any Debt other than Permitted
Restricted Subsidiary Debt.
11.9 Sale of Assets, etc.
(a) Subject to the penultimate paragraph of this clause (a),
the
Company will not
and will not permit any of its Restricted Subsidiaries to
make any
Transfer, provided that the foregoing restriction does not
apply
to a Transfer
if:
(i) the property that is the subject of such Transfer
constitutes
(A) inventory, (B) equipment, fixtures, supplies or materials
no
longer required in the operation of the business of the Company
and
the Restricted Subsidiaries or that is obsolete or (C) checks,
drafts,
money orders or other instruments with respect to accounts
receivable
that are to be collected in the ordinary course of business, and,
in
each case, such Transfer is in the ordinary course of business;
(ii) such
Transfer is (A) from a Restricted Subsidiary to the
Company or a Wholly-Owned Restricted Subsidiary or (B) from the
Company to a Wholly-Owned Restricted Subsidiary;
(iii) such Transfer is subject to Section 11.2 and satisfies
the
requirements thereof; or
(iv) such Transfer is not a Transfer described in clause (i)
through clause (iii) above, and all of the following conditions
shall
have been satisfied with respect to such Transfer (each such
Transfer
is referred to as a "Basket Transfer"):
(A) in the good faith opinion of the Board of Directors of the
Company, the
Transfer is in exchange for consideration with a Fair Market
Value at least
equal to the greater of book value or the Fair Market Value
of the property
exchanged, is in the best interests of the Company and the
Restricted
Subsidiaries, and is not detrimental to the interests of the
holders of
Notes,
(B) immediately after
giving effect to such transaction no Default or
Event of Default
would exist, and
(C) immediately after giving effect to such Transfer,
(I) the book value of all property that was the subject of any
Basket Transfer occurring during the period beginning with the
date
that is 12 calendar months preceding the first day of the month
in
which such Basket Transfer occurred and ending on the date of
such
Basket Transfer does not exceed 10% of Consolidated Tangible
Net
Assets determined as of the end of the then most recently fiscal
year
of the Company ended prior to such period, and
(II) the Operating Income Contribution Percentage of all
property
that was the subject of any Basket Transfer occurring during
the
period beginning with the date that is 12 calendar months
preceding
the first day of the month in which such Basket Transfer occurred
and
ending on the date of such Basket Transfer does not exceed 10%.
For purposes of
determining the book value of any property that is the
subject of a Transfer, such book value
shall be the book value of such property,
as determined in accordance with GAAP, at
the time of the consummation of such
Transfer, provided that, in the case of a
Transfer of any capital stock or other
equity interests of a Subsidiary, as
provided in Section 11.9(b), the book value
thereof shall be deemed to be an amount
equal to
(X) the difference (determined after eliminating all
intercompany
transactions,
assets and liabilities in accordance with GAAP) of
(1) the book value of the total assets of such Subsidiary less
(2) the liabilities of such Subsidiary times
(Y) a percentage that is equal to the percentage of total
equity interests of such Subsidiary attributable to the capital
stock or other equity interest being so Transferred.
(b) Transfers of Restricted Subsidiary Stock. The
Company will not and will not permit any Restricted
Subsidiary to Transfer any shares of the stock (or any
warrants, rights or options to purchase stock or other
securities exchangeable for or convertible into stock) of a
Restricted Subsidiary (such stock, warrants, rights, options
and other securities herein called "Restricted Subsidiary
Stock"), nor will any Restricted Subsidiary issue, sell or
otherwise dispose of any shares of its own Restricted
Subsidiary Stock, provided that the foregoing restrictions
do not apply to:
(i) the issuance by a Restricted Subsidiary of shares of its
own Restricted Subsidiary Stock to the Company or a
Wholly-Owned
Restricted Subsidiary;
(ii)
Transfers by the Company or a Restricted Subsidiary of
shares of Restricted Subsidiary Stock to the Company or to a
Wholly-Owned Restricted Subsidiary;
(iii) the issuance by a Restricted Subsidiary of directors'
qualifying shares or the issuance of Glamourette of its Exempt
Preferred Stock to its officers, directors and employees; and
(iv) the Transfer of all of the Restricted Subsidiary Stock
of a Restricted Subsidiary owned by the Company and the other
Restricted Subsidiaries if:
(A) such Transfer satisfies the requirements of Section
11.9(a)(iv) hereof;
(B) in connection with such Transfer the entire
Investment (whether represented by stock, Debt, claims or
otherwise but excluding any reserves or escrows for
customary purposes established in connection with such
Transfer) of the Company and the other Restricted
Subsidiaries in such Restricted Subsidiary is Transferred to
a Person other than the Company or a Restricted Subsidiary
not being simultaneously disposed of;
(C) the Restricted Subsidiary being disposed of has no
continuing Investment in any other Restricted Subsidiary not
being simultaneously disposed of or in the Company; and
(D) immediately after the consummation of such
Transfer, and after giving effect thereto, no Default or
Event of Default would exist.
11.10 Restricted Payments and Restricted
Investments.
(a) The Company will not, and will not permit any Restricted
Subsidiary to,
declare or make any Restricted Payment or make any
Restricted
Investment unless:
(i) immediately after, and after giving effect to, such
Restricted Payment or such Restricted Investment, the aggregate
amount
of (y) all Restricted Payments declared or made after December
31,
1997 and (z) all Restricted Investments at such time would not
exceed
the sum of
(A) Eight Million Dollars ($8,000,000), plus
(B) 50% (or 100% in the case of a deficit) of Full
Consolidated Net Income for the period commencing on and
including January 1, 1998 and ending on and including the date
such Restricted Payment is declared or made or such Restricted
Investment is made, plus
(C) the aggregate amount of net cash proceeds received by
the Company from the sale of capital stock of the Company after
December 31,1997; and
(ii) at the time of such declaration and immediately
before, and after giving effect to, such Restricted Payment
or such Restricted Investment, no Default or Event of
Default exists or would exist.
(b) Notwithstanding the limitations set forth in clause
(a) hereof, the Company may make one or more Investments in
any one or more Unrestricted Subsidiaries after December 31,
1997, in an aggregate amount in respect of all Unrestricted
Subsidiaries not in excess of $10,000,000, so long as
immediately before, and after giving effect to, such
Investment, no Default or Event of Default exists or would
exist. For the avoidance of doubt, any such Investment in
any Unrestricted Subsidiary permitted by this clause (b)
shall constitute a "Restricted Investment" for purposes of
this Agreement and the Other Agreement and the amount of
which shall be included in determining compliance with
clause (a) upon the declaration or making of any Restricted
Payment or the making of any other Restricted Investment
(other than an Investment in any Unrestricted Subsidiary
permitted by this clause (b)).
(c) Notwithstanding the limitations set forth in clause
(a) above, Glamourette may pay cash dividends on its Exempt
Preferred Stock outstanding from time to time and may
redeem, retire, purchase or otherwise acquire shares of its
Exempt Preferred Stock from time to time. For the avoidance
of doubt, such payments and transactions relating to Exempt
Preferred Stock shall not constitute "Restricted Payments"
for purposes of this Agreement and the amounts thereof shall
not be included in determining compliance with clause (a)
above for any purpose. The permissions granted under this
clause (c) are subject to the limitation that no more than
1,000 shares of Exempt Preferred Stock shall be issued and
outstanding at any one time, the issuance of Exempt
Preferred Stock is solely to employees, managers or
directors of Glamourette, the maximum annual cash dividend
payable in
respect of such Exempt Preferred Stock is $62 per
share and the redemption, retirement, purchase or other
acquisition of Exempt Preferred Stock by Glamourette is in
connection with the resignation or termination of
employment, death or retirement of any such employee,
manager or director and is at a price which is fair and
reasonable in the reasonable opinion of the Company.
11.11 Liens.
(a) Negative Pledge. Subject to Section 11.11(d) hereof as to
the
Collateral and
the Pledged Stock Collateral, the Company will not, and will
not permit any
Restricted Subsidiary to, cause or permit to exist, or agree
or consent to
cause or permit to exist in the future (upon the happening of
a contingency or
otherwise), on any of their property, whether now owned or
hereafter
acquired, any Lien except:
(i) (A) Liens for taxes, assessments or other governmental
charges the payment of which is not at the time required by
Section
10.4, and
(B) statutory Liens of landlords and Liens of carriers,
warehousemen,
mechanics,
materialmen, inventory suppliers and other similar Liens, in
each case,
incurred in the ordinary course of business for sums not yet
due
or the payment
of which is not at the time required by Section 10.4;
(ii) Liens (A) arising from judicial attachments and judgments,
(B) securing appeal bonds or supersedeas bonds, and (C) arising
in
connection with court proceedings (including, without
limitation,
surety bonds and letters of credit or any other instrument serving
a
similar purpose), provided that (1) the execution or other
enforcement
of such Liens is effectively stayed, (2) the claims secured
thereby
are being actively contested in good faith and by appropriate
proceedings, (3) adequate book reserves shall have been
established
and maintained and shall exist with respect thereto, in
accordance
with GAAP, and (4) the aggregate amount so secured shall not at
any
time exceed $500,000
(iii) Liens incurred or deposits made in the ordinary course of
business (i) in connection with workers' compensation,
unemployment
insurance and other types of social security or retirement benefits
or
to obtain letters of credit in connection therewith, or (ii) to
secure
(or to obtain letters of credit that secure) the performance of
tenders, statutory obligations, surety bonds, appeal bonds,
bids,
leases (other than Capital Leases), performance bonds,
purchase,
construction or sales contracts, leases and other similar
obligations,
in each case not incurred or made in connection with the borrowing
of
money, the obtaining of advances or credit or the payment of
the
deferred purchase price of property, and which Liens do not, in
the
aggregate, materially impair the use of the property subject
thereto
in the operation of the business of the Company and the
Restricted
Subsidiaries or the value of such property for the purposes of
such
business;
(iv) leases or subleases granted to others, easements,
rights-of-way, restrictions, zoning restrictions, governmental
restrictions in respect of any property or property right or
franchise
of the Company or any Restricted Subsidiary and other similar
charges
or encumbrances, in each case incidental to, and not interfering
with,
the ordinary conduct of the business of the Company or any
Restricted
Subsidiary, taken as a whole, provided that such charges and
encumbrances do not, in the aggregate, materially detract from
the
value of such property;
(v) Liens created to secure all or any part of the purchase
price, or to secure Debt incurred or assumed to pay all or any part
of
the purchase price or cost of construction, of property (or any
improvement thereon) acquired or constructed by the Company or
any
Restricted Subsidiary, provided that all of the following
conditions
are satisfied:
(A) any such Lien shall extend solely to the item or items of
such
property (or
improvements thereon) or proceeds thereof so acquired or
constructed and,
if required by the terms of the instrument originally
creating such
Lien, other property (or improvements thereon) which is an
improvement to
or is acquired for specific use in connection with such
acquired or
constructed property (or improvements thereon) or which is real
property being
improved by such acquired or constructed property (or
improvements
thereon),
(B) the principal amount of the Debt secured by any such Lien shall
at
no time exceed
an amount equal to the cost to the Company or such
Restricted
Subsidiary of the properties (or improvements thereon) so
acquired or
constructed,
(C) after giving effect to the incurrence or assumption of such
Debt
secured by such
Lien, no Default or Event of Default shall exist, and
(D) any such Lien shall be created contemporaneously with, or
within
365 days after,
the acquisition or construction of such property;
(vi) Liens existing on property of a Person immediately prior
to
its being consolidated with or merged into the Company or any
Restricted Subsidiary or its becoming a Restricted Subsidiary, or
any
Lien existing on any property acquired by the Company or any
Restricted Subsidiary at the time such property is so acquired
(whether or not the Debt secured thereby shall have been
assumed),
provided that
(A) no such Lien shall have been created or assumed as part of
such
consolidation or
merger or such Person's becoming a Restricted Subsidiary
or such
acquisition of property,
(B) each such Lien shall extend solely to the item or items of
property so
acquired and proceeds thereof and, if required by the terms of
the instrument
originally creating such Lien, other property which is an
improvement to
or is acquired for specific use in connection with such
acquired
property,
(C) after giving effect to such consolidation, merger or
acquisition,
no Default or
Event of Default shall exist, and
(D) the principal amount of the Debt secured by any such Lien shall
at
no time exceed
an amount equal to the lesser of book value or Fair Market
Value (as
determined in good faith by the Board of Directors of the
Company) of such
property (or improvements thereon) at the time of such
consolidation,
merger, becoming a Subsidiary or acquisition;
(vii) Liens securing obligations under the Credit Agreement
and related agreements (provided that the Notes are secured
ratably by the related collateral securing such obligations as
contemplated by the Intercreditor Agreement), Liens securing
Permitted Restricted Subsidiary Debt described in clause (d) of
the definition thereof and Liens securing Permitted Restricted
Subsidiary Debt described in clause (e) of the definition
thereof
to the extent, but only to the extent, that such Liens encumber
inventory and secure unpaid letter of credit reimbursement
obligations referred to in such clause;
(viii) Liens in existence on the Closing Date securing other
Debt
of the Company and the Restricted Subsidiaries, provided
that such Liens are described on Schedule 11.11;
(ix) Liens on property or assets of the Company or any
Restricted Subsidiary securing Debt of the Company owing to any
Wholly-Owned Restricted Subsidiary or securing Debt of any
Restricted Subsidiary owing to the Company or any other
Wholly-Owned Restricted Subsidiary;
(x) Liens renewing, extending or replacing Liens permitted
by clauses (v), (vi), (vii) or (viii), provided that all of the
following conditions are satisfied:
(A) no such new Lien shall extend to any property of the Company
and
the Restricted
Subsidiaries other than property already encumbered by an
existing Lien
being so renewed, extended or replaced, and
(B) the principal amount of the underlying obligation secured by
such
existing Lien
outstanding at the time of such renewal, extension or
replacement
shall not be increased in connection with such renewal,
extension or
replacement and the average life thereof shall not be reduced;
(xi) Liens (other than Liens permitted under clause (i)
through clause (x) above) securing any Debt of the Company,
which
Debt, as of the date of the creation of such Lien, together
with
the aggregate principal amount of Debt outstanding at such time
secured by Liens permitted by clause (v), clause (vi), clause
(vii), clause (viii) and clause (x) of this Section 11.11, does
not exceed the applicable percentage of Consolidated Tangible
Net
Worth determined with respect to such time as set forth in the
table immediately below: the Applicable Percentage of
Consolidated Tangible Net If such time is: Worth is:
----------------------------------------------------------------
On or prior to December 31, 1999 20% After December 31, 1999
and
on or prior to December 31, 2000 19% After December 31, 2000
and
on or prior to December 31, 2001 18% After December 31, 2001
and
on or prior to December 31, 2002 17% After December 31, 2002
and
on or prior to December 31, 2003 16% After December 31, 2003
15%
and provided that immediately after giving
effect to the incurrence or
assumption of such Debt no Default or Event
of Default shall exist.
(b) Equal and Ratable Lien; Equitable Lien. In case any property
shall
be subjected to
a Lien in violation of this Section 11.11, the Company will
forthwith make
or cause to be made, to the fullest extent permitted by
applicable law,
provision whereby the Notes and the Guarantee, as the case
may be, will be
secured equally and ratably with all other obligations
secured thereby
pursuant to such agreements and instruments as shall be
approved by the
Required Holders, and the Company will cause to be
delivered to
each holder of a Note an opinion, satisfactory in form and
substance to the
Required Holders, of independent counsel to the effect
that such
agreements and instruments are enforceable in accordance with
their terms, and
in any such case the Notes shall have the benefit, to the
fullest extent
that, and with such priority as, the holders of Notes may be
entitled thereto
under applicable law, of an equitable Lien on such
property
securing the Notes. A violation of this Section 11.11 will
constitute an
Event of Default, whether or not any such provision is made
pursuant to this
Section 11.11(b).
(c) Financing Statements. The Company will not, and will not
permit
any Restricted
Subsidiary to, sign or file a financing statement under the
Uniform
Commercial Code of any jurisdiction that names the Company or
such
Restricted
Subsidiary as debtor, or sign any security agreement
authorizing
any secured
party thereunder to file any such financing statement, except,
in any such
case, a financing statement filed or to be filed to perfect or
protect a
security interest that the Company or such Restricted
Subsidiary
is entitled to
create, assume or incur, or permit to exist, under the
foregoing
provisions of this Section 11.11 or to evidence for
informational
purposes a
lessor's interest in property leased to the Company or any such
Restricted
Subsidiary or to evidence any Transfer of an asset for which
such filing is
appropriate.
(d) Collateral Anything contained to the contrary in this
Section
11.11
notwithstanding, the Company will not, and will not permit any
Restricted
Subsidiary to, directly or indirectly create, incur, assume or
permit to exist
(upon the happening of a contingency or otherwise) any Lien
on or with
respect to any property that at such time constitutes
Collateral
or Pledged Stock
Collateral, whether now owned or held or hereafter
acquired, or any
income or profits therefrom or assign or otherwise convey
any right to
receive such income or profits, provided that the foregoing
restriction and
limitation shall not apply to:
(i) Liens created with respect to the Collateral and/or the
Pledged Stock Collateral pursuant to the Financing Documents;
(ii)
Liens securing obligations under the Credit Agreement and
related
agreements; and
(iii) Liens that would be permitted to exist under Section 11
.11
(a)(i) or Section 11.11 (a)(ii) hereof
11.12 Line of Business.
The Company will
not and will not permit any Restricted Subsidiary to
engage in any business if, as a result, the
general nature of the business in
which the Company and the Restricted
Subsidiaries, taken as a whole, would then
be engaged would be substantially changed
from the general nature of the
business in which the Company and the
Restricted Subsidiaries, taken as a whole,
are engaged on the date of the Closing.
12. EVENTS OF DEFAULT.
An "Event of
Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole
Amount, if any,
on any Note when the same becomes due and payable, whether
at maturity or
at a date fixed for prepayment or by declaration or
otherwise;
of
(b) the Company defaults in the payment of any interest on any
Note
for more than 5
days after the same becomes due and payable; or
(c) any Obligor defaults in the performance of or compliance with
any
term contained
in any of Section 11.2 through Section 11.11, inclusive, or
Section 7.1(d);
or
(d) any Obligor defaults in the performance of or compliance with
any
term contained
herein, in the Other Agreement or in any other Financing
Document (other
than those referred to in paragraphs (a), (b), (c) or (k)
of this Section
12) and such default is not remedied within 30 days after
the earlier of
(i) a Responsible Officer obtaining actual knowledge of such
default and (ii)
the Company receiving written notice of such default from
any holder of a
Note (any such written notice to be identified as a "notice
of default" and
to refer specifically to this paragraph (d) of Section 12),
unless such
default is capable of being cured but shall have not been cured
(notwithstanding
diligent efforts with respect thereto) within such period,
in which case
such period shall be extended for an additional 60 days, upon
receipt by the
Required Holders of a written request from the Company in
respect thereof,
provided that all cure efforts in respect thereof have
been and are
being diligently pursued; failure to cure any such default by
the end of such
extended period shall, in any case, be an Event of Default
under this
clause (d); or
(e) (i) any representation or warranty made in writing by or on
behalf
of any Obligor
or by any officer of any Obligor in this Agreement, the
Other Agreement,
in any other Financing Document or in any writing
furnished in
connection with the transactions contemplated hereby or
thereby
(including, without limitation, in any instrument delivered
pursuant to
Section 10.7) proves to have been false or incorrect in any
material respect
on the date as of which made or (ii) any representation or
warranty made in
writing by or on behalf of HIL or by any officer of HIL in
this Agreement
or the Other Agreement or in any writing furnished in
connection with
the transactions contemplated hereby or thereby proves to
have been false
or incorrect in any material respect on the date as of
which made;
or
(f) (i) any Obligor is in default (as principal or as guarantor
or
other surety) in
the payment of any principal of or premium or make-whole
amount or
interest on any Debt (other than Debt under this Agreement, the
Other Agreement
and the Notes) beyond any period of grace provided with
respect thereto,
that individually or together with such other Debt as to
which any such
failure exists has an aggregate outstanding principal amount
of at least
$500,000, or (ii) any Obligor is in default in the performance
of or compliance
with any term of any evidence of any Debt (other than
indebtedness
under this Agreement, the Other Agreement and the Notes), that
individually or
together with such other Debt as to which any such failure
exists has an
aggregate outstanding principal amount of at least $500,000,
or of compliance
with any mortgage, indenture or other agreement relating
thereto or any
other condition exists, and as a consequence of such default
or condition
such Debt has become, or has been declared (or one or more
Persons are
entitled to declare such Debt to be), due and payable before
its stated
maturity or before its regularly scheduled dates of payment; or
(g) any Obligor (i) is generally not paying, or admits in writing
its
inability to
pay, its debts as they become due, (ii) files, or consents by
answer or
otherwise to the filing against it of, a petition for relief or
reorganization
or arrangement or any other petition in bankruptcy, for
liquidation or
to take advantage of any bankruptcy, insolvency,
reorganization,
moratorium or other similar law of any jurisdiction, (iii)
makes an
assignment for the benefit of its creditors, (iv) consents to
the
appointment of a
custodian, receiver, trustee or other officer with similar
powers with
respect to it or with respect to any substantial part of its
property, (v) is
adjudicated as insolvent or to be liquidated, or (vi)
takes corporate
action for the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters
an order
appointing, without consent by any Obligor, a custodian,
receiver,
trustee or other
officer with similar powers with respect to such Obligor
or with respect
to any substantial part of the property of such Obligor, or
constituting an
order for relief or approving a petition for relief or
reorganization
or any other petition in bankruptcy or for liquidation or to
take advantage
of any bankruptcy or insolvency law of any jurisdiction, or
ordering the
dissolution, winding-up or liquidation of such Obligor, or any
such petition
shall be filed against such Obligor and such petition shall
not be dismissed
within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating
in excess of
$500,000 are rendered against any one or more of the Obligors
and which
judgments are not, within 30 days after entry thereof, bonded,
discharged or
stayed pending appeal, or are not discharged within 30 days
after the
expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of
ERISA or section 412 of the Code for any plan year or part
thereof or a
waiver of such standards or extension of any amortization
period is sought
or granted under section 412 of the Code,
(ii) a notice of intent to terminate any Plan shall have been
or
is reasonably expected to be filed with the PBGC or the PBGC
shall
have instituted proceedings under section 4042 of ERISA to
terminate
or appoint a trustee to administer any Plan or the PBGC shall
have
notified the Company or any ERISA Affiliate that a Plan may become
a
subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of section 4001 (a)(1 8) of ERISA) under all
Plans
subject to Title IV of ERISA, determined in accordance with Title
IV
of ERISA, shall exceed $1,000,000,
(iv) the Company or any ERISA Affiliate shall have incurred or
is
reasonably expected to incur any liability in the nature of a
penalty,
excise tax or fine pursuant to Title I of ERISA, any liability
under
Title IV of ERISA or any liability under section 4971 through
section
4980E of the Code,
(v) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or
(vi) the Company or any Restricted Subsidiary establishes or
amends any employee welfare benefit plan that provides
post-employment
welfare benefits in a manner that, on and after the date of
Closing,
would in the aggregate increase the liability of the Company or
such
Restricted Subsidiary thereunder by more than $500,000; and any
such
event or events described in clauses (i) through (vi) above,
either
individually or together with any other such event or events,
could
reasonably be expected to have a Material Adverse Effect; as used
in
this Section 12(j), the terms "employee benefit plan" and
"employee
welfare benefit plan" shall have the respective meanings assigned
to
such terms in section 3 of ERISA; or
(k) the Guarantee in respect of any Guarantor or any provision
thereof
shall cease to
be in full force or effect except as otherwise provided
herein, or any
Guarantor or any Person acting by or on behalf of such
Guarantor shall
deny or disaffirm such Guarantor's obligations under such
Guarantee, or
any Guarantor shall default in the due performance or
observance of
any term, covenant or agreement on its part to be performed
pursuant to
Section 23; or
(l) any Financing Document creating or granting a security interest
or
Lien in and to
the Collateral and/or the Pledged Stock Collateral in favor
of the
Collateral Agent shall cease to be in full force and effect,
except
as otherwise
permitted or provided for under the terms of the Financing
Documents, or
the Company shall deny or disaffirm the validity of any such
security
interest or Lien; or
(m) The Chase Manhattan Bank or any other agent under the
Credit
Agreement shall
commence any enforcement proceedings or actions in respect
of the
Collateral and/or the Pledged Stock Collateral except to the
extent
permitted under
the lntercreditor Agreement.
13. REMEDIES ON DEFAULT, ETC.
13.1
Acceleration.
(a) If an Event of Default with respect to the Company described
in
paragraph (g) or
paragraph (h) of Section 12 (other than an Event of
Default
described in clause (i) of paragraph (g) or described in clause
(vi) of
paragraph (g) by virtue of the fact that such clause
encompasses
clause (i) of
paragraph (g)) has occurred, all the Notes then outstanding
shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
any
holder or
holders of 33 and 1/3% or more in principal amount of the Notes
at the time
outstanding may at any time at its or their option, by notice
or notices to
the Company, declare all the Notes then outstanding to be
immediately due
and payable.
(c) If any Event of Default described in paragraph (a) or (b)
of
Section 12 has
occurred and is continuing, any holder or holders of Notes
at the time
outstanding affected by such Event of Default may at any time,
at its or their
option, by notice or notices to the Company, declare all
the Notes held
by it or them to be immediately due and payable.
Upon any Notes
becoming due and payable under this Section 13.1, whether
automatically or by declaration, such Notes
will forthwith mature and the entire
unpaid principal amount of such Notes, plus
(x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount
determined in respect of such principal
amount (to the full extent permitted by
applicable law), shall all be
immediately due and payable, in each and
every case without presentment, demand,
protest or further notice, all of which are
hereby waived. The Company
acknowledges, and the parties hereto agree,
that each holder of a Note has the
right to maintain its investment in such
Note free from repayment by the Company
(except as herein specifically provided
for) and that the provision for payment
of a Make-Whole Amount by the Company in
the event that such Note is prepaid or
is accelerated as a result of an Event of
Default, is intended to provide
compensation for the deprivation of such
right under such circumstances.
13.2 Other
Remedies.
If any Default
or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have
become or have been declared immediately
due and payable under Section 13.1, the
holder of any Note at the time
outstanding may proceed to protect and
enforce the rights of such holder by an
action at law, suit in equity or other
appropriate proceeding, whether for the
specific performance of any agreement
contained herein or in any Note, or for an
injunction against a violation of any of
the terms hereof or thereof, or in aid
of the exercise of any power granted hereby
or thereby or by law or otherwise.
The holders of Notes shall have all of the
rights and remedies in favor of, or
for the benefit of, such holders under the
Security Agreements, the Pledge
Agreements and the other Financing
Documents in respect of the Collateral and/or
the Pledged Stock Collateral, it being
expressly understood that no such right
or remedy is intended to be exclusive of
any other right or remedy; but each and
every right and remedy shall be cumulative
and shall be in addition to every
other right and remedy given herein, in any
other Financing Document or now or
hereafter existing at law or in equity or
by statute or otherwise, and may be
exercised, or caused to be exercised, from
time to time as is provided in the
Security Agreements, the Pledge Agreements
and such other Financing Documents.
13.3 Rescission.
At any time
after any Notes have been declared due and payable pursuant to
clause (b) or clause (c) of Section 13.1,
the holders of 66 and 2/3% or more in
principal amount of the Notes then
outstanding, by written notice to the
Company, may rescind and annul any such
declaration and its consequences if (a)
the Company has paid all overdue interest
on the Notes, all principal due and
payable on any Notes other than by reason
of such declaration, and all interest
on such overdue principal, if any, and any
Make-Whole Amount that is due and
payable in respect of the Notes other than
by reason of such declaration and any
interest thereon and (to the extent
permitted by applicable law) any overdue
interest in respect of the Notes, at the
applicable Default Rate, (b) all Events
of Default and Defaults, other than
non-payment of amounts that have become due
solely by reason of such declaration, have
been cured or have been waived
pursuant to Section 18, and (c) no judgment
or decree has been entered for the
payment of any monies due pursuant hereto
or to the Notes. No rescission and
annulment under this Section 13.3 will
extend to or affect any subsequent Event
of Default or Default or impair any right
consequent thereon.
13.4 No Waivers or
Election of Remedies, Expenses, etc.
No course of
dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall
operate as a waiver thereof or
otherwise prejudice such holder's rights,
powers or remedies. No right, power or
remedy conferred by this Agreement or by
any Note upon any holder thereof shall
be exclusive of any other right, power or
remedy referred to herein or therein
or now or hereafter available at law, in
equity, by statute or otherwise.
Without limiting the obligations of the
Company under Section 16, the Company
will pay to the holder of each Note on
demand such further amount as shall be
sufficient to cover all costs and expenses
of such holder incurred in any
enforcement or collection under this
Section 13, including, without limitation,
reasonable attorneys' fees, expenses and
disbursements.
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF
NOTES.
14.1 Registration of
Notes.
The Company
shall keep at its principal executive office a register for the
registration and registration of transfers
of Notes. The name and address of
each holder of one or more Notes, each
transfer thereof and the name and address
of each transferee of one or more Notes
shall be registered in such register.
Prior to due presentment for registration
of transfer, the Person in whose name
any Note shall be registered shall be
deemed and treated as the owner and holder
thereof for all purposes hereof, and the
Company shall not be affected by any
notice or knowledge to the contrary. The
Company shall give to any holder of a
Note that is an Institutional Investor
promptly upon request therefor, a
complete and correct copy of the names and
addresses of all registered holders
of Notes.
14.2 Transfer and
Exchange of Notes.
Upon surrender
of any Note at the principal executive office of the Company
for registration of transfer or exchange
(and in the case of a surrender for
registration of transfer, duly endorsed or
accompanied by a written instrument
of transfer duly executed by the registered
holder of such Note or his attorney
duly authorized in writing and accompanied
by the address for notices of each
transferee of such Note or part thereof),
the Company shall execute and deliver,
at the Company's expense (except as
provided below), one or more new Notes (as
requested by the holder thereof) in
exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount
of the surrendered Note. Each such
new Note shall be payable to such Person as
such holder may request and shall be
substantially in the form of Exhibit 1.
Each such new Note shall be dated and
bear interest from the date to which
interest shall have been paid on the
surrendered Note or dated the date of the
surrendered Note if no interest shall
have been paid thereon. The Company may
require payment of a sum sufficient to
cover any stamp tax or governmental charge
imposed in respect of any such
transfer of Notes. Notes shall not be
transferred in denominations of less than
$500,000, provided that if necessary to
enable the registration of transfer by a
holder of its entire holding of Notes, one
Note may be in a denomination of less
than $500,000. Any transferee, by its
acceptance of a Note registered in its
name (or the name of its nominee), shall be
deemed to have made the
representation set forth in Section
6.2.
14.3 Replacement of
Notes.
Upon receipt by
the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft,
destruction or mutilation of any Note
(which evidence shall be, in the case of an
Institutional Investor, notice from
such Institutional Investor of such
ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably
satisfactory to
it (provided that if the holder of such Note is, or is a
nominee for, you
or the Other Purchaser or another holder of a Note with a
minimum net
worth of at least $100,000,000, such Person's own unsecured
agreement of
indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the
Company at its own expense shall execute and deliver, in lieu
thereof, a new
Note, dated and bearing interest from the date to which
interest shall
have been paid on such lost, stolen, destroyed or mutilated
Note or dated
the date of such lost, stolen, destroyed or mutilated Note if
no interest
shall have been paid thereon.
15. PAYMENTS ON NOTES.
15.1 Place of
Payment.
Subject to
Section 15.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on
the Notes shall be made in Anderson,
South Carolina at the principal office of
the Company in such jurisdiction. The
Company may at any time, by notice to each
holder of a Note, change the place of
payment of the Notes so long as such place
of payment shall be either a
principal office of the Company in the
United States of America or a principal
office of a bank or trust company in the
United States of America.
15.2 Home Office
Payment.
So long as you
or your nominee shall be the holder of any Note, and
notwithstanding anything contained in
Section 15.1 or in such Note to the
contrary, the Company will pay all sums
becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by
the method and at the address
specified for such purpose below your name
in Schedule A, or by such other
method or at such other address as you
shall have from time to time specified to
the Company in writing for such purpose,
without the presentation or surrender
of such Note or the making of any notation
thereon, except that upon written
request of the Company made concurrently
with or reasonably promptly after
payment or prepayment in full of any Note,
you shall surrender such Note for
cancellation, reasonably promptly after any
such request, to the Company at its
principal executive office or at the place
of payment most recently designated
by the Company pursuant to Section 15.1.
Prior to any sale or other disposition
of any Note held by you or your nominee you
will, at your election, either
endorse thereon the amount of principal
paid thereon and the last date to which
interest has been paid thereon or surrender
such Note to the Company in exchange
for a new Note or Notes pursuant to Section
14.2. The Company will afford the
benefits of this Section 15.2 to any
Institutional Investor that is the direct
or indirect transferee of any Note
purchased by you under this Agreement and
that has made the same agreement relating
to such Note as you have made in this
Section 15.2.
16. EXPENSES, ETC.
16.1 Transaction
Expenses.
Whether or not
the transactions contemplated hereby are consummated, the
Obligors will pay all costs and expenses
(including reasonable attorneys' fees
of a special counsel and, if reasonably
required, local or other counsel and the
$1,500 registration fee payable to the
Securities Valuation Office of the
National Association of Insurance
Commissioners in connection with the
registration of this transaction with such
Office) incurred by you and the Other
Purchaser or any holder of a Note in
connection with such transactions and in
connection with any amendments, waivers or
consents under or in respect of this
Agreement or the Notes (whether or not such
amendment, waiver or consent becomes
effective), including, without limitation:
(a) the costs and expenses incurred
in enforcing or defending (or determining
whether or how to enforce or defend)
any rights under this Agreement or the
Notes or in responding to any subpoena or
other legal process or informal
investigative demand issued in connection with
this Agreement or the Notes, or by reason
of being a holder of any Note, and (b)
the costs and expenses, including financial
advisors' fees, incurred in
connection with the insolvency or
bankruptcy of the Company or any Subsidiary or
in connection with any work-out or
restructuring of the transactions
contemplated hereby and by the Notes. The
Obligors will pay, and will save you
and each other holder of a Note harmless
from, all claims in respect of any
fees, costs or expenses if any, of brokers
and finders (other than those
retained by you).
16.2 Survival.
The obligations
of the Obligors under this Section 16 will survive the
payment or transfer of any Note, the
enforcement, amendment or waiver of any
provision of this Agreement or any other
Financing Document and the termination
of this Agreement or any other Financing
Document.
17. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; ENTIRE AGREEMENT.
All
representations and warranties contained herein shall survive
the
execution and delivery of this Agreement
and the Notes, the purchase or transfer
by you of any Note or portion thereof or
interest therein and the payment of any
Note, and may be relied upon by any
subsequent holder of a Note, regardless of
any investigation made at any time by or on
behalf of you or any other holder of
a Note. All statements contained in any
certificate or other instrument
delivered by or on behalf of the Obligors
or HIL pursuant to this Agreement
shall be deemed representations and
warranties of the Obligors or HIL, as the
case may be, under this Agreement. Subject
to the preceding sentence, this
Agreement and the Notes embody the entire
agreement and understanding between
you and the Obligors and HIL and supersede
all prior agreements and
understandings relating to the subject
matter hereof.
18. AMENDMENT AND WAIVER.
18.1
Requirements.
This Agreement,
the Notes and the other Financing Documents may be amended,
and the observance of any term hereof or of
the Notes may be waived (either
retroactively or prospectively), with (and
only with) the written consent of the
Company and the Required Holders, except
that
(a) no amendment or waiver of any of the provisions of any of
Sections
1, 2, 3, 4, 5,
6,15.2 and 22, or any defined term (as it is used therein),
will be
effective as to you unless consented to by you in writing, and
(b) no amendment or waiver may, without the written consent of
the
holder of each
Note at the time outstanding affected thereby, (i) subject
to the
provisions of Section 13 relating to acceleration or
rescission,
change the
amount or time of any prepayment or payment of principal of, or
reduce the rate
or change the time of payment or method of computation of
interest or of
the Make-Whole Amount on, the Notes, (ii) change the
percentage of
the principal amount of the Notes the holders of which are
required to
consent to any such amendment or waiver hereunder or under any
of the Financing
Documents, (iii) release any of the Collateral and/or the
Pledged Stock
Collateral except as expressly provided for in the Security
Agreements, the
Pledge Agreements or lntercreditor Agreement, (iv) change
the Collateral
Agent or (v) amend any of Sections 8,12,13,18, 21 and 23.
18.2 Solicitation of
Holders of Notes.
(a) Solicitation. The Company will provide each holder of the
Notes
(irrespective of
the amount of Notes then owned by it) with sufficient
information,
sufficiently far in advance of the date a decision is
required, to
enable such holder to make an informed and considered decision
with respect to
any proposed amendment, waiver or consent in respect of any
of the
provisions hereof or of the Notes. The Company will deliver
executed
or true and
correct copies of each amendment, waiver or consent effected
pursuant to the
provisions of this Section 18 to each holder of outstanding
Notes promptly
following the date on which it is executed and delivered by,
or receives the
consent or approval of, the requisite holders of Notes.
(b)
Payment. The Company will not directly or indirectly pay or
cause
to be paid any
remuneration, whether by way of supplemental or additional
interest, fee or
otherwise, or grant any security, to any holder of Notes
as consideration
for or as an inducement to the entering into by any holder
of Notes of any
waiver or amendment of any of the terms and provisions
hereof unless
such remuneration is concurrently paid, or security is
concurrently
granted, on the same terms, ratably to each holder of Notes
then outstanding
even if such holder did not consent to such waiver or
amendment.
18.3 Binding Effect,
etc.
Any amendment or
waiver consented to as provided in this Section 18 applies
equally to all holders of Notes and is
binding upon them and upon each future
holder of any Note and upon the Obligors
and HIL without regard to whether such
Note has been marked to indicate such
amendment or waiver. No such amendment or
waiver will extend to or affect any
obligation, covenant, agreement, Default or
Event of Default not expressly amended or
waived or impair any right consequent
thereon. No course of dealing between the
Company and the holder of any Note nor
any delay in exe
