<PAGE>
Exhibit 10.27.4
AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT
dated as of June 27, 2005
among
EMERSON RADIO CORP.,
EMERSON RADIO MACAO COMMERCIAL OFFSHORE LIMITED,
MAJEXCO IMPORTS, INC.,
EMERSON RADIO (HONG KONG) LIMITED,
And EMERSON RADIO INTERNATIONAL LTD.,
as the Borrower
PNC BANK, NATIONAL ASSOCIATION
AND THE OTHER LENDERS PARTY HERETO,
as Lenders
and
PNC BANK, NATIONAL ASSOCIATION, as Agent
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TABLE OF CONTENTS
PAGE
----
ARTICLE 1
DEFINITIONS.......................................................2
Section
1.1 Defined
Terms............................................2
Section
1.2 Other
Definitional Provisions...........................21
ARTICLE 2 AMOUNT AND TERMS OF
COMMITMENTS..................................21
Section
2.1 Revolving
Credit Commitments............................21
Section
2.2 Revolving
Credit Note...................................22
Section
2.3 Procedure
for Revolving Credit Borrowings...............22
Section
2.4 Commitment
and Other Fees...............................24
Section
2.5
Termination/Reduction of
Commitments....................24
Section
2.6 Term
Loans..............................................31
Section
2.7 Term
Notes..............................................31
Section
2.8 Procedure
for Term Loan Borrowing.......................31
Section
2.9
Prepayments.............................................32
Section
2.10 Conversion and
Continuation Options.....................33
Section
2.11 Minimum Amounts
of Tranches/Number of Tranches..........34
Section
2.12 Interest Rates
and Payment Dates........................34
Section
2.13 Inability to
Determine Interest Rate....................35
Section
2.14
Payments/Funding........................................36
Section
2.15 Change in
Legality......................................37
Section
2.16 Increased
Costs.........................................37
Section
2.17
Indemnity...............................................40
Section
2.18 Intentionally
omitted...................................41
Section
2.19 Purpose of
Loans........................................41
ARTICLE 3. REPRESENTATIONS AND
WARRANTIES..................................41
Section
3.1 Financial
Condition.....................................41
Section
3.2 No Material
Adverse Change..............................42
Section
3.3 Corporate
Existence; Compliance with Law................42
Section
3.4 Corporate
Power; Authorization;
Enforceable Obligations...............................42
Section
3.5 No Legal
Bar............................................43
Section
3.6 No Material
Litigation..................................43
Section
3.7 No
Default..............................................43
Section
3.8 Ownership of
Property; Liens............................43
Section
3.9 Intellectual
Property...................................43
Section
3.10 No Burdensome
Restrictions..............................44
Section
3.11
Taxes...................................................44
Section
3.12 Federal
Regulations.....................................44
Section
3.13 Investment
Company Act; Public Utility
Holding Company Act; Other Regulations................44
Section
3.14
Subsidiaries............................................44
<PAGE>
Section
3.15 Employee
Grievances.....................................45
Section
3.16
ERISA...................................................45
Section
3.17 ER Intercompany
Payable.................................46
ARTICLE 4. CONDITIONS
PRECEDENT............................................49
Section
4.1 Conditions
to Effective Date............................49
Section
4.2 Conditions
to Each Loan.................................51
ARTICLE 5. AFFIRMATIVE
COVENANTS...........................................52
Section
5.1 Financial
Statements, Budgets and Forecasts.............52
Section
5.2
Certificates; Other
Information.........................53
Section
5.3 Payment of
Obligations..................................54
Section
5.4 Conduct of
Business and Maintenance of Existence........54
Section
5.5 Maintenance
of Property; Insurance......................54
Section
5.6 Inspection
of Property; Books and
Records; Discussions..................................55
Section
5.7
Notices.................................................56
Section
5.8 ERISA
Compliance........................................56
Section
5.9 Taxes and
Claims........................................57
Section
5.10 Environmental
Matters...................................57
Section
5.11 Shipping
Documents......................................57
Section
5.12 Significant
Subsidiary..................................58
Section
5.13 Waivers and
Consents....................................58
Section
5.14 Hedging
Agreement.......................................59
Section
5.15 Lockbox
Account.........................................58
ARTICLE 6. NEGATIVE
COVENANTS..............................................58
Section
6.1 Limitation
on Indebtedness..............................58
Section
6.2 Limitation
on Liens.....................................59
Section
6.3 Limitation
on Contingent Obligations....................60
Section
6.4 Limitations
on Fundamental Changes......................60
Section
6.5 Limitation
on Sale of Assets............................61
Section
6.6 Limitation
on Investments, Loans and Advances...........61
Section
6.7 Limitation
on Optional Payments and
Modifications of Debt Instruments.....................62
Section
6.8 Transactions
with Affiliates............................63
Section
6.9 Fiscal
Year.............................................63
Section
6.10 Limitation on
Conduct of Business.......................63
Section
6.11 Net
Worth...............................................63
Section
6.12 Fixed Charge
Coverage Ratio.............................64
Section
6.13 Senior Funded
Debt to EBITDA............................64
Section
6.14 Intentionally
omitted...................................64
Section
6.15 ERISA
Obligations.......................................65
Section
6.16 Restricted
Payments.....................................65
ARTICLE 7. EVENTS OF
DEFAULT...............................................65
Section
7.1 Events of
Default.......................................65
ii
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ARTICLE 8. THE
AGENT.......................................................69
Section
8.1
Actions.................................................69
Section
8.2
Exculpation.............................................69
Section
8.3
Successor...............................................70
Section 8.4
Credit
Decisions........................................70
Section
8.5 Notices,
etc. from Agent................................71
Section
8.6 Security
Documents......................................71
ARTICLE 9. PURCHASING
LENDER...............................................71
Section
9.1 Purchasing
Lender.......................................71
Section
9.2 Disclosure
of Information...............................72
Section
9.3 Pledges to
Federal Reserve Bank.........................73
ARTICLE 10.
MISCELLANEOUS..................................................73
Section
10.1 Amendments
and Waivers.................................73
Section
10.2
Notices................................................75
Section
10.3 No Waiver;
Cumulative Remedies.........................76
Section
10.4 Survival of
Representations and Warranties.............76
Section
10.5 Payment of
Expenses and Taxes..........................76
Section
10.6 Successors
and Assigns.................................77
Section
10.7
Set-off/Sharing........................................77
Section
10.8 Foreign
Subsidiaries...................................78
Section
10.9 Judgment
Currency/Withholding Tax......................79
Section
10.10
Counterparts...........................................79
Section
10.11
Severability...........................................79
Section
10.12
Integration............................................80
Section
10.13 Governing
Law..........................................80
Section
10.14 Submission To
Jurisdiction; Waivers....................80
Section
10.15
Acknowledgments........................................80
Section
10.16 Waivers of Jury
Trial..................................81
Section
10.17
SSG.81
EXHIBITS
Exhibit A
Revolving Credit Note
Exhibit A-1
Swing Loan Note
Exhibit B
Term Note
Exhibit C
Borrowing Base Certificate
Exhibit D
Omitted
Exhibit E
Assumption Agreement
Exhibit F
Omitted
Exhibit G
Omitted
Exhibit H
Stock Pledge Agreement
Exhibit I
Intellectual Property Security Agreement
Exhibit J
Omitted
iii
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Exhibit K
Landlord/Warehouse Waiver
Exhibit L
Omitted
Exhibit M
Borrowing Request
SCHEDULES
---------
Pricing Schedule
Schedule I
Commitments
Schedule II
Consents (ss. 3.4(b))
Schedule III
Litigation (ss. 3.6)
Schedule IV
Subsidiaries (ss. 3.14)
Schedule V
Employee Grievances (ss. 3.15)
Schedule VI
ERISA Plans (ss. 3.16)
Schedule VII
Liens (ss. 6.2(g))
Schedule VIII
Existing Permitted Investments
Schedule IX
Omitted
Schedule X
Affiliated Agreements (ss.6.8)
Schedule XI
Notice Addresses
Schedule VI (a)
Insurance (ss.3.18)
Schedule VI (b)
Material Contracts (ss.3.17)
Schedule VI (c)
Environmental
Matters (ss.3.21)
Schedule 4.1 (n)
Closing Checklist
iv
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT
AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT,
dated as of June 27, 2005
among EMERSON RADIO CORP. ("ERC US"), a Delaware
corporation, EMERSON RADIO
MACAO COMMERCIAL OFFSHORE LIMITED, a Macao
corporation ("ER MACAO"),
MAJEXCO IMPORTS, INC. ("MI"), a California
corporation, EMERSON RADIO
(HONG KONG) LIMITED ("ER HONG KONG") a Hong Kong
corporation, and EMERSON
RADIO INTERNATIONAL LTD. ("ER BVI"), a British Virgin
Islands company, jointly and
severally as co-borrowers and co-obligors, except
as expressly set forth herein
in Section 10.8 hereof, (collectively, the
"Borrower"), PNC BANK,
NATIONAL ASSOCIATION (in its capacity as lender, "PNC")
and each other lender
signatory hereto or which becomes a Lender pursuant to
Section 9.1 (each a "Lender"
and, collectively, the "Lenders") and PNC BANK,
NATIONAL ASSOCIATION as agent
for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders are
parties
to the Revolving Credit and
Term Loan Agreement, dated June 28, 2002, pursuant
to which the Lenders extended
certain credit facilities to the Borrower (the
"Original Credit
Agreement");
WHEREAS, the Borrower has requested that the Lenders amend
and
restate the terms and
conditions of the Original Credit Agreement and extend
certain additional credit
facilities to the Borrower; and
WHEREAS, the Lenders have agreed, upon the terms and
conditions set forth herein,
to amend and restate the Original Credit Agreement
and to extend such additional
credit facilities to the Borrower.
NOW, THEREFORE, in consideration of the premises, and
for
other good and valuable
consideration, the receipt and adequacy of which are
hereby acknowledged, the
Lenders, the Agent and the Borrower hereby agree as
follows:
<PAGE>
ARTICLE 1
DEFINITIONS
Section 1.1. Defined Terms.
As used in this Agreement, the following terms shall have
the
following
meanings:
"A Stock" when used in reference to inventory, new
product
(manufactured of new material
and parts and not repaired, remanufactured or
rebuilt), which has not been
subjected to use after original manufacture (but
excluding in any event
seconds, opened returns and inventory held for resale).
"Adjusted EBITDA" Consolidated EBITDA for ERC US and its
Subsidiaries other than SSG
and the Foreign Subsidiaries.
"Affiliate" as to any Person, any other Person which,
directly
or indirectly, is in control
of, is controlled by, or is under common control
with, such Person. For
purposes of this definition, "control" of a Person means
the power, directly or
indirectly, either to (a) vote 10% or more of the
securities having ordinary
voting power for the election of directors of such
Person or (b) direct or cause
the direction of the management and policies of
such Person whether by
contract or otherwise.
"Agent" (a) PNC Bank, National Association; or (b) such
other
bank or financial institution
as shall have been subsequently appointed as
successor Agent pursuant to
Section 8.3 of this Agreement.
"Agreement" this Amended and Restated Revolving Credit
and
Term Loan Agreement, as
amended, supplemented or otherwise modified from time to
time.
"Anti-Terrorism Laws" shall mean any Laws relating to
terrorism or money
laundering, including Executive Order No. 13224, the USA
Patriot Act, the Laws
comprising or implementing the Bank Secrecy Act, and the
Laws administered by the
United States Treasury Department's Office of Foreign
Asset Control (as any of the
foregoing Laws may from time to time be amended,
renewed, extended, or
replaced).
"Applicable Fee Rate" means a rate per annum determined
in
accordance with the Pricing
Schedule. The Agent shall set the Applicable Fee
Rate based on Level II
Pricing on the Pricing Schedule until receipt by the
Agent of the financial
statements of Borrower for the fiscal quarter ending
September 30, 2005 and
thereafter the Agent shall set the Applicable Fee Rate
for each fiscal quarter based
upon the financial statements of Borrower for the
immediately preceding fiscal
quarter delivered pursuant to Section 5.1. The
Applicable Fee Rate as so
determined shall apply effective as of the date the
relevant financial statements
are received by the Agent. If the Borrower shall
fail to deliver financial
statements as required by Section 5.1, the Applicable
Fee Rate shall be set as
determined by Level IV Pricing on the Pricing Schedule
for each fiscal quarter for
which such financials are not delivered to the Agent
for the period from the
beginning of such fiscal quarter to the date such
financial statements are
delivered and from such date to the end of such fiscal
quarter the Applicable Fee
Rate shall be set by Agent based upon such financial
statements.
2
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"Applicable Margin" means a rate per annum determined in
accordance with the Pricing
Schedule. The Agent shall set the Applicable Margin
based on Level II Pricing on
the Pricing Schedule until receipt by the Agent of
the financial statements of
Borrower for the fiscal quarter ending September 30,
2005 and thereafter the Agent
shall set the Applicable Margin for each fiscal
quarter based upon the
financial statements of Borrower for the immediately
preceding fiscal quarter
delivered pursuant to Section 5.1. The Applicable
Margin as so determined shall
apply effective as of the date the relevant
financial statements are
received by the Agent. If the Borrower shall fail to
deliver financial statements
as required by Section 5.1, the Applicable Margin
shall be set as determined by
Level IV Pricing on the Pricing Schedule for each
fiscal quarter for which such
financials are not delivered to the Agent for the
period from the beginning of
such fiscal quarter to the date such financial
statements are delivered and
from such date to the end of such fiscal quarter
the Applicable Margin shall
be set by Agent based upon such financial
statements.
"Assignment and Acceptance" as defined in Section 9.1.
"Assumption Agreement" an agreement substantially in the
form
of Exhibit E hereto (with
such changes therein as are reasonably acceptable to
the Agent) to be delivered to
the Agent pursuant to Section 5.12.
"Available Commitment" at any time with respect to
Revolving
Credit Loans for each Lender,
an amount equal to (i) the amount of such Lender's
Commitment at such time to
make Revolving Credit Loans minus (ii) the sum of the
aggregate principal amount of
all then outstanding Revolving Credit Loans and
Letters of Credit Outstanding
made by such Lender.
"Base Rate" on any date the higher of (i) the Prime Rate
then
in effect and (ii) the
Federal Funds Open Rate then in effect plus 1/2%.
"Base Rate Loans" Loans whose interest rate is based on
the
Base Rate.
"Blocked Person" the meaning assigned to such term in
Section
3.22.
"Board" the Board of Governors of the Federal Reserve
System
of the United
States.
3
<PAGE>
"Borrowing Base" means an amount equal to (A) the sum of
(x)
80% of the value of Eligible
Receivables of ERC US for the most recently ended
Calculation Period (excluding
therefrom in all cases the Special Receivables)
plus (y) 65% of the value of
the Special Receivables of ERC US for the most
recently ended Calculation
Period plus (z) the lesser of (i) 55% (or such
greater percentage as the
Required Lenders may approve with respect to any
Calculation Period) of the
aggregate value of unsold Eligible Inventory of ERC
US and MI for the most
recently ended Calculation Period, (ii) 85% (or such
greater percentage as the
Required Lenders may approve with respect to any
Calculation Period) of the
Net Recovery Value and (iii) $21,000,000, during the
period from and including
January 1 to and including March 31 in each calendar
year and $25,000,000, during
the period from and including April 1 to and
including December 31 in each
calendar year, less (B) (x) the Rental Reserve
until the Agent shall have
received landlord/warehousemen waivers as required by
Section 5.13 in form and
substance satisfactory to the Agent from all Persons
providing warehouse and
leasehold premises to ERC US, (y) the amount of the
California unitary tax
assessed against ERC US (and all penalties, interest and
other amounts payable with
respect thereto) in the event a Lien is filed with
respect to such tax by any
Governmental Authority so long as such tax is not
paid (provided if ERC US
enters into an agreement with the relevant Governmental
Authority assessing such tax
in form and substance satisfactory to the Required
Lenders with respect to a
schedule for payment of such assessed tax (and any
penalties, interest or other
amounts payable with respect thereto), the amount
reserved with respect to such
assessed tax shall be limited to all payments
under such agreement due
prior to the second anniversary of any date of
determination so long as ERC
US is not in breach of such agreement and no
proceedings have been
initiated to enforce or foreclose upon the Lien with
respect thereto), (z) at any
time during the period from and including January
1st to and including March
31st in each year, an amount equal to 10% of the net
accounts receivable reflected
on the then most recent Borrowing Base Certificate
delivered with respect to
such period, and (aa) such additional reserves as
Agent shall deem appropriate
in its reasonable business judgment in the event
the inventory of any Person
constituting the Borrower is underinsured (in
Agent's reasonable business
judgment) by the insurance in force pursuant to
Section 5.5. If the Required
Lenders shall have approved a change in any
percentage used in
determining the Borrowing Base for any Calculation
Period,
they shall have no further or
future obligation to do so with respect to any
other Calculation
Period.
"Borrowing Base Certificate" a certificate in the form
of
Exhibit C hereto to be
delivered by the ERC US for each Calculation Period.
"Borrowing Date" any Business Day specified in a notice
pursuant to Section 2.3 as a
date on which a Borrower requests the Lenders to
make Loans.
"Business Day" a day other than Saturday, Sunday or other
day
on which commercial banks in
Pittsburgh, Pennsylvania are authorized or required
by law to be closed and, in
the case of Eurodollar Loans, a day which is also a
Working Day.
"CAPEX" for any period, the cost attributed in accordance
with
GAAP consistent with those
applied in preparation of the financial statements
referred to in Section 5.1
hereof to acquisitions during such period by ERC US
and/or its consolidated
Subsidiaries (other than SSG) of any asset, tangible or
intangible, or replacements
or substitutes therefor or additions thereto which
are treated as a non current
asset on such financial statements, including,
without limitation, the
acquisition or construction of assets having a useful
life of more than one
year.
"Calculation Period" In the case of the initial Loan,
the
Calculation Period shall be
as of June 24, 2005 and then as of the end of each
successive calendar month
until the first date, if any, Undrawn Availability
falls below $2,500,000, on
which date the Calculation Period shall, until the
Undrawn Availability equals
or exceeds $2,500,000 for a thirty- (30) day period,
be each successive seven day
period beginning on a Saturday and ending on the
following Friday.
4
<PAGE>
"Capital Lease Obligations" of any Person for any period,
the
obligations of such Person to
pay rent and other amounts under any lease of (or
other arrangement conveying
the right to use) real or personal property, or a
combination thereof, for such
period, which obligations are required to be
classified and accounted for
as capital leases on a balance sheet of such Person
under GAAP.
"Capital Stock" any and all shares, interests,
participations
or other equivalents (however
designated) of shares of capital or capital stock
of a corporation, any and all
equivalent ownership interests in a Person (other
than a corporation) and any
and all warrants or options to purchase any of the
foregoing.
"Change in Control" means the acquisition by any Person,
or
two or more Persons acting in
concert (other than any individuals who are
members of ERC US's senior
management on the Effective Date or any entity, if
and so long as, the majority
of equity and voting interests in which is owned by
one or more of such
individuals), of beneficial ownership (within the meaning
of
Rule 13d-3 of the Securities
and Exchange Commission under the Securities
Exchange Act of 1934) of
greater than 30% (or such greater percentage as the
Required Lenders may agree to
in writing) of the outstanding shares of voting
stock of ERC US.
"Closing Date" the date on which the Lenders make the
initial
Loans.
"Code" the Internal Revenue Code of 1986, as amended from
time
to time.
"Commitment" for each Lender at any time from and
including
the Effective Date to but
excluding the Maturity Date the lesser of (i) the
amount set forth opposite
such Lender's name in Schedule I under the heading
"Commitment" as such amount
may be adjusted pursuant to Sections 2.5 or 9.1 and
(ii) the product of such
Lender's Percentage and the Borrowing Base for the then
immediately preceding
Calculation Period.
"Consolidated EBITDA" means, for any fiscal period, (a)
Consolidated Net Income
(Loss) for such period plus, (b) the sum of (i) other
non-cash charges in
accordance with GAAP (including expenses related to
stock
options pursuant to FAS
123R), (ii) Consolidated Interest Expense, (iii)
depreciation, (iv)
amortization of intangible assets and (v) federal,
state,
local and foreign income
taxes; all computed and calculated in accordance with
GAAP.
"Consolidated Intangibles" at a particular date, all assets
of
ERC US and its consolidated
Subsidiaries (excluding SSG), that would be
classified as intangible
assets in accordance with GAAP, but in any event
including, without
limitation, unamortized organization and reorganization
expense and
goodwill.
"Consolidated Interest Expense" for any period, the
total
interest expense paid for
such period (including, without limitation, that
attributable to Capital Lease
Obligations in accordance with GAAP) of ERC US and
its consolidated Subsidiaries
(excluding SSG) with respect to all outstanding
Indebtedness of ERC US and
its consolidated Subsidiaries (excluding SSG).
5
<PAGE>
"Consolidated Net Income" for any period, the consolidated
net
income (or net loss) of ERC
US and its consolidated Subsidiaries (excluding SSG)
for such period, determined
in accordance with GAAP.
"Consolidated Net Worth" at a particular date, the sum of
all
amounts which would be
included under shareholders' equity on a consolidated
balance sheet of ERC US and
its consolidated Subsidiaries (excluding SSG)
determined in accordance with
GAAP as at such date.
"Consolidated Tangible Net Worth" as used in Section 7.1(h)
at
a particular date, (a) the
sum of all amounts which would be included under
shareholders' equity on a
consolidated balance sheet of ERC US and its
consolidated Subsidiaries
(excluding SSG) determined in accordance with GAAP as
at such date minus (b)
Consolidated Intangibles as at such date.
"Contamination" shall mean the presence or release or
threat
of release of Regulated
Substances in, on, under or emanating to or from the
Property, which pursuant to
Environmental Safety Laws requires notification or
reporting to an official
body, or which pursuant to Environmental Safety Laws
requires the investigation,
cleanup, removal, remediation, containment,
abatement of or other
response action or which otherwise constitutes a
violation
of Environmental Safety
Laws.
"Contingent Obligation" as to any Person any guarantee
of
payment, collection or
performance by such Person of any Indebtedness or other
obligation of any other
Person, or any agreement to provide financial assurance
with respect to the financial
condition, or the payment of the obligations of,
such other Person (including,
without limitation, purchase or repurchase
agreements, reimbursement
agreements with respect to letters of credit or
acceptances, indemnity
arrangements, grants of security interests to support
the
obligations of another
Person, keepwell agreements and take-or-pay or
through-put arrangements)
which has the effect of assuring or holding harmless
any third Person against loss
with respect to one or more obligations of such
other Person; provided,
however, that the term Contingent Obligation shall not
include endorsements of
instruments for deposit or collection in the ordinary
course of business or
indemnities entered into in the ordinary course of
business in connection with
the sale of inventory or licensing of intellectual
property or other proprietary
information. The amount of any Contingent
Obligation of any Person
shall be deemed to be the lower of (a) an amount equal
to the stated or determinable
amount of the primary obligation in respect of
which such Contingent
Obligation is made and (b) the maximum amount for which
such contingently liable
Person may be liable pursuant to the terms of the
instrument embodying such
Contingent Obligation, unless such primary obligation
and the maximum amount for
which such contingently liable Person may be liable
are not stated or
determinable, in which case the amount of such
Contingent
Obligation shall be such
contingently liable Person's maximum reasonably
anticipated liability in
respect thereof as determined by the contingently
liable Person in good
faith.
6
<PAGE>
"Contractual Obligation" as to any Person, any provision
of
any security issued by such
Person or of any agreement, instrument or other
undertaking to which such
Person is a party or by which it or any of its
property is bound.
"Controlled Group" as set forth in Section 1563(a) of
the
Code.
"Default" any of the events specified in Section 7.1,
whether
or not any requirement for
the giving of notice, the lapse of time, or both, or
any other condition, has been
satisfied.
"Director Share" one ordinary share of the Capital Stock of
ER
Hong Kong held by Paul
Gullett, an individual, or a replacement reasonably
acceptable to
Agent.
"Dollar" and "$" lawful currency of the United States of
America.
"Effective Date" as set forth in Section 4.1.
"Eligible Inventory" all A Stock goods of ERC US and MI
excluding work in progress,
any inventory purchased from a Person not
constituting the Borrower in
which ERC US or MI does not have title, which is
subject to a Lien (other than
in favor of the Agent and the Lender), which has
not been shipped to, or at
the direction of, ERC US or MI, in which the Agent
does not have a first
priority perfected security interest, with respect to
which any representations or
warranties contained in the Loan Documents are
untrue or as to which any
Person constituting the Borrower has breached its
covenants in the Loan
Documents, and excluding any inventory in any warehouse
or
other facility for which
Agent does not have a Waiver and Consent in form and
substance satisfactory to it,
and any other inventory which the Agent deems to
be otherwise unacceptable in
its reasonable judgment (including, without
limitation, by reason of its
being unacceptable due to age, type, category or
quantity).
"Eligible Receivables" all accounts receivable of ERC US
other
than accounts receivable (i)
which have remained unpaid for more than 90 days
after the date of their
creation; (ii) which are owed by any Person where 50% or
more of the receivables owed
by such Person would be excluded by reason of
clause (i) of this definition
(the "50% Rule"); (iii) which are owed by any
Person constituting the
Borrower or any Affiliate of any Person constituting the
Borrower; (iv) which are
payable by any Person not incorporated in a
jurisdiction which is part of
the United States of America, Canada or any state
or province thereof; (v) as
to which the goods which gave rise to the receivable
have been or are being
returned or as to which a credit has been claimed but
only to the extent of such
return or claimed credit; (vi) as to which
(collectively, "Contras") the
account party has (or claimed the right to) set
off against or has netted out
(or claimed the right to net out) charge backs or
other amounts due such
account party by any Person constituting the Borrower
but
only to the extent of such
Contra; (vii) as to which there are accrued and
unpaid late charges, to the
extent of such late charges (provided, that this
clause (vii) shall not
derogate from the provisions of clause (i) above);
(viii)
which are payable by any
Person which is the subject of any voluntary or
involuntary bankruptcy or
insolvency proceeding (state or federal), which has
made a general assignment for
the benefit of creditors or had a receiver,
trustee or other similar
official appointed with respect to all or a substantial
portion of its properties or
which has ceased doing business; or (ix) which the
Agent deems to be otherwise
unacceptable in its reasonable judgment.
7
<PAGE>
"Environmental Complaint" shall mean any written complaint
by
any Person or setting forth a
cause of action for personal injury or property
damage, natural resource
damage, contribution or indemnity for response costs,
civil or administrative
penalties, criminal fines or penalties, or declaratory
or equitable relief arising
under any Environmental Laws or any order, notice of
violation, citation,
subpoena, request for information or other written
notice
or demand of any type issued
by an official body pursuant to any Environmental
Safety Laws.
"Environmental Liabilities" shall mean any and all
claims,
demands, penalties, fines,
liabilities, settlements, damages, losses, costs and
expenses (including, without
limitation, reasonable attorneys' and reasonable
consultants' fees and
disbursements, remedial investigation and feasibility
study costs, clean-up costs
and other response costs under the Environmental and
Safety Laws, currently in
existence or which may be enacted in the future,
laboratory fees, court costs
and litigation expenses) of whatever kind or
nature, known or unknown,
contingent or otherwise, arising out of or in any way
related to (i) the presence,
disposal or release of any Hazardous Materials
which are on, from or which
affect any real property owned or leased by any
Person constituting the
Borrower or any part thereof, including, without
limitation, soil, water,
vegetation, buildings, equipment, personal property, or
which affect Persons, animals
or otherwise; (ii) any personal injury (including
wrongful death) or property
damage (real or personal) arising out of or related
to such Hazardous Materials
or damage to wetlands whether or not relating to
Hazardous Materials; (iii)
any lawsuit brought or threatened, settlement
reached, or government order
or directive relating to such Hazardous Materials;
and/or (iv) any violation of
any Requirement of Law or requirements or demands
of any Governmental
Authority, which are based upon or in any way related to
such Hazardous Materials and
which are paid or incurred by the Agent or any
Lender.
"Environmental and Safety Laws" shall mean all Requirements
of
Law relating to the
environment and workplace safety including, without
limitation, the Clean Air Act
("CAA"), the Clean Water Act ("CWA"), the Toxic
Substances Control Act
("TSCA"), the Hazardous Materials Transportation Act
("HMTA"), the Resource
Conservation and Recovery Act, as amended ("RCRA"), the
Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"),
as modified by the Superfund
Amendments and Reauthorization Act of 1986
("SARA"), the Emergency
Planning and Community Right to Know Act ("EPCRA"), the
Noise Control Act ("NCA"),
the Occupational Safety and Health Act ("OSHA"), the
Safe Drinking Water Act and
the Federal Insecticide, Fungicide and Rodenticide
Act, as any such Requirements
of Laws may be amended, supplemented or otherwise
modified from time to
time.
"Environmentally Sensitive Area" shall mean (i) any wetland
as
defined by applicable
Environmental Laws; (ii) any area designated as a
coastal
zone pursuant to applicable
laws, including Environmental Safety Laws; (iii) any
area of historic or
archeological significance or scenic area as defined or
designated by applicable
laws, including Environmental Safety Laws; (iv)
habitats of endangered
species or threatened species as designated by
applicable
laws, including Environmental
Safety Laws; or (v) a floodplain or other flood
hazard area as defined
pursuant to any applicable Laws.
8
<PAGE>
"ERC Intercompany Payable" the net Indebtedness owed by ERC
US
to the Foreign Subsidiaries,
including, but not limited to, Indebtedness owed by
ERC US to ER Hong Kong and ER
BVI pursuant to a Letter Agreement, dated March
15, 1984, between ERC US and
ER Hong Kong.
"ERISA" means the Employee Retirement Income Security Act
of
1974 (and any sections of the
Code amended by it), as the same from time to time
may be amended, supplemented
or modified, and all regulations promulgated
thereunder.
"ERISA Affiliate" means each trade or business (whether or
not
incorporated) which together
with any Person constituting the Borrower would be
deemed to be a single
employer under Section 414 of the Code.
"Eurodollar Loans" Loans whose rate of interest is based
upon
the Eurodollar
Rate.
"Eurodollar Rate" shall mean, with respect to any Tranche
for
any Interest Period, the
interest rate per annum determined by the Agent by
dividing (the resulting
quotient rounded upwards, if necessary, to the nearest
1/100th of 1% per annum) (i)
the rate of interest determined by the Agent in
accordance with its usual
procedures (which determination shall be conclusive
absent manifest error) to be
the average of the London interbank offered rates
for U.S. Dollars quoted by
the British Bankers' Association as set forth on Dow
Jones Markets Service
(formerly known as Telerate) display page 3750 (or
appropriate successor or, if
the British Bankers' Association or its successor
ceases to provide such
quotes, a comparable replacement determined by the
Agent)
two (2) Business Days prior
to the first day of such Interest Period for an
amount comparable to such
Tranche and having a borrowing date and a maturity
comparable to such Interest
Period by (ii) a number equal to 1.00 minus the
Euro-Rate Reserve Percentage.
The Eurodollar Rate may also be expressed by the
following formula:
Eurodollar Rate = Average of London interbank
offered rates on Moneyline Telerate Markets
Service display page 3750 as quoted
by British Bankers' Association or
appropriate successor
---------------------------------------------
1.00 - Euro-Rate Reserve Percentage
The Eurodollar Rate shall be adjusted with respect to
any
Tranche outstanding on the
effective date of any change in the Euro-Rate Reserve
Percentage as of such
effective date. The Agent shall give prompt notice to
the
Borrower of the Eurodollar
Rate as determined or adjusted in accordance
herewith, which determination
shall be conclusive absent manifest error.
"Euro-Rate Reserve Percentage" shall mean the maximum
percentage (expressed as a
decimal rounded upward to the nearest 1/100 of 1%) as
determined by the Agent which
is in effect during any relevant period, as
prescribed by the Board of
Governors of the Federal Reserve System (or any
successor) for determining
the reserve requirements (including supplemental,
marginal and emergency
reserve requirements) with respect to eurocurrency
funding (currently referred
to as "Eurocurrency Liabilities") of a member bank
in such System.
9
<PAGE>
"Event of Default" as defined in Section 7.1.
"Executive Order No. 13224" shall mean the Executive Order
No.
13224 on Terrorist Financing,
effective September 24, 2001, as the same has
been, or shall hereafter be,
renewed, extended, amended or replaced.
"Federal Funds Effective Rate" for any day shall mean the
rate
per annum (based on a year of
360 days and actual days elapsed and rounded
upward to the nearest 1/100
of 1%) announced by the Federal Reserve Bank of New
York (or any successor) on
such day as being the weighted average of the rates
on overnight federal funds
transactions arranged by federal funds brokers on the
previous trading day, as
computed and announced by such Federal Reserve Bank (or
any successor) in
substantially the same manner as such Federal Reserve
Bank
computes and announces the
weighted average it refers to as the "Federal Funds
Effective Rate" as of the
date of this Agreement; provided, if such Federal
Reserve Bank (or its
successor) does not announce such rate on any day, the
"Federal Funds Effective
Rate" for such day shall be the Federal Funds Effective
Rate for the last day on
which such rate was announced.
"Federal Funds Open Rate" shall mean the rate per annum
determined by the Agent in
accordance with its usual procedures (which
determination shall be
conclusive absent manifest error) to be the "open" rate
for federal funds
transactions as of the opening of business for federal
funds
transactions among members of
the Federal Reserve System arranged by federal
funds brokers on such day, as
quoted by Garvin Guybutler, any successor entity
thereto, or any other broker
selected by the Agent, as set forth on the
applicable Telerate display
page; provided, however, that if such day is not a
Business Day, the Federal
Funds Open Rate for such day shall be the "open" rate
on the immediately preceding
Business Day, or if no such rate shall be quoted by
a Federal funds broker at
such time, such other rate as determined by the Agent
in accordance with its usual
procedures.
"Fixed Charge Coverage Ratio" means, as of the last day of
any
fiscal quarter of ERC US, the
ratio of (i) Consolidated EBITDA less the sum of
(x) cash federal, state,
local and foreign income tax expense, (y) CAPEX
(excluding the cost of
acquisitions of interests in other Persons) and (z)
distributions (whether
denominated as redemptions, dividends or otherwise and
whether paid in cash or in
kind) by ERC US to any holder of any of its Capital
Stock for the four
consecutive fiscal quarters of ERC US and its
consolidated
Subsidiaries ending on such
date to (ii) the sum of (x) Consolidated Interest
Expense, plus (y) scheduled
principal payments on any Indebtedness of ERC US and
its Consolidated Subsidiaries
(other than SSG) for such period.
"Foreign Subsidiaries" shall mean each of ER Hong Kong,
ER
BVI, Emerson Global Limited
and Emerson Radio Macao Commercial Offshore Limited.
10
<PAGE>
"Funded Debt" at any date of determination, for ERC US and
its
Subsidiaries other than SSG
(determined on a consolidated basis without
duplication in accordance
with GAAP): obligations created, issued or incurred
for borrowed money (whether
by loan or the issuance and sale of debt securities
or otherwise), all Contingent
Obligations relating to obligations created,
issued or incurred for
borrowed money, all Capital Lease Obligations and all
reimbursement and other
obligations of each such Person in respect of letters of
credit, acceptances and
similar obligations issued or created for the account of
such Person (but excluding,
in the case of the Foreign Subsidiaries, (i)
reimbursement obligations
under back to back letter of credit facilities so long
as no issuer of any letter of
credit under any such facilities to a Foreign
Subsidiary as beneficiary, or
for its account, has failed to honor a draw
thereunder for any reason,
and (ii) the Other Unsecured Foreign Obligations).
"GAAP" generally accepted accounting principles in the
United
States of America consistent
with those utilized in preparing the audited
financial statements referred
to in Section 5.1(a). Unless otherwise
specifically provided herein,
any accounting term used in the Agreement shall
have the meaning customarily
given such term in accordance with GAAP, and all
financial computations
hereunder shall be computed in accordance with GAAP
consistently applied. That
certain items or computations are explicitly modified
by the phrase "in accordance
with GAAP" shall in no way be construed to limit
the foregoing. If any
"Accounting Changes" (as defined below) occur and such
changes result in a change in
the calculation of the financial covenants,
standards or terms used in
the Agreement or any other Loan Document, then
Borrower, Agent and Lenders
agree to enter into negotiations in order to amend
such provisions of the
Agreement so as to equitably reflect such Accounting
Changes with the desired
result that the criteria for evaluating Borrower's and
its Subsidiaries' financial
condition shall be the same after such Accounting
Changes as if such Accounting
Changes had not been made; provided, however, that
the agreement of Required
Lenders to any required amendments of such provisions
shall be sufficient to bind
all Lenders. "Accounting Changes" means (i) changes
in accounting principles
required by the promulgation of any rule, regulation,
pronouncement or opinion by
the Financial Accounting Standards Board of the
American Institute of
Certified Public Accountants or the Securities and
Exchange Commission (or
successor thereto or any agency with similar functions),
(ii) changes in accounting
principles concurred in by Borrower's certified
public accountants; (iii)
purchase accounting adjustments under A.P.B. 16 or 17
and EITF 88-16, and the
application of the accounting principles set forth in
FASB 109, including the
establishment of reserves pursuant thereto and any
subsequent reversal (in whole
or in part) of such reserves and (iv) the reversal
of any reserves established
as a result of purchase accounting adjustments. If
the Required Lenders and
Borrower agree upon the required amendments, then after
appropriate amendments have
been executed and the underlying Accounting Change
with respect thereto has been
implemented, any reference to GAAP contained in
the Agreement or in any other
Loan Document shall, only to the extent of such
Accounting Change, refer to
GAAP, consistently applied after giving effect to
the implementation of such
Accounting Change. If the Required Lenders and
Borrower cannot agree by the
date which is 15 days prior to the required
reporting date under Section
5.1 upon the required amendments to reflect any
Accounting Change which has
become effective, then all financial statements
delivered and all
calculations of financial covenants and other standards
and
terms in accordance with the
Agreement and the other Loan Documents shall be
prepared, delivered and made
without regard to the underlying Accounting Change.
11
<PAGE>
"Governmental Authority" any nation or government, any
state
or other political
subdivision thereof and any entity exercising executive,
legislative, judicial,
regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" shall mean, without limitation,
any
flammable material,
explosives, radioactive materials, gasoline, petroleum
products, asbestos, urea
formaldehyde, polychlorinated biphenyls, hazardous
materials, hazardous wastes,
hazardous or toxic substances, or related materials
as defined in the
Environmental and Safety Laws.
"HK Subordination Agreement" the Subordination Agreement
in
the form annexed hereto in
Exhibit K to be executed and delivered by ER Hong
Kong, ER BVI and ERC US in
favor of the Agent as the same may be amended,
modified or supplemented from
time to time.
"Inactive Subsidiary" any Subsidiary which is not a
Significant
Subsidiary.
"Indebtedness" of any Person at any date (without
duplication):
(a) all indebtedness of such Person for borrowed money or
for
the deferred purchase price
of property or services (other than current trade
liabilities incurred in the
ordinary course of business and payable in
accordance with customary
practices),
(b) any other indebtedness of such Person which is
evidenced
by a note, bond, debenture or
similar instrument,
(c) all Capital Lease Obligations of such Person,
(d) all reimbursement and other obligations of such Person
in
respect of letters of credit,
acceptances and similar obligations issued or
created for the account of
such Person,
(e) all liabilities secured by any Lien on any property
owned
by such Person even though
such Person has not assumed or otherwise become
liable for the payment
thereof,
(f) net liabilities of such Person under interest rate cap
and
or collar agreements,
interest rate swap agreements, foreign currency exchange
agreements and other hedging
agreements or arrangements,
(g) all Contingent Obligations of such Person, and
(h) withdrawal liabilities of such Person under a Plan.
The Indebtedness of any
Person shall include any Indebtedness of any partnership
in which such Person is a
general partner and Indebtedness of any limited
liability company of which
such Person is a member to the extent, if any, the
organizational documents of
such entity provide that members are liable for its
obligations.
12
<PAGE>
"Indemnified Liabilities" has the meaning ascribed thereto
in
Section 10.5.
"Intellectual Property" has the meaning ascribed thereto
in
Section 3.9.
"Intellectual Property Security Agreements" the
Intellectual
Property Security Agreements
in the form of Exhibit I hereto, to be executed and
delivered by ERC US and Scott
to the Agent, as the same may be amended,
supplemented or modified from
time to time.
"Interest Payment Date" (a) as to any Base Rate Loan,
the
first day of each calendar
month to occur while such Loan is outstanding,
beginning on the first day of
the first full calendar month occurring after the
date of such Loan, (b) in
addition, as to any Eurodollar Loan, the last day of
each Interest Period with
respect thereto, and (c) in addition, as to any
Eurodollar Loan with an
Interest Period of six months duration, on the last day
of the third calendar month
thereof. Interest shall accrue from and including
the first day of an Interest
Period to but excluding the last day of such
Interest Period.
"Interest Period" with respect to any Eurodollar Loan:
(a) initially, the period commencing on the borrowing or
conversion date, as the case
may be, with respect to such Eurodollar Loan and
ending one, two, three or six
months thereafter, as selected by the Borrower in
its notice of borrowing or
notice of conversion, given with respect thereto,
subject to availability;
and
(b)
thereafter, each period commencing on the last day of
the
next preceding Interest
Period applicable to such Eurodollar Loan and ending
one, two, three, or six
months thereafter, as selected by the Borrower by
irrevocable notice to the
Agent given not less than three Business Days prior to
the last day of the then
current Interest Period with respect thereto, subject
to availability;
provided that, the foregoing
provisions relating to Interest Periods are subject
to the following:
(1) if any Interest
Period would end on a day other than a
Business Day such Interest Period shall be extended to the
next
Business Day unless, in the case of a Eurodollar Loan, such
next
succeeding Business Day would fall in the next calendar month, in
which
case such Interest Period shall end on the next preceding Business
Day;
(2) in the case of a Eurodollar Loan, if an Interest
Period
commences on the last day in a calendar month that is a Business
Day,
such Interest Period shall end on the last day that is a Business
Day
in the month that is the specified number of months after the month
in
which such Interest Period commenced;
(3) an Interest Period that otherwise would extend beyond
the
Maturity Date shall end on the Maturity Date; and
(4) Borrower shall elect Interest Periods for Eurodollar
Loans
so as to create, if necessary, a principal amount of Base Rate
Loans on
each Term Loan Payment Date sufficient to permit any
prepayments
required pursuant to Section 2.6(b), and 2.9(f) without requiring
the
prepayment of outstanding Eurodollar Loans.
13
<PAGE>
"Letter of Credit" shall have the meaning assigned to
such
term in Section
2.5A1.
"Letter of Credit Borrowing" shall have the meaning
assigned
to such term in Section
2.5A3.4.
Letter of Credit Fee" shall have the meaning assigned to
such
term in Section
2.5A2.
"Letters of Credit Outstanding" shall mean at any time the
sum
of (i) the aggregate undrawn
face amount of outstanding Letters of Credit and
(ii) the aggregate amount of
all unpaid and outstanding Reimbursement
Obligations and Letter of
Credit Borrowings.
"Lien" any mortgage, pledge, hypothecation, assignment,
deposit arrangement,
encumbrance, lien (statutory or other), other charge or
security interest; or any
preference, priority or other agreement or
preferential arrangement of
any kind or nature whatsoever (including, without
limitation, any conditional
sale or other title retention agreement, any Capital
Lease Obligations having
substantially the same economic effect as any of the
foregoing). A precautionary
filing of a financing statement by a lessor of
property (other than with
respect to a Capital Lease Obligation) covering only
such property shall not
constitute a Lien.
"Loan" any loan made by the Lenders pursuant to this
Agreement
(whether denominated as a
Base Rate Loan, Eurodollar Loan, Revolving Credit
Loan, Term Loan, Swing Loan
or otherwise).
"Loan Documents" this Agreement, the Notes, the Security
Documents, the HK
Subordination Agreement and each other agreement or
instrument
executed and delivered
pursuant hereto or thereto (other than any Lender Hedge
Agreements).
"Material Adverse Effect" a material adverse effect on (a)
the
business, operations,
property or condition (financial or otherwise) of the
Borrower, taken as a whole,
or (b) the validity or enforceability of (i) this
Agreement, any of the Notes
or the other Loan Documents or (ii) the rights or
remedies of the Lender
hereunder or thereunder.
"Maturity Date" June 30, 2008.
"Multiemployer Plan" a Plan which is a multiemployer plan
as
defined in Section 4001(a)(3)
of ERISA.
"Net Recovery Value" at any time the net orderly
liquidation
value of the Eligible
Inventory as set forth in the then most recent valuation
report prepared for the Agent
and the Lenders by Ozer Group or other independent
appraiser selected by the
Agent.
"Notes" the collective reference to the Revolving Credit
Notes, Swing Loan Note and
Term Notes.
14
<PAGE>
"Obligations" all obligations (monetary or otherwise) of
each
Person constituting the
Borrower to the Lenders and/or the Agent arising under
or in connection with this
Agreement (including, without limitation, the net
amount owed to any Lender
pursuant to any Lender Hedge Agreement), the Notes and
the other Loan Documents. The
nominal amount with respect to which any Lender
Hedge Agreements are entered
into shall not constitute Obligations for any
purpose.
"Original Credit Agreement" the meaning given to such term
in
the recitals
hereto.
"Other Unsecured Foreign Obligations" an amount equal to
(a)
the reimbursement obligations
and obligations in respect of trust receipts,
advances and other loans and
extensions of credit to the Foreign Subsidiaries
under all credit facilities
opened by financial institutions other than the
Lenders minus (b) any cash
collateral held by such other financial institutions
securing such
obligations.
"Payment Office" as specified in Section 2.14(a).
"PBGC" the Pension Benefit Guaranty Corporation
established
pursuant to Subtitle A of
Title IV of ERISA, and any entity succeeding to any or
all of its functions under
ERISA.
"Percentage" of any Lender means, at any time, with respect
to
Revolving Credit Loans, the
percentage set forth opposite such Lender's name on
Schedule I hereto under the
heading "Revolving Credit Loans."
"Permitted Additional Share Repurchases" any purchases
of
Capital Stock permitted
pursuant to clauses (ii) and (iii) of Section 6.6(b)
hereof.
"Permitted Investments"
(a) marketable direct obligations issued or
unconditionally
guaranteed by the United
States of America or issued by any agency thereof and
backed by the full faith and
credit of the United States of America, in each
case maturing within six
months from the date of acquisition thereof; (b)
marketable general
obligations issued by any state of the United States of
America or any political
subdivision of any such state or any public
instrumentality thereof
maturing within six months from the date of acquisition
thereof and, at the time of
acquisition, having one of the two highest ratings
generally obtainable from
either Standard & Poor's Corporation or Moody's
Investors Service,
Inc.;
(c) without limiting the provisions of subsection (d) of
this
definition, commercial paper
maturing no more than six months from the date of
acquisition thereof and, at
the time of acquisition, having a rating of A-1 (or
the equivalent) or higher
from Standard & Poor's Corporation and P-1 (or the
equivalent) or higher from
Moody's Investors Service, Inc.;
15
<PAGE>
(d) commercial paper maturing no more than six months from
the
date of acquisition thereof
and issued by (i) the holding company of any Lender
or (ii) the holding company
of any other bank that has (A) combined capital,
surplus and undivided profits
(less any undivided losses) of not less than $250
million, (B) a Keefe Bank
Watch Rating of C or better and (C) commercial paper
having a rating of A-2 (or
the equivalent) from Standard & Poor's Corporation
or
P-2 (or the equivalent) or
higher from Moody's Investors Service, Inc.;
(e) domestic and Eurodollar certificates of deposit, time
or
demand deposits or bankers'
acceptances maturing within six months from the date
of acquisition issued or
guaranteed by or placed with, and money market deposit
accounts issued or offered
by:
(1) any Lender,
(2) any other commercial bank organized under the laws of
the
United States of America, any state thereof or the District
of
Columbia, Hong Kong or the British Virgin Islands having
combined
capital, surplus and undivided profits (less any undivided losses)
of
not less than $500 million (or its equivalent in other
currencies),
(3) any branch located in the United States of America of
a
commercial bank organized under the laws of the United Kingdom
or
Canada
having combined capital, surplus and undivided profits (less
any
undivided losses) of not less than $500 million or
(4) any domestic commercial bank the deposits of which
are
guaranteed by the Federal Deposit Insurance Corporation, provided
that
(A) the full amount of the deposits of the Person making such
Permitted
Investment are so guaranteed and (B) the aggregate amount of
all
Permitted Investments under this clause (iv) does not exceed
$500,000;
(5) fully collateralized repurchase agreements with a term
of
not more than 30 days for underlying securities of the type
described
in subsections (a) and (b) of this definition, entered into with
any
institution meeting the qualifications specified in clause (d)
or
subclauses (i) through (iii) of clause (e) of this
definition;
provided, in each case, that such obligations are payable in
Dollars;
and
(6) those
investments listed on Schedule VIII to the extent in
existence on the date hereof.
"Person" an individual, partnership, corporation,
limited
liability company, business
trust, joint stock company, trust, unincorporated
association, joint venture,
Governmental Authority or other entity of whatever
nature.
"Plan" any employee benefit plan which is subject to ERISA
and
which covers the employees or
former employees of any Person constituting the
Borrower or an ERISA
Affiliate, under which any Person constituting the
Borrower
or an ERISA Affiliate has any
obligation or liability or under which such Person
or an ERISA Affiliate has
made contributions within the preceding five years.
References herein to a Plan
shall include any Multiemployer Plan.
16
<PAGE>
"PNC" the meaning given to such term in the recitals
hereto.
"Pricing Schedule" means the Schedule identified as
such,
attached hereto and made a
part hereof.
"Prime Rate" means the rate of interest per annum
publicly
announced from time to time
by PNC as its prime rate. The Prime Rate is not
intended to be the lowest
rate of interest charged by PNC in connection with
extensions of credit to
debtors.
"Property" shall mean all real property, both owned and
leased, of any Borrower or
Subsidiary of a Borrower.
"Purchasing Lender" as defined in Section 9.1.
"Regulated Substances"
shall mean, without limitation, any
substance, material or waste,
regardless of its form or nature, defined under
Environmental Safety Laws as
a "hazardous substance," "pollutant," "pollution,"
"contaminant," "hazardous or
toxic substance," "extremely hazardous substance,"
"toxic chemical," "toxic
substance," "toxic waste," "hazardous waste," "special
handling waste," "industrial
waste," "residual waste," "solid waste," "municipal
waste," "mixed waste,"
"infectious waste," "chemotherapeutic waste," "medical
waste," or "regulated
substance" or any other material, substance or waste,
regardless of its form or
nature, which otherwise is regulated by Environmental
Safety Laws.
"Regulation U" Regulation U of the Board of Governors of
the
Federal Reserve System as in
effect from time to time.
"Reimbursement Obligation" the meaning assigned to such
term
in Section
2.5A3.2.
"Rental Reserve" the aggregate charges to ERC US from
each
warehouseman and space lessor
of ERC US in the United States of America from
whom a Waiver and Consent
satisfactory to the Agent shall not have been obtained
for the next three (3) month
period at any date of determination.
"Reportable Event" any event set forth in Section 4043(b)
of
ERISA or the regulations
thereunder.
"Required Environmental Notices" shall mean all notices,
reports, plans, forms or
other filings which pursuant to Environmental Safety
Laws, Required Environmental
Permits or at the request or direction of an
official body either must be
submitted to an official body or which otherwise
must be
maintained.
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"Required Environmental Permits" shall mean all permits,
licenses, bonds, consents,
programs, approvals or authorizations required under
Environmental Safety Laws to
own, occupy or maintain the Property or which
otherwise are required for
the operations and business activities of the
Borrower.
"Required Lenders" means, if there are less than three
Lenders, the Lenders holding
100% of the aggregate Commitments, if no Loans are
outstanding, and, otherwise,
Lenders holding 100% of outstanding Loans and, if
there are three or more
Lenders, the Lenders holding 51% of the aggregate
Commitments, if no Loans are
outstanding, and, otherwise, Lenders holding 51% of
outstanding Loans.
"Requirement of Law" as to any Person, the Certificate
of
Incorporation and By-Laws or
other organizational or governing documents of such
Person, and any law, treaty,
rule or regulation or determination of an
arbitrator or a court or
other Governmental Authority, in each case applicable
to or binding upon such
Person or any of its property or to which such Person or
any of its property is
subject.
"Responsible Officer" in such Person's capacity as such,
the
chief executive officer of
any Person constituting the Borrower or the president
of such Person (if not the
chief executive officer) and, with respect to
financial matters, the chief
financial officer or corporate controller of such
Person constituting the
Borrower; provided, in the case of ER Hong Kong, ER
Macao and ER BVI,
"Responsible Officer" shall mean a director of ER Hong
Kong,
ER Macao or ER BVI, as the
case may be.
"Revolving Credit Loans" as defined in Section 2.1(a).
"Revolving Credit Note" as defined in Section 2.2.
"Revolving Loan Commitment" as to any Lender, the
obligation
of such Lender to make
Revolving Credit Loans to the Borrower as set forth on
Schedule I hereto, and
"Revolving Loan Commitments" shall mean the aggregate
Revolving Loan Commitments of
all of the Lenders.
"Revolving Facility Usage" the sum of (i) aggregate amount
of
all Revolving Credit Loans
outstanding plus (ii) the Letters of Credit
Outstanding.
"Scott" H.H. Scott, Inc., a New Jersey corporation and
wholly
owned subsidiary of ERC
US.
"Security Agreements" the Security Agreements in the form
of
Exhibit G hereto, to be
executed and delivered by ERC US and MI to the Agent, as
the same may be amended,
supplemented or modified from time to time.
"Security Documents" the collective reference to the
Security
Agreements, Intellectual
Property Security Agreements and the Stock Pledge
Agreements.
"Senior Funded Debt" all Funded Debt less Subordinated Debt
of
ERC US and its consolidated
Subsidiaries other than SSG.
"Significant Subsidiary" at any time a Subsidiary of ERC
US
(other than SSG) which meets
the definition of a "significant subsidiary"
contained as of the date
hereof in Regulation S-X of the Securities and Exchange
Commission.
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<PAGE>
"Special Receivables" all account receivables of ERC US
so
designated by the Agent in its reasonable discretion due to the
level
of dilution with respect to payments due thereunder (as is
currently
the case with accounts receivable due from "Walmart" and "Target"),
but
are otherwise Eligible Receivables. In addition to the
accounts
receivables in which "Walmart" and "Target" are the account
debtors,
the Agent reserves the right to designate otherwise
Eligible
Receivables to be Special Receivables from time to time in
its
reasonable discretion.
"SSG" collectively, Sport Supply Group, Inc. a Delaware
corporation and its wholly
owned Subsidiaries.
"Standby Letter of Credit" a Letter of Credit issued to
support obligations of the
Borrower, contingent or otherwise, which finance the
working capital and business
needs of the Borrower incurred in the ordinary
course of
business.
"Stock Pledge Agreements" collectively, each Stock
Pledge
Agreement in the form of
Exhibit H hereto, to be executed and delivered by ERC
US, ER Hong Kong and Emerson
Global Limited to the Agent, as the same may be
amended, supplemented or
modified from time to time.
"Subordinated Debt" means any unsecured Indebtedness of
any
Person constituting the
Borrower (a) no part of the principal of which is stated
to be payable or is required
to be paid (whether by way of mandatory sinking
fund, mandatory redemption,
mandatory prepayment or otherwise) prior to October
1, 2005, and the payment of
the principal of and interest on which and other
obligations of the Borrower
in respect thereof are subordinated to the prior
payment in full of the
principal of and interest (including post-petition
interest) on the Notes and
all other Obligations hereunder on terms and
conditions approved in
writing by the Required Lenders and (b) otherwise
containing terms, covenants
and conditions satisfactory in form and substance to
the Required Lenders, as
evidenced by their prior written approval thereof.
"Subsidiary" as to any Person (a "Parent") (a) any other
Person in which the Parent
owns or controls, directly or indirectly, more than
50% of the Capital Stock of
such Person, (b) any other Person of which such
percentage of Capital Stock
shall at the time be owned or controlled by the
Parent or one or more of its
Subsidiaries as defined in clause (a) or by one or
more such Subsidiaries, or
(c) any other Person of which Capital Stock having
ordinary voting power (other
than stock or such other ownership interests having
such power only by reason of
the happening of a contingency) to elect a majority
of the board of directors or
other managers of such Person are at the time
owned, or the management of
which is otherwise controlled, directly or
indirectly through one or
more intermediaries, or both, by such Parent.
"Subsidiary Borrower" means Majexco Imports, Inc.,
Emerson
Radio Macao, ER Hong Kong or
ER BVI, and each Subsidiary which executes and
delivers an Assumption
Agreement pursuant to Section 5.12, as the case may be,
and, collectively, the
"Subsidiary Borrowers."
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<PAGE>
"Swing Loan Commitment" shall mean PNC's commitment to
make
Swing Loans to the Borrower
pursuant to Section 2.1A hereof in an aggregate
principal amount of up to
$500,000, subject in all cases to activation pursuant
to said Section
2.1A.
"Swing Loan Note" shall mean the Swing Loan Note of the
Borrower in the form of
Exhibit A-1 evidencing the Swing Loans, together with
all amendments, extensions,
renewals, replacements, refinancings or refundings
thereof in whole or in
part.
"Swing Loan Request" shall mean a request for Swing Loans
made
in accordance with Section
2.3A hereof.
"Swing Loans" shall mean collectively and Swing Loan
shall
mean separately all Swing
Loans or any Swing Loan made by PNC to the Borrower
pursuant to Section 2.1.A
hereof.
"Term Loan Commitment" the commitment of each Lender to make
a
Term Loan as set forth on
Schedule I hereto.
"Term Loans" as defined in Section 2.6.
"Term Loan Payment Date" shall mean the last Business Day
of
each March, June, September
and December occurring prior to the Maturity Date
beginning September 30,
2005.
"Term Notes" as defined in Section 2.7.
"Tranche" the collective reference to Eurodollar Loans
whose
Interest Periods begin on the
same date and end on the same later date (whether
or not such Loans originally
were made on the same day).
"Transfer" any direct or indirect sale, conveyance,
lease,
transfer, option to purchase
or other disposition. (including without
limitation, a sale-leaseback
transaction), or a series of related sales,
conveyances, leases,
transfers, options to purchase or other dispositions.
"Type" as to any Loan, its nature as a Base Rate Loan or
a
Eurodollar Loan.
"Undrawn Availability" at a particular date shall mean
an
amount equal to (a) the
lesser of (i) the Borrowing Base, or (ii) the maximum
Commitments of the Lenders
set forth on Schedule I for Revolving Credit Loans
minus (b) the then
outstanding principal amount of all Revolving Credit
Loans.
"USA Patriot Act" shall mean the Uniting and
Strengthening
America by Providing
Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Public
Law 107-56, as the same has been, or shall
hereafter be, renewed,
extended, amended or replaced.
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<PAGE>
"Waiver and Consent" means a landlord/warehouse waiver
substantially in the form of
Exhibit L.
"Working Day" any Business Day on which dealings in
foreign
currencies and exchange
between banks may be carried on in London, England.
Section 1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined
in
this Agreement shall have the
defined meanings when used in the other Loan
Documents or any certificate
or other document made or delivered pursuant
hereto.
(b) As used herein and in the Notes, and any certificate
or
other document made or
delivered pursuant hereto, accounting terms relating to
ERC US and its Subsidiaries
not defined in Section 1.1 and accounting terms
partly defined in Section
1.1, to the extent not defined, shall have the
respective meanings given to
them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words
of
similar import when used in
this Agreement shall refer to this Agreement as a
whole and not to any
particular provision of this Agreement, and Section,
subsection, Schedule and
Exhibit references are to this Agreement unless
otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both
the singular and plural forms of such terms.
ARTICLE 2.
AMOUNT AND TERMS OF COMMITMENTS
Section 2.1 Revolving Credit Commitments.
(a) Subject to the terms and conditions of this
Agreement,
each Lender severally agrees
to make revolving credit loans ("Revolving Credit
Loans") to the Borrower from
time to time from the date hereof to but excluding
the Maturity Date in an
aggregate principal amount at any one time outstanding
for the Borrower not to
exceed the then Available Commitment of such Lender. The
Borrower may borrow and
prepay the Revolving Credit Loans in whole or in part,
and reborrow Revolving Credit
Loans, all in accordance with the terms and
conditions hereof. All then
outstanding Revolving Credit Loans shall be paid in
full on the Maturity
Date.
(b) The Revolving Credit Loans may from time to time be
Eurodollar Loans, Base Rate
Loans or a combination thereof, as determined by the
Borrower and notified to the
Agent in accordance with Section 2.3 and Section
2.10, provided that no
Revolving Credit Loan shall be made as a Eurodollar Loan
after the day that is one
month prior to the Maturity Date.
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<PAGE>
Section 2.1A Swing Loan Commitment.
Subject to the terms and conditions of this Agreement,
PNC
may, at its option,
cancelable at any time for any reason whatsoever, make
swing
loans (the "Swing Loans") to
the Borrower at any time or from time to time after
the date hereof to, but not
including, the Maturity Date, in an aggregate
principal amount up to but
not in excess of $500,000 (the "Swing Loan
Commitment"), provided that
the aggregate principal amount of PNC's Swing Loans
and the Revolving Credit
Loans of all the Lenders at any one time outstanding
shall not exceed the
Revolving Credit Commitments of all the Lenders. Within
such limits of time and
amount and subject to the other provisions of this
Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section
2.1A. Swing Loans shall be
made in the form of Base Rate Loans only. The
foregoing notwithstanding,
the Swing loan Commitment shall not be effective and
no Swing Loans shall be
requested or made hereunder, unless and until said
commitment is activated by
written notice to PNC from the Required Lenders.
Section 2.2 Revolving Credit Note.
The Revolving Credit Loans made by each Lender shall be
evidenced by a promissory
note of the Borrower, substantially in the form of
Exhibit A, with appropriate
insertions as to date and principal amount (each a
"Revolving Credit Note"),
payable to the order of such Lender and in a principal
amount equal to such Lender's
Revolving Loan Commitment. Each Lender is hereby
authorized to record the
date, Type and amount of each Revolving Credit Loan,
each continuation thereof,
each conversion of all or a portion thereof to
another Type, the date and
amount of each payment or prepayment of principal
thereof and, in the case of
Eurodollar Loans, the length of each Interest Period
with respect thereto, on the
schedule annexed to and constituting a part of each
Revolving Credit Note, and
any such recordation shall constitute rebuttable
presumptive evidence of the
accuracy of the information so recorded. Each
Revolving Credit Note shall
(x) be dated the Closing Date, (y) be stated to
mature on the Maturity Date
and (z) provide for the payment of interest in
accordance with Section
2.12.
2.2A Swing Loan Note.
The obligation of the Borrower to repay the unpaid
principal
amount of the Swing Loans
made to it by PNC together with interest thereon shall
be evidenced by a Swing Loan
Note in a face amount equal to the Swing Loan
Commitment.
Section 2.3 Procedure for Revolving Credit Borrowings.
(a) The Borrower may borrow under the Commitment for
Revolving
Credit Loans prior to the
Maturity Date on any Business Day. The Borrower shall
give the Agent irrevocable
notice (which notice must be received by the Agent
prior to 10:00 a.m.,
Pittsburgh time, three Business Days prior to the
requested
Borrowing Date, if all or any
part of the requested Revolving Credit Loans are
to be initially Eurodollar
Loans and on the requested Borrowing Date in the case
of Base Rate Loans),
specifying (1) the amount to be borrowed, (2) the
requested
Borrowing Date, (3) whether
the borrowing is to be of Eurodollar Loans or Base
Rate Loans or a combination
thereof and (4) if the borrowing is to be entirely
or partly of Eurodollar
Loans, the amount of such Loans and the length of the
initial Interest Period
therefor. Each Revolving Credit Loan shall be in an
amount equal to (x) in the
case of Base Rate Loans, $250,000 or a whole multiple
of $50,000 in excess thereof
(or, if less, the then Available Commitment) and
(y) in the case of Eurodollar
Loans $500,000 or a whole multiple of $100,000 in
excess thereof. The Agent
shall promptly notify the Lenders of its receipt of
any such irrevocable notice
of borrowing from the Borrower.
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<PAGE>
(b) On or before 2:00 p.m., Pittsburgh time, on the
Business
Day specified in the
Borrower's notice of borrowing, each Lender shall
provide
the Agent with funds at the
Payment Office in an amount equal to such Lender's
Percentage of the requested
borrowing. The proceeds of each borrowing shall be
made available by the Agent
to the Borrower pursuant to Section 2.14(d). No
Lender's obligation to make
any Loan shall be affected by any other Lender's
failure to make any Loan.
Neither the Agent nor any Lender shall have any
liability for the failure of
any Lender (other than itself) to fund a Loan.
(c) With respect to any Loan, unless the Agent shall have
been
notified in writing by any
Lender prior to the date of making such Loan that
such Lender does not intend
to make available to the Agent such Lender's portion
of the Loan to be made on
such date, the Agent may (but shall not be obligated
to) assume that such Lender
has made such amount available to the Agent on that
date and, in reliance on such
assumption, the Agent may make available to the
Borrower a corresponding
amount. If such amount is not made available by such
Lender to the Agent on the
date of making such Loan, such Lender shall be
obligated to pay such amount
to the Agent and shall pay to the Agent on demand
interest on such amount at
the Federal Funds Effective Rate for the number of
days from and including the
date of making such Loan to the date on which such
Lender's portion of the Loan
becomes immediately available to the Agent. The
Agent shall also be entitled
to recover such amount, with interest thereon at
the rate per annum then
applicable to the Loans comprising such borrowing, upon
demand, from the Borrower. A
statement of the Agent submitted to any Lender with
respect to any amounts owing
under this Section 2.3(c) shall be conclusive and
binding in the absence of
demonstrable error. Nothing in this Section 2.3(c)
shall be deemed to relieve
any Lender from its obligation to fulfill its
Commitments
hereunder.
2.3A Procedure for Swing Loan Borrowing.
Except as otherwise provided herein, the Borrower may
from
time to time prior to the
Maturity Date request PNC to make Swing Loans by
delivery to PNC not later
than 10:00 a.m. Pittsburgh time on the proposed
Borrowing Date a request in
writing or by telephone (immediately confirmed in
writing by letter, facsimile
or telex) (each, a "Swing Loan Request"), it being
understood that the Agent may
rely on the authority of any individual making
such a telephonic request
without the necessity of receipt of such written
confirmation. Each Swing Loan
Request shall be irrevocable and shall specify the
proposed Borrowing Date and
the principal amount of such Swing Loan, which shall
be not less than
$250,000.
So long as PNC elects to make Swing Loans, PNC shall,
after
receipt by it of a Swing Loan
Request pursuant to this Section, fund such Swing
Loan to the Borrower in
immediately available funds at the Payment Office prior
to 2:00 p.m. Pittsburgh time
on the Borrowing Date.
23
<PAGE>
Section 2.4 Commitment and Other Fees.
(a) The Borrower agrees to pay to the Agent for the benefit
of
and disbursement to the
Lenders a nonrefundable commitment fee in respect of the
Commitments to make Revolving
Credit Loans, for the period from and including
the date hereof to the
Maturity Date, computed at a rate per annum equal to the
Applicable Fee Rate for each
calendar quarter, calculated on the basis of a
360-day year for the actual
days elapsed, on the average daily amount of the
aggregate Available
Commitments during the period for which payment is made,
payable quarterly in arrears
on the first Business Day of each April, July,
October and January and on
the Maturity Date or such earlier date as the
Commitments shall terminate
as provided herein, commencing on the first of such
dates to occur after the date
hereof. As soon as practicable the Agent shall
notify the Borrower and the
Lenders of each determination of the Applicable Fee
Rate.
(b) The Borrower agrees to pay to PNC Capital Markets an
arrangement fee in an amount
and pursuant to the terms set forth in the letter
agreement, dated May 20,
2005, between the Borrower and PNC Capital Markets.
(c) The Borrower agrees to pay to the Agent, for its own
account, an administrative
agent's fee in the amount set forth in the letter
agreement, dated May 20,
2005, between the Borrower and PNC Capital Markets in
consideration of PNC's acting
as Agent hereunder. The Agent's compensation shall
be paid on the dates set
forth in said letter.
(d) The Borrower agrees to pay to the Agent, for
distribution
to the Lenders in accordance
with their pro rata shares, a closing fee in the
amount set forth in the
letter agreement, dated May 20, 2005, between the
Borrower and PNC Capital
Markets. The Agent's compensation shall be paid on the
dates set forth in said
letter.
Section 2.5 Termination/Reduction/Increase of
Commitments.
(a) ERC US shall have the right, upon not less than five
Business Days' written notice
to the Agent, to terminate the Revolving Loan
Commitments or, from time to
time, to reduce the amount of such Commitments,
provided that at no time may
the Revolving Loan Commitments be reduced by the
Borrower to an amount less
than the sum of the outstanding principal amount of
Revolving Credit Loans. Any
such reduction shall be in an amount equal to
$1,000,000 or a whole
multiple of $250,000 in excess thereof and shall reduce
permanently the Revolving
Loan Commitments then in effect. Any such reduction in
the Revolving Loan Commitment
shall be binding on the Subsidiary Borrowers
whether or not they have
notice thereof.
(b) Each reduction in the Revolving Loan Commitments shall
be
permanent and irrevocable.
All reductions in the Revolving Loan Commitments
shall be made pro rata to the
Revolving Loan Commitments of the Lenders. The
Agent shall promptly notify
each Lender of the amount of any reduction of its
Revolving Loan
Commitment.
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<PAGE>
(c) After delivery by ERC US of the annual financial
statements to be provided
under Section 5.1(a) for the fiscal year ended March
31, 2006 and provided that at
the time of such request there does not exist an
Event of Default or Default,
the Borrower may request a pro rata increase of the
Revolving Credit Commitments,
in an amount not less than $5,000,000.00 or
greater than $10,000,000.00
in the aggregate by written notice to the Lenders
requesting each Lender's
proportional increase, and the Lenders agree to respond
to the Borrower's request for
an increase within thirty (30) calendar days
following receipt of same;
provided, however, that the failure of any Lender to
respond within such time
period shall not in any manner constitute an agreement
by such Lender to said
increase of its proportionate share of its Commitment.
If
all Lenders elect to increase
their proportionate share of their Commitments as
proposed above, this
Agreement and the relevant Notes shall be amended to
reflect such increases, all
at the cost and expense of the Borrower. If one or
more Lenders decline to so
increase their proportionate share of the Commitments
or do not respond to
Borrower's request, the provisions of Section 2.5(d)
shall
apply.
(d) In the event that one or more Lenders do not agree to
the
increase of its proportionate
share of the Commitments pursuant to Section
2.5(c) or do not respond to
Borrower's request for an increase within the time
required under Section 2.5(c)
(each a "Non-Increasing Bank"), then the Lenders
that have agreed to such
increase within the time required under Section 2.5(c)
(the "Increasing Banks") may
elect to increase their Commitments proportionately
up to the amounts of the
Commitments that would have otherwise been assumed by
the Non-Increasing Bank. Any
amount of the Commitments not assumed by the
Increasing Banks pursuant to
the immediately preceding sentence is referred to
as the "Additional
Commitments". Should there exist any Additional
Commitments
not assumed by the Increasing
Banks, then the Agent and the Borrower may arrange
to have one or more other
banks (each a "New Increasing Bank") included as a
Lender hereunder with respect
to the Additional Commitments and all other
rights, interests and
obligations of a Lender under this Agreement and the
other
Loan Documents. Any such
assumption shall be (1) pursuant to an assumption
agreement substantially
similar to an Assumption Agreement, (2) subject to and
in accordance with this
Section 2.5, and (3) effective on the last day of the
Interest Period if any Loans
are Eurodollar Loans. Upon the effectiveness of the
increase in the Commitments
by the Increasing Banks or the New Increasing Banks,
as the case may be, pursuant
to this Section 2.5(d), (i) this Agreement and the
relevant Notes shall be
amended and/or restated to reflect the reduction and/or
increase of each Lender's pro
rata share of the Commitments contemplated in this
Section 2.5(d) (as determined
by the Agent), (ii) the Borrower will issue new
Notes to any New Increasing
Bank to evidence the Borrower's obligations with
respect to such New
Increasing Bank's Commitment, and (iii) each New
Increasing
Bank shall be deemed to be a
Lender for all purposes of this Agreement and the
other Loan Documents, all at
the cost and expense of the Borrower.
2.5A Letter of Credit Subfacility.
2.5A1 Issuance of Letters of Credit.
The Borrower may request the issuance of a letter of
credit
(each a "Letter of Credit")
by delivering to the Agent a completed application
and agreement for letters of
credit in such form as the Agent may reasonably
specify from time to time by
no later than 10:00 a.m., Pittsburgh time, at least
five (5) Business Days, or
such shorter period as may be agreed to by the Agent,
in advance of the proposed
date of issuance. Each Letter of Credit shall be a
Standby Letter of Credit
denominated in Dollars. Subject to the terms and
conditions hereof and in
reliance on the agreements of the other Lenders set
forth in this Section 2.5.A1,
the Agent will issue a Letter of Credit provided
that each Letter of Credit
shall (A) have a maximum maturity of twelve (12)
months from the date of
issuance, and (B) in no event expire later than ten (10)
Business Days prior to the
Maturity Date and providing that in no event shall
(i) the amount of Letters of
Credit Outstanding exceed, at any one time,
$1,000,000 or (ii) the
Revolving Facility Usage exceed, at any one time, the
Available
Commitment.
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2.5A2 Letter of Credit Fees.
The Borrower shall pay (i) to the Agent for the ratable
account of the Lenders a fee
(the "Letter of Credit Fee") equal to the
Applicable Margin for
Eurodollar Loans then in effect, and (ii) to the Agent
for
its own account a fronting
fee equal to 0.125% per annum (computed on the basis
of a year of 360 days and
actual days elapsed), which fees shall be computed on
the daily average amount of
Letters of Credit Outstanding and shall be payable
quarterly in arrears
commencing with the first Business Day of each April,
July,
October and January following
issuance of each Letter of Credit and on the
Maturity Date. The Borrower
shall also pay to the Agent for the Agent's sole
account the Agent's then in
effect customary fees and administrative expenses
payable with respect to the
Letters of Credit as the Agent may generally charge
or incur from time to time in
connection with the issuance, maintenance,
modification (if any),
assignment or transfer (if any), negotiation, and
administration of Letters of
Credit.
2.5A3 Disbursements, Reimbursement.
2.5A3.1 Immediately upon the issuance of each Letter of
Credit, each Lender shall be
deemed to, and hereby irrevocably and
unconditionally agrees to,
purchase from the Agent a participation in such
Letter of Credit and each
drawing thereunder in an amount equal to such Lender's
pro rata share of the maximum
amount available to be drawn under such Letter of
Credit and the amount of such
drawing, respectively (based on such Lender's
Percentage).
2.5A3.2 In the event of any request for a drawing under
a
Letter of Credit by the
beneficiary or transferee thereof, the Agent will
promptly notify the Borrower.
Provided that it shall have received such notice,
the Borrower shall reimburse
(such obligation to reimburse the Agent shall
sometimes be referred to as a
"Reimbursement Obligation") the Agent prior to
12:00 noon, Pittsburgh time
on each date that an amount is paid by the Agent
under any Letter of Credit
(each such date, a "Drawing Date") in an amount equal
to the amount so paid by the
Agent. In the event the Borrower fails to reimburse
the Agent for the full amount
of any drawing under any Letter of Credit by 12:00
noon, Pittsburgh time, on the
Drawing Date, the Agent will promptly notify each
Lender thereof, and the
Borrower shall be deemed to have requested that Base
Rate Loans be made by the
Lenders to be disbursed on the Drawing Date under such
Letter of Credit, subject to
the amount of the unutilized portion of the
Revolving Credit Commitment
and subject to the conditions set forth in Section
4.2 other than any notice
requirements. Any notice given by the Agent pursuant
to this Section 2.5A3.2 may
be oral if immediately confirmed in writing;
provided that the lack of
such an immediate confirmation shall not affect the
conclusiveness or binding
effect of such notice.
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2.5A3.3 Each Lender shall upon any notice pursuant to
Section
2.5A3.2 make available to the
Agent an amount in immediately available funds
equal to its pro rata share
(based on such Lender's Percentage) of the amount of
the drawing, whereupon the
participating Lenders shall (subject to Section
2.5A3.3.4) each be deemed to
have made a Base Rate Loan to the Borrower in that
amount. If any Lender so
notified fails to make available to the Agent for the
account of the Agent the
amount of such Lender's pro rata share (based on such
Lender's Percentage) of such
amount by no later than 2:00 p.m., Pittsburgh time
on the Drawing Date, then
interest shall accrue on such Lender's obligation to
make such payment, from the
Drawing Date to the date on which such Lender makes
such payment (i) at a rate
per annum equal to the Federal Funds Effective Rate
during the first three days
following the Drawing Date and (ii) at a rate per
annum equal to the rate
applicable to Base Rate Loans on and after the fourth
day following the Drawing
Date. The Agent will promptly give notice of the
occurrence of the Drawing
Date, but failure of the Agent to give any such notice
on the Drawing Date or in
sufficient time to enable any Lender to effect such
payment on such date shall
not relieve such Lender from its obligation under
this Section
2.5A3.3.
2.5A3.4 With respect to any unreimbursed drawing that is
not
converted into a Base Rate
Loan of the Borrower in whole or in part as
contemplated by Section
2.5A3.3, because of the Borrower's failure to satisfy
the conditions set forth in
Section 4.2 other than any notice requirements or
for any other reason, the
Borrower shall be deemed to have incurred from the
Agent a borrowing (each a
"Letter of Credit Borrowing") in the amount of such
drawing. Such Letter of
Credit Borrowing shall be due and payable on demand
(together with interest) and
shall bear interest at the rate per annum
applicable to Base Rate
Loans. Each Lender's payment to the Agent pursuant to
Section 2.5A3.3 shall be
deemed to be a payment in respect of its participation
in such Letter of Credit
Borrowing and shall constitute a "Participation
Advance" from such Lender in
satisfaction of its participation obligation under
this Section
2.5A3.
2.5A4 Repayment of Participation Advances.
2.5A4.1 Upon (and only upon) receipt by the Agent for
its
account of immediately
available funds from the Borrower (i) in reimbursement
of
any payment made by the Agent
under the Letter of Credit with respect to which
any Lender has made a
Participation Advance to the Agent, or (ii) in payment
of
interest on such a payment
made by the Agent under such a Letter of Credit, the
Agent will pay to each
Lender, in the same funds as those received by the
Agent,
the amount of such Lender's
pro rata share (based on such Lender's Percentage)
of such funds, except the
Agent shall retain the amount of the pro rata share
(based on such Lender's
Percentage) of such funds of any Lender that did not
make a Participation Advance
in respect of such payment by Agent.
2.5A4.2 If the Agent is required at any time to return
to
Borrower, or to a trustee,
receiver, liquidator, custodian, or any official in
any insolvency proceeding,
any portion of the payments made by the Borrower to
the Agent pursuant to Section
2.5A4.1 in reimbursement of a payment made under
the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of
the Agent, forthwith return
to the Agent the amount of its pro rata share (based
on such Lender's Percentage)
of any amounts so returned by the Agent plus
interest thereon from the
date such demand is made to the date such amounts are
returned by such Lender to
the Agent, at a rate per annum equal to the Federal
Funds Effective Rate in
effect from time to time.
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<PAGE>
2.5A5 Documentation.
The Borrower agrees to be bound by the terms of the
Agent's
application and agreement for
letters of credit and the Agent's written
regulations and customary
practices relating to letters of credit, though such
interpretation may be
different from such Borrower's own. In the event of a
conflict between such
application or agreement and this Agreement, this
Agreement shall govern. It is
understood and agreed that, except in the case of
gross negligence or willful
misconduct, the Agent shall not be liable for any
error, negligence and/or
mistakes, whether of omission or commission, in
following any Borrower's
instructions or those contained in the Letters of
Credit or any modifications,
amendments or supplements thereto.
2.5A6 Determinations to Honor Drawing Requests.
In determining whether to honor any request for drawing
under
any Letter of Credit by the
beneficiary thereof, the Agent shall be responsible
only to determine that the
documents and certificates required to be delivered
under such Letter of Credit
have been delivered and that they comply on their
face with the requirements of
such Letter of Credit.
2.5A7 Nature of Participation and Reimbursement
Obligations.
Each Lender's obligation in accordance with this Agreement
to
make the Revolving Credit
Loans or Participation Advances, as contemplated by
Section 2.5A3, as a result of
a drawing under a Letter of Credit, and the
obligations of the Borrower
to reimburse the Agent upon a draw under a Letter of
Credit, shall be absolute,
unconditional and irrevocable, and shall be performed
strictly in accordance with
the terms of this Section 2.5A under all
circumstances, including the
following circumstances:
(i) any setoff, counterclaim, recoupment, defense or
other
right which such Lender may
have against the Agent, the Borrower or any other
Person for any reason
whatsoever;
(ii) the failure of the Borrower or any other Person to
comply, in connection with a
Letter of Credit Borrowing, with the conditions set
forth in Section 2.1, 2.3, or
4.2 or as otherwise set forth in this Agreement
for the making of a Revolving
Credit Loan, it being acknowledged that such
conditions are not required
for the making of a Letter of Credit Borrowing and
the obligation of the Lenders
to make Participation Advances under Section
2.5A3;
(iii) any lack of validity or enforceability of any Letter
of
Credit;
28
<PAGE>
(iv) the existence of any claim, setoff, defense or
other
right which any Borrower or
any Lender may have at any time against a
beneficiary or any transferee
of any Letter of Credit (or any Persons for whom
any such transferee may be
acting), the Agent or any Lender or any other Person
or, whether in connection
with this Agreement, the transactions contemplated
herein or any unrelated
transaction (including any underlying transaction
between any Borrower or
Subsidiaries of a Borrower and the beneficiary for which
any Letter of Credit was
procured);
(v) any draft, demand, certificate or other document
presented
under any Letter of Credit
proving to be forged, fraudulent, invalid or
insufficient in any respect
or any statement therein being untrue or inaccurate
in any respect even if the
Agent has been notified thereof;
(vi) payment by the Agent under any Letter of Credit
against
presentation of a demand,
draft or certificate or other document which does not
comply with the terms of such
Letter of Credit;
(vii) any adverse change in the business, operations,
properties, assets, condition
(financial or otherwise) or prospects of any
Borrower or Subsidiaries of a
Loan Party;
(viii) any breach of this Agreement or any other Loan
Document
by any party
thereto;
(ix) the occurrence or continuance of an insolvency
proceeding
with respect to any
Borrower;
(x) the fact that an Event of Default or a Default shall
have
occurred and be
continuing;
(xi) the fact that the Maturity Date shall have passed or
this
Agreement or the Commitments
hereunder shall have been terminated; and
(xii) any other circumstance or happening whatsoever,
whether
or not similar to any of the
foregoing.
2.5A8 Indemnity.
The Borrower hereby agrees to protect, indemnify, pay and
save
harmless the Agent from and
against any and all claims, demands, liabilities,
damages, losses, costs,
charges and expenses (including reasonable fees,
expenses and disbursements of
counsel and allocated costs of internal counsel)
which the Agent may incur or
be subject to as a consequence, direct or indirect,
of the issuance of any Letter
of Credit, other than as a result of (A) the gross
negligence or willful
misconduct of the Agent as determined by a final
judgment
of a court of competent
jurisdiction or (B) the wrongful dishonor by the Agent
of a proper demand for
payment made under any Letter of Credit, except if such
dishonor resulted from any
act or omission, whether rightful or wrongful, of any
present or future de jure or
de facto government or governmental authority (all
such acts or omissions herein
called "Governmental Acts").
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<PAGE>
2.5A9 Liability for Acts and Omissions.
As between any Borrower and the Agent, such Borrower
assumes
all risks of the acts and
omissions of, or misuse of the Letters of Credit by,
the respective beneficiaries
of such Letters of Credit. In furtherance and not
in limitation of the
foregoing, the Agent shall not be responsible for: (i)
the
form, validity, sufficiency,
accuracy, genuineness or legal effect of any
document submitted by any
party in connection with the application for an
issuance of any such Letter
of Credit, even if it should in fact prove to be in
any or all respects invalid,
insufficient, inaccurate, fraudulent or forged
(even if the Agent shall have
been notified thereof); (ii) the validity or
sufficiency of any instrument
transferring or assigning or purporting to
transfer or assign any such
Letter of Credit or the rights or benefits
thereunder or proceeds
thereof, in whole or in part, which may prove to be
invalid or ineffective for
any reason; (iii) the failure of the beneficiary of
any such Letter of Credit, or
any other party to which such Letter of Credit may
be transferred, to comply
fully with any conditions required in order to draw
upon such Letter of Credit or
any other claim of the Borrower against any
beneficiary of such Letter of
Credit, or any such transferee, or any dispute
between or among any Borrower
and any beneficiary of any Letter of Credit or any
such transferee; (iv) errors,
omissions, interruptions or delays in transmission
or delivery of any messages,
by mail, cable, telegraph, telex or otherwise,
whether or not they be in
cipher; (v) errors in interpretation of technical
terms; (vi) any loss or delay
in the transmission or otherwise of any document
required in order to make a
drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter
of Credit of the proceeds of
any drawing under such Letter of Credit; or (viii)
any consequences arising from
causes beyond the control of the Agent, including
any Governmental Acts, and
none of the above shall affect or impair, or prevent
the vesting of, any of the
Agent's rights or powers hereunder. Nothing in the
preceding sentence shall
relieve the Agent from liability for the Agent's gross
negligence or willful
misconduct in connection with actions or omissions
described in such clauses (i)
through (viii) of such sentence. In no event shall
the Agent or the Agent's
Affiliates be liable to the Borrower for any indirect,
incidental, punitive,
exemplary or special damages or expenses (including
without limitation attorneys'
fees), or for any damages resulting from any
change in the value of any
property relating to a Letter of Credit.
Without limiting the generality of the foregoing, the
Agent
and each of its Affiliates
(i) may rely on any oral or other communication
believed in good faith by the
Agent or such Affiliate to have been authorized or
given by or on behalf of the
applicant for a Letter of Credit; (ii) may honor
any presentation if the
documents presented appear on their face substantially
to comply with the terms and
conditions of the relevant Letter of Credit; (iii)
may honor a previously
dishonored presentation under a Letter of Credit,
whether
such dishonor was pursuant to
a court order, to settle or compromise any claim
of wrongful dishonor, or
otherwise, and shall be entitled to reimbursement to
the same extent as if such
presentation had initially been honored, together
with any interest paid by the
Agent or its Affiliates; (iv) may honor any
drawing that is payable upon
presentation of a statement advising negotiation or
payment, upon receipt of such
statement (even if such statement indicates that a
draft or other document is
being delivered separately), and shall not be liable
for any failure of any such
draft or other document to arrive, or to conform in
any way with the relevant
Letter of Credit; (v) may pay any paying or
negotiating bank claiming
that it rightfully honored under the laws or practices
of the place where such bank
is located; and (vi) may settle or adjust any claim
or demand made on the Agent
or its Affiliate in any way related to any order
issued at the applicant's
request to an air carrier, a letter of guarantee or of
indemnity issued to a carrier
or any similar document (each an "Order") and
honor any drawing in
connection with any Letter of Credit that is the subject
of
such Order, notwithstanding
that any drafts or other documents presented in
connection with such Letter
of Credit fail to conform in any way with such
Letter of Credit.
30
<PAGE>
In furtherance and extension and not in limitation of
the
specific provisions set forth
above, any action taken or omitted by the Agent
under or in connection with
the Letters of Credit issued by it or any documents
and certificates delivered
thereunder, if taken or omitted in good faith, shall
not put the Agent under any
resulting liability to the Borrower or any Lender.
Section 2.6 Term Loans.
(a) Subject to the terms and conditions hereof, each
Lender
severally agrees to make a
term loan (each a "Term Loan") to the Borrower on the
Closing Date in an amount not
to exceed the amount of the Term Loan Commitment
of such Lender. The Term
Loans may, from time to time, be Base Rate Loans,
Eurodollar Loans or a
combination thereof, as determined by the Borrower and
notified to the Agent in
accordance with Section 2.8 and 2.10. Any portion of
the Term Loan Commitment
which is unused on the Closing Date shall irrevocably
terminate on such
date.
(b) The Borrower shall repay the outstanding principal
amount
of the Term Loans on each
Term Loan Payment Date in an amount equal to $625,000.
The then outstanding
principal amount of the Term Loans shall be repaid in
full
on the Maturity
Date.
Section 2.7 Term Notes.
The Term Loan made by each Lender shall be evidenced by
a
promissory note of the
Borrower substantially in the form of Exhibit B (each a
"Term Note"), with
appropriate insertions therein as to date and principal
amount, payable to the order
of such Lender and in a principal amount equal to
such Lender's Term Loan. Each
Lender is hereby authorized to record the date and
amount of each payment or
prepayment of principal of its Term Loan, each
continuation thereof, each
conversion of all or a portion thereof to another
Type and, in the case of
Eurodollar Loans, the length of each Interest Period
with respect thereto, on the
schedule annexed to and constituting a part of the
Term Note, and any such
recordation shall constitute rebuttable presumptive
evidence of the accuracy of
the information so recorded.
Section 2.8 Procedure for Term Loan Borrowing.
The Borrower shall give the Agent irrevocable notice
(which
notice must be received by
the Agent prior to 12:00 noon, New Jersey time, one
Business Day prior to the
Closing Date) requesting that the Lenders make Term
Loans on the Closing Date and
specifying (1) the amount to be borrowed, (2)
whether the Term Loans are to
be initially a Eurodollar Loan or Base Rate Loan
or a combination thereof, and
(3) if the Term Loans are to be entirely or partly
a Eurodollar Loan, the amount
of such Loan and the length of the initial
Interest Period therefore.
Each portion of the Term Loan which is maintained as
a Eurodollar Loan shall be in
a principal amount of $500,000 or a multiple of
$100,000 in excess thereof.
The Agent shall promptly notify the Lenders of its
receipt of any notice from
the Borrower pursuant to this Section.
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<PAGE>
Section 2.9 Prepayments.
(a) From time to time the Borrower may voluntarily prepay
the
Loans, in whole or in part,
subject to the provisions of Section 2.17 but
otherwise without premium or
penalty, upon at least three (3) Business Days'
irrevocable notice to the
Agent, in the case of Eurodollar Loans and otherwise
by 12:00 noon on the date of
payment, specifying the date and amount of
prepayment. Partial
prepayments of Revolving Loans shall be in an aggregate
principal amount of $100,000
or a whole multiple in excess thereof or, if less,
the then outstanding
principal amount of the Revolving Loans. Partial
prepayments of Term Loans
shall be in an aggregate principal amount of
$1,000,000 or a whole
multiple of $50,000 in excess thereof or, if less, the
outstanding principal amount
of the Loan being prepaid. All prepayments shall be
allocated to the Lenders
based on their respective Total Percentages (as such
term is used in the
definition of "Percentage"). The Borrower shall further
instruct the Lenders whether
to apply such prepayment to Revolving Loans or Term
Loans or both; provided such
instructions shall require the same pro rata
allocation by each Lender
among the Revolving Loans and Term Loans held by them.
(b) If any notice of prepayment is given, the amount
specified
in such notice shall be due
and payable on the date specified therein.
Prepayments of the Loans
shall be accompanied by payment or accrued interest to
the payment date on the
principal amount prepaid.
(c) Partial prepayments of the Term Loans shall be applied
to
the installments of principal
under the Term Loans in the inverse order of their
respective scheduled
maturities.
(d) Amounts prepaid on account of the Term Loans may not
be
reborrowed.
(e) [Intentionally omitted].
(f) In the event that (i) any Person constituting the
Borrower
or any Subsidiary of any
Person constituting the Borrower (other than SSG) shall
effect a Transfer of any
Capital Stock issued by ERC US or SSG owned by such
Person constituting the
Borrower or any such Subsidiary or (ii) ERC US shall
issue any additional Capital
Stock or effect a Transfer of any of its Capital
Stock held as treasury shares
or otherwise (other than (1) in satisfaction of
the exercise of stock options
held by any employee or director of ERC US
pursuant to ERC US' stock
option plan, (2) the issuance of warrants (and Capital
Stock in satisfaction
thereof) to brokerage houses in connection with the
marketing of the Capital
Stock of ERC US, (3) the issuance of Capital Stock of
ERC US pursuant to exchange
offers in connection with investments in other
Persons permitted by the
terms hereof and (4) or (iii) any Person constituting
the Borrower or any
Subsidiary of any Person constituting the Borrower
(other
than SSG) shall effect a
Transfer of any assets (o
