REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of June 28, 2002
among
XXXXXXX RADIO CORP.,
MAJEXCO IMPORTS, INC.,
XXXXXXX RADIO (HONG KONG) LIMITED,
And XXXXXXX 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
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS...........................................................................................1
Section 1.1 Defined Terms............................................................................1
Section 1.2 Other Definitional Provisions...........................................................20
ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS......................................................................20
Section 2.1 Revolving Credit Commitments............................................................20
Section 2.2 Revolving Credit Note...................................................................21
Section 2.3 Procedure for Revolving Credit Borrowings...............................................21
Section 2.4 Commitment and Other Fees...............................................................22
Section 2.5 Termination/Reduction of Commitments....................................................23
Section 2.6 Term Loans..............................................................................23
Section 2.7 Term Notes..............................................................................23
Section 2.8 Procedure for Term Loan Borrowing.......................................................24
Section 2.9 Prepayments.............................................................................24
Section 2.10 Conversion and Continuation Options.....................................................25
Section 2.11 Minimum Amounts of Tranches/Number of Tranches..........................................26
Section 2.12 Interest Rates and Payment Dates........................................................26
Section 2.13 Inability to Determine Interest Rate....................................................27
Section 2.14 Payments/Funding........................................................................28
Section 2.15 Change in Legality......................................................................29
Section 2.16 Increased Costs.........................................................................30
Section 2.17 Indemnity...............................................................................32
Section 2.18 Intentionally omitted...................................................................33
Section 2.19 Purpose of Loans........................................................................33
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.......................................................................37
Section 3.1 Financial Condition.....................................................................37
Section 3.2 No Material Adverse Change..............................................................38
Section 3.3 Corporate Existence; Compliance with Law................................................38
Section 3.4 Corporate Power; Authorization; Enforceable Obligations.................................38
Section 3.5 No Legal Bar............................................................................39
Section 3.6 No Material Litigation..................................................................39
Section 3.7 No Default..............................................................................39
Section 3.8 Ownership of Property; Liens............................................................39
Section 3.9 Intellectual Property...................................................................39
Section 3.10 No Burdensome Restrictions..............................................................40
Section 3.11 Taxes...................................................................................40
Section 3.12 Federal Regulations.....................................................................40
Section 3.13 Investment Company Act; Public Utility Holding Company
Act; Other Regulations..................................................................40
Section 3.14 Subsidiaries............................................................................40
Section 3.15 Employee Grievances.....................................................................40
Section 3.16 ERISA...................................................................................41
Section 3.17 ER Intercompany Payable.................................................................42
ARTICLE 4. CONDITIONS PRECEDENT.................................................................................43
Section 4.1 Conditions to Effective Date............................................................43
Section 4.2 Conditions to Each Loan.................................................................45
ARTICLE 5. AFFIRMATIVE COVENANTS................................................................................46
Section 5.1 Financial Statements....................................................................47
Section 5.2 Certificates; Other Information.........................................................49
Section 5.3 Payment of Obligations..................................................................49
Section 5.4 Conduct of Business and Maintenance of Existence........................................49
Section 5.5 Maintenance of Property; Insurance......................................................50
Section 5.6 Inspection of Property; Books and Records; Discussions..................................50
Section 5.7 Notices.................................................................................51
Section 5.8 ERISA Compliance........................................................................51
Section 5.9 Taxes and Claims........................................................................52
Section 5.10 Environmental Matters...................................................................52
Section 5.11 Shipping Documents......................................................................52
Section 5.12 Significant Subsidiary..................................................................53
Section 5.13 Waivers and Consents....................................................................53
Section 5.14 Hedging Agreement.......................................................................53
Section 5.15 Lockbox Account.........................................................................53
ARTICLE 6. NEGATIVE COVENANTS...................................................................................54
Section 6.1 Limitation on Indebtedness..............................................................55
Section 6.2 Limitation on Liens.....................................................................56
Section 6.3 Limitation on Contingent Obligations....................................................57
Section 6.4 Limitations on Fundamental Changes......................................................57
Section 6.5 Limitation on Sale of Assets............................................................57
Section 6.6 Limitation on Investments, Loans and Advances...........................................58
Section 6.7 Limitation on Optional Payments and Modifications of
Debt Instruments........................................................................59
Section 6.8 Transactions with Affiliates............................................................59
Section 6.9 Fiscal Year.............................................................................59
Section 6.10 Limitation on Conduct of Business.......................................................59
Section 6.11 Net Worth...............................................................................59
Section 6.12 Fixed Charge Coverage Ratio.............................................................60
Section 6.13 Senior Funded Debt to EBITDA............................................................60
Section 6.14 Intentionally omitted...................................................................60
Section 6.15 ERISA Obligations.......................................................................60
Section 6.16 Restricted Payments.....................................................................60
ARTICLE 7. EVENTS OF DEFAULT....................................................................................60
Section 7.1 Events of Default.......................................................................60
ARTICLE 8. THE AGENT............................................................................................64
Section 8.1 Actions.................................................................................64
Section 8.2 Exculpation.............................................................................65
Section 8.3 Successor...............................................................................65
Section 8.4 Credit Decisions........................................................................66
Section 8.5 Notices, etc............................................................................66
Section 8.6 Security Documents......................................................................66
ARTICLE 9. PURCHASING LENDER....................................................................................66
Section 9.1 Purchasing Lender.......................................................................66
Section 9.2 Disclosure of Information...............................................................68
Section 9.3 Pledges to Federal Reserve Bank.........................................................68
ARTICLE 10. MISCELLANEOUS.......................................................................................68
Section 10.1 Amendments and Waivers..................................................................68
Section 10.2 Notices.................................................................................70
Section 10.3 No Waiver; Cumulative Remedies..........................................................71
Section 10.4 Survival of Representations and Warranties..............................................71
Section 10.5 Payment of Expenses and Taxes...........................................................71
Section 10.6 Successors and Assigns..................................................................72
Section 10.7 Set-off/Sharing.........................................................................73
Section 10.8 Foreign Subsidiaries....................................................................74
Section 10.9 Judgment Currency/Withholding Tax.......................................................74
Section 10.10 Counterparts............................................................................75
Section 10.11 Severability............................................................................75
Section 10.12 Integration.............................................................................75
Section 10.13 Governing Law...........................................................................75
Section 10.14 Submission To Jurisdiction; Waivers.....................................................75
Section 10.15 Acknowledgments.........................................................................76
Section 10.16 Waivers of Jury Trial...................................................................76
Section 10.17 SSG.....................................................................................76
Exhibits
Exhibit A Revolving Credit Note
Exhibit B Term Note
Exhibit C Borrowing Base Certificate
Exhibit D Omitted
Exhibit E Assumption Agreement
Exhibit F Omitted
Exhibit G Security Agreement
Exhibit H Stock Pledge Agreement
Exhibit I Intellectual Property Security Agreement
Exhibit J Opinion of Counsel
Exhibit K HK Subordination Agreement
Exhibit L Landlord/Warehouse Waiver
Exhibit M Convertible Debenture Trustee Instructions
Exhibit N 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 Convertible Debentures
Schedule X Affiliated Agreements (ss.6.8)
Schedule XI Notice Addresses
WMLM 108066.029
REVOLVING CREDIT AND TERM LOAN AGREEMENT
REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of June 28, 2002 among
XXXXXXX RADIO CORP. ("ERC US"), a Delaware corporation, MAJEXCO IMPORTS, INC.
("MI"), a California corporation, XXXXXXX RADIO (HONG KONG) LIMITED ("ER HONG
KONG") a Hong Kong corporation, and XXXXXXX 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 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 has requested the Lenders to extend credit facilities
to Borrower; and
WHEREAS, the Lenders have agreed, upon the terms and conditions set forth
herein, to extend such 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:
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).
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"Adjusted EBITDA" Consolidated EBITDA for ERC US and its Subsidiaries other
than SSG and the Foreign Subsidiaries.
"Adjusted Funded Debt" Funded Debt of ERC US and its Subsidiaries other
than SSG and the Foreign Subsidiaries less the then aggregate liability of the
Foreign Subsidiaries hereunder.
"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 Revolving Credit and Term Loan Agreement, as amended,
supplemented or otherwise modified from time to time.
"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
III Pricing on the Pricing Schedule until receipt by the Agent of the financial
statements of Borrower for the fiscal quarter ending September 30, 2002 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.
"Applicable Margin" means a rate per annum determined in accordance with
the Pricing Schedule. The Agent shall set the Applicable Margin based on Level
III Pricing on the Pricing Schedule until receipt by the Agent of the financial
statements of Borrower for the fiscal quarter ending September 30, 2002 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.
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"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 made by such
Lender.
"Base Rate" on any date the higher of (i) the Prime Rate then in effect and
(ii) the Federal Funds Rate then in effect plus1/2%.
"Base Rate Loans" Loans whose interest rate is based on the Base Rate.
"Board" the Board of Governors of the Federal Reserve System of the United
States.
"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 plus (y) 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) $15,000,000, during the period from and including
January 1 to and including March 31 in each calendar year and $18,000,000,
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
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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. "Borrower
Deposit" has the meaning ascribed thereto in Section 4.2(g).
"Business Day" a day other than Saturday, Sunday or other day on which
commercial banks in New Jersey 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 26, 2002 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.
"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.
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"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.
"Congress Financial Credit Facility" the Loan and Security Agreement dated
March 31, 1994 among Congress Financial Corporation and ERC US and MI, as
amended.
"Consolidated EBITDA" means, for any fiscal period, (a) Consolidated Net
Income (Loss) for such period less upward adjustments to deferred tax assets
which increase earnings as reflected on the profit and loss statement of ERC US
plus, (b) the sum of (i) downward adjustments to deferred tax assets which
decrease earnings as reflected on ERC US' profit and loss statement, (ii) other
non-cash charges related to changes in GAAP, (iii) Consolidated Interest
Expense, (iv) depreciation, (v) amortization of intangible assets and (vi)
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).
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"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.
"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.
"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.
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"Convertible Debentures" has the meaning ascribed thereto in Section
2.19(a).
"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 Xxxx Xxxxxxx, an individual.
"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
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portion of its properties or which has ceased doing business other than K Mart
but only to the extent of receivables which are payable within 20 days of the
invoice date not exceeding $4,000,000 at any time; or (ix) which the Agent deems
to be otherwise unacceptable in its reasonable judgment.
"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 ("XXXX"), 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.
"ER Hong Kong Bought and Sold Notes" shall mean the executed and undated
instrument of transfer, and contract notes, necessary to effect the transfer and
registration of the Pledged Stock (as defined and set forth in the Stock Pledge
Agreement executed and delivered by ERC US to the Agent) in ER Hong Kong.
"ER Hong Kong Director Resignations" collectively each undated, executed
resignation from the Board of Directors of ER Hong Kong from each member of such
Board of Directors.
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"ERC Intercompany Payable" the net 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 and otherwise.
"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.
"Escrow Account" has the meaning ascribed thereto in Section 2.19.
"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 Xxxxx 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 Dow Xxxxx 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
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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.
"Event of Default" as defined in Section 7.1.
"Excess Cash Flow" for any period, Consolidated EBITDA less, for such
period, the sum of (i) cash taxes paid, (ii) up to $1,000,000 of CAPEX, (iii)
Consolidated Interest Expense and (iv) scheduled principal payments and
scheduled prepayments made on the Term Loan pursuant to Section 2.9(e).
"Federal Funds Rate" for any period, a fluctuating interest rate per annum
(based on a 360 day year) equal for each day during such period to the average
of the rates of interest charged on overnight federal funds transactions, with
member banks of the Federal Reserve System only, as published for any day which
is a Business Day by the Federal Reserve Bank of New York (or, in the absence of
such publication, as reasonably determined by the Agent).
"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 (excluding the deferred
portion of any thereof), (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 and ER BVI.
"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 ER Hong Kong and ER BVI,
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 ER Hong Kong
or ER BVI as beneficiary, or for their account, has failed to honor a draw
thereunder for any reason and excluding, in the case of ERC US, any proceeds of
the Term Loan while such proceeds are held in the Escrow Account; and the
reimbursement obligations of ER Hong Kong under the HS Trade LC Facility or
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other trade letter of credit facility opened by another financial institution
shall be reduced, for purposes of this definition, by any cash collateral
required and held by Hang Seng Bank or such other financial institution with
respect thereto).
"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.
"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.
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"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.
"Hedging Agreements" shall mean, collectively, each interest rate swap,
cap, collar or other hedging agreement entered into by any one or more Persons
constituting the Borrower pursuant to Section 4.1(h).
"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.
"HS Facility" has the meaning set forth in Section 6.1(b).
"HS Trade LC Facility" has the meaning set forth in Section 6.1(b).
"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,
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(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.
"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 Xxxxx 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:
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(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), 2.9(e) and 2.9(f) without
requiring the prepayment of outstanding Eurodollar Loans.
"Lender Hedge Agreements" shall mean, collectively, each Hedging Agreement
entered into pursuant to Section 4.1(h) hereof by one or more Persons
constituting the Borrower and any Lender.
"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 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.
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"Maturity Date" June 30, 2005.
"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 and Term
Notes.
"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.
"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 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 Xxxxx'x
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 Xxxxx'x Investors Service, Inc.;
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(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 Xxxxx 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 Xxxxx'x 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.
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"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.
"PNC" PNC Bank, National Association.
"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.
"Purchasing Lender" as defined in Section 9.1.
"Regulation U" Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"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 Lenders" means, if there are no more 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 four
or more Lenders, the Lenders holding 66 2/3% of the aggregate Commitments, if no
Loans are outstanding, and, otherwise, Lenders holding 66 2/3% 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.
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"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 and ER BVI,
"Responsible Officer" shall mean a director of ER Hong Kong 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 hereunder.
"Xxxxx" X.X. Xxxxx, 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.
"SSG" collectively, Sport Supply Group, Inc. a Delaware corporation and its
wholly owned Subsidiaries.
"Stock Pledge Agreements" collectively, each Stock Pledge Agreement in the
form of Exhibit H hereto, to be executed and delivered by ERC US and ER Hong
Kong 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
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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., 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."
"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, 2002.
"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
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Lenders set forth on Schedule I for Revolving Credit Loans minus (b) the then
outstanding principal amount of all Revolving Credit Loans.
"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
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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.
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.
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 11:00 a.m., New Jersey 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 (provided that the Borrower shall not maintain
any Loans as Eurodollar Loans prior to the earlier of July 30, 2002 and the date
a Purchasing Lender shall have entered into an Assignment and Acceptance with
PNC with respect to not less than $20,000,000 in principal amount of the Loans
and commitments of PNC hereunder) 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.
(b) On or before 2:00 p.m., New Jersey 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.
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(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 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.
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 last day of each March, June, September and
December 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) On the Effective Date, the Borrower shall pay to the Agent for the
benefit of and disbursement to the Lenders a nonrefundable facility fee equal to
$400,000 which shall be distributed by the Agent to the Lenders pro rata based
on their commitments.
(c) The Borrower agrees to pay to the Agent, for its own account, the
amounts set forth in the letter agreement dated June 28, 2002 between the
Borrower and PNC in consideration of PNC's acting as Agent hereunder. The
Agent's compensation shall be paid on the dates set forth in said letter.
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Section 2.5 Termination/Reduction 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. 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 $1,000,000 for
each Term Loan Payment Date occurring on or before June 30, 2004; and $1,750,000
on each Term Loan Payment Date thereafter. 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 an constituting
a part of the Term Note, and any such recordation shall constitute rebuttable
presumptive evidence of the accuracy of the information so recorded.
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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 (provided that the Borrower shall not maintain any Loans as
Eurodollar Loans prior to the earlier of July 30, 2002 and the date a Purchasing
Lender shall have entered into an Assignment and Acceptance with PNC with
respect to not less than $20,000,000 in principal amount of the Loans and
commitments of PNC hereunder) 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.
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 $500,000 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.
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(e) On or before the fifth (5th) Business Day following the date the
consolidated and consolidating balance sheet of ERC US and its consolidated
subsidiaries are required to be delivered pursuant to Section 5.1(a) in each
year beginning in 2003, the Borrower shall prepay the outstanding principal
amount of the Term Loans by an amount equal to 50% of Excess Cash Flow for the
immediately preceding fiscal year. Principal prepayments made pursuant to this
Section 2.9(e) shall be applied to required payments of the principal of the
Term Loan pursuant to Section 2.6(b) in the inverse order of maturity until the
Term Loan is paid in full. Principal amounts repaid pursuant to this Section
2.9(e) may not be reborrowed.
(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) the issuance of Capital Stock of ERC US in
connection with the conversion of any Convertible Debentures into such Capital
Stock), 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 (other than Transfers of inventory in the ordinary course of business and
Transfers of equipment which is or to be replaced in the ordinary course within
three (3) months from the date of Transfer); in each case described in the
preceding clauses (i), (ii) and (iii) for a price in excess of $500,000 in the
aggregate in any fiscal year (whether such Transfers are made in one or more
transactions); the Borrower shall, simultaneously with the consummation of any
such Transfers, prepay the Term Loans in an amount equal to the net proceeds of
such Transfer(s) (including the first $500,000 thereof but after deducting
reasonable attorneys' fees and other customary costs of Transfer). Each such
prepayment shall be applied to required payments of the principal of the Term
Loan pursuant to Section 2.6(b) in the inverse order of maturity until the Term
Loan is paid in full. Principal amounts repaid pursuant to this Section 2.9(f)
may not reborrowed. No Transfer referred to in this Section 2.9(f) shall be
effected except on arms length business terms.
(g) The Agent shall disburse all prepayments of the Loans to the
Lenders on a pro rata basis.
Section 2.10 Conversion and Continuation Options. The Borrower shall have
the right at any time upon prior irrevocable notice to the Agent (i) not later
than 12:00 noon, New Jersey time, on any Business Day, to convert any Eurodollar
Loan to a Base Rate Loan, (ii) not later than 12:00 noon, New Jersey time, three
Business Days prior to conversion or continuation, to convert any Base Rate Loan
into a Eurodollar Loan or to continue any Eurodollar Loan as a Eurodollar Loan
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for any additional Interest Period, and (iii) not later than 12:00 noon, New
Jersey time, three Business Days prior to conversion, to convert the Interest
Period with respect to any Eurodollar Loan to another permissible Interest
Period, subject in each case to the following:
(a) a Eurodollar Loan may not be converted at a time other than the
last day of the Interest Period applicable thereto;
(b) any portion of a Loan maturing or required to be repaid in less
than one month may not be converted into or continued as a Eurodollar Loan;
(c) no Eurodollar Loan may be continued as such and no Base Rate Loan
may be converted to a Eurodollar Loan when any Event of Default has occurred and
is continuing;
(d) any portion of a Eurodollar Loan that cannot be converted into or
continued as a Eurodollar Loan by reason of Section 2.10(b) or 2.10(c) or
otherwise automatically shall be converted at the end of the Interest Period in
effect for such Loan to a Base Rate Loan;
(e) on the last day of any Interest Period for Eurodollar Loans, if
the Borrower has failed to give notice of conversion or continuation as
described in this subsection or if such conversion or continuation is not
permitted pursuant to Section 2.10(d) or otherwise, such Loans shall be
converted to Base Rate Loans on the last day of such then expiring Interest
Period;
(f) accrued interest on a Loan (or portion thereof) being converted
shall be paid by the Borrower at the time of conversion.
Section 2.11 Minimum Amounts of Tranches/Number of Tranches. All
borrowings, conversions and continuations of Loans hereunder and all selections
of Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $500,000 or a
whole multiple of $100,000 in excess thereof. No more than six Eurodollar
Tranches may be outstanding at any time.
Section 2.12 Interest Rates and Payment Dates.
(a) Subject to the provisions of Section 2.12(c), each Base Rate Loan
shall bear interest at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days and twelve 30-day months) equal
to the Base Rate plus the Applicable Margin for Base Rate Loans.
(b) Subject to the provisions of Section 2.12(c), each Eurodollar Loan
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum equal to the Eurodollar Rate for
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the Interest Period in effect for such Eurodollar Loan plus the Applicable
Margin for Eurodollar Loans in effect for such Interest Period.
(c) If all or a portion of (A) the principal amount of any Loan, (B)
any interest payable thereon or (C) any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall, upon notice to the
Borrower from the Agent, bear interest at a rate per annum which is
(1) in the case of overdue principal, the rate that otherwise
would be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% per annum or such other lower rate as a court may
impose, or
(2) in the case of overdue interest or fees or other amounts, the
Base Rate plus 2% per annum or such other lower rate as a court may impose,
in each case from the date of such nonpayment until such amount is paid in full
(as well as after, to the extent permitted by law, as before judgment). In no
event shall any interest to be paid pursuant to this Agreement exceed the
maximum rate permitted by law.
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing on overdue amounts pursuant to Section
2.12(c) shall be payable on demand.
(e) As soon as practicable the Agent shall notify the Borrower and the
Lenders of (A) each determination of a Eurodollar Rate and Applicable Margin and
(B) the effective date and the amount of each change in the interest rate on a
Loan. Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of clearly demonstrable error. At the request of the
Borrower, the Agent shall deliver to the Borrower a statement showing the
quotations used by the Agent in determining any interest rate pursuant to
Sections 2.12(a), (b) or (c).
Section 2.13 Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
(b) a Lender notifies the Agent and Borrower that the Eurodollar Rate
determined or to be determined for such Interest Period will not adequately and
fairly reflect the cost to such Lender of making or maintaining the Eurodollar
Loans during such Interest Period, or
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(c) The Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that Dollar deposits in the principal
amounts of the Eurodollars Loans to which such Interest Period is to be
applicable are not generally available in the London Interbank Market,
the Agent shall give notice thereof to the Borrower by fax or telephone as soon
as practicable thereafter. If such notice is given (A) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans, and (B) any Loans that were to have been converted to or
continued as Eurodollar Loans on the first day of such Interest Period shall be
converted to or continued as Base Rate Loans. Until such notice has been
withdrawn by the Agent, no Loans shall be made as or converted to or continued
as Eurodollar Loans.
Section 2.14 Payments/Funding.
(a) All payments (including prepayments) made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees,
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:00 noon, New Jersey time, on the due date thereof to the Agent, for
the account of the Lenders in Dollars and in immediately available funds to the
Agent's account at such address as the Agent shall give notice to the Borrower
and the Lenders (the "Payment Office"). Except for payments received by the
Agent for the account of the Agent in its capacity as such, or for the account
of a specific Lender in accordance with the provisions of this Agreement, the
Agent shall, within one Business Day of funds collection, distribute like funds
relating to the payment of principal, interest or fees pro rata to the Lenders
(based on their Percentages) to which such payment is due and payable for their
accounts and at the addresses as each such Lender shall specify in its notice to
the Agent made in accordance with Section 10.2 of this Agreement. If the Agent
fails to so distribute funds within the time set forth in the preceding
sentence, the Agent shall pay interest on the amount to be distributed at a rate
equal to the Federal Funds Rate from the date such funds were to be distributed
to the date of distribution.
Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full, the Agent may (but shall not be obligated
to) assume that the Borrower has made such payment in full to the Agent on such
date, and the Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent the Borrower shall not have so made such
payment in full to the Agent, each Lender shall repay to the Agent forthwith on
demand the amount distributed to such Lender together with interest thereon, at
the rate equal to the Federal Funds Rate, for each day from the date such amount
is distributed to such Lender until the date such Lender repays such amount to
the Agent.
(b) If any principal payment hereunder (other than payments on
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
such payment date shall be extended to the next succeeding Business Day, and
interest thereon shall be payable at the then applicable rate during such
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extension. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day (and interest shall accrue during such extension of
time) unless the result of such extension would be to extend such payment into
another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
(c) If on any date a payment is due hereunder, the Borrower shall pay
less than the amount stated to be due or on any date the Agent shall receive any
payment under any Security Document or pursuant to any proceeding to enforce the
Obligations of any Person constituting the Borrower, such proceeds shall be
distributed to the Lenders pro rata based on their respective Percentages and
shall be applied first to costs of collection incurred by each Lender, second to
accrued and unpaid interest, third to principal and then to the payment of any
other amounts due hereunder or the other Loan Documents.
(d) The Agent shall fund each Loan by depositing $5,000,000 in
aggregate of the initial Loans to ER Hong Kong's and ER BVI's account no.
8019335333 with PNC (provided such funds may only be used to fund the Escrow
Account) and by depositing the proceeds of all other Loans in the account (the
"Account") of ERC US (account no. 8019335317) at PNC's office at Two Xxxxx
Xxxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000 or as otherwise directed in a
writing from the Borrower to the Agent directing payment for purposes permitted
by the terms hereof; provided that the proceeds of each Loan shall first be
applied to principal prepayments or payments due on the date of such Loan
(without derogating from the Borrower's obligation to repay) and proceeds of any
conversion or continuation of a Loan to or as a particular Type shall be applied
by the Agent solely to effect such conversion or continuation. Each Lender is
hereby authorized to debit the accounts of each Person constituting the Borrower
for all payments due hereunder; provided the foregoing shall not derogate from
the Borrower's obligation to pay or restrict any Lender's recourse to any
particular fund or source of monies. The Borrower agrees to maintain its primary
depository accounts with PNC's office at Xxx Xxxxx Xxxxxx Xxxxxxxxx, Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000.
Section 2.15 Change in Legality. Notwithstanding any other provision
herein, if any change in any Requirement of Law or in the interpretation or
application thereof by a Governmental Authority shall make it unlawful for a
Lender to make or maintain Eurodollar Loans as contemplated by this Agreement,
(a) the Commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert Loans to Eurodollar Loans forthwith shall
be canceled and (b) such Loans then outstanding as Eurodollar Loans, if any,
automatically shall be converted to Base Rate Loans on the respective last days
of the then current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a Eurodollar Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 2.17.
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Section 2.16 Increased Costs.
(a) If the adoption of, or any change in, any Requirement of Law or in
the interpretation or application thereof by a Governmental Authority or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(1) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made by it,
or change the basis of taxation of payments to such Lender in respect
thereof (except for the imposition of and changes in the rate of tax on the
overall net income of the Lender);
(2) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of a Lender which is not otherwise included in the determination of
the Eurodollar Rate hereunder, including, without limitation, the
imposition of any reserves with respect to Eurocurrency Liabilities under
Regulation D of the Board; or
(3) shall impose on a Lender any other condition;
(4) and the result of any of the foregoing is to increase the
cost to such Lender, by an amount which such Lender deems to be material,
of making, converting into, continuing or maintaining Eurodollar Loans
hereunder or to reduce any amount receivable hereunder in respect thereof
then, in any such case, the Borrower shall promptly pay such Lender, upon
its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If a Lender becomes
entitled to claim any additional amounts pursuant to this subsection, it
shall promptly notify the Agent and the Borrower of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection submitted by a Lender to the Borrower
and Agent shall include a computation thereof and be conclusive in the
absence of clearly demonstrable error. This covenant shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
(5) Each Lender agrees, as promptly as practicable after it
becomes aware of any circumstances referred to above that would result in
such increased cost, the affected Lender shall, to the extent not
inconsistent with such Lender's internal policies of general application,
use reasonable commercial efforts to minimize costs and expenses incurred
by it and payable to it by the Borrower.
(b) In the event that a Lender shall have determined that any change
in any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof does or shall have the effect of reducing the rate of return on
such Lender's or such corporation's capital as a consequence of its obligations
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hereunder to a level below that which such Lender or such corporation could have
achieved but for such change or compliance (taking into consideration Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, after submission
by such Lender to the Borrower (with a copy to the Agent) of a written request
therefore (which shall contain a computation of the compensating amount to be
paid, such computation to be conclusive in the absences of demonstrable error),
the Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
(c) In the event that by reason of any change in any Requirement of
Law (including, without limitation, the lapse or termination of any treaty) or
in the interpretation thereof, or the adoption of any new law, regulation or
requirement by any Governmental Authority, or the imposition of any requirement
of any central bank whether or not having the force of law, (i) the Agent or any
Lender shall, with respect to this Agreement, the Loans, the Notes or its
obligation to make Loans under this Agreement, be subjected to any withholding
or other tax, levy, impost, charge, fee, duty or deduction of any kind
whatsoever (other than franchise taxes imposed by the jurisdiction in which the
Agent or such Lender is domiciled and other than any tax generally imposed or
based upon the net income or branch profits of the Agent or such Lender)
(collectively, "Taxes") or (ii) any change shall occur in the taxation of the
Agent or such Lender with respect to any Loan, the interest payable thereon or
any fees payable hereunder or referred to herein (other than franchise taxes
imposed by the jurisdiction in which the Agent or such Lender is domiciled and
other than any change which affects, and to the extent that it affects, the
taxation of the net income or branch profits of the Agent or such Lender), and
if any such measures or any other similar measure shall result in an increase in
the cost to the Agent or such Lender of making or maintaining any Loan or a
reduction in the amount of principal, interest or fees receivable by the Agent
or such Lender in respect thereof, the Agent or such Lender promptly after
learning of the imposition of such cost or reduction in any amount shall notify
the Borrower and the Agent (if applicable) stating the reasons therefor. The
Borrower shall thereafter pay to the Agent or such Lender, upon demand from time
to time, as additional consideration hereunder, such additional amounts as will
fully compensate the Agent or such Lender for such increased costs or reduced
amounts and shall promptly provide the Agent or such Lender, as the case may be,
with official tax receipts or other evidence of the payment of any taxes paid by
the Borrower. A certificate as to the increased costs or reduced amounts setting
forth the calculations therefor, shall be submitted promptly by the Agent or
such Lender to the Borrower and the Agent (if applicable) and, in the absence of
demonstrable error, shall be conclusive and binding as to the amount thereof. If
the Agent or Lender receives any additional amounts from the Borrower pursuant
to this subsection (c) if requested by Borrower, the Agent or such Lender shall
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(at the Borrower's expense) attempt to obtain a refund, reduction, deduction or
credit for any Taxes with respect to the additional amounts paid under this
subsection (c). If the Agent or such Lender actually receives or enjoys the
benefit of any such refund, reduction, deduction or credit for any such Taxes,
the Agent or such Lender shall reimburse the Borrower if and to the extent, but
only the extent, that the Agent or such Lender determines that it has actually
received (i) a refund of taxes or other amounts (together with any interest
actually received thereon from the respective Governmental Authority) which
refund is attributable to the Taxes with respect to which such additional
amounts were paid; or (ii) an effective net reduction (through a reduction,
deduction, credit or otherwise) in any taxes or other amounts otherwise payable
by the Agent or such Lender (including any taxes imposed on or measured by the
net income of the Agent or such Lender), which reduction is attributable to the
Taxes with respect to which such additional amounts were paid. If, at any time
after the Agent or such Lender makes a payment to the Borrower pursuant to the
preceding sentence, the Agent or such Lender determines that it was not entitled
to the full amount of any refund (together with the interest thereon) reimbursed
to the Borrower as aforesaid or that its taxes are not reduced by a credit or
deduction for the full amount of Taxes reimbursed to the Borrower as aforesaid,
the Borrower upon the demand of the Agent or such Lender will promptly pay to
the Agent or such Lender the amounts so refunded to which the Agent or such
Lender was not so entitled, or the amount by which the taxes of the Agent or
such Lender were not so reduced, as the case may be.
(d) If Borrower is required to pay additional amounts under this
Section 2.16 to any Lender, the Borrower may, at its own expense, require such
Lender to transfer and assign in whole or in part, without recourse all or part
of its interests, rights and obligations under this Agreement to an assignee
(which may be another Lender, if a Lender accepts such assignment) which shall
assume such assigned obligations in a writing in form and substance reasonably
acceptable to the Agent; provided that (i) such assignment shall not conflict
with any law, rule or regulation or order of any court or other Governmental
Authority, (ii) the Borrower shall have received a written consent of the Agent
in the case of any entity that is not a Lender, which consent shall not be
unreasonably withheld, and (iii) the Borrower or such assignee shall have paid
to the assigning Lender in immediately available funds the principal of, and
interest accrued to the date of such payment on, the Loans made by it hereunder
and all other amounts owed to it hereunder as of such date.
Section 2.17 Indemnity.
(a) The Borrower agrees to indemnify each Lender and to hold each
Lender harmless from any loss or expense which such Lender may sustain or incur
as a consequence of
(7) default by the Borrower in payment when due of any portion of
the principal amount of or interest on any Eurodollar Loan,
(8) default by Borrower in making a borrowing of, conversion into
or continuation of Eurodollar Loans after Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement,
(9) default by Borrower in making any prepayment after Borrower
has given a notice thereof in accordance with the provisions of this
Agreement, or
(10) the making of a payment or a prepayment of Eurodollar Loans
on a day which is not the last day of an Interest Period with respect
thereto,
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including, without limitation, in each case, any such loss or expense arising
from the reemployment of funds obtained by such Lender or from fees payable to
terminate the deposits from which such funds were obtained.
(b) For the purpose of calculation of all amounts payable to a Lender
under this subsection such Lender shall be deemed to have actually funded its
relevant Eurodollar Loan through the purchase of a deposit bearing interest at
the Eurodollar Rate in an amount equal to the amount of that Eurodollar Loan and
having a maturity comparable to the relevant Interest Period; provided, however,
that each Lender may fund each of its Eurodollar Loans in any manner it sees
fit, and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this subsection. This covenant shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
Section 2.18 Intentionally omitted.
Section 2.19 Purpose of Loans.
(a) The proceeds of the Revolving Credit Loans shall be used first to
repay the outstanding Indebtedness under the Congress Financial Credit Facility,
second to increase the funds on deposit in the Escrow Account to a total of
$20,750,000 and third for working capital needs of the Borrower and for general
corporate purposes. The proceeds of the Term Loan and the Borrower Deposit shall
be used solely to repay ERC US's outstanding 8-1/2% Senior Subordinated
Convertible Debentures Due 2002 (the "Convertible Debentures"). The Convertible
Debentures were issued on August 30, 1995 in the aggregate principal amount of
$20,750,000. ERC US represents that (x) there is currently outstanding
$20,750,000 in aggregate principal amount of the Convertible Debentures and (y)
it has received no notice that any of the Convertible Debentures will be
converted into Capital Stocks of ERC US. The Term Loan shall be funded by
payment by the Agent on behalf of the Lenders from the accounts referred to in
Section 2.14(d) directly to account no. 8019335296 at PNC which is an interest
bearing account and is titled "ERC US Convertible Debenture Escrow Account"
(hereinafter, the "Escrow Account"). The amount of the Term Loan disbursed into
the Escrow Account, when added to the Borrower Deposit, shall not exceed the sum
of (x) the outstanding principal amount of Convertible Debentures on the Closing
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Date (excluding Convertible Debentures to be converted) plus (y) accrued and
unpaid interest thereon from the interest payment date for the Convertible
Debentures immediately preceding the Closing Date, all as certified to the Agent
and the Lenders by the Trustee for the holders of the Convertible Debentures.
Any portion of the Term Loan Commitment not used to fund the Escrow Account on
the Closing Date shall irrevocably terminate. Borrower shall pay interest on the
principal amount of the Term Loan funded on the Closing Date while the proceeds
thereof are in the Escrow Account and shall continue to pay interest thereon
after disbursement thereof. Interest, if any, accruing on funds in the Escrow
Account shall remain in the Escrow Account and be applied in accordance with the
terms of this Section 2.19. The Agent shall disburse funds from the Escrow
Account directly to holders of Convertible Debentures (or their agents) on 5
days' notice (i) to pay the purchase price of Convertible Debentures to be
purchased by ERC US on or prior to the maturity date of the Convertible
Debentures provided (a) no Event of Default shall have occurred and be
continuing as a result of the failure of any Person constituting the Borrower to
pay any amount due by it hereunder or under any other Loan Document or as a
result of a breach of Section 6.11, 6.12 or 6.13 hereof, (b) the purchase price
funded for any such Convertible Debenture shall not exceed 101% of the
outstanding principal amount thereof plus accrued and unpaid interest from the
most recent interest payment date for the Convertible Debentures and (c) funds
shall be disbursed by the Agent only against presentation to Agent of the
original Convertible Debenture to be purchased together with any endorsement
deemed necessary by the Agent together with proof satisfactory to the Agent of
the identity of the holder of such Convertible Debenture as reflected on the
Register maintained by the Trustee (or any Person, such as DTC, acting for the
Trustee) for the holders of the Convertible Debentures pursuant to the Documents
pursuant to which the Convertible Debentures were issued and the power and
authority of such holder to Transfer such Convertible Debenture and (d) each
Convertible Debenture so delivered to the Agent shall be destroyed by it upon
disbursement of funds for the purchase thereof or delivered (at Agent's
discretion) to the Trustee for the holders of the Convertible Debentures for
cancellation (in accordance with the Trustee's instructions which are annexed
hereto as Exhibit M), and (ii) on the maturity date of the Convertible
Debentures to the Trustee for the holders thereof (in accordance with the
Trustee's instructions which are annexed hereto as Exhibit M) an amount equal to
the lesser of (x) the funds then remaining in the Escrow Account (in excess of
the amount, if any, to be paid on such date for the purchase of Convertible
Debentures pursuant to clause (i) of this sentence) and (y) the outstanding
principal amount of Convertible Debentures on the maturity date of the
Convertible Debentures (excluding Convertible Debentures to be converted) plus
accrued and unpaid interest thereon from the interest payment date for the
Convertible Debentures immediately preceding such maturity date. Notwithstanding
anything to the contrary in this Section 2.19(a), Borrower authorizes payment of
the Convertible Debentures to be made in accordance with the written
instructions of the Trustee for the holders of the Convertible Debentures Any
portion of the funds in the Escrow Account remaining after the close of business
on the maturity date of the Convertible Debentures for which notice of payment
has not been given pursuant to this Section 2.19(a), exclusive of any interest
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thereon, if any, remaining in the Escrow Account, shall be applied by the Agent
to required payments of the principal of the Term Loan pursuant to Section
2.6(b) in the inverse order of maturity until the Term Loan is paid in full and
any interest remaining in the Escrow Account at such time shall be returned to
the Borrower provided no Event of Default has occurred and is continuing.
Principal amounts repaid pursuant to this Section 2.19 may not reborrowed.
Pending disbursements from the Escrow Account, monies therein shall be held, and
the Borrower hereby pledges, to the Agent for the benefit of the Agent and the
Lenders, such monies, as cash collateral for the Obligations which monies, upon
the occurrence and continuance of an Event of Default and the maturity of the
Loans (by acceleration or otherwise) shall be applied by the Agent to repayment
of the Obligations in such order as the Agent shall elect. Borrower has no
independent right to withdraw funds from the Escrow Account.
(b) The duties and responsibilities of the Agent hereunder with
respect to the Escrow Account shall be determined solely by the express
provisions of this Section 2.19, and no other or further duties or
responsibilities shall be implied. The Agent shall not have any liability
hereunder, nor duty to inquire into the terms and provisions of any agreement or
instructions, other than outlined in this Agreement. Without limiting the
generality of the foregoing, it is expressly agreed that the Agent shall be
entitled to rely solely upon any instrument, written statement or other
instructions purportedly made or given pursuant hereto, and shall have no
liability to the parties hereto for any action it may take or refrain from
taking in connection with such reliance. The Agent shall have no liability for
anything it may do or refrain from doing in connection with its duties hereunder
except as a result of its own willful misconduct on gross negligence. The Agent
may rely upon any instrument not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any information
contained therein. Anything in this Agreement to the contrary notwithstanding,
in no event shall the Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including, but not limited to, lost
profits), even if the Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action.
(c) In the event of a dispute over the application or release of funds
from the Escrow Account, the Agent shall have the authority to deposit all or
any portion of the funds in the Escrow Account as Agent deems appropriate and
related documents with a court of competent jurisdiction and to abide by the
judgment thereof. In making any such deposit, the Agent shall notify the court
that the funds in the Escrow Account are encumbered by a security interest in
favor of the Agent and the Lenders and shall seek entry of an order from such
court that the funds in the Escrow Account to be deposited shall, for the
purpose of enabling Agent to establish, maintain and continue the perfection of
its security interest in the funds in the Escrow Account, be deemed to be in the
possession and control of the Agent.
(d) In the event that Agent should resign or be replaced as provided
in Article 8, the successor Agent shall take control of the Escrow Account. Any
successor Agent shall execute and deliver to the predecessor Agent and the
parties hereto, an instrument accepting such appointment and the transfer of the
funds in the Escrow Account and agreeing to the terms of this Agreement, and
thereupon such successor Agent shall, without further act, become vested with
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all the estates, properties, rights, powers and duties of the predecessor Agent
as if originally named herein.
(e) Neither the Agent or any Lender shall have any liability in the
event the monies in the Escrow Account are insufficient to purchase or pay for
all Convertible Debentures or are unavailable for application to such purchase
or payment pursuant to the terms of Section 2.19(a). The Borrower assumes all
risks of the acts, omissions or misuse of any disbursements from the Escrow
Account to any purported holder of any Convertible Debenture or to the Trustee
for the holders of the Convertible Debentures. Except to the extent of its own
gross negligence or willful misconduct, the Agent shall not be responsible for:
(6) the form, validity, sufficiency, accuracy, genuineness, or
legal effect of any document submitted by any Person in connection with the
purchase by ERC US of any Convertible Debenture, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged;
(7) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting to
transfer or assign a Convertible Debenture or the rights or benefits
thereunder or proceeds thereof in whole or in part;
(8) failure of holder of any Convertible Debenture or the Trustee
to comply fully with conditions required in order to demand payment under
or with respect to any Convertible Debenture;
(9) errors, omissions, interruptions or delays in transmission or
delivery of any information or messages, by mail, cable, telegraph, telex
or otherwise;
(10) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a disbursement from the Escrow
Account or of the proceeds thereof;
(11) errors in interpretation of technical terms;
(12) any misapplication by a holder of any Convertible Debenture
or the Trustee for the holders thereof (or any Person, such as DTC acting
for the Trustee for the holders of the Convertible Debentures or such
holders) of the proceeds of any disbursement from the Escrow Account; and
(13) any consequences arising from causes beyond the control of
the Agent including, without limitation, acts of any Governmental
Authority.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Agent and each Lender hereunder.
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The Borrower hereby agrees to protect, indemnify, pay and save the
Agent harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including, without limitation,
reasonable attorneys' fees) which the Agent may incur or be subject to as a
consequence, direct or indirect, of (i) the application of any monies in the
Escrow Account, other than as a result of the gross negligence or willful
misconduct of the Agent as determined by a court of proper jurisdiction, or (ii)
the failure of the Agent to honor a request for disbursement of funds from the
Escrow Account as a result of any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto Governmental Authority. The
agreements in this paragraph shall survive payment of the Obligations.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and
to make the Loans, the Borrower hereby represents and warrants to the Agent and
the Lenders that as of the Effective Date:
Section 3.1 Financial Condition.
(a) The consolidated balance sheets of ERC US and its consolidated
Subsidiaries as at March 31, 2002 and the related consolidated statements of
income and of cash flows for the fiscal period ended on each such date, copies
of which have heretofore been furnished to each Lender, present fairly in all
material respects the consolidated financial condition of ERC US and its
consolidated Subsidiaries as at such dates, and the consolidated results of
their operations and their consolidated cash flows for the fiscal years then
ended.
(b) All such financial statements, including the related schedules,
have been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by such accountants and as disclosed
therein).
(c) Neither ERC US nor any of its consolidated Subsidiaries (other
than SSG) had, at the date of the most recent balance sheet delivered to the
Agent pursuant to Section 3.1(a) or 5.1 hereof, any material Contingent
Obligation, material contingent liability or material liability for taxes, or
any material long-term lease or material unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction or other financial derivative, except as reflected
in the foregoing statements or in the notes thereto or would not reasonably be
expected to have a Material Adverse Effect.
(d) During the period from April 1, 2002, to and including the
Effective Date hereof there has been no sale, transfer or other disposition by
ERC US or any of its consolidated Subsidiaries (other than SSG) of any material
part of its business or property (other than in the ordinary course of business)
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and no purchase or other acquisition of any business or property (including any
Capital Stock of any other Person, other than Capital Stock of ERC US by ERC US,
in any case, other than in the ordinary course of business) material in relation
to the consolidated financial condition of the Borrower and its consolidated
Subsidiaries at March 31, 2002.
(e) As of the date hereof, the holders of the Convertible Debentures
are set forth on Schedule IX.
Section 3.2 No Material Adverse Change. Since March 31, 2002, there has
been no development or event which has had or could reasonably be expected to
have a Material Adverse Effect.
Section 3.3 Corporate Existence; Compliance with Law. Each of ERC US and
its Subsidiaries (other than Inactive Subsidiaries) (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification except where the failure to so qualify or
be in good standing therewith would not have a Material Adverse Effect and (d)
is in compliance with all Requirements of Law except where the failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.
Section 3.4 Corporate Power; Authorization; Enforceable Obligations.
(a) Each Person constituting the Borrower has the corporate power and
authority, and the legal right, to make, deliver and perform this Agreement, the
Notes and each other Loan Document to which it is a party and to borrow
hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement, the Notes and each
other Loan Document to which it is a party and to authorize the execution,
delivery and performance of this Agreement, the Notes and each other Loan
Document to which it is a party.
(b) Except for consents, authorizations, approvals, notices and
filings described on Schedule II, all of which have been obtained, made or
waived, no consent or authorization of, approval by, notice to, filing with or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of this Agreement or the Notes
or any other Loan Document.
(c) This Agreement has been, and each Note and each other Loan
Document to which it is a party will be, duly executed and delivered on behalf
of each Person constituting the Borrower.
(d) This Agreement constitutes, and each Note and each other Loan
Document when executed and delivered will constitute, a legal, valid and binding
obligation of each Person constituting the Borrower enforceable against each
such Person in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
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similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
Section 3.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the Notes, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or Contractual Obligation of any
Person constituting the Borrower and will not result in, or require, the
creation or imposition of any Lien on any of its respective properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation.
Section 3.6 No Material Litigation. Except as set forth on Schedule III or
disclosed in writing to the Lenders, no litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the any Person constituting the Borrower, threatened by or against
any Person constituting the Borrower or against any of its respective properties
or revenues (a) with respect to this Agreement, the Notes or any of the
transactions contemplated hereby, or (b) which if adversely determined would
have a Material Adverse Effect.
Section 3.7 No Default. No Person constituting the Borrower is in default
under or with respect to any of their respective Contractual Obligations in any
respect which would reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
Section 3.8 Ownership of Property; Liens. Each Person constituting the
Borrower has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien except as permitted by Section 6.2.
Section 3.9 Intellectual Property. Each Person constituting the Borrower
owns, or is licensed to use, all trademarks, tradenames, copyrights, patents,
technology, know-how and processes necessary for the conduct of its business as
currently conducted (collectively, the "Intellectual Property") except where the
failure to own or license any such Intellectual Property would not have a
Material Adverse Effect. The Intellectual Property owned or licensed by each
Person constituting the Borrower is set forth on Exhibit I. Except as set forth
on Exhibit I, no claim has been asserted in writing and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property which would have a
Material Adverse Effect, nor does any Person constituting the Borrower know of
any valid basis for any such claim which, if asserted, would have a Material
Adverse Effect. To the best of the knowledge of the Borrower, the use of such
Intellectual Property by each Person constituting the Borrower does not infringe
the rights of any Person.
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Section 3.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of any Person constituting the Borrower has, or could
reasonably be expected to have, a Material Adverse Effect.
Section 3.11 Taxes. Each Person constituting the Borrower has filed or
caused to be filed all tax returns which, to the knowledge of such Person, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of such Person constituting the Borrower or its respective Subsidiaries,
as the case may be); no tax Lien has been filed, and, to the knowledge of such
Person, no claim is being asserted, with respect to any such tax, fee or other
charge in any case which would have a Material Adverse Effect, except, there is
currently a California unitary tax assessed against ERC US in an amount of
approximately $1,100,000 and no Lien has been filed with respect thereto.
Section 3.12 Federal Regulations. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board as now and
from time to time hereafter in effect or for any purpose which violates the
provisions of any Regulations of the Board. If requested by any Lender at any
time, each Person constituting the Borrower will furnish to such Lender a
statement in conformity with the requirements of FR Form U-1 referred to in
Regulation U.
Section 3.13 Investment Company Act; Public Utility Holding Company Act;
Other Regulations. No Person constituting the Borrower is (a) an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended, or (b) a "holding
company" as defined in, or otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935. No Person constituting the Borrower is
subject to regulation under any federal or state statute or regulation which
limits its ability to incur Indebtedness.
Section 3.14 Subsidiaries. All the Subsidiaries of ERC US as of the
Effective Date and the ownership of the Capital Stock of such Subsidiaries are
listed on Schedule IV to this Agreement. None of the Capital Stock of any such
Subsidiary is subject to a Lien in favor of any Person (except Liens in favor of
the Agent and Lenders).
Section 3.15 Employee Grievances. Except as set forth on Schedule V hereof,
as of the Effective Date no Person constituting the Borrower is a party to any
collective bargaining agreement or, to the best knowledge of such Person,
subject to any current effort to organize, and there are no actions or
proceedings pending or, to the best of the knowledge of such Person, threatened
against it, by or on behalf of, or with, its employees, other than employee
grievances arising in the ordinary course of business which are not, in the
aggregate, material.
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Section 3.16 ERISA.
(a) Except as set forth in Schedule VI hereof, as of the Effective
Date no Person constituting the Borrower has any Plan (including without
limitation any Multiemployer Plan) or any similar arrangement (a "Foreign Plan")
under the law of their domicile, in the case of the Foreign Subsidiaries, or
have made or make any payments to any Plan or Foreign Plan.
(b) Each Person constituting the Borrower is and has at all times been
in substantial compliance with all applicable provisions of ERISA, except where
a failure to be in such compliance would not have a Material Adverse Effect.
Each Foreign Subsidiary is in compliance with all Requirements of Law related to
any Foreign Plan.
(c) No Person constituting the Borrower has engaged in a transaction
in connection with which such Person or any ERISA Affiliate could be subject to
a material liability for either a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Code.
(d) There has been no termination of a Plan or trust created under any
Plan that would give rise to a material liability to the PBGC on the part of any
Person constituting the Borrower or any ERISA Affiliate. No material liability
to the PBGC has been or is expected to be incurred with respect to any Plan by
any Person constituting the Borrower or any ERISA Affiliate. The PBGC has not
instituted proceedings to terminate any Plan. There exists no condition or set
of circumstances which presents a material risk of termination or partial
termination of any Plan by the PBGC. Each Person constituting the Borrower and
each ERISA Affiliate have paid all premiums to the PBGC when due. No Foreign
Subsidiary has incurred any material liability to any Governmental Authority or
other Person with respect to any Foreign Plan.
(e) Full payment has been made of all amounts which are required under
the terms of each Plan to have been paid as contributions to such Plan as of the
last day of the most recent fiscal year of such Plan ended on or before the date
of this Agreement, and no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any Plan. No Person constituting the Borrower nor any ERISA Affiliate
has failed to make a required installment under Section 412(m) of the Code or
any other payment required under Section 412 of the Code on or before the due
date.
(f) The value of the benefit liabilities (as defined in Section
4001(a)(16) of ERISA) of each Plan (based on the actuarial assumptions contained
in Title IV of ERISA) does not exceed the fair market value of the assets of
such Plan. No Person constituting the Borrower nor any ERISA Affiliate is
required to provide security to a Plan under Section 401(a)(29) of the Code.
(g) No Person constituting the Borrower nor any ERISA Affiliate has
made a complete or partial withdrawal from a Multiemployer Plan. To the best
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knowledge of each Person constituting the Borrower the liability to which such
Person or any ERISA Affiliate would become subject under ERISA if such Person
and all ERISA Affiliates were to withdraw completely from all Multiemployer
Plans as of the most recent valuation date, together with any secondary
liability for withdrawal liability such Person and any ERISA Affiliate may have
as of the date hereof, would not have a Material Adverse Effect. To the best
knowledge of each Person constituting the Borrower no such Multiemployer Plan is
in reorganization (as such term is defined in Section 4241 of ERISA) or is
insolvent (as such term is defined in Section 4245 of ERISA).
(h) No Person constituting the Borrower (i) has any liability for any
Plan or Multiemployer Plan to which any Subsidiary of ERC US (other than the
Subsidiary Borrowers) contributes or as to which such Subsidiary has any
liability; or (ii) makes any contribution to any such Plan or Multiemployer
Plan; or (iii) has any employees enrolled in or covered by any such Plan or
Multiemployer Plan.
Section 3.17 ER Intercompany Payable. The ER Intercompany Payable is not
evidenced by any note or other instrument or writing except only by entries on
the books and records of ER Hong Kong and ER BVI. ER Hong Kong and ER BVI will
make a notation on such books and records to reflect the subordination of the ER
Intercompany Payable pursuant to the HK Subordination Agreement. In the event
the ER Intercompany Payable becomes evidenced by a note, instrument or other
writing, ER Hong Kong and ER BVI will (prior to its execution) cause the form
thereof to contain a reference to the provisions of the HK Subordination
Agreement satisfactory in form and substance to Agent and shall promptly deliver
a copy of such note, instrument or other writing to the Agent as executed.
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ARTICLE 4. CONDITIONS PRECEDENT
Section 4.1 Conditions to Effective Date. This Agreement shall become
effective on the date (the "Effective Date") on which each condition listed in
Section 4.2 is satisfied and each of the following shall have occurred:
(a) The Agent shall have received counterparts of (i) this Agreement,
executed and delivered by a duly authorized officer of each Person constituting
the Borrower and each Lender, and (ii) each Security Document and other Loan
Document executed by each Person party thereto. Each Lender shall have received
a Revolving Credit Note and Term Note conforming to the requirements hereof and
executed by a duly authorized officer of each Person constituting the Borrower.
(b) The Agent shall have received a certificate of the Secretary or an
Assistant Secretary of each Person constituting the Borrower and Xxxxx dated as
of the Effective Date and certifying (1) that attached thereto is a true,
complete and correct copy of resolutions duly adopted by the Board of Directors
of such Person authorizing (x) the execution, delivery and performance of this
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Agreement and the Notes and the other Loan Documents and (y) the borrowings
contemplated hereunder and that such resolutions have not been amended,
modified, revoked or rescinded, (2) as to the incumbency and specimen signature
of each officer executing any Loan Documents on behalf of such Person
constituting the Borrower and (3) that attached thereto are true and complete
copies of the organizational documents of such Person (which in the case of ER
Hong Kong and ER BVI shall have been amended to incorporate changes therein
requested by the Agent); and such certificate and the resolutions attached
thereto shall be in form and substance satisfactory to the Agent.
(c) The Agent shall have received the executed legal opinion of
Xxxxxxxxxx, Xxxxxxx P.C., US, counsel to the Persons constituting the Borrower,
together with the opinions of Xxxxx & XxXxxxxx, Hong Kong counsel, to ER Hong
Kong, and Xxxxxxx, Xxxx & Xxxxxxx, British Virgin Island's counsel to ER BVI,
substantially in the form of Exhibit J. Such legal opinions shall cover such
matters incident to the transactions contemplated by this Agreement as the Agent
and the Lenders reasonably may require.
(d) The Borrower shall have paid to the Agent, for distribution to the
Lenders, a non-refundable facility fee of $400,000.
(e) The Agent shall have received (i) a payoff letter from Congress
Financial with respect to the Congress Financial Credit Facility which letter
shall state that the Congress Financial Credit Facility and the commitment of
Congress Financial to Lender under will terminate upon payment of the amounts
set forth therein and (ii) UCC-3 Termination Statements or other documents
necessary to terminate all Liens securing the repayment of the Congress
Financial Credit Facility.
(f) The Borrower shall have paid all fees of counsel to the Agent
submitted on the date hereof as previously agreed to. This condition precedent
does not derogate from the Borrower's continuing obligations under Section 10.5.
(g) The Trustee for the holders of the Convertible Debentures shall
have confirmed to the Agent the outstanding principal amount of the Convertible
Debentures.
(h) The Agent shall have received a Waiver and Consent from Xxxxxxx
Xxxx, Inc. with respect to the California warehouse used by ERC US and a letter
from SSG with respect to the warehousing arrangements between it and ERC US, in
each case in form and substance satisfactory to the Agent.
(i) The Lender shall have received such other materials, documents and
papers regarding the Borrower or the Loans as the Lender may reasonably require.
(j) The Agent shall have received (i) all UCC Financing Statements or
other public filing documents required to perfect any security interests and
other evidence of the Liens granted pursuant to the Security Documents and (ii)
original stock certificates evidencing all Capital Stock pledged pursuant to the
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Stock Pledge Agreement together with original stock powers (or equivalent forms)
executed in blank in form and substance satisfactory to the Agent.
(k) The Agent shall have received the executed ER Hong Kong Bought and
Sold Notes and ER Hong Kong Director Resignations.
(l) ERC US shall have delivered to the Agent the most recent draft of
ERC US' financial statements for the fiscal year ended March 31, 2002 and such
statements shall be acceptable to the Agent.
(m) All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Lenders, and the Agent and the Lenders
shall have received such other documents and legal opinions in respect of any
aspect or consequence of the transactions contemplated hereby or thereby as they
may reasonably request.
Section 4.2 Conditions to Each Loan. The obligation of the Lenders to make
any Loan requested to be made on any date (including, without limitation, the
initial Loan) is subject to the satisfaction of the following conditions
precedent:
(a) Each of the representations and warranties made by each Person
constituting the Borrower in or pursuant to the Loan Documents shall be true and
correct in all material respects on and as of such date as if made on and as of
such date except for representations and warranties which speak as of another
date, in which case such representations and warranties shall have been true in
all material respects as of such date (it being agreed that for purposes of this
Section 4.2 (a) the date referred to in Section 3.2 shall refer to the date of
the then most recent audited financial statements of ERC US and its consolidated
Subsidiaries delivered to the Agent.
(b) No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the Loans requested to be made
on such date.
(c) The Agent shall have received a Borrowing Base Certificate for the
then most recently ended Calculation Period in accordance with Section 5.2(c).
(d) The Agent and the Lenders shall have received all fees due and
owing pursuant to Sections 2.4.
(e) No notice of, or any other document or instrument creating, any
federal tax Lien or Lien under Section 412 of the Code or Section 4068 of ERISA
shall have been issued, recorded or filed in an amount in excess of $100,000
with respect to the assets of any Person constituting the Borrower and no Lender
shall have informed the Agent or the Borrower that such Lender has processed any
such Lien or has notice thereof.
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(f) No restrictions shall have been imposed on the convertibility or
transferability of any currency by any Governmental Authority where ER Hong Kong
or ER BVI is domiciled which the Agent deems in its business judgment will have
an adverse impact on the ability of any Person constituting the Borrower to pay
or perform the Obligations hereunder or under the other Loan Documents or to
continue to operate its business.
(g) In the case of any Revolving Credit Loan requested to be made
during the period beginning on the Effective Date and ending on the earlier of
July 30, 2002 and the date a Purchasing Lender shall have entered into an
Assignment and Acceptance with PNC with respect to not less than $20,000,000 in
principal amount of the Loans and commitments of PNC hereunder, funding such
Revolving Credit Loan will not reduce the then Undrawn Availability to less than
$5,000,000.
(h) To the extent the Loan proceeds to be deposited in the Escrow
Account on the Closing Date are less than $20,750,000, Borrower shall have,
simultaneously with the funding of the initial Loans deposited other funds (the
"Borrower Deposit") in the Escrow Account so that the aggregate funds on deposit
therein are not less than $20,750,000.
(i) On the date of the initial Loan, the ratio of Senior Funded Debt
to Consolidated EBITDA shall not exceed 2.0 to 1.0. For purposes of this Section
4.2(i), Senior Funded Debt shall be reduced by the amount of the Borrower
Deposit.
(j) On the date of the initial Loan, the Congress Financial Credit
Facility shall be paid in full.
(k) In the case of the initial Loans, the Agent, ERC US and Bank of
America shall have entered into an account control agreement in form and
substance satisfactory to the Agent with respect to such of the accounts of ERC
US and MI with the Bank of America as is required by the Agent.
Each borrowing hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this Section 4.2 have been satisfied.
ARTICLE 5.
AFFIRMATIVE COVENANTS
Each Person constituting the Borrower hereby agrees that, so long as
the Commitments remain in effect, any Note remains outstanding and unpaid or any
other amount is owing to the Agent or any Lender hereunder, each Person
constituting the Borrower shall and shall cause their respective Subsidiaries,
other than SSG and Inactive Subsidiaries, to:
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Section 5.1 Financial Statements. Furnish to the Agent (with sufficient
copies for each Lender):
(a) (i) as soon as available, but in any event within 105 days after
the end of the fiscal year of ERC US ended March 31, 2002, a copy of the
consolidated balance sheet of ERC US and its consolidated Subsidiaries as at the
end of such fiscal year and the related consolidated statements of income and
retained earnings and of cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, certified by
and reported on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Ernst & Young, LLP or
other independent certified public accountants of nationally recognized standing
reasonably acceptable to the Agent, setting forth in comparative form the
figures for the previous year, together with a compliance certificate by a
Responsible Officer as to their being fairly stated in all material respects
when considered in relation to the consolidated financial statements of ERC US
and its consolidated Subsidiaries together with an unaudited consolidating
balance sheet of ERC US and its consolidated Subsidiaries as at the end of such
fiscal year and the related unaudited consolidated statements of income and
retained earnings and of cash flows for such fiscal year setting forth in each
case, in comparative form, the figures for the previous fiscal year together
with a compliance certificate by a Responsible Officer as to their being fairly
stated in all material respects; and (ii) as soon as available but in any event
within 90 days of the end of each other fiscal year of ERC US ending after March
31, 2002, a copy of the consolidated and consolidating balance sheet of ERC US
and its consolidated Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating statements of income and retained
earnings and of cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, certified by and
reported on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Ernst & Young, LLP or
other independent certified public accountants of nationally recognized standing
reasonably acceptable to the Agent, setting forth in comparative form the
figures for the previous year, together with a compliance certificate by a
Responsible Officer as to their being fairly stated in all material respects
when considered in relation to the consolidated financial statements of ERC US
and its consolidated Subsidiaries; and
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(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of ERC US, the unaudited consolidated and consolidating balance sheet of ERC US
and its consolidated Subsidiaries as at the end of such fiscal quarter and the
related unaudited consolidated and consolidating statements of income and
retained earnings and of cash flows of ERC US and its consolidated Subsidiaries
for such fiscal quarter and the portion of the fiscal year through the end of
such fiscal quarter, setting forth in each case in comparative form the figures
for the previous year, together with a compliance certificate by a Responsible
Officer as to their being fairly stated in all material respects when considered
in relation to the consolidated financial statements of ERC US and its
consolidated Subsidiaries (subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
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Section 5.2 Certificates; Other Information. Furnish to the Agent (with
sufficient copies for each Lender):
(a) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and 5.1(b), the following: (i) a certificate of a
Responsible Officer of ERC US stating that, to the best of such Officer's
knowledge such Responsible Officer has obtained no knowledge of any Default or
Event of Default, except as specified in such certificate and (ii) an updated
listing of all license agreements for intellectual property to which ERC US
and/or any of its Subsidiaries is a party as licensor or licensee.
(b) within five Business Days after the same are sent, copies of all
financial statements and reports which ERC US sends to its stockholders
generally, and within five days after the same are filed, copies of all
financial statements and reports which ERC US may make to, or file with, the
Securities and Exchange Commission or any successor or analogous Governmental
Authority;
(c) within seven Business Days after the end of each Calculation
Period and, in the event the Calculation Period becomes a seven day period
pursuant to the definition of such term, by the Wednesday next following the end
of each Calculation Period, (i) a Borrowing Base Certificate as of the last day
of such Calculation Period which certificate shall include, inter alia, an
accounts receivable aging report for each Person constituting the Borrower as of
the end of the Calculation Period covered by such certificate, and (ii) a report
with respect to each back to back letter of credit facility and each other
credit facility of ER Hong Kong and ER BVI, giving notice of any failure of any
issuer of any letter of credit under any such facility to honor a draw
thereunder for any reason and notice of disputes with respect to any such
letters of credit; and
(d) promptly, such additional financial and other information as the
Agent from time to time reasonably may request.
Section 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the relevant Person constituting the Borrower or its Subsidiaries, as the case
may be or except for amounts not exceeding $500,000, in the aggregate, incurred
in the ordinary course of business but subject to Section 6.2.
Section 5.4 Conduct of Business and Maintenance of Existence. Continue to
engage in businesses related to the businesses now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to Section 6.4; comply with all Contractual Obligations and
Requirements of Law (excluding, for purposes of this subsection, Requirements of
Law specifically addressed in other subsections of this Article 5) except, in
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the case of any Inactive Subsidiary, to the extent that failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.
Section 5.5 Maintenance of Property; Insurance. Keep all property useful
and necessary in its business in good working order and condition, ordinary wear
and tear excepted; maintain with financially sound and reputable insurance
companies (rated A or better by A.M. Best & Co.) insurance on substantially all
its property (including, without limitation, inventory) in at least such amounts
and against at least such risks (but including in any event general liability,
product liability and business interruption) as is required by Agent in its
reasonable business judgment and available in the marketplace; cause Agent to be
a loss payee on all such insurance policies and furnish to the Agent proof
reasonably satisfactory to the Agent of the annual renewal thereof (within 30
days of such renewal) and, upon written request, such other information as to
the insurance carried as Agent may reasonably request. Such insurance policies
that cover goods shall provide that the insurance company shall give Agent at
least thirty (30) days' written notice before any such policy of insurance is
altered or canceled and that no act, whether willful or negligent, or default of
Borrower shall affect the right of Agent to recover under such policy of
insurance in case of loss or damage. Borrower irrevocably makes, constitutes and
appoints Agent (and all officers, employees or agents designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact) for the purpose,
following an Event of Default, of making, settling and adjusting claims under
such policies of insurance, endorsing the name of the relevant Persons
constituting the Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and making all
determinations and decisions with respect to such policies of insurance.
Section 5.6 Inspection of Property; Books and Records; Discussions. Keep
proper books of record and account in which full, true and correct entries in
conformity with prudent business practices and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and permit representatives of the Agent and each Lender during
normal business hours and upon reasonable notice (unless an Event of Default has
occurred and is continuing, in which case no such notice from the Agent or any
Lender shall be required) to visit and inspect any of its properties, examine
and make abstracts from any of its books and records and conduct asset/system
reviews and/or appraisals, including, without limitation, up to three (3) field
exams every fiscal year of ERC US during the term hereof to be performed by a
third party acceptable to the Required Lenders and an annual inventory appraisal
to be performed by a third party acceptable to the Required Lenders (all such
asset/system reviews and appraisals, field exams and inventory appraisals to be
at the Borrower's sole cost and expense, the cost of which shall be paid by
Borrower on demand from the Agent) at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations, properties and
financial and other condition of any Person constituting the Borrower and its
Subsidiaries with officers and employees of such Person and its Subsidiaries and
with its independent certified public accountants.
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Section 5.7 Notices. Promptly give notice to the Agent of:
(a) the occurrence of any Default or Event of Default of which the
Borrower has knowledge;
(b) any (i) default or event of default under any Contractual
Obligation of any Person constituting the Borrower or any of its Subsidiaries,
other than SSG and Inactive Subsidiaries, or (ii) litigation, investigation or
proceeding which may exist at any time between any Person constituting the
Borrower or any of its Subsidiaries, other than SSG and Inactive Subsidiaries,
and any Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, would have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Person constituting the
Borrower or any of its Subsidiaries in which the amount involved is $500,000 or
more and not covered by insurance or in which injunctive or similar relief is
sought;
(d) the occurrence of any event having a Material Adverse Effect; and
(e) The failure of any Person which has issued one or more letters of
credit in a face amount equal to or greater than $100,000 (or its equivalent in
any currency), in the case of trade letters of credit, and $500,000, in the case
of back to back letters of credit (or its equivalent in any currency), singly or
in the aggregate to ER Hong Kong or ER BVI, as beneficiary, or for the account
of ER Hong Kong or ER BVI, to honor a draw under such letter of credit for any
reason.
Each notice pursuant to this subsection shall be accompanied by a
statement of a Responsible Officer of the relevant Person constituting the
Borrower setting forth details of the occurrence referred to therein and stating
what action such Person proposes to take with respect thereto.
Section 5.8 ERISA Compliance. Comply with all the applicable provisions of
ERISA now or hereafter in effect with respect to each of its Plans except where
the failure to comply would not have a Material Adverse Effect. Notify the
Lender of the following events, as soon as possible and in any event within
thirty days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan; (ii) the occurrence
of a prohibited transaction (as defined in Section 406 of ERISA or Section 4975
of the Code) with respect to any Plan, (iii) the institution of proceedings or
the taking or expected taking of any other action by the PBGC or any Person
constituting the Borrower or any ERISA Affiliate to terminate or withdraw or
partially withdraw from any Plan and, with respect to a Multiemployer Plan, the
Reorganization or Insolvency of such Plan (as such terms are defined in ERISA),
(iv) the failure of any Person constituting the Borrower or any ERISA Affiliate
to make a required installment under Section 412 (m) of the Code or any other
payment required under Section 412 of the Code on or before the due date or (v)
the adoption of an amendment with respect to a Plan so that any Person
constituting the Borrower or any ERISA Affiliate is required to provide security
to the Plan under Section 401(a)(29) of the Code, and in
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addition to such notice, promptly deliver to the Lender a certificate signed by
a Responsible Officer setting forth the details relating thereto, and the action
that such Person and the ERISA Affiliate propose to take with respect thereto
and when known, any action taken or threatened by the Internal Revenue Service
or the PBGC, together with a copy of any notice to the PBGC or the Internal
Revenue Service or any notice delivered by the PBGC or the Internal Revenue
Service.
Section 5.9 Taxes and Claims. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any property belonging to it and which upon non-payment could become a Lien
on any portion of its property, prior to the date on which penalties attach
thereto; provided that, subject to any more restrictive provisions contained in
the Loan Documents, Borrower shall not be required to pay or cause to be paid
any such tax, assessment, charge or levy the payment of which is being contested
in good faith and by proper proceedings and for which adequate reserves are
being maintained in accordance with GAAP; provided, however, Borrower shall
immediately pay and discharge or cause to be paid and discharged any such
contested taxes, assessments and governmental charges or levies in excess of
$100,000 upon the commencement of any proceeding to foreclose, sell or otherwise
execute on the Lien thereof.
Section 5.10 Environmental Matters.
(a) Borrower shall defend, indemnify and hold harmless the Agent and
all Lenders from and against any and all Environmental Liabilities.
(b) Borrower shall not cause or permit (or allow any subtenant to
cause or permit) (i) any real property owned or leased by it, or any part
thereof, to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials in violation
of the Environmental and Safety Laws.
(c) The provisions of this Section 5.10 shall be in addition to any
other obligation and liability the Borrower may have to the Agent and the
Lenders, and shall survive the transactions contemplated herein, the termination
of this Credit Agreement and the repayment of all Obligations.
Section 5.11 Shipping Documents. Upon reasonable request by Agent, (i)
each of the Subsidiary Borrowers or any one or more of them as Agent shall
direct from time to time, shall deliver the copies of all ocean or other bills
of lading and other shipping documents (collectively, "Shipping Documents") for
each shipment of goods made by or for any Subsidiary Borrower to ERC US, MI or
any other Subsidiary or Person receiving goods (and acting on ERC US' behalf) to
be sold by ERC US to be delivered to the Agent or any Person selected by Agent
to act on its behalf (including without limitation any Lender) and/or (ii) upon
the occurrence and during the continuance of an Event of Default, cause the
Agent or any Person selected by Agent to act on its behalf (including without
limitation any Lender) to be named on such Shipping Documents as a Person
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necessary to negotiate or effect a Transfer of such Shipping Documents or the
goods covered thereby, and (iii) ERC US shall cause any other Person shipping
goods to ERC US to take the actions described in clause (i) and (ii) of this
Section 5.11.
Section 5.12 Significant Subsidiary. Cause each Subsidiary which
becomes a Significant Subsidiary after the Closing Date (if not already a
Subsidiary Borrower) to become a party hereto by executing and delivering an
Assumption Agreement to this Agreement. If any two (2) or more Inactive
Subsidiaries (a "Significant Group") taken together would constitute a
Significant Subsidiary, Borrower shall cause so many of such Inactive
Subsidiaries to become a party hereto (by executing and delivering an Assumption
Agreement to this Agreement) as is necessary to cause the remaining Person(s) in
such group to cease to be a Significant Group.
Section 5.13 Waivers and Consents. Borrower shall use reasonable
efforts to obtain Waivers and Consents substantially in the form of Exhibit L
hereto from each warehousemen/lessor of each location in the United States of
America at which any Person constituting the Borrower maintains any Collateral
(as defined in the Security Agreements) and which has not been obtained prior to
the Effective Date. Section
Section 5.14 Hedging Agreement. Not later than the thirty-fifth day
following the Closing Date, Borrower shall enter into an interest rate hedging
arrangement in form and substance and with counterparties acceptable to the
Agent (whose acceptance shall not be unreasonably withheld) with respect to at
least $10,000,000 of the Loans for a period of at least one year.
Section 5.15 Lockbox Account. On or before December 31, 2002, ERC US
and MI shall have terminated their lockbox and other deposit accounts with Bank
of America, N.A., on or before September 3, ERC US shall have established those
lockbox and other deposit accounts and full cash dominion with PNC Bank,
National Association (in that capacity, the "Depository") to which their
customers will be directed to make payment on accounts and into which proceeds
of collateral shall be promptly deposited, and shall have entered into control
agreements with the Depository and the Agent with respect to such deposit
accounts providing for a first security therein in favor of the Agent for the
benefit of the Lenders, all in form and substance satisfactory to the Required
Lenders.
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ARTICLE 6.
NEGATIVE COVENANTS
Each Person constituting the Borrower hereby agrees that, so long as
the Commitments remain in effect, any Note remains outstanding and unpaid or any
other amount is owing to the Agent or any Lender hereunder, it shall not, and
shall not permit any of their respective Subsidiaries, other than SSG, to,
directly or indirectly:
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Section 6.1 Limitation on Indebtedness. Create, incur, assume or suffer
to exist any Indebtedness, except:
(a) Indebtedness (i) in respect of the Loans, the Notes and other
obligations of such Person constituting the Borrower under this Agreement and
(ii) arising with respect to Hedging Agreements;
(b) Indebtedness of ER Hong Kong and ER BVI to the Bank of America
and/or Hang Seng Bank pursuant to the Letter Agreement dated July 11, 2001, as
amended, between Bank of America and ER Hong Kong and ER BVI (the "B of A
Facility"), the Letter Agreement dated July 7, 2000, as amended, between Hang
Seng Bank and ER Hong Kong which establishes a back-to-back letter of credit
facility (the "HS Facility"), and a trade letter of credit facility (the "HS
Trade LC Facility"), and other letter of credit facilities to ER Hong Kong
and/or ER BVI, provided the Person providing such letter of credit facility does
not require cash collateral in an amount in excess of 35% of the available face
amount of letters of credit issued under such other facility.
(c) ERC US may guarantee up to $5,000,000 (or its equivalent in other
currencies) of the aggregate liability of ER Hong Kong and ER BVI under the HS
Trade LC Facility or other trade letter of credit facilities permitted by
6.1(b).
(d) ERC Intercompany Payable in the aggregate principal amount of
$35,000,000 on the Closing Date plus an additional $3,000,000 for each fiscal
year ending after March 31, 2002. ERC US shall cause the amount of the ERC
Intercompany Payable to increase by $3,000,000 during each fiscal year. ERC US
shall not at any time reduce the outstanding principal amount of the ERC
Intercompany Payable below $35,000,000 during the fiscal year ending March 31,
2003, $38,000,000 during the fiscal year ending March 31, 2004, $41,000,000
during the fiscal year ending March 31, 2005, and $44,000,000 during the fiscal
year ending March 31, 2006, and shall make no payment with respect thereto at
any time during which an Event of Default has occurred and is continuing.
Neither ER Hong Kong nor ER BVI shall effect a Transfer of the ERC Intercompany
Payable.
(e) Unsecured Indebtedness not exceeding $500,000 and which has no
negative pledge covenant of a Person which becomes a Subsidiary after the date
hereof, provided that such Indebtedness existed at the time such Person became a
Subsidiary and was not created in anticipation thereof;
(f) Capital Lease Obligations plus purchase money indebtedness
existing on the Effective Date plus additional Capital Lease Obligations and
purchase money indebtedness provided the aggregate amount of such additional
Capital Lease Obligations and purchase money indebtedness does not increase in
any fiscal year during the term of this Agreement by more than $500,000 over the
amount thereof in the prior fiscal year; and
(g) Contingent Obligations in accordance with Section 6.3 of this
Agreement.
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(h) Convertible Debentures in an aggregate outstanding principal
amount not exceeding $20,750,000 provided the same are paid or retired prior to
their current stated maturity date.
Section 6.2 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets (including, without limitation,
any Capital Stock of ER Hong Kong, ER BVI, MI or SSG) or revenues, whether now
owned or hereafter acquired, except for:
(a) Liens securing the Obligations.
(b) Liens securing Indebtedness permitted by Section 6.1(f); provided,
that, in the case of Liens securing Indebtedness permitted by Section 6.1(f)
such Liens shall not encumber any property not financed by such Indebtedness,
and in the case of any Liens permitted by Section 6.1(e), such Liens shall not
encumber any property owned by any Person other than the new Subsidiary or any
property not encumbered by such Lien at the time it was created, such Liens
existed at the time such Person became a Subsidiary and were not created in
anticipation of the acquisition, and any such Lien does not by its terms secure
any Indebtedness other than Indebtedness existing immediately prior to the time
such Person becomes a Subsidiary;
(c) Subject to Section 5.9, Liens for taxes not yet due or which are
being contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the relevant Person
constituting the Borrower or its Subsidiaries, as the case may be, in conformity
with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlords' or other like Liens on inventory and equipment arising in the
ordinary course of business which secure amounts not overdue for a period of
more than 60 days or which are being contested in good faith by appropriate
proceedings provided, the Borrower shall give immediate written notice to the
Agent of any action taken by the holder of any such Lien to foreclose or enforce
such Lien and shall immediately pay and discharge the same upon notice from the
Agent that in the Agent's business judgment such Lien impairs or may impair the
Agent's security interest in, or the value of, any Collateral (as defined in any
of the Loan Documents);
(e) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(f) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business; and
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(g) Liens listed on Schedule VII, provided that no such Lien is
amended after the date of this Agreement to cover any additional property or to
secure additional Indebtedness.
Notwithstanding the termination pursuant to the terms of any
Intellectual Property Security Agreement of any Lien on any Intellectual
Property of any Person constituting the Borrower, except upon payment in full of
the Obligations and termination of the Commitments, no Person constituting the
Borrower shall create, incur, assume or suffer to exist any Lien on any
Intellectual Property owned by it except in favor of the Agent and the Lenders.
Section 6.3 Limitation on Contingent Obligations. Create, incur, assume
or suffer to exist any Contingent Obligation, except as permitted by this
Agreement, including without limitation, Section 6.1(b) and 6.1(c), provided, in
any case those obligations are not otherwise prohibited under this Agreement.
Section 6.4 Limitations on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or (except in the case of Inactive Subsidiaries)
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), reincorporate itself in any other jurisdiction, or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
property, business or assets, make, in the case of any Subsidiary Borrower, any
amendments to its organizational documents, or make any material change in its
present method of conducting business, except:
(a) any Subsidiary of ERC US, other than ER Hong Kong or ER BVI, may
be merged or consolidated with or into ERC US (provided that ERC US shall be the
continuing or surviving corporation) or with or into any one or more wholly
owned Subsidiaries of ERC US other than SSG or any Inactive Subsidiary (provided
that the wholly owned Subsidiary or Subsidiaries or the Subsidiary Borrower, if
it is a party to such merger or consolidation, shall be the continuing or
surviving corporation) and after giving effect to any of such transactions, no
Default or Event of Default shall exist; and
(b) any wholly owned Subsidiary of ERC US other than ER Hong Kong or
ER BVI may sell, lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to ERC US or any wholly-owned
Subsidiary of ERC US other than SSG or any Inactive Subsidiary; and
(c) sales of assets in accordance with Section 6.5 of this Agreement.
Section 6.5 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets,
tangible or intangible, (including, without limitation, Capital Stock of any
Person constituting the Borrower (other than Capital Stock of ERC US or SSG,
provided the provisions of Section 2.9(f) are complied with), receivables and
leasehold interests), whether now owned or hereafter acquired, except:
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(a) obsolete or worn out property and property no longer used or
useful in such Persons' business disposed of in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) the sale or discount without recourse of accounts receivable only
in connection with the compromise thereof or the assignment of past-due accounts
receivable for collection; and
(d) as otherwise contemplated by Section 6.4 of this Agreement.
Section 6.6 Limitation on Investments, Loans and Advances. Purchase, hold
or acquire beneficially any Capital Stock, other securities or evidences of
indebtedness of, make or permit to exist any loans or advances to, or make or
permit to exist any investment or acquire any interest whatsoever in, any other
Person, except:
(a) extensions of trade credit to customers in the ordinary course of
business provided payment of such trade credit is made on normal business terms.
(b) So long as no Event of Default shall have occurred and be
continued, ERC US may (i) acquire Capital Stock in SSG (provided such Capital
Stock of SSG is acquired only with Capital Stock of ERC US and provided giving
effect to any such acquisition shall not cause any Person who holds less than
10% (or such greater percentage as the Required Lenders may agree to in writing)
of any class of Capital Stock of ERC US on the date hereof to hold more than 10%
(or such greater percentage as the Required Lenders may agree to in writing) of
any such class of Capital Stock of ERC US, and (ii) beginning on the first
anniversary of the Closing Date, in accordance with the strategic objectives of
its business plan, acquire Capital Stock in other Persons (other than Inactive
Subsidiaries) in businesses related to that of ERC US; in all cases described in
clauses (i) and (ii) taken together in an aggregate amount for each 12 month
period beginning on an anniversary of the Closing Date and ending on the next
succeeding anniversary of the Closing Date (each such period, an "Acquisition
Period") not exceeding the lesser of (x) $500,000 and (y) the principal amount
of the Term Loan repaid pursuant to Section 2.9(e) during the twelve month
period immediately preceding the then current Acquisition Period;
(c) Permitted Investments, provided if the Person making the Permitted
Investment is organized under the laws of any state of the United States of
America, the District of Columbia, Puerto Rico, or any other territory or
possession of the United States of America the Agent shall have been granted a
first priority perfected security interest therein;
(d) capital contributions, loans and advances by ER Hong Kong and/or
ER BVI to ERC US;
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(e) loans and advances in the form of cash by any Person constituting
the Borrower in an aggregate amount for all Persons constituting Borrower not to
exceed $1,000,000 in outstanding principal amount at any time; and
(f) loans and advances between ER Hong Kong and ER BVI in the ordinary
course of business.
(g) prior to the occurrence of an Event of Default, advances by any
Person constituting the Borrower to Inactive Subsidiaries to pay charges imposed
by Governmental Authorities related to the maintenance of such Inactive
Subsidiary's corporate existence, such as annual filing and franchise fees and
other minimal expenses necessary to maintain such Inactive Subsidiary in good
standing.
Section 6.7 Limitation on Optional Payments and Modifications of Debt
Instruments. Make any optional payment or prepayment on or redemption,
defeasance or purchase of any Subordinated Debt, or amend, modify or change, or
consent or agree to any amendment, modification or change to any of the terms
relating to the payment or prepayment or principal of or interest on, any such
Indebtedness, other than any amendment, modification or change which would
extend the maturity or reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment of interest thereon.
Section 6.8 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transaction is
(a) not otherwise prohibited under this Agreement, and (b) upon fair and
reasonable terms no less favorable to the relevant Person constituting the
Borrower, than it would obtain in a comparable arm's length transaction with a
Person which is not an Affiliate. Transactions entered into pursuant to the
agreements listed on Schedule X are permitted, provided in the case of the
management agreements or other transactions with SSG, the net amount owed by SSG
at any time shall not exceed $100,000.
Section 6.9 Fiscal Year. Permit the fiscal year of the Borrower to end on a
day other than March 31st of each year.
Section 6.10 Limitation on Conduct of Business. Enter into any business
either directly or through any Subsidiary except for businesses in which ERC US
and its Subsidiaries are engaged on the date of this Agreement and business
related to such existing businesses.
Section 6.11 Net Worth. Permit Consolidated Net Worth at the end of any
fiscal quarter of ERC US to be less than the sum of (a) an amount equal to (i)
85% times (ii) an amount equal to the Consolidated Net Worth as shown in the
audited financial statements of ERC US for the fiscal year ended March 31, 2002
and delivered to the Agent and the Lenders pursuant to Section 5.1, minus the
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share repurchase amount of $5,500,000 plus (b) 50% of the aggregate, cumulative
Consolidated Net Income (but excluding net losses for purposes of this
calculation), if any, for each quarter occurring after the Closing Date.
Section 6.12 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage
Ratio for the period of four consecutive fiscal quarters preceding any date of
determination to be less than 1.25 to 1.
Section 6.13 Senior Funded Debt to EBITDA.
(a) Permit the ratio of Senior Funded Debt of ERC US and its
consolidated Subsidiaries to Consolidated EBITDA for the period of four
consecutive fiscal quarters preceding any date of determination to be greater
than: 2.50 to 1.0.
(b) Permit the ratio of Adjusted Funded Debt of ERC US and its
consolidated Subsidiaries to Adjusted EBITDA for the period of four consecutive
fiscal quarters preceding any date of determination to be greater than: 2.50 to
1.0.
Section 6.14 Intentionally omitted.
Section 6.15 ERISA Obligations. Be or become obligated to the PBGC, in any
material respect, other than in respect of annual premium payments.
Section 6.16 Restricted Payments. Make any purchase, redemption or other
acquisition of any Capital Stock of ERC US other than payment of the Convertible
Debentures. Make any other distribution to holders of the Capital Stock of ERC
US, in their capacity as such, except for the issuance of Capital Stock of ERC
US in transactions described in the parenthetical contained in Section
2.9(f)(ii) and pursuant to transactions contemplated by Section 6.6(b)(i).
ARTICLE 7.
EVENTS OF DEFAULT
Section 7.1 Events of Default. If any of the following events (each,
an "Event of Default") shall occur and be continuing:
(a) (i) The Borrower shall fail to pay any principal of any Note or
the Loans when due in accordance with the terms thereof or hereof; or (ii) the
Borrower shall fail to pay any interest on any Note or the Loans, or any other
amount payable hereunder, or any Person constituting the Borrower shall fail to
pay any net amount due by it under any Lender Hedge Agreement, in each case
within two (2) Business Days' after any such interest or other amount becomes
due in accordance with the terms thereof or hereof (and, in the case of any
Lender Hedge Agreement, notice of such failure shall have been given to the
Agent in writing); or
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(b) Any representation or warranty made or deemed made by any Person
constituting the Borrower or any other party to a Loan Document herein or in any
other Loan Document or which is contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or
(c) Any Person constituting the Borrower shall default in the
observance or performance of any agreement contained in Article 6, Section 5.1,
5.2, 5.6, 5.7 or 5.11 or in any covenant or agreement in any Security Document,
or in any covenant or agreement in any other Loan Document which has a grace
period expressed with respect thereto; or
(d) Any Person constituting the Borrower or any other Party to a Loan
Document shall default in the observance or performance of any other agreement
contained in this Agreement (other than as provided in Sections 7.1(a), (b) or
(c)) or any other Loan Document, and such default shall continue unremedied for
a period of 30 days, provided, if such Event of Default is not a monetary Event
of Default and is capable of cure and the relevant Person is diligently
proceeding to cure such Event of Default, such Person shall have an additional
thirty (30) days to effect such cure; or
(e) ERC US or any of its Subsidiaries, other than SSG, shall:
(1) default in any payment of principal of or interest on any
Indebtedness (other than the Notes or in respect of any Lender Hedge
Agreement) or in the payment of any Contingent Obligation in either case in
excess of $500,000, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness or Contingent
Obligation was created; or
(2) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Contingent
Obligation or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause the holder
or holders of such Indebtedness or beneficiary or beneficiaries of such
Contingent Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated
maturity or such Contingent Obligation to become payable; or
(f) (1) ERC US or any of its Subsidiaries, other than SSG, shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
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substantial part of its assets, or ERC US or any of its Subsidiaries, other than
SSG, shall make a general assignment for the benefit of its creditors; or (2)
there shall be commenced against ERC US or any of its Subsidiaries, other than
SSG, any case, proceeding or other action of a nature referred to in clause (1)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (3) there shall be commenced against ERC US or any
of its Subsidiaries, other than SSG, any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (4) ERC US or any of its Subsidiaries, other than SSG, shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (1), (2) or (3) above; or
(5) ERC US or any of its Subsidiaries, other than SSG, shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(g) One or more judgments or decrees shall be entered against ERC US
or any of its Subsidiaries, other than SSG, involving in the aggregate a
liability (not paid or fully covered by insurance) of $900,000 or more and all
such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof; or
(h) (i) Any Reportable Event, which the Required Lenders determine in
good faith (which determination shall be final and conclusive) constitutes
grounds for the termination of any Plan or Plans by PBGC or for the appointment
by the appropriate United States District Court of a trustee to administer or
liquidate any Plan or Plans, shall have occurred and be continuing thirty (30)
days after written or telegraphic or telephonic notice to such effect shall have
been given to the Borrower by the Agent; or (ii) a decision shall have been made
by the Board of Directors (or any committee thereof), any authorized officer or
other employee of any Person constituting the Borrower, or any trustee or
trustees of any Plan or Plans to terminate any Plan or Plans or to file a
termination notice with respect to any Plan or Plans; or (iii) a trustee shall
be appointed by the appropriate United States District Court to administer any
Plan or Plans, or any Plan or Plans shall be terminated; or (iv) PBGC shall
institute proceedings to terminate any Plan or Plans or to appoint a trustee to
administer any Plan or Plans; or (v) any Person constituting the Borrower or any
ERISA Affiliate shall fail with respect to any Plan or Plans to meet the minimum
funding standards established in the Code, or shall obtain a waiver of such
minimum funding standards; or (vi) any Person constituting the Borrower or any
ERISA Affiliate shall completely or partially withdraw from a Plan; or (vii) any
Person constituting the Borrower or any ERISA Affiliate shall make a decision to
cease operations at a facility or facilities where such cessation would result
in a separation from employment of more than 20% of the total number of
employees who are participants under a Plan; where in the case of any one or
more of the events described in the preceding clauses (i) through (vii) the
aggregate outstanding amount of unfunded vested liabilities under such Plan if a
single employer plan (including unfunded vested liabilities which arise or might
arise as a result of the termination of or withdrawal from such Plan) or the
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allocable portion of such outstanding unfunded vested liabilities under a
Multiemployer Plan shall exceed (either singly or in the aggregate in the case
of any such liability arising out of one or more of the events described in the
preceding clauses (i) through (vii) under more than one such Plan) 2% of the
Consolidated Tangible Net Worth of ERC US and shall in good faith be determined
by the Required Lenders (which determination shall be final and conclusive) to
have a Material Adverse Effect; or
(i) A Change in Control shall occur; or
(j) Any Subsidiary of any Person constituting the Borrower shall take
any action set forth in Article 6 which the Borrower has undertaken not to
permit; or
(k) Any Subsidiary of any Person constituting the Borrower shall fail
to take any action set forth in Article 5 which the Borrower has undertaken to
cause and such failure shall not be remedied for a period of 30 days; or
(l) An Event of Default under (and as defined in) any other Loan
Document shall occur; or
(m) ERC US shall cease to own all of the issued and outstanding
Capital Stock of ER Hong Kong (other than the Director Share) or MI, or Xxxx
Xxxxxxx, an individual with an office at Suite 3105, Hampton Court, Xxx Xxxxxxx,
00-00 Xxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx 1, or other nominee of ERC US reasonably
acceptable to Agent, shall cease to own the Director Share as nominee for ERC
US; or
(n) ER Hong Kong shall cease to own all the issued and outstanding
Capital Stock of ER BVI; or
(o) any Person shall become a member of the Board of Directors of ER
Hong Kong unless simultaneously with becoming a member of said Board of
Directors such Person has delivered an ER Hong Kong Director Resignation to the
Agent;
(p) Xxxxxxxx X. Xxxxxx shall cease to be the Chairman of the Board and
Chief Executive Officer of ERC US or shall own less than 20% of its issued and
outstanding common Capital Stock of ERC US; or
then, and in any such event, (A) if such event is an Event of Default specified
in clause (1) or (2) of Section 7.1(f) above with respect to any Person
constituting the Borrower, automatically the Commitments shall immediately
terminate and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes shall immediately become due
and payable, and (B) if such event is any other Event of Default, any one or
more of the following actions may be taken: (i) the Agent may (with the consent
of the Required Lenders) and shall (upon the request of the Required Lenders),
by written notice to the Borrower, declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; (ii) the Agent
may (with the consent of the Required Lenders) and shall (upon the request of
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the Required Lenders), by written notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes to be due and payable forthwith, whereupon the same
shall immediately become due and payable and (iii) the Agent may (with the
consent of the Required Lenders) and shall (upon the request of the Required
Lenders but subject to the provisions of Article 8), proceed to enforce the
rights and remedies of the Secured Party under the Security Documents. Except as
expressly provided above in this Section, presentment, demand, protest and all
other notices of any kind are hereby expressly waived.
ARTICLE 8.
THE AGENT
Section 8.1 Actions. Each Lender authorizes the Agent t o act on behalf of
such Lender under this Agreement, the other Loan Documents and any other
related instruments and, in the absence of other written instructions from the
Lenders received from time to time by the Agent (with respect to which the Agent
agrees that it will, subject to the last two sentences of this Section 8.1,
comply in good faith except as otherwise advised by counsel), to exercise such
powers hereunder and thereunder as are specifically delegated to or required of
the Agent by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Lender agrees (which agreement shall survive
any termination of this Agreement) to indemnify the Agent, pro rata according to
such Lender's Percentage, from and against any and all liabilities, obligations,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement, the Notes, any of the other Loan Documents and any other related
instruments, including, without limitation, the reimbursement of the Agent for
all reasonable out-of-pocket expenses (including, without limitation,
syndication costs and attorneys' fees) incurred by the Agent hereunder or in
connection herewith or in enforcing the obligations of the Borrower or any
Lender under this Agreement, under any of the other Loan Documents or any other
related instruments, in all cases as to which the Agent is not reimbursed by the
Borrower; provided that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements determined by a court of proper jurisdiction in
a final proceeding to have resulted from the Agent's gross negligence or willful
misconduct. The Agent shall not be required to take any action hereunder or
under any other related instruments, or to prosecute or defend any suit in
respect of this Agreement or any such instrument, unless indemnified to its
satisfaction by the Lenders against costs, liability, and expense. If any
indemnity in favor of the Agent shall become impaired, it may call for
additional indemnity and cease to do the acts indemnified against until such
additional indemnity is given. The Agent may delegate its duties hereunder to
affiliates, agents or attorneys-in-fact selected in good faith by the Agent.
Each Lender's obligation to indemnify the Agent as set forth above shall be
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unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which such Lender may have or have had
against the Agent, any other Lender, the Borrower, any Subsidiary or any other
Person.
Section 8.2 Exculpation. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement. Neither the
Agent nor any of its directors, officers, employees, or agents (collectively,
the "Related Parties") shall be liable to any Lender for any action taken or
omitted to be taken by it under this Agreement, the other Loan Documents or any
other related instrument, or in connection herewith or therewith, except for its
own willful misconduct or gross negligence, nor shall the Agent or any Related
Parties be responsible for any recitals or representations or warranties herein
or therein, or for the effectiveness, enforceability, validity or due execution
of this Agreement, the other Loan Documents or any other related instruments,
nor shall the Agent or any Related Parties be obligated to make any inquiry
respecting the performance by the Borrower of its obligations hereunder or
thereunder. The Agent shall be entitled to rely upon advice of counsel
concerning legal matters and upon any notice, consent, certificate, statement or
writing which it believes to be genuine and to have been presented by a proper
Person. The Agent may at any time request instructions from the Lenders with
respect to any actions or approvals which, by the terms of this Agreement, the
Agent is permitted or required to take or grant, and the Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from taking any action or withholding any approval under this
Agreement or any of the other Loan Documents until it has received instructions
from the Required Lenders. No Lender shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
hereunder or under any of the other Loan Documents in accordance with
instructions from the (i) Required Lenders, or (ii) all of the Lenders to the
extent required hereunder.
Section 8.3 Successor. The Agent may resign as such at any time upon
at least ten (10) Business Days' prior notice to the Borrower and all Lenders,
and the Agent may be removed at any time by written notice from the Required
Lenders. If the Agent at any time shall resign or be removed, the Required
Lenders may appoint another Lender as a successor Agent. If the Required Lenders
do not make such appointment within thirty days, the resigning or removed Agent
shall appoint a new Agent from among the Lenders or, if no Lender accepts such
appointment, from among commercial banking institutions or trust institutions
generally; provided such successor agent shall be a domestic commercial bank
having a combined capital and surplus in excess of $500,000,000 and, if not a
Lender, shall be reasonably acceptable to ERC US (ERC US' approval not to be
unreasonably withheld or delayed). Upon the acceptance of any appointment as
Agent by a successor Agent, such successor Agent shall thereupon become the
Agent hereunder and shall be entitled to receive from the prior Agent such
documents of transfer and assignment as such successor Agent may reasonably
request, and the resigning or removed Agent shall (i) be discharged from its
duties and obligations under this Agreement and the other related instruments
and (ii) entitled to the continued benefit of this Article 8 with respect to all
actions taken by it prior to its removal or resignation.
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Section 8.4 Credit Decisions. Each Lender represents and acknowledges
to the Agent that it has, independently of the Agent and each other Lender, and
based on the financial information referred to in this Agreement and the other
Loan Documents and such other documents, information and investigations as it
has deemed appropriate, made its own credit decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently of the
Agent and each Lender, and based on such documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement, the Loan Documents
or any other related instruments.
Section 8.5 Notices, etc. from Agent. The Agent shall give prompt
notice to each Lender of each notice or request given to the Agent by the
Borrower or by the Agent to the Borrower pursuant to the terms of this
Agreement. The Agent will promptly distribute to each Lender each instrument
received for its account and copies of all other communications received by the
Agent from the Borrower for distribution to the Lenders by the Agent in
accordance with the terms of this Agreement.
Section 8.6 Security Documents. Each Lender hereby authorizes the
Agent to enter into the Security Documents and to take all action contemplated
thereby. Each Lender hereby confirms its agreement to be bound by the terms and
conditions of the Security Documents. Each Lender agrees that no Lender shall
have any right individually to seek to realize upon the collateral granted for
the benefit of the Lenders pursuant to any of the Security Documents, it being
understood and agreed that such rights and remedies may be exercised by the
Agent for the benefit of the Agent and the Lenders upon the terms of the
Security Documents.
ARTICLE 9.
PURCHASING LENDER
Section 9.1 Purchasing Lender.
(a) Each Lender, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time may sell, assign and
delegate to any Affiliate of such Lender and/or, with the consent of the Agent
and ERC US (which in each case shall not be unreasonably withheld or delayed and
shall not be required of ERC US after the occurrence during the continuance of
an Event of Default), to one or more additional banks or financial institutions
(each, a "Purchasing Lender") all or any part (but not less than $5,000,000 in
aggregate of such Lender's rights and obligations under this Agreement, the
Notes and the other Loan Documents (provided, that any such sale, assignment and
delegation shall be made with respect to each Loan and the Commitment and Term
Loan Commitment of such Lender hereunder) pursuant to an agreement ("Assignment
and Acceptance") executed by the Purchasing Lender and such Lender. Such
Assignment and Acceptance shall specify an effective date which is not less than
five Business Days after the date of execution thereof. Upon such execution,
delivery, and acceptance, from and after the effective date determined pursuant
to such Assignment and Acceptance and payment by the assigning Lender of a
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$3,500 administrative fee to the Agent for its own account with respect to each
Purchasing Lender party to such Assignment and Acceptance, (A) the Purchasing
Lender thereunder shall be a party hereto and, to the extent of the Commitments
assigned and Loans sold pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Commitment as set forth
therein, and (B) the assigning Lender thereunder shall, to the extent of the
Commitments assigned pursuant to such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Such Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender as a Lender and the resulting adjustment of
Commitments arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such assigning Lender under this
Agreement and the Notes. On or prior to the effective date determined pursuant
to such Assignment and Acceptance, the Borrower, at its own expense, shall
execute and deliver to the assigning Lender and Purchasing Lender in exchange
for the surrendered Notes, new Notes to the order of such Purchasing Lender in
an amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, new
Notes to the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Notes shall be dated the Closing Date and
otherwise shall be in the form of the Notes replaced thereby. The Notes
surrendered by the assigning Lender shall be returned to the Borrower marked
"replaced." The assigning Lender shall provide the Agent with a copy of each
Assignment and Acceptance.
(b) If, pursuant to this Agreement, any interest in this Agreement or
any other Loan Documents is assigned to any transferee, or a participation in
any interest in this Agreement is given to a transferee, in either case which is
organized under the laws of any jurisdiction other than the United States or any
State thereof, the transferor Lender shall cause such transferee, concurrently
with the effectiveness of such transfer, (i) to represent to the transferor
Lender (for the benefit of the transferor Lender, the Agent and the Borrower)
that under applicable law and treaties no taxes will be required to be withheld
by the Agent, the Borrower or the transferor Lender with respect to any payments
to be made to such transferee in respect of the Loans, (ii) to furnish to the
transferor Lender, the Agent and the Borrower Form W-8ECI or W-8BEN (Ownership
Exemption or Reduced Rate Certificate) (wherein such transferee claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments hereunder) and (iii) to agree (for the benefit of the
transferor Lender, the Agent and the Borrower) to provide the transferor Lender,
the Agent and the Borrower a new Form W-8ECI or W-8BEN upon the expiration or
obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly
executed and completed by such transferee, and to comply from time to time with
all applicable U.S. laws and regulations with regard to such withholding tax
exemption.
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Section 9.2 Disclosure of Information. Each Person constituting the
Borrower authorizes the Lenders to disclose to any Purchasing Lender and any
prospective Purchasing Lender any and all information relating to each Person
constituting the Borrower and its Affiliates which has been furnished to the
Agent and the Lenders by or on behalf of each Person constituting the Borrower;
provided that any such Purchasing Lender agrees to keep any information relating
to any Person constituting the Borrower received hereunder confidential except
as may be required by any Requirement of Law.
Section 9.3 Pledges to Federal Reserve Bank. Nothing herein shall
prohibit any Lender from pledging or assigning any Note to any Federal Reserve
Bank in accordance with applicable law.
ARTICLE 10.
MISCELLANEOUS
Section 10.1 Amendments and Waivers.
(a) No amendment or waiver of any provision of this Agreement, or any
of the other Loan Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent, unless in
writing and signed by all the Lenders, shall do any of the following: (A) waive
any of the conditions specified in Section 4.1 (though the Agent alone may defer
the fulfillment of such conditions until the date of the applicable borrowing),
(B) increase the amount or extend the term of the Commitments of the Lenders or
subject the Lenders to any additional obligations, (C) reduce the principal of,
or interest on, the Loans, the Reimbursement Obligations or any of the Notes, or
reduce any fees payable hereunder, (D) postpone any date fixed for any payment
in respect of principal of, or interest on, the Loans, the Reimbursement
Obligations or any of the Notes, as the case may be, or fees payable hereunder,
(E) change any of the components which shall be required for the Lenders or any
Lender to take any action hereunder, (i.e., the Percentage of the Commitments,
or the aggregate unpaid principal amount of the Loans, or the number of
Lenders), (F) release all or any substantial portion of the collateral subject
to any Security Document except as contemplated by the Intellectual Property
Security Agreements and, with respect to intellectual property, the Security
Agreements executed and delivered by ERC US and Xxxxx or (G) amend this Section
10.1; and provided, further, that no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Lenders hereinabove
required to take such action, affect the rights or duties of the Agent under
this Agreement. Without derogating from the foregoing, no amendment to this
Agreement shall be effective unless signed by each Person constituting the
Borrower.
(b) The liability of each Person constituting the Borrower hereunder
shall be absolute and unconditional irrespective of:
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(14) any change in the time, manner, or place of payment or in
any other term of, or any other amendment or waiver of, or any consent to
departure from any of the Loan Agreement, any of the Loan Documents or any
Obligations;
(15) any change in the name, Capital Stock, Certificate of
Incorporation or by-laws, as the case may be, of any Person constituting
the Borrower;
(16) the insolvency of, or the voluntary or involuntary
bankruptcy, assignment for the benefit of creditors, reorganization or
other similar proceedings affecting any Person constituting the Borrower or
any of their respective assets; or
(17) any other circumstance or claim which might otherwise
constitute a defense available to, or a discharge of, any Person
constituting the Borrower in respect of the Obligations.
(c) No payment made by any Person constituting the Borrower, or
received or collected by the Agent or any of the Lenders, from any Person
constituting the Borrower by virtue of any action or proceeding or set-off or
application at any time in reduction of or in payment of the Obligations shall
be deemed to modify, release or otherwise affect the liability of any Person
constituting the Borrower under the Loan Documents. Notwithstanding any such
payments received or collected by the Agent or any of the Lenders in connection
with the Obligations, each Person constituting the Borrower shall remain liable
for the Obligations until all Obligations are paid in full. The joint and
several obligation of each Person constituting the Borrower shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned by the Agent
or the Lenders upon the insolvency, bankruptcy or reorganization of any Person
constituting the Borrower or otherwise, all as though such payment had not been
made.
(d) The obligations and liabilities of each Person constituting the
Borrower hereunder shall not be released, discharged, limited or in any way
affected by anything done, suffered or permitted by the Agent or Lenders in
connection with any monies or credit advanced by the Agent or Lenders to any
Person constituting the Borrower or any security therefor, including, without
limitation, any loss of, or in respect of, any security received by the Agent or
any of the Lenders from any Person constituting the Borrower. It is agreed that
the Lenders and/or the Agent, without releasing, discharging, limiting or
otherwise affecting in whole or in part the obligations and liabilities of any
Person constituting the Borrower hereunder, may, without limiting the generality
of the foregoing:
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(1) grant time, renewals, extensions, indulgences, releases and
discharges to any Person constituting the Borrower;
(2) take or abstain from taking security or collateral for the
Obligations or from perfecting security or collateral for the
Obligations;
(3) release, discharge, compromise or otherwise deal with (with
or without consideration) any and all collateral, mortgages,
indemnities, guaranties or other security given by any Person
constituting the Borrower with respect to the Obligations;
(4) accept compromises from any Person constituting the Borrower;
(5) after an Event of Default, apply all monies at any time
received from any Person constituting the Borrower or from any
guaranties, indemnities or any collateral upon such part of the
Obligations as the Lenders and/or Agent may see fit or change any such
application in whole or in part from time to time as the Agent or such
Lenders may see fit; or
(6) otherwise deal with each Person constituting the Borrower and
all other Persons and collateral as the Lenders and/or Agent may see
fit;
(e) neither the Agent nor any of the Lenders shall be bound or
obligated to exhaust recourse against any Person constituting the Borrower or
other Persons or any security, guarantee, indemnity, mortgage or collateral it
may hold or take any other action before being entitled to payment from each
Person constituting the Borrower hereunder and each Person constituting the
Borrower hereby waives any requirement that would otherwise compel the Agent or
the Lenders to do any of the foregoing.
Section 10.2 Notices. Any notice, request, demand, direction or other
communication (for purposes of this Section 10.2 only, a "Notice") to be given
to or made upon any party hereto under any provision of this Agreement shall be
given or made by telephone or in writing (which includes by means of electronic
transmission (i.e., "e-mail") or facsimile transmission). Any such Notice must
be delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Schedule XI hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 10.2. Any notice shall be effective:
(a) In the case of hand-delivery, when delivered;
(b) If given by mail, four days after such Notice is deposited with
the United States Postal Service, with first-class postage prepaid, return
receipt requested;
(c) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, or
an overnight courier delivery of a confirmatory Notice (received at or before
noon on such next Business Day);
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(d) In the case of a facsimile transmission, when sent to the
applicable party's facsimile machine's telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;
(e) In the case of electronic transmission, when actually received.
Any Lender giving a Notice to a Person constituting the Borrower shall
concurrently send a copy thereof to the Agent, and the Agent shall promptly
notify the other Lenders of its receipt of such Notice, provided that any
notice, request or demand to or upon the Agent pursuant to Section 2.3, Section
2.5, Section 2.8, Section 2.9(a) or Section 2.10 shall not be effective until
received. Any party may change its address for notices by notice to the other
parties hereto in the manner provided in this subsection. Any notice to the
Borrower or given by the Borrower shall be binding upon, and deemed received or
given by, all Persons constituting the Borrower if given by any Person
constituting the Borrower (in the case of notices from the Borrower) or
delivered to any Person constituting the Borrower at the address set forth on
Schedule XI (or such other address noticed to the Lender as provided herein) and
no separate notice to or by any other Person constituting the Borrower shall be
necessary for the binding effect or deemed receipt of a notice to or by the
Borrower.
Section 10.3 No Waiver; Cumulative Remedies.
(a) No failure to exercise and no delay in exercising, on the part of
the Agent or any Lender, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof.
(b) No single or partial exercise of any right, remedy, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
(c) The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
Section 10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the Notes.
Section 10.5 Payment of Expenses and Taxes. The Borrower shall:
(a) pay or reimburse the Agent for all its reasonable out-of-pocket
costs and expenses incurred in connection with the negotiation, preparation and
execution of, and any proposed or effective amendment, supplement or
modification to, this Agreement and the Notes and the other Loan Documents and
any other documents prepared in connection herewith or therewith, and the
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consummation of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Agent;
(b) pay or reimburse the Agent and each Lender for all reasonable
out-of-pocket costs and expenses incurred by each of them in connection with the
enforcement or preservation of any rights under this Agreement, the Notes, the
other Loan Documents and any such other documents, including, without
limitation, reasonable fees and disbursements of counsel to the Agent and each
Lender;
(c) pay, indemnify, and hold the Agent and each Lender harmless from,
any and all recording and filing fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other similar
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the Notes, the other Loan
Documents and any such other documents; and
(d) pay, indemnify, and hold the Agent and each Lender harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions (whether sounding in contract, in tort or on any other
ground), judgments, suits, reasonable out-of-pocket costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of, or in any other way
arising out of or relating to, (i) this Agreement, the Notes, the other Loan
Documents or any other documents contemplated by or referred to herein or
therein, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan (including without
limitation, any disbursement from the Escrow Fund with respect to the purchase
or payment of any Convertible Debentures), (iii) any investigation, litigation
or proceeding relating to any acquisition or proposed acquisition by ERC US or
any of its Subsidiaries of all or a portion of the Capital Stock or all or
substantially all of the assets of any Person, regardless of whether any Lender
is a party thereto or (iv)any action taken or omitted to be taken by the Agent
or any Lender with respect to any of the foregoing;
(all the foregoing, collectively, the "Indemnified Liabilities"), and if and to
the extent that the foregoing undertaking may be unenforceable for any reason,
the Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law; provided, that the Borrower shall have no obligation hereunder
to the Agent or any Lender with respect to Indemnified Liabilities arising from
the gross negligence or willful misconduct of the Agent or such Lender. The
agreements in this subsection shall survive repayment of the Notes and all other
amounts payable hereunder.
Section 10.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Borrower, the Agent, the Lenders, all future
future holders of the Notes and their respective successors and assigns, except
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that no Person constituting the Borrower may assign, transfer or delegate any of
their rights or obligations under this Agreement without the prior written
consent of the Lenders other than pursuant to the operation of law by reason of
a transaction permitted by Section 6.4.
Section 10.7 Set-off/Sharing.
(a) In addition to any rights and remedies of the Agent and Lenders
provided by law, each Lender shall have the right, without prior notice to any
Person constituting the Borrower, any such notice being expressly waived by each
Person constituting the Borrower to the extent permitted by applicable law, upon
any amount becoming due and payable by any Person constituting the Borrower
hereunder or under the Notes or the other Loan Documents (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency of such Lender to or for the credit or the account of any
Person constituting the Borrower. Each Lender agrees promptly to notify the
Borrower and Agent after any such set-off and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
(b) Each of the Lenders agree among themselves that with respect to
all amounts received by them which are applicable to the payment or satisfaction
of all or part of the Loans or Reimbursement Obligations, interest thereon, any
fees or any other amount payable hereunder or under the other Loan Documents,
equitable adjustment will be made so that, in effect, all such amounts will be
shared among the Lenders in proportion to their respective Percentages, whether
received by voluntary payment, by the exercise of the right of setoff or
banker's lien, by counterclaim or by the enforcement of their rights hereunder
or under the other Loan Documents.
(c) If any Lender shall, through the exercise of any right of
counterclaim, setoff, banker's lien or otherwise, receive payment or reduction
of a proportion of the aggregate amount of the Loans or interest thereon due to
such Lender, or any other amount payable hereunder, as the case may be, which is
greater than the proportion received by any other Lender or Lenders in respect
to the aggregate amount of any Loan or Reimbursement Obligation and interest
thereon due such Lender, or with respect to any other amount payable hereunder,
that Lender receiving such proportionately greater payment shall notify the
other Lenders and the Agent of such receipt and purchase participations (which
it shall be deemed to have done simultaneously upon the receipt of such excess
payment) in the Loans and Reimbursement Obligations held by the other Lender or
Lenders so that all such recoveries of principal and interest with respect to
the Loans shall be proportionate to each Lender's respective Percentage;
provided that if all or part of such proportionately greater payment received by
such purchasing Lender is thereafter recovered from such Lender, those purchases
shall be rescinded and the purchase prices paid for such participations shall be
returned to the purchasing Lender to the extent of such recovery, together with
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a pro rata portion (based on the amount of each participation) of the interest
thereon (or other amounts), if any, recovered from the purchasing Lender.
(d) The Borrower expressly consents to the arrangement described in
this Section 10.7.
Section 10.8 Foreign Subsidiaries. Notwithstanding anything to the contrary
contained herein, the joint and several liability of the Foreign Subsidiaries
and the Significant Subsidiaries which are formed in a jurisdiction outside the
United States hereunder shall be limited to $5,000,000 of the Obligations
outstanding on the Maturity Date or such earlier date (an "Accelerated Maturity
Date") to which the maturity of the Obligations is accelerated pursuant to
Section 7.1 (and whether denominated as principal, interest, Revolving Credit
Loans, Term Loans, or otherwise). It is agreed that no payment of interest on,
or principal of, the Revolving Credit Loans or Term Loans by any Person (whether
or not a Foreign Subsidiary) prior to the Maturity Date or any Accelerated
Maturity Date shall be counted towards, satisfy or discharge such $5,000,000
limit on liability provided, that, on the date the Term Loans, and all accrued
and unpaid interest thereon, are paid in full, the Foreign Subsidiaries shall
have no further liability for the Obligations. Nothing in this Section 10.8
shall (i) release or impair the validity of the Obligations, (ii) in any way
affect or impair any Lien granted pursuant to any Security Document or any other
Loan Document, (iii) in any way affect or impair the right of the Agent and the
Lenders to foreclose the Security Documents or enforce any other Loan Documents
pursuant to the terms thereof or (iv) impair or reduce the liability of ERC US
or MI for the whole of the Obligations which liability is unlimited. The
establishment of multiple accounts by Persons constituting the Borrower shall
not derogate from their joint and several liability for the Obligations as
limited by this Section 10.8.
Section 10.9 Judgment Currency/Withholding Tax.
(a) If for the purposes of obtaining a judgment in any court with
respect to any obligation of any Person constituting the Borrower under this
Agreement, the Notes or any other instrument or agreement executed and delivered
by any Person constituting the Borrower in connection therewith it becomes
necessary to convert into any other currency any amount in Dollars due
thereunder, then such conversion shall be made at the buying spot rate of
exchange for freely transferable Dollars at the close of business on the day
before the day on which the judgment is given at the place where such court is
located. If there is a change in such rate of exchange prevailing between the
day before the day on which the judgment is given and the date of the payment
thereof, the Borrower agrees to pay such additional amounts (if any) as may be
necessary to insure that the amount paid on such date is the amount in such
other currency which, when converted at such rate of exchange in effect on the
date of payment, is the amount then due in Dollars. Any amount due under this
Section 10.9 will be due in Dollars. Any amount due under this Section 10.9 will
be due as a separate debt and shall not be affected by or merged into any
judgment being obtained for any other sums due under or in respect of this
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Agreement, the Notes or any other instrument or agreement executed and delivered
by any Person constituting the Borrower in connection therewith. In no event,
however, shall the Borrower be required to pay more Dollars at such rate of
exchange when payment is made than the amount of Dollars stated to be due.
(b) If any payment of the Obligations by any Subsidiary Borrower which
is organized or located in a jurisdiction outside the United States of America
is subject in such jurisdiction to any withholding or other tax, levy, impost,
charge, fee, duty or deduction of any kind whatsoever (each, a "Foreign Tax"),
the Borrower shall pay to the Agent or Lender, as the case may be, such
additional amounts as will result in a net payment to the Agent or such Lender
equal to the amount such payee would have received had no such Foreign Tax been
imposed.
Section 10.10 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
Section 10.11 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 10.12 Integration. This Agreement represents the agreement of the
Borrower, the Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
Section 10.13 Governing Law. This Agreement and the Notes and the rights
and obligations of the parties under this Agreement and the Notes shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New Jersey.
Section 10.14 Submission To Jurisdiction; Waivers. Each Person constituting
the Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to or arising out of this Agreement and the other Loan
Documents to which it is a party, or the conduct of any party with respect
thereto, or for recognition and enforcement of any judgment in respect thereof,
to the nonexclusive general jurisdiction of the Courts of the State of New
Jersey, the courts of the United States of America for the District of New
Jersey, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives to the fullest extent permitted by law any objection that it
may now or hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
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(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to the Borrower at the
address set forth in Section 10.1 or at such other address of which the Lender
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to xxx in any other jurisdiction; and
(e) waives, to the maximum extent permitted by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
subsection any special, exemplary, punitive or consequential damages.
Section 10.15 Acknowledgments. Each Person constituting the Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the Notes and the other Loan Documents;
(b) it has not been advised by the Agent or any Lender or their
respective counsel as to any tax or other financial implications or consequences
of the transactions contemplated by the Loan Documents and each Person
constituting the Borrower has made an independent analysis of, and decision with
respect to, such matters, relying on its own legal counsel and other
professionals. It is further acknowledged that the Agent, the Lenders and their
respective counsel had and have no obligation to advise any Person constituting
the Borrower with respect to any such matters.
(c) neither the Agent nor any Lender has any fiduciary relationship to
any Person constituting the Borrower, and the relationship between the Agent and
the Lenders, on one hand, and each Person constituting the Borrower, on the
other hand, is solely that of debtor and creditor; and
(d) no joint venture exists among any Person constituting the
Borrower, the Agent or any Lender.
Section 10.16 Waivers of Jury Trial. EACH PERSON CONSTITUTING THE BORROWER,
THE AGENT AND EACH LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
Section 10.17 SSG. Notwithstanding anything to the contrary contained
herein, SSG is not a party hereto and is not obligated in anyway hereunder.
[Balance of page Intentionally Blank
Signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
Borrowers:
XXXXXXX RADIO CORP
By:/s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: CFO - EVP
MAJEXCO IMPORTS, INC.
By:/s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: CFO - EVP
XXXXXXX RADIO (HONG KONG) LIMITED
By: /s/ Xxxx X. Xxxx
Name: Xxxx X. Xxxx
Title: Director
XXXXXXX RADIO INTERNATIONAL LTD.
By: Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: Director
Lenders:
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxxxx Xxxxxx
Name: Xxxxxxxx Xxxxxx
Title: VP
Agent:
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxxxx Xxxxxx
Name: Xxxxxxxx Xxxxxx
Title: VP
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