LIFETIME HOAN CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the fiscal year ended December 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
[No Fee Required]

For the transition period from to

Commission file number 1-19254

Lifetime Hoan Corporation
(Exact name of registrant as specified in its charter)

Delaware 11-2682486
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.)

One Merrick Avenue, Westbury, New York 11590
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:
(516) 683-6000

Securities registered pursuant to Section 12(b) of the
Act: None

Securities registered pursuant to Section 12(g) of the
Act:

Common Stock, par value $.01 per share
(Title of Class)

Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
periods that the registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No

Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to
this Form 10-K [X ].

The aggregate market value of 4,337,000 shares of the
voting stock held by non-affiliates of the registrant
as of February 28, 2002 was approximately
$28,138,000. Directors, executive officers, and
trusts controlled by said individuals are considered
affiliates for the purpose of this calculation, and
should not necessarily be considered affiliates for
any other purpose.

The number of shares of Common Stock, par value $.01
per share, outstanding as of February 28, 2002 was
10,491,101.

DOCUMENTS INCORPORATED BY REFERENCE
See Part III hereof with respect to incorporation by
reference from the registrant's definitive proxy
statement to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934 and the
Exhibit Index hereto.

LIFETIME HOAN CORPORATION

FORM 10-K

TABLE OF CONTENTS

PART 1
1. Business 3
2. Properties 10
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders
11

PART II
5. Market for the Registrant's Common Stock and Related
Stockholder Matters 11
6. Selected Financial Data 12
7. Management's Discussion and Analysis of Financial
Condition
and Results of Operations 13
8. Financial Statements and Supplementary Data 17
9. Changes in and Disagreements with Accountants on
Accounting
and Financial Disclosure 17

PART III
10. Directors and Executive Officers of the Registrant18
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial Owners and
Management 19
13. Certain Relationships and Related Transactions 19

PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 20
Exhibit Index 20
Index to Financial Statements and Financial Statement
Schedule F-1

Signatures

2

PART I

ITEM 1. BUSINESS

General

Forward Looking Statements: This Annual Report on Form
10-K contains certain forward-looking statements within
the meaning of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995,
including statements concerning the Company's future
products, results of operations and prospects. These
forward-looking statements involve risks and
uncertainties, including risks relating to general
economic and business conditions, including changes which
could affect customer payment practices or consumer
spending; industry trends; the loss of major customers;
changes in demand for the Company's products; the timing
of orders received from customers; cost and availability
of raw materials; increases in costs relating to
manufacturing and transportation of products; dependence
on foreign sources of supply and foreign manufacturing;
and the seasonal nature of the business as detailed
elsewhere in this Annual Report on Form 10-K and from
time to time in the Company's filings with the Securities
and Exchange Commission. Such statements are based on
management's current expectations and are subject to a
number of factors and uncertainties which could cause
actual results to differ materially from those described
in the forward-looking statements.

Lifetime Hoan Corporation designs, markets and
distributes a broad range of household cutlery,
kitchenware, cutting boards, pantryware and bakeware
products. The Company has developed a strong consumer
franchise by promoting and marketing innovative products
under both owned and licensed trade names. Owned trade
names include Hoffritzr, Roshcor, Baker's Advantager,
Kamensteinr, Hoanr, Prestiger, Tristarr and Old
Homesteadr,. Licensed trade names include Farberwarer,
KitchenAidr and various names under license from The
Pillsbury Company. The Farberwarer trade name is used
pursuant to a 200 year royalty-free license. As used
herein, unless the context requires otherwise, the terms
"Company" and "Lifetime" mean Lifetime Hoan Corporation
and its subsidiaries.

Sales growth is stimulated by expanding product offerings
and penetrating various channels of distribution, both
domestically and internationally. In addition, the
following acquisitions and agreements have been made
which have had a favorable impact on the Company's
business:

Hoffritzr

In September 1995, the Company acquired the Hoffritzr
trademarks and brand name. The Company uses the name on
various products including cutlery, scissors, personal
care implements, kitchen tools, bakeware, barware and
barbecue accessories. The Company believes that Hoffritzr
is a well-known, respected name with a history of
quality. The acquisition of the brand name has enabled
the Company to sell products at higher price points than
the rest of the Company's products. Since acquiring the
brand name, the Company has continuously designed and
developed new items each year and currently sells
approximately 300 types of items under the Hoffritz brand
name. The Company markets these products primarily
through major department stores and high end specialty
stores nationwide.

3

Farberwarer

In April 1996, the Company entered into an agreement to
acquire certain assets of Farberware, Inc.
("Farberware"). Under the terms of the acquisition
agreement, and a joint venture agreed to by the Company
and Syratech Corporation in connection therewith, the
Company acquired a 200 year, royalty-free, exclusive
right to use the Farberwarer name in connection with the
product lines covered by its then existing license
agreement, which included kitchen cutlery products
(excluding flatware) and kitchen tools such as spatulas,
barbecue forks and "gadgets" (but excluding appliances),
plus certain limited additional products. This agreement
enables the Company to market products under the
Farberwarer name without paying additional royalties.
The Company also acquired 50 Farberware outlet stores. In
addition, rights to license the Farberwarer name for use
by third parties in certain product categories are held
by a joint venture, owned equally by the Company and a
wholly-owned subsidiary of Syratech Corporation.

Microban

In April 1997, the Company entered into an agreement with
the Microban Products Company whereby the Company secured
exclusive rights to incorporate Microban antibacterial
protection into plastic components of cutting boards,
kitchen tools, kitchen gadgets, and cutlery.

Meyer Agreement

In 1997, the Company entered into an agreement with Meyer
Corporation, regarding the operation of the Company's
Farberware retail outlet stores. Pursuant to the
agreement, the Company continues to own and operate the
Farberware retail outlet stores, which the Company
acquired in 1996, and Meyer Corporation, the licensed
manufacturer of Farberware branded cookware products,
assumes responsibility for merchandising and stocking
cookware products in the stores. Meyer Corporation
receives all revenue from sales of Farberware cookware,
currently occupies 40% of the space in each store and
reimburses the Company for 40% of the operating expenses
of the stores. Effective January 1, 2002, in addition to
the 40% of the space that Meyer occupies, an additional
20% of the space in each store will be co-managed by the
Company and Meyer, with the revenues and expenses from
this space to be shared equally by the Company and Meyer.
Salton Agreement

Effective January 1, 2000, the Company entered into an
agreement with Salton Inc., regarding the operation of
the Company's Farberware retail outlet stores. Pursuant
to the agreement, the Company continues to own and
operate the Farberware retail outlet stores, which the
Company acquired in 1996 and Salton Inc., the licensed
manufacturer of Farberware branded electric products,
assumes responsibility for merchandising and stocking
electric products in the stores. Salton Inc. receives all
revenue from sales of Farberware electric, occupies 20%
of the space in each store and reimburses the Company for
20% of the operating expenses attributable to the stores.
Roshco Acquisition

In August 1998, the Company acquired all of the
outstanding common stock of Roshco, Inc. ("Roshco"), a
privately-held bakeware and baking-related products
distributor, located in Chicago, Illinois. Roshco
markets its bakeware and baking-related products under
the Roshco and Baker's Advantage trade names. The
purchase price consisted of an initial cash payment of
$5.0 million and notes payable of $1.5 million. The
Company paid off these notes with $500,000 payments in
each of 2001, 2000 and 1999. The Company was also
obligated to make additional payments based on the annual
sales volume for bakeware and baking-related products for
a period of two years. In 1999 and 2000, the Company paid
approximately $416,000 and $543,000, respectively, to
fulfill its obligation to make any such additional
payments. The Company also assumed bank debt of $2.6
million that was paid on the acquisition date.

4

Prestige Acquisition

In September 1999, the Company acquired 51% of the
capital stock of Prestige Italiana, Spa. ("Prestige
Italy") and Prestige Haushaltswaren GmbH ("Prestige
Germany" and together with Prestige Italy, the "Prestige
Companies") for approximately $1.3 million in cash.
Meyer Corporation will continue to own 49% of the
Prestige Companies.

The Prestige Companies market and distribute kitchen
tools, gadgets, cutlery and bakeware under the Prestiger
trade name in Italy and Germany.

Salton Agreement

In January 2000, the Company entered into an agreement
with Salton Inc. regarding the operation of the Company's
Farberware retail outlet stores. Pursuant to the
agreement, the Company continued to own and operate the
Farberware retail outlet stores, which the Company
acquired in 1996, and Salton Inc., the licensed
manufacturer of Farberware branded electric products,
assumed responsibility for merchandising and stocking
electric products in the stores. Salton Inc. received all
revenue from sales of Farberware electric products,
occupied 20% of the space in each store and reimbursed
the Company for 20% of the operating expenses
attributable to the stores. Salton, Inc. terminated the
agreement effective December 31, 2001. Effective January
1, 2002, a new agreement was entered into in which the
additional 20% of space in each store will be co-managed
by the Company and Meyer.

Kamenstein Acquisition

Effective September 1, 2000, the Company acquired the
assets and certain liabilities of M. Kamenstein, Inc.
("Kamenstein"), a privately-held 107-year old housewares
company, whose products include pantryware, teakettles,
and home organization accessories. Kamenstein's revenues
were approximately $21.0 million for the twelve month
period ended August 31, 2000. In acquiring Kamenstein,
the Company assumed bank debt and other indebtedness of
approximately $10.0 million. The Company is obligated to
make contingent payments based on the annual gross profit
earned on the sales of the business for a period of 3
years. Kamenstein contributed $7.6 million in sales to
the Company's total net sales for the four-month period
ended December 31, 2000 and $21.6 million in net sales
during 2001.

KitchenAid Agreement

On October 16, 2000, the Company entered into a licensing
agreement with KitchenAid, a division of the Whirlpool
Corporation. This agreement allows the Company to
design, manufacture and market an extensive range of
kitchen utensils, barbecue items, and pantryware products
under the KitchenAidr brand name. On January 1, 2002,
the licensing agreement between the Company and
KitchenAid, was amended, expanding the covered products
to include bakeware and baking related products.
Shipments of products under the KitchenAidr name began in
the second quarter of 2001.

5
Products

The Company designs, markets and distributes a broad
range of household cutlery, kitchenware, cutting boards,
pantryware and bakeware, marketing its products under
various trade names including Farberwarer, KitchenAidr,
Hoffritzr, Prestiger, Kamensteinr, Hoanr and Bakers
Advantager.

Cutlery

The Company markets and distributes household cutlery
under a variety of trade names including Farberwarer,
Hoffritzr, and Tristarr. Cutlery is sold individually, in
blister packages, boxed sets and in sets fitted into
wooden counter blocks, resin carousels and stainless
carousels.

Cutlery is generally shipped as individual pieces from
overseas manufacturers to the Company's warehouse
facilities in central New Jersey. This permits the
Company to configure the quantity, style and contents of
cutlery sets to meet customer requirements as to product
mix and pricing. The sets are then assembled and
packaged for shipment to customers.

Kitchenware

The Company sells over 4,000 kitchenware items under
various trade names including Farberwarer, Hoffritzr,
KitchenAidr, Hoanr, Prestiger and Smart Choice. The
kitchenware items are manufactured to the Company's
specifications outside the United States and are
generally shipped fully assembled. These items are
typically packaged on a card, which can be mounted for
sale on racks at the retailers' premises for maximum
display visibility. Products include the following:

Kitchen Tools and Gadgets

Food preparation and serving tools such as metal,
plastic and wooden spoons, spatulas, serving forks,
graters, strainers, ladles, shears, vegetable and fruit
knives, juicers, pizza cutters, pie servers, and slicers;

Barbecue accessories, in sets and individual pieces,
featuring such items as spatulas, tongs, forks, skewers,
hamburger and fish grills, brushes, corn holders, food
umbrellas, and nut and lobster crackers.

Impulse Purchase Products

J-Hook and Clip Strip merchandising systems which
enable the Company to create additional selling space in
the stores. The line consists of a variety of quality,
novelty items designed to trigger impulse buying. This
line is targeted towards supermarkets and mass merchants.

6
Cutting Boards
The Company designs and markets a full range of
cutting boards made of polyethylene, wood, glass and
acrylic. These products are distributed under several
trade names including Farberwarer, KitchenAidr and
Hoffritzr. All cutting boards are imported. Boards are
also packaged with cutlery items and kitchen gadgets.

Bakeware
The Company designs, markets and distributes a
variety of bakeware and baking related products. Trade
names that these products are sold under include
Hoffritzr, Bakers Advantager, Roshcor and under a license
from Pillsbury, one of America's best known brands of
baking accessories, featuring the Poppin-FreshT logo on
such items as pastry brushes, spatulas, whisks, spoon and
cup sets, cookie cutters, mixing spoons and magnets.

This product line includes baking, measuring, and
rangetop products such as cookie sheets, muffin, cake and
pie pans, drip pans, bake, roast and loaf pans, scraper
sets, whisks, cutters, rolling pins, baking shells,
baking cups, measuring devices, thermometers, timers,
pizza stones, fondues, woks, ceramics and coasters.
These items are manufactured to the Company's
specifications outside the United States and are
generally shipped fully assembled.

Pantryware
In September 2000 with the acquisition of
Kamenstein, the Company began to design, market and
distribute pantryware, teakettles, spice racks and home
organization accessories. Products are distributed under
the trade names Kamensteinr, MKIr, Farberwarer, Norman
Rockwellr, Gracie Knightr, Warren Kimbler, Claire Murrayr
and Debbie Mummr.

These product lines include bread boxes, mug
holders, paper towel dispensers, spice carousels, mail
caddy's, enamel teakettles, stainless steel teakettles,
storage and organization products and hardwood message
centers. These items are manufactured to the Company's
specifications outside the United States and are
generally shipped fully assembled. The spices in the
spice carousels are filled domestically in Kamenstein's
Massachusetts warehouse.

New Products

The Company has a design and development department
consisting of 18 employees who create new products,
packaging and merchandising concepts. In excess of 600
items were developed or remodeled in 2001, including the
following:

Kitchen Aid: Introduction of a new, premium line of
culinary tools, gadgets, and cutting boards using
stainless steel, silicone, Santoprener, high-impact
plastics, fiberglass-reinforced DuPontr Nylon 6/6, and
chromed zinc alloy castings, offered in a range of 8
colors.in 1999.

Cutlery: Broad extension of forged cutlery to include
Farberwarer Pro Forged, Farberwarer Pro Stainless, and
Farberwarer Millenium Forged, all offered in open stock
and block sets. Introduction of polyresin knife blocks
and the redesign of cutlery carousels.

Gadgets: Introduction of 25 items to further extend the
Farberwarer product lines. The Company began a redesign
of all Farberwarer tools and gadgets to be completed and
introduced in the Spring of 2002.

Bakeware: Expansion of the Roshcor roaster program, as
well as Roshcor, Farberwarer, and Hoffritzr fondues,
fondue accessories and fondue books. Addition of Baker's
Delightr and Baker's Advantager bakeware sets.

Kamenstein: Reintroduced Farberwarer hardwood
pantryware. Expansion of hardwood pantryware accessory
items including trivet baskets and hardwood with marble
items, enamel-on-steel and Noveltear kettles, and Warren
Kimbler, Debbie Mummr and Cheri Blumr assortments.
Introduction of stainless steel serveware.

7

Sources of Supply

The Company sources its products from approximately 44
manufacturers located primarily in the Far East,
including the People's Republic of China, and to a
smaller extent in the United States, Thailand, Malaysia,
Indonesia, Taiwan, and Italy. A majority of its cutlery
was purchased from five suppliers in 2001 who accounted
for 28%, 21%, 14%, 11% and 10% of the total purchases,
respectively, and from four suppliers in 2000 who
accounted for 32%, 25%, 22% and 11% of the total
purchases, respectively. A majority of its pantryware
was purchased from two suppliers in 2001 who accounted
for 45% and 32 % of the total purchases, respectively,
and from two suppliers in 2000 who accounted for 59% and
11% of the total purchases, respectively. An
interruption of supply from any of these manufacturers
could have an adverse impact on the Company's ability to
fill orders on a timely basis. However, the Company
believes other manufacturers with whom the Company does
business would be able to increase production to fulfill
the Company's requirements.

The Company's policy is to maintain a large inventory
base and, accordingly, it orders products substantially
in advance of anticipated time of sale to its customers.
While the Company does not have any long-term formal
arrangements with any of its suppliers, in certain
instances, particularly in the manufacture of cutlery,
the Company places firm commitments for products up to
twelve months in advance of receipt of firm orders from
customers. Lifetime's arrangements with most
manufacturers allow for flexibility in modifying the
quantity, composition and delivery dates of each order.
Excluding the Prestige Companies, all purchase orders are
in United States dollars. The Prestige Companies
purchase orders are in their local currency.

Marketing

The Company markets its product lines directly through
its own sales force and through a network of independent
sales representatives. The Company's products are sold
primarily in the United States to approximately 900
customers including national retailers, department store
chains, mass merchant retail and discount stores,
supermarket chains, warehouse clubs, direct marketing
companies and specialty chains and through other channels
of distribution. During the years ended December 31,
2001, 2000 and 1999, Walmart accounted for approximately
14%, 11% and 14% of net sales, respectively. No other
customer accounted for 10% or more of the Company's net
sales during 2001, 2000 and 1999.

Competition

The markets for household cutlery, kitchenware, cutting
boards, pantryware and bakeware are highly competitive
and include numerous domestic and foreign competitors,
some of which are larger than the Company. The primary
competitive factors in selling such products to retailers
are consumer brand name recognition, quality, packaging,
breadth of product line, distribution capability, prompt
delivery and price to the consumer.

8

Patents and Trademarks

The Company uses a number of owned trademarks, primarily
Hoffritzr, Bakers Advantager, Roshcor, Kamensteinr,
Tristarr and Hoanr, as well as Farberwarer which is
licensed under a 200 year royalty-free agreement, which
the Company considers significant to its competitive
position. Some of these trademarks are registered in the
United States and others have become distinctive marks as
to which the Company has acquired common law rights. The
Company also has licensed trademarks from The Pillsbury
Company and KitchenAid, a division of the Whirlpool
Corporation, which the Company uses in its business. The
Company also owns several design and utility patents
expiring from 2002 to 2017 on the overall design of some
of its products. The Company also acquired patents,
trademarks and copyrights as part of the Hoffritzr,
Roshco and Kamenstein acquisitions that expire from 2002
to 2022. The Company believes that the expiration of any
of its patents would not have a material adverse effect
on its business.

Seasonality

Although the Company sells its products throughout the
year, the Company has traditionally had higher net sales
during its third and fourth quarters. During 1999, the
Company experienced problems with the installation of a
new warehouse management system that negatively impacted
its ability to make shipments primarily in the first and
third quarters, which impacted the normal seasonality of
quarterly shipments. The following table sets forth the
quarterly net sales for the years ended December 31,
2001, 2000 and 1999:

Net Sales (in thousands)

Backlog

The Company receives projections on a seasonal basis from
its principal customers; however, firm purchase orders
are most frequently placed on an as needed basis. The
Company's experience has been that while there may be
some modifications of customers' projections, the Company
is able, with some degree of certainty, to predict its
product needs.

The Company's backlog at December 31, 2001 and 2000 was
$8,368,000 and $7,341,000, respectively. The Company
expects to fill the 2001 backlog during 2002. The
Company does not believe that backlog is indicative of
its future results of operations or prospects. Although
the Company seeks commitments from customers well in
advance of shipment dates, actual confirmed orders are
typically not received until close to the required
shipment dates.

Employees

As of December 31, 2001, Lifetime had 685 675 full-time
employees, of whom 4 were employed in an executive
capacity, 75 in sales, marketing, design or product
development, 66 in financial, administrative or clerical
capacities, 242 in warehouse or distribution capacities
and 236 were outlet store personnel. Prestige Italy had
17 employees and Prestige Germany had 35 employees. None
of the Company's employees are represented by a labor
union. The Company considers its employee relations to be
good.

9

ITEM 2. PROPERTIES

The following table describes the facilities at which the
Company operates its business:

Aside from the properties listed above, the Company's
Outlet Store subsidiary leases approximately 50 stores in
retail outlet centers located in 22 states throughout the
United States. The square footage of the stores range
from approximately 2,000 square feet to 5,500 square
feet. The terms of these leases range from three to five
years with expiration dates beginning in January 2002 and
extending through July 2004.

Effective March 1, 2002, the Company's approximate square
footage in the Dayton, New Jersey warehouse facility
decreased from 305,000 square feet to 77,000 square feet.

10

ITEM 3. LEGAL PROCEEDINGS

The Company is, from time to time, a party to litigation
arising in the normal course of its business. The
Company believes that there are currently no material
legal proceedings the outcome of which would have a
material adverse effect on the Company's consolidated
financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded under the symbol
"LCUT" on The Nasdaq National Market ("Nasdaq") and has
been since its initial public offering in June 1991. The
Board of Directors of the Company has authorized a
repurchase of up to 3,000,000 of its outstanding common
shares in the open market. Through December 31, 2001, a
total of 2,128,000 common shares had been repurchased and
retired at a cost of approximately $15,235,000.

The following table sets forth the high and low sales
prices for the Common Stock of the Company for the fiscal
periods indicated as reported by Nasdaq.

At December 31, 2001, the Company estimates that there
were approximately 700 beneficial holders of the Common
Stock of the Company.

The Company paid quarterly cash dividends of $0.0625 per
share, or a total annual cash dividend of $0.25 per
share, on its Common Stock in each of 2001 and 2000. The
Board of Directors currently intends to continue to pay
quarterly cash dividends of $0.0625 per share of Common
Stock for the foreseeable future, although the Board may
in its discretion determine to modify or eliminate such
dividends at any time.

11

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated income statement data for the
years ended December 31, 2001, 2000 and 1999, and the
consolidated balance sheet data as of December 31, 2001
and 2000, have been derived from the Company's audited
consolidated financial statements included elsewhere in
this Annual Report on Form 10-K. The selected
consolidated income statement data for the years ended
December 31, 1998 and 1997, and the selected consolidated
balance sheet data as of December, 1999, 1998 and 1997,
are derived from the Company's audited consolidated
financial statements which are not included in this
Annual Report on Form 10-K.
(in thousands except per share data)

12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
General
The following discussion should be read in conjunction
with the consolidated financial statements for the
Company and notes thereto set forth in item 8.

Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial
Condition and Results of Operations discusses the
Company's consolidated financial statements, which have
been prepared in accordance with accounting principles
generally accepted in the United States. The preparation
of these financial statements requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. On an on-going
basis, management evaluates its estimates and judgements,
including those related to bad debts and inventories.
Management bases its estimates and judgements on
historical experience and on various other factors that
are believed to be reasonable under the circumstances,
the results of which form the basis for making judgements
about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual
results may differ from these estimates under different
assumptions or conditions.

The following table sets forth income statement data of
the Company as a percentage of net sales for the periods
indicated below.

2001 COMPARED TO 2000

Net Sales

Net sales in 2001 were $143.5 million, an increase of
approximately $14.2 million, or 10.9% higher than 2000.
The sales increase was primarily attributable to the M.
Kamenstein, Inc. business, acquired in September 2000,
which contributed $21.6 million to net sales during the
full year in 2001 as compared to $7.6 million for the
last four months in 2000.

Gross Profit

Gross profit for 2001 was $62.8 million, an increase of
approximately $8.4 million, or 15.4%. Gross profit as a
percentage of net sales increased to 43.7% from 42.0%.
The increase in gross profit was primarily the result of
adding a full year of sales in 2001 for the M.
Kamenstein, Inc. business acquired in September 2000 as
compared to the last four months of 2000, and higher
gross profit margins in its regular business. Gross
profit margins in 2000 were also negatively impacted by a
$4.0 million charge to cost of goods sold due to an
inventory shortfall revealed during the 2000 year-end
physical inventory.

13

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2001
were $56.9 million, an increase of $9.0 million, or
18.8%, over 2000. The increase in selling, general and
administrative expenses was primarily attributable to the
added operating expenses of the M. Kamenstein, Inc.
business for an entire year in 2001 as compared to only
four months in 2000, relocation charges and duplicate
rent and other expenses associated with the Company's
move into its new New Jersey warehouse in 2001, and
higher fourth quarter warehouse operating expenses.

Interest Expense

Interest expense for 2001 was $1.3 million, an increase
of $376,000 from 2000. This increase was due attributable
to a higher level of borrowings throughout 2001 under the
Company's lines of credit, offset in part by lower rates
of interest in 2001.

2000 COMPARED TO 1999

Net Sales

Net sales in 2000 were $129.4 million, an increase of
approximately $22.6 million, or 21.2% higher than 1999.
Approximately $13.8 million of the sales increase was
attributable to acquisitions; the Prestige Companies
acquired in September 1999 and the Kamenstein business
acquired in September 2000. The remaining increase in
net sales reflects the positive impact of the Company's
return to normalized shipping rates and turnaround times
for customer orders during 2000. In 1999, net sales were
severely impacted as problems arose from the installation
of a new warehouse management system, which hampered the
Company's ability to ship merchandise to its customers.

Gross Profit

Gross profit for 2000 was $54.4 million, an increase of
approximately $5.6 million, or 11.5%. Gross profit as a
percentage of net sales decreased to 42.0% from 45.7%.
The decline in gross profit margin was primarily the
result of an inventory shortfall revealed during the 2000
year-end physical inventory. Consequently, the Company
recorded a charge of approximately $4.0 million (which
reduced earnings by $0.23 and $0.22 basic and diluted per
common share for the fourth quarter and year ended
December 31, 2000, respectively), which is included in
cost of goods sold for 2000. The Company investigated
the shortfall; however, the ultimate cause could not be
finally determined. Accordingly, the associated charge
was reported in the fourth quarter of 2000. The Company
reviewed its procedures and operating and financial
controls and, based upon such review, where appropriate,
implemented enhanced procedures and controls.

Gross profit margin also decreased as a result of certain
efforts to clean up and reduce inventory in preparation
for the move to the new warehouse in 2001.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2000
were $47.9 million, an increase of $5.7 million, or
13.4%, over 1999. The increase in selling, general and
administrative expenses was primarily attributable to the
expenses related to the Kamenstein business that was
acquired in September 2000 and to the Prestige Companies
which were acquired in September 1999. Excluding the
expenses relating to the Kamenstein business and the
Prestige Companies, selling general and administrative
expenses increased by approximately $200,000.

14

As a percentage of net sales, selling, general and
administrative expenses decreased to 37.0% from 39.6%.

Interest Expense

Interest expense for 2000 was $913,000, an increase of
$632,000 from 1999. This increase was due attributable to
a higher level of borrowings throughout 2000 under the
Company's lines of credit.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2001, the Company had cash and cash
equivalents of $5.0 million, an increase of $3.7 million
from the prior year, working capital was $29.1 million, a
decrease of $8.9 million from 2000, and the current
ratio was 1.65 to 1. The decrease in working capital
resulted from a $12.1 million increase in short term
borrowings under the Company's new revolving credit
agreement. The increase in borrowing was used to finance
the purchase of approximately $13.3 million of equipment
and leasehold improvements.

Cash provided by operating activities was approximately
$7.8 million, primarily the result of decreased
merchandise inventories and net income, partially offset
by an increase in accounts receivable. Cash used in
investing activities was approximately $13.4 million,
which was primarily the purchase of fixed assets. Cash
provided by financing activities was approximately $9.4
million, primarily the result of an increase in the net
proceeds from short term borrowings offset by cash
dividends paid.

Capital expenditures were $13.3 million in 2001 and $2.0
million in 2000. Approximately $11.4 million of the 2001
capital expenditures were for equipment and leasehold
improvements in the Company's new warehouse facility in
New Jersey. Total planned capital expenditures for 2002
are estimated at $2.5 million. These expenditures are
expected to be funded from current operations, cash and
cash equivalents and, if necessary, borrowings under the
revolving credit agreement.

On November 9, 2001, the Company entered into a $45
million three-year, secured, reducing revolving credit
agreement (the "Agreement") with a group of banks and, in
conjunction therewith, canceled its $40 million short-
term lines of credit. The Agreement is secured by all of
the assets of the Company and reduces to $40 million at
December 31, 2002 and further to $35 million at December
31, 2003 and through the maturity date. Under the terms
of the Agreement, the Company is required to satisfy
certain financial covenants, including limitations on
indebtedness and sale of assets; a minimum fixed charge
ratio; and net worth maintenance. Borrowings under the
Agreement have different interest rate options that are
based on either an alternate base rate, LIBO rate, or the
lender's cost of funds rate. As of December 31, 2001, the
Company had $2,502,000 of letters of credit and trade
acceptances outstanding and $6,70020,000,000 of
borrowings under the Agreement and, as a result, the
availability under the Agreement was $22,498,000.
Interest rates on borrowings at December 31, 2001 ranged
from 3.875% to 3.9375%.

In addition to the Agreement, the Prestige Companies have
three lines of credit with three separate banks providing
a total available credit facility of approximately $3.4
million. As of December 31, 2001, the Prestige Companies
had borrowings of approximately $2.8 million against
these lines. Interest rates on these lines of credit
ranged from 5.85% to 8.25%.

15
Products are sold to retailers primarily on 30-day credit
terms, and to distributors primarily on 60-day credit
terms. As of December 31, 2001, the Company had an
aggregate of $1.8 million of accounts receivable
outstanding in excess of 60 days or approximately 6.2% of
gross receivables, and had inventory of $42.3 million.

The Company believes that its cash and cash equivalents
plus internally generated funds and its credit
arrangements will be sufficient to finance its operations
for the next twelve months.

The results of operations of the Company for the periods
discussed have not been significantly affected by
inflation or foreign currency fluctuations. The Company
negotiates predominantly all of its purchase orders with
its foreign manufacturers in United States dollars. Thus,
notwithstanding any fluctuations in foreign currencies,
the Company's cost for a purchase order is generally not
subject to change after the time the order is placed.
However, the weakening of the United States dollar
against local currencies could lead certain manufacturers
to increase their United States dollar prices for
products. The Company believes it would be able to
compensate for any such price increase.

Item 7A. Quantitative and Qualitative Disclosures About
Market Risk

Market risk represents the risk of loss that may impact
the consolidated financial position, results of
operations or cash flows of the Company. The Company is
exposed to market risk associated with changes in
interest rates. The Company's lines of credits bear
interest at variable rates. The Company is subject to
increases and decreases in interest expense on its
variable rate debt resulting from fluctuations in the
interest rates of such debt. There have been no changes
in interest rates that would have a material impact on
the consolidated financial position, results of
operations or cash flows of the Company for the year
ended December 31, 2001.

16
The Company believes that its cash and cash equivalents
plus internally generated funds and its credit
arrangements will be sufficient to finance its operations
for the next twelve months.

The results of operations of the Company for the periods
discussed have not been significantly affected by
inflation or foreign currency fluctuation. The Company
negotiates predominantly all of its purchase orders with
its foreign manufacturers in United States dollars. Thus,
notwithstanding any fluctuation in foreign currencies,
the Company's cost for any purchase order is not subject
to change after the time the order is placed. However,
the weakening of the United States dollar against local
currencies could lead certain manufacturers to increase
their United States dollar prices for products. The
Company believes it would be able to compensate for any
such price increase.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements are included herein commencing
on page F-1.

The following is a summary of the unaudited quarterly
results of operations for the years ended December 31,
2001 and 2000.

Three Months Ended

During the three month period ended December 31, 2000,
the Company recorded a charge relating to an inventory
shortfall of approximately $4.0 million (which reduced
earnings by $0.23 and $0.22 per basic and diluted common
share for fourth quarter and year ended December 31,
2000, respectively) which is included in cost of goods
sold.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

17
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT

The following table sets forth certain information
concerning the Executive Officers and Directors of the
Company:

Mr. Siegel has been continuously employed by the
Company as its President since 1999. In 2000, Mr. Siegel
became the Chief Executive Officer of the Company. In
2001, Mr. Siegel became the Chairman of the Board of
Directors. Prior thereto Mr. Siegel was Executive Vice
President of the Company since 1967.

Mr. Bruce Cohen was first elected a Director in 1998
and has been continuously employed by the Company in his
present capacity since 1999. Prior thereto Mr. Bruce
Cohen was a Vice President - National Sales Manager for
the Company since 1991.

Mr. Phillips has been continuously employed by the
Company in his present capacity since 1981.

Mr. McNally has been continuously employed by the
Company in his present capacity since October 1997. Mr.
McNally, was formerly Senior Vice President - Finance for
Cybex International, Inc., (formerly Lumex, Inc.), a
manufacturer and distributor of healthcare products and
fitness equipment. Mr. McNally held that position for 15
years prior to joining the Company.

Mr. Milton L. Cohen has served continuously on the
Board of Directors since 1958. Mr. Milton L. Cohen was
the Chairman of the Board of Directors from 1958 to 2000.
Prior to 2000, Mr. Milton L. Cohen was also Chief
Executive Officer of the Company since 1958.

Mr. Shiftan had served as Deputy Executive Director of
The Port Authority of New York & New Jersey from 1998 to
2001. Prior to becoming Deputy Executive Director of the
Port Authority of New York & New Jersey, he had, since
1996, been Chairman of Patriot Group, LLC, a financial
advisory firm. Prior thereto, Mr. Shiftan held executive
management positions in venture capital, investment
banking and financial advisory firms.

18
Mr. Bernstein has been a member of the Certified Public
Accounting firm, Cole, Samsel & Bernstein LLC (and its
predecessors), for approximately forty-nine years.

Mr. Florence has been Chairman of the Board, Chief
Executive Officer and President of Syratech, Inc., a
consumer products company, since 1986.

Milton L. Cohen is the father of Bruce Cohen.

Jeffrey Siegel and Craig Phillips are cousins.

The Board of Directors has an audit committee, whose
three members (Messrs. Shiftan, Bernstein and Florence)
are independent directors.

The directors and officers of the Company are elected
annually by the stockholders and Board of Directors of
the Company, respectively. Directors serve until the next
annual meeting of the stockholders or until their
successors have been elected and qualified or until their
earlier resignation or removal. Officers are elected at
the first Board of Directors meeting following the annual
stockholders meeting and serve at the pleasure of the
Board of Directors.

Directors who are not employees of the Company receive
a retainer of $5,000 per year, and an additional fee of
$1,000 for each Board meeting attended, plus
reimbursement of reasonable out-of-pocket expenses.
Directors who are employees of the Company do not receive
compensation for serving as directors or attending
meetings. The Company has entered into indemnification
agreements with the directors and officers of the
Company.

ITEM 11. EXECUTIVE COMPENSATION

There is hereby incorporated by reference the information
to appear under the caption "Executive Compensation" in
the Company's definitive Proxy Statement for its 2002
Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

There is hereby incorporated by reference the information
to appear under the caption "Principal Stockholders" in
the Company's definitive Proxy Statement for its 2002
Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There is hereby incorporated by reference the information
to appear under the caption "Certain Transactions" in the
Company's definitive Proxy Statement for its 2002 Annual
Meeting of Stockholders.

19

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K

(a)(1) and (2) - see list of Financial Statements and
Financial Statement Schedule on F-1.

(b) Reports on Form 8-K in the fourth quarter of 2001.

None.

(c) Exhibits*:
10.32 Credit Facility Agreement between Lifetime
Hoan Corporation and The Bank of New York, HSBC Bank
USA, Citibank, N.A., Wells Fargo Bank, N.A., and Bank
Leumi USA, dated November 9, 2001.

Exhibit
No. Description

3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3[a] to
Form S-1 [No. 33-40154] of Lifetime Hoan
Corporation).

3.2 Amendment dated June 9, 1994 to the Restated
Certificate of Incorporation of the Company (incorporated
herein by reference to the December 31, 1994 Form 10-K
[No. 1-19254] of Lifetime Hoan Corporation).

3.3 By-Laws of the Company (incorporated herein by
reference to Exhibit 3[b] to Form S-1 [No. 33-40154]
of Lifetime Hoan Corporation).

10.1 Loan Agreement dated as of May 11, 1988 with Bank of
New York, as amended (incorporated by reference to
Exhibit 10[d] to Form S-1 [No. 33-40154] of Lifetime
Hoan Corporation).

10.2 Amendment No. 6 dated as of March 5, 1992 between
Lifetime Hoan Corporation and The Bank of New York
(incorporated by reference to the December 31, 1991
Form 10-K [No. 1-19254] of Lifetime Hoan
Corporation).

10.3 Stock Option Plan for key employees of Lifetime Hoan
Corporation, as amended June 9, 1994 (incorporated
by reference to the December 31, 1994 Form 10-K [No.
1-19254] of Lifetime Hoan Corporation).

10.4 Promissory notes dated December 17, 1985 of Milton
L. Cohen, Jeffrey Siegel, Craig Phillips and Robert
Phillips, as amended (incorporated by reference to
Exhibit 10[f] to Form S-1 [No. 33-40154] of Lifetime
Hoan Corporation).

10.5 Lease to Dayton, New Jersey premises dated August
20, 1987 and amendment between the Company and Isaac
Heller (incorporated by reference to Exhibit 10[h]
to Form S-1 [No. 33-40154] of Lifetime Hoan
Corporation).

10.6 License Agreement dated December 14, 1989 between
the Company and Farberware, Inc. (incorporated by
reference to Exhibit 10[j] to Form S-1 [No. 33-
40154] of Lifetime Hoan Corporation).

10.7 License Agreement dated as of April 19, 1991 between
the Company and The Pillsbury Company (incorporated
by reference to Exhibit 10[m] to Form S-1 [No. 33-
40154] of Lifetime Hoan Corporation).

20
10.8 Real Estate Sales Agreement dated October 28, 1993
between the Company and The Olsten Corporation
(incorporated by reference to the December 31, 1993
Form 10-K [No. 1-19254] of Lifetime Hoan
Corporation).

10.9 Amendment to the Real Estate Sales Agreement dated
September 26, 1994 between the Company and The
Olsten Corporation. (incorporated by reference to
the December 31, 1995 Form 10-K [No. 1-19254] of
Lifetime Hoan Corporation).

10.10 Lease to additional Dayton, New Jersey premises
dated December 7, 1994. (incorporated by reference
to the December 31, 1995 Form 10-K [No. 1-19254] of
Lifetime Hoan Corporation).

10.11 License Agreement dated December 21, 1995
between the Company and The Walt Disney Company.

10.12 Memorandum of purchase dated September 18, 1995
between the Company and Alco Capital Group, Inc.
(incorporated by reference to the September 30, 1995
Form 10-Q [No. 1-19254] of Lifetime Hoan
Corporation).

10.13 Registration Rights Agreement dated September
18, 1995 between the Company and Alco Capital Group,
Inc. (incorporated by reference to the September 30,
1995 Form 10-Q [No. 1-19254] of Lifetime Hoan
Corporation).

10.14 Amendment No. 1 dated September 26, 1995 to the
Lease for the additional Dayton, New Jersey
premises. (incorporated by reference to the
September 30, 1995 Form 10-Q [No. 1-19254] of
Lifetime Hoan Corporation).

10.15 Form of Extension Agreement dated as of
December 15, 1995 between Milton L. Cohen and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).

10.16 Form of Extension Agreement dated as of
December 15, 1995 between Jeffrey Siegel and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).

10.17 Form of Extension Agreement dated as of
December 15, 1995 between Craig Phillips and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).

10.18 Asset Purchase Agreement by and between
Farberware, Inc., Far-b Acquisition Corp., Syratech
Corporation and Lifetime Hoan Corporation, dated
February 2, 1996.

10.19 Joint Venture Agreement by and among Syratech
Corporation, Lifetime Hoan Corporation and Far-b
Acquisition Corp., dated February 2, 1996.

10.20 Employment Agreement dated April 7, 1996 with
Milton L. Cohen (incorporated by reference to the
March 31, 1996 10-Q).

10.21 Employment Agreement dated April 7, 1996 with
Jeffrey Siegel (incorporated by reference to the
March 31, 1996 10-Q).

10.22 Employment Agreement dated April 7, 1996 with
Craig Phillips (incorporated by reference to the
March 31, 1996 10-Q).

10.23 Lifetime Hoan 1996 Incentive Stock Option Plan
(incorporated by reference to the March 31, 1996 10-
Q).

21
10.24 Lifetime Hoan 1996 Incentive Bonus Compensation
Plan (incorporated by reference to the March 31,
1996 10-Q).

10.25 Meyer Operating Agreement dated July 1, 1997
between Lifetime Hoan Corporation and Meyer
Corporation and Amendment to Agreement dated July 1,
1998.

10.26 Jeffrey Siegel Employment Agreement Amendment
No. 1, dated June 6, 1997
10.27 Milton L. Cohen Employment Agreement Amendment
No. 1, dated June 6, 1997

10.28 Stock Purchase Agreement between Lifetime Hoan
Corporation and Roshco, Inc. dated August 10, 1998.

10.29 Stock Purchase Agreement between Lifetime Hoan
Corporation and Meyer International Holdings Limited
and Prestige Italiana, SPA dated September 2, 1999.

10.30 Stock Purchase Agreement between Lifetime Hoan
Corporation and Meyer International Holdings Limited
and Prestige Haushaltswaren GmbH, dated September 2,
1999.

10.31 Asset Purchase Agreement between MK Acquisition
Corp., a wholly owned subsidiary of Lifetime Hoan
Corporation, and M. Kamenstein, Inc., dated September 28,
2000.

10.32 Employment Agreement dated April 6, 2001
between Jeffrey Siegel and Lifetime Hoan Corporation.

10.33 Consulting Agreement dated April 7, 2001
between Milton L. Cohen and Lifetime Hoan Corporation.

10.34 Credit Facility Agreement between Lifetime Hoan
Corporation and The Bank of New York, HSBC Bank USA,
Citibank, N.A., Wells Fargo Bank, N.A., and Bank
Leumi USA, dated November 9, 2001.

21 Subsidiaries of the registrant

23 Consent of Ernst & Young LLP.

*The Company will furnish a copy of any of the exhibits
listed above upon payment of $5.00 per exhibit to cover
the cost of the Company furnishing the exhibits.

(d) Financial Statement Schedules - the response to this
portion of Item 14 is submitted as a separate
section of this report.

22

FORM 10-K -- ITEM 14(a)(1) and (2)
LIFETIME HOAN CORPORATION

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE

The following Financial Statements and Schedule of
Lifetime Hoan Corporation are included in Item 8.

Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 2001 and 2000 F-3
Consolidated Statements of Income for the
Years ended December 31, 2001, 2000 and 1999 F-4
Consolidated Statements of Stockholders' Equity for the
Years ended December 31, 2001, 2000 and 1999 F-5
Consolidated Statements of Cash Flows for the
Years ended December 31, 2001, 2000 and 1999 F-6
Notes to Consolidated Financial Statements F-7

The following financial statement schedule of Lifetime Hoan Corporation is
included in Item 14 (d);

Schedule II - Valuation and qualifying accounts S-1

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

F-1
REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Lifetime Hoan Corporation

We have audited the accompanying consolidated balance
sheets of Lifetime Hoan Corporation as of December 31,
2001 and 2000 and the related consolidated statements of
income, stockholders' equity, and cash flows for each of
the three years in the period ended December 31, 2001.
Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These consolidated
financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to
express an opinion on these consolidated financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing
standards generally accepted in the United States. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of Lifetime Hoan
Corporation at December 31, 2001 and 2000, and the
consolidated results of its operations and its cash flows
for each of the three years in the period ended December
31, 2001, in conformity with accounting principles
generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements
taken as a whole, presents fairly in all material
respects the information set forth therein.

Ernst & Young LLP

Melville, New York
February 14, 2002 18

F-2

LIFETIME HOAN CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

See notes to consolidated financial statements.

F-3

LIFETIME HOAN CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(in thousands - except per share data)

See notes to consolidated financial statements.

F-4

LIFETIME HOAN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)

See notes to consolidated financial statements.

F-5LIFETIME HOAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

See notes to consolidated financial statements.
F-6

LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Organization and Business: The accompanying consolidated financial
statements include the accounts of Lifetime Hoan Corporation
("Lifetime"), its wholly-owned subsidiaries, Outlet Retail Stores,
Inc. ("Outlets"), Roshco, Inc. ("Roshco") and M. Kamenstein Corp.
("Kamenstein") and its 51% owned and controlled subsidiaries, Prestige
Italiana, Spa. ("Prestige Italy") and Prestige Haushaltswaren GmbH
("Prestige Germany" and together with Prestige Italy, the "Prestige
Companies"), collectively, the "Company". Significant intercompany
accounts and transactions have been eliminated in consolidation.

The Company is engaged in the design, marketing and distribution
of household cutlery, kitchenware, cutting boards, pantryware and
bakeware, marketing its products under a number of trade names, some
of which are licensed. The Company sells its products primarily to
retailers throughout the United States.

The significant accounting policies used in the preparation of the
consolidated financial statements of the Company are as follows:

Revenue Recognition: Revenue is recognized upon the shipment of
merchandise.

Inventories: Merchandise inventories, principally finished
goods, are priced by the lower of cost (first-in, first-out basis) or
market method. Reserves for excess or obsolete inventory reflected in
the Company's consolidated balance sheet at December 31, 2001 and 2000
are considered adequate by the Company's management, however, there
can be no assurance that these reserves will prove to be adequate over
time to provide for ultimate losses in connection with the Company's
inventory.

Accounts Receivable: The Company is required to estimate the
collectibility of its accounts receivable. A considerable amount of
judgment is required in assessing the ultimate realization of these
receivables including the current credit-worthiness of each customer.
The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required
payments. If the financial conditions of the Company's customers were
to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.

Property and Equipment: Property and equipment is stated at cost.
Property and equipment other than leasehold improvements is being
depreciated by the straight-line method over the estimated useful
lives of the assets. Building and improvements are being depreciated
over 30 years and machinery, furniture, and equipment over 5 to 10
years. Leasehold improvements are amortized over the term of the
lease or the estimated useful lives of the improvements, whichever is
shorter.

Cash Equivalents: The Company considers highly liquid instruments
with a maturity of three months or less when purchased to be cash
equivalents.

Use of Estimates: The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Excess of Cost Over Net Assets Acquired and Other Intangibles:
Excess of cost over net assets acquired pursuant to acquisitions is
being amortized by the straight-line method over periods ranging from
30 to 40 years. Accumulated amortization at December 31, 2001 and
2000 was $2,366,000 and $1,795,000, respectively.

Other intangibles consist of a royalty-free license, trademarks and
brand names acquired pursuant to two acquisitions and are being
amortized by the straight-line method over 30 years. Accumulated
amortization at December 31, 2001 and 2000 was $2,286,000 and
$1,896,000, respectively.

Amortization expense for the years ended December 31, 2001,
December 31, 2000 and December 31, 1999 was $961,000, $868,000 and
$735,000, respectively.

F-7
LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)

Long-Lived Assets: The Company reviews long-lived assets for
impairment when circumstances indicate the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount of fair value less costs
to sell.

Income Taxes: Income taxes have been provided using the liability
method.

Earnings Per Share: Basic earnings per share has been computed by
dividing net income by the weighted average number of common shares
outstanding of 10,492,000 in 2001, 10,995,000 in 2000, and 12,572,000
in 1999. Diluted earnings per share has been computed by dividing
net income by the weighted average number of common shares
outstanding, including the dilutive effects of stock options, of
10,537,000 in 2001, 11,079,000 in 2000, and 12,671,000 in 1999.

Recent Accounting Pronouncements: In June 2001, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("SFAS") No. 142, Goodwill and Other Intangible
Assets. Under SFAS 142, goodwill and intangible assets with indefinite
lives are no longer amortized but are reviewed at least annually for
impairment. The amortization provisions of SFAS 142 apply to goodwill
and intangible assets acquired after June 30, 2001. With respect to
goodwill and intangible assets acquired prior to July 1, 2001, the
Company is required to adopt SFAS 142 effective January 1, 2002.
Application of the non-amortization provisions of SFAS 142 for
goodwill is expected to result in an increase in income from
operations of approximately $570,000 in 2002. Changes in the estimated
useful lives of intangible assets are not expected to result in a
material effect on net income in 2002. At December 31, 2001, the
Company had goodwill of approximately $15.5 million. Pursuant to SFAS
142, the Company will test its goodwill for impairment upon adoption
and, if impairment is indicated, record such impairment as a
cumulative effect of an accounting change. The Company is currently
evaluating the effect that the adoption may have on its consolidated
results of operations and financial position.

In October 2001, the FASB issued SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"),
which supersedes SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be disposed of." The
primary objectives of SFAS No. 144 is to develop one accounting model
based on the framework established in SFAS No. 121 for long-lived
assets to be disposed of by sale, and to address significant
implementation issues. The provisions of this statement are effective
for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years, with early application encouraged.
The Company is evaluating the impact of SFAS No. 144 on its financial
position and results of operations.

NOTE B - ACQUISITIONS AND LICENSES

Kamenstein Acquisition: In September 2000, the Company acquired
the assets and certain liabilities of M. Kamenstein, Inc.
("Kamenstein"), a privately-held 107-year old housewares company whose
products include pantryware, teakettles, and home organization
accessories. Kamenstein's revenues were approximately $21.0 million
for the twelve month period ended August 31, 2000. In acquiring
Kamenstein, the Company assumed bank debt and other indebtedness of
approximately $10.0 million. The Company is obligated to make
contingent payments in the future based on the annual gross profit
achieved by the Kamenstein business for a 3 -year period. Kamenstein
contributed $7.6 million in sales to the Company's total net sales for
the four-month period ended December 31, 2000 and $21.6 million for
2001. This acquisition was accounted for using the purchase method
and the Company recorded excess of the cost over the net assets
acquired of $6,063,000.

The table below reflects unaudited pro forma combined results of
the Company as if the acquisition had taken place at the beginning of
fiscal 2000 and 1999. The pro forma financial information is not
necessarily indicative of the operating results that may occur in the
future or that would have occurred had the acquisition of Kamenstein
been affected on the dates indicated.

F-8
LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE B - ACQUISITIONS AND LICENSES (continued)

Prestige Acquisition: In September 1999, the Company acquired 51%
of the capital stock and controlling interest in each of Prestige
Italy and Prestige Germany. The Company paid approximately $1.3
million for its majority interests in the Prestige Companies. This
acquisition was accounted for using the purchase method and the
Company recorded the excess of the cost over the net assets acquired
of $586,000.

Pro forma results are not presented for the Prestige
acquisition due to immateriality.

Operations of the acquired entities have been included since
their respective dates of acquisition.

KitchenAid License Agreement: In October 2000, the Company
entered into a licensing agreement with KitchenAid, a division of the
Whirlpool Corporation. This agreement allows the Company to design,
manufacture and market an extensive range of kitchen utensils,
barbecue items and pantryware products under the KitchenAidr brand
name. On January 1, 2002, the licensing agreement between the Company
and KitchenAid, was amended, expanding the covered products to include
bakeware and baking related products. Shipments of products under the
agreement began in the second quarter of 2001.

NOTE C -CREDIT FACILITIES

On November 9, 2001, the Company entered into a $45 million three-
year, secured, reducing revolving credit agreement (the "Agreement")
with a group of banks and, in conjunction therewith, canceled its $40
million short-term lines of credit. The Credit Facility is secured by
all of the assets of the Company and reduces to $40 million at
December 31, 2002 and further to $35 million at December 31, 2003, and
through the maturity date. Under the terms of the Agreement, the
Company is required to satisfy certain financial covenants, including
limitations on indebtedness and sale of assets; a minimum fixed charge
ratio; and net worth maintenance. Borrowings under the Agreement have
different interest rate options that are based on either an alternate
base rate, LIBOR, or the lender's cost of funds rate. As of December
31, 2001, the Company had $2,502,000 of letters of credit and trade
acceptances outstanding and $6,70020,000,000 of borrowings under the
Agreement and, as a result, the availability under the Agreement was
$22,498,000. Interest rates on borrowings at December 31, 2001 ranged
from 3.875% to 3.9375%.

In addition to the Agreement, the Prestige Companies have three
lines of credit with three separate banks for a total available credit
facility of approximately $3.4 million. As of December 31, 2001, the
Prestige Companies had borrowings of approximately $2.8 million
against these lines. Interest rates on these lines of credits range
from 5.85% to 8.25%.

The Company paid interest of approximately $1,289,000, $913,000 and
$281,000 during the years ended December 31, 2001, 2000 and 1999,
respectively.

NOTE D - CAPITAL STOCK

Cash Dividends: The Company paid regular quarterly cash
dividends of $0.0625 per share on its Common Stock, or a total annual
cash dividend of $0.25, in 2001, 2000 and 1999. The Board of
Directors currently intends to maintain a quarterly cash dividend of
$0.0625 per share of Common Stock for the foreseeable future, although
the Board may in its discretion determine to modify or eliminate such
dividend at any time.

Common Stock Repurchase and Retirement: In December 1999,
the Board of Directors of the Company authorized a repurchase of up to
1,000,000 of its outstanding shares of Common Stock in the open
market. In 2000, the Board of Directors increased the authorized
amount of Common Stock that could be bought back from 1,000,000
shares to 3,000,000 shares. Through December 31, 2001, 2,128,000
shares were repurchased for approximately $15,235,000.

F-9

LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE D - CAPITAL STOCK (continued)

Stock Option Plans: In June 2000, the stockholders of the Company
approved the adoption of a Stock Option Plan (the "Plan"), which
replaced all other Company stock option plans, whereby options to
purchase up to 1,750,000 shares of common stock may be granted to key
employees of the Company, including directors and officers. The Plan
authorizes the Board of Directors of the Company to issue incentive
stock options as defined in Section 422A (b) of the Internal Revenue
Code and stock options that do not conform to the requirements of that
Section of the Code. All options expire on the tenth anniversary of
the date of grant and vest over a range of up to five years, from the
date of grant.

As of December 31, 2001, approximately 707,000 shares were
available for grant under the Company's stock option plans.

The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares
at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related Interpretations because the Company believes
the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" requires
use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense
is recognized.

Pro forma information regarding net income and earnings per share
is required by FASB Statement No. 123, and has been determined as if
the Company has accounted for its employee stock options under the
fair value method of that Statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions: risk-
free interest rates of 4.55%, 6.01% and 5.88% for 2001, 2000 and 1999,
respectively; 4.25% dividend yield in 2001, 3.67% dividend yield in
2000 and 4.68% dividend yield in 1999; volatility factor of the
expected market price of the Company's common stock of 0.07 in 2001,
0.45 in 2000 and 0.07 in 1999; and a weighted-average expected life of
the options of 4.7, 5.0 and 5.1 years in 2001, 2000 and 1999,
respectively.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.

For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options' vesting
periods. The Company's pro forma information is as follows:

F-10

LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE D - CAPITAL STOCK (continued)

A summary of the Company's stock option activity and
related information for the years ended December 31 follows:

The weighted average fair values of options granted
during the years ended December 31, 2001, 2000 and 1999 were $0.27,
$0.64 and $0.44, respectively.

The following table summarizes information about
employees' stock options outstanding at December 31, 2001:

In connection with the grant of certain options, the
Company recorded, and is amortizing, deferred compensation.

In connection with the exercise of options under a stock
option plan which has since expired, the Company received cash of
$255,968 and notes in the amount of $908,000. The notes bear interest
at 9% and are due no later than December 31, 2005. During 2001, a
note from Milton L. Cohen, a director of the Company in the amount of
$422,000 was canceled. During 2001, a new note was issued to Milton
L. Cohen in the amount of $855,000 which consolidated all amounts due
to the Company.

F-11
LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE E - INCOME TAXES

Pre-tax income for the years ended December 31, 2001, 2000 and 1999
were comprised of domestic income of $6,060,000, $6,850,000 and
$6,794,000, respectively, and foreign losses of $665,000, $599,000 and
$11,000, respectively.

The provision for income taxes consists of (in thousands):

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's net deferred tax
assets are as follows (in thousands):

While management believes that the Company's deferred tax asset
will be realized based on its generation of taxable income in recent
years and its future projected taxable income, the substantial
restrictions on and time periods required to realize certain of the
Company's NOL's make it appropriate to record a valuation allowance
against a portion of those NOL's. A valuation allowance has been
provided against all of the Company's foreign net operating loss
carryforwards. Accordingly, the Company has provided a total
valuation allowance of $226,000 and $204,000 as of December 31, 2001
and 2000, respectively. There can be no assurance that the Company
will generate sufficient taxable earnings in future years to fully
realize recorded tax benefits.

The provision for income taxes differs from the amounts computed by
applying the applicable federal statutory rates as follows (in
thousands):

In 2001 the Company received income tax refunds (net of
payments) of approximately $218,000. The Company paid income taxes
(net of refunds) of approximately $4,970,000 and $4,178,000 during the
years ended December 2000 and 1999, respectively.
F-12
LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE F - COMMITMENTS

Operating Leases: The Company has lease agreements for its
warehouses, showroom facilities, sales offices and outlet stores which
expire through 2016. These leases provide for, among other matters,
annual base rent escalations and additional rent for real estate taxes
and other costs.

Future minimum payments under non cancelable operating leases are
as follows (in thousands):

Under agreements with Meyer Corporation and Salton, Inc., the
Company is reimbursed for use of floor space in its outlet stores.
Meyer Corporation reimbursed the Company 40.0% (as amended from 52.0%
in January 2000) of the operating lease expenses of the outlet stores
in 2000, which is not a sublease commitment. In 2001, 2000 and 1999,
Meyer Corporation reimbursed approximately $1,337,000, $1,463,000 and
$1,856,000, respectively, for operating lease expense to the Company.
Salton Inc. reimbursed the Company 20.0% of the operating lease
expense of the outlet stores in 2000, which is also not a sublease
commitment. In 2001 and 2000, Salton Inc. reimbursed approximately
$668,000 and $731,000, respectively, for operating lease expense to
the Company.

Rental and related expenses under the operating leases were
approximately $7,567,000, $5,916,000 and $5,554,000 for the years
ended December 31, 2001, 2000 and 1999, respectively. Amounts for
2001, 2000 and 1999 are prior to the Meyer Corporation and Salton Inc.
reimbursements described above.

Royalties: The Company has royalty licensing agreements which
expire through December 31, 2007. Future minimum royalties payable
are as follows (in thousands):

F-13
LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE F - COMMITMENTS (continued)

Legal Proceedings: The Company is, from time to time, a party to
litigation arising in the normal course of its business. The Company
believes that there are currently no material legal proceedings the
outcome of which would have a material adverse effect on the Company's
consolidated financial position or results of operations.

Employment Agreements: Effective as of April 6, 2001, Mr. Jeffrey
Siegel entered into a new employment agreement with the Company that
provides that the Company will employ him as its President and Chief
Executive Officer for a term commencing on April 6, 2001, and as its
Chairman of the Board commencing immediately following the 2001 Annual
Meeting of stockholders, and continuing until April 6, 2006 and
thereafter for additional consecutive one year periods unless
terminated by either the Company or Mr. Siegel as provided in the
agreement. The agreement provides for an annual salary of $700,000
and for the payment to him of bonuses pursuant to the Company's
Incentive Bonus Compensation Plan. The agreement also provides for,
among other things, certain standard fringe benefit arrangements, such
as disability benefits, insurance and an accountable expense
allowance. The agreement further provides that if the Company is
merged or otherwise consolidated with any other organization or
substantially all of the assets of the Company are sold or control of
the Company has changed (the transfer of 50% or more of the
outstanding stock of the Company) which is followed by: (i) the
termination of his employment agreement, other than for cause; (ii)
the diminution of his duties or change in executive position; (iii)
the diminution of his compensation (other than a general reduction to
all employees); or (iv) the relocation of his principal place of
employment to other than the New York Metropolitan Area, the Company
would be obligated to pay to Mr. Siegel or his estate the base salary
required pursuant to the employment agreement for the balance of the
term. The employment agreement also contains restrictive covenants
preventing Mr. Siegel from competing with the Company for a period of
five years from the earlier of the termination of Mr. Siegel's
employment (other than a termination by the Company without cause) or
the expiration of his employment agreement.

Incentive Bonus Compensation Plan: In April 1996, the Board of
Directors adopted and in June 1996, the stockholders approved an
incentive bonus compensation plan ("1996 Bonus Plan"). The 1996 Bonus
Plan provided for the award of a bonus, with respect to each of the
ten fiscal years of the Company beginning with the 1996 fiscal year,
to each of the then President and the Executive Vice President of the
Company. The bonus payable to each executive was an amount equal to
3.5% of pretax income, before any provision for executive
compensation, stock options exercised during the year under the
Company's stock option plans and extraordinary items. In June 2000,
the stockholders of the Company approved the adoption of an incentive
bonus compensation plan ("2000 Bonus Plan"), which replaced the 1996
Bonus Plan. The 2000 Bonus Plan provides for the award of a bonus, to
designated Senior Executive Officers based on a predetermined
financial performance measurement. For 2001, the Chief Executive
Officer was the only designated officer and for 2000, the then Chief
Executive Officer and then President were both designated officers.
In each year the amount of the bonus payment was equal to 3.5% of
pretax income, before any provision for executive compensation, stock
options exercised during the year under the Company's stock option
plans, extraordinary items and non recurring charges. During the
years ended December 31, 2001, 2000 and 1999, the Company recorded
annual compensation expense of approximately $346,000, $600,000, and
$600,000, respectively, pursuant to the bonus plans.

In February 2001, the Board of Directors declared special bonuses
for the then Chief Executive Officer and the President aggregating
approximately $850,000 charged to operations for the year ended
December 31, 2000.

In April 2001, the Company paid Mr. Milton L. Cohen a bonus of
$178,500 for the period January 1, 2001 through April 6, 2001.

F-14

LIFETIME HOAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE G - RELATED PARTY TRANSACTIONS

Effective April 6, 2001, Milton L. Cohen, a director of the
Company, and the Company entered into a 5-year consulting agreement
with an annual fee of $440,800.

As of December 31, 2001 and December 31, 2000, Milton L. Cohen
owed the Company approximately $739,000 and $855,000, respectively.

As of December 31, 2001 and December 31, 2000, Jeffrey Siegel
owed the Company approximately $659,000 and $474,000, respectively,
which, for each year, included $344,000 of an outstanding loan related
to the exercise of stock options under a stock option plan which has
since expired.

NOTE H - RETIREMENT PLAN

The Company maintains a defined contribution retirement plan ("the
Plan") for eligible employees under Section 401(k) of the Internal
Revenue Code. Participants can make voluntary contributions up to a
maximum of 15% of their respective salaries. The Company made matching
contributions to the Plan of approximately $178,000 and $50,000 in
2001 and 2000, respectively, and made no contributions to the Plan in
1999.

NOTE I - CONCENTRATION OF CREDIT RISK

The Company maintains cash and cash equivalents with various
financial institutions.

Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities comprising
the Company's customer base and their dispersion across the United
States. The Company's accounts receivable are not collateralized. The
Company periodically reviews the status of its accounts receivable
and, where considered necessary, establishes an allowance for
doubtful accounts.

During the years ended December 31, 2001, 2000 and 1999, Walmart
accounted for approximately 14%, 11% and 14% of net sales,
respectively. No other customer accounted for 10% or more of the
Company's net sales during 2001, 2000 and 1999.

NOTE J - OTHER

Property and Equipment:

Property and equipment consist of (in thousands):

Depreciation expense for the years ended December 31, 2001,
December 31, 2000 and December 31, 1999 was $2,733,000, $2,593,000 and
$2,080,000 respectively.

F-15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

LIFETIME HOAN CORPORATION

NOTE J - OTHER (Continued)

Accrued Expenses:

Accrued expenses consist of (in thousands):

Sources of Supply: The Company sources its products from
approximately 44 manufacturers located primarily in the Far East,
including the People's Republic of China, and to a smaller extent in
the United States, Thailand, Malaysia, Indonesia, Taiwan, and Italy.
A majority of its cutlery was purchased from five suppliers in 2001
who accounted for 28%, 21%, 14%, 11% and 10% of the total purchases,
respectively, and from four suppliers in 2000 who accounted for 32%,
25%, 22% and 11% of the total purchases, respectively. A majority of
its pantryware was purchased from two suppliers in 2001 who accounted
for 45% and 32%, respectively, of the total purchases and from two
suppliers in 2000 who accounted for 59% and 11%, respectively. An
interruption of supply from any of these manufacturers could have an
adverse impact on the Company's ability to fill orders on a timely
basis. However, the Company believes other manufacturers with whom the
Company does business would be able to increase production to fulfill
the Company's requirements.

Inventory: During the three-month period ended December
31, 2000, the Company recorded a charge relating to an inventory
shortfall of approximately $4.0 million (which reduced earnings by
$0.23 and $0.22 per basic and diluted per common share for the fourth
quarter and the year ended December 31, 2000, respectively) which is
included in cost of goods sold.

Minority Interest: The Company has recorded approximately
$667,000 and $605,000 relating to minority interest in operations of
its consolidated subsidiaries, the Prestige Companies, in the caption
other income, net in the accompanying consolidated financial
statements of income for the years ended December 31, 2001 and 2000,
respectively.

F-16
LIFETIME HOAN CORPORATION

Schedule II - Valuation and Qualifying Accounts

Lifetime Hoan Corporation

(in thousands)

(a) Uncollectible accounts written off, net of recoveries.
(b) Allowances granted.
(c) Charged to net sales.

S-1

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Lifetime Hoan Corporation

/s/ Jeffrey Siegel
Jeffrey Siegel
Chairman of the Board of
Directors,
Chief Executive Officer,
President and Director

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.

Signature Title Date

/s/ Jeffrey Siegel Chairman of the Board of Directors,
Jeffrey Siegel Chief Executive Officer, President March 29, 2002
and Director

/s/ Craig Phillips
Craig Phillips Vice-President - Distribution, March 29, 2002
Secretary and Director

/s/ Robert McNally
Robert McNally Vice-President - Finance March 29, 2002
and Treasurer
(Principal Financial and
Accounting Officer)

/s/ Bruce Cohen
Bruce Cohen Executive Vice-President March 29, 2002
and Director

/s/ Milton L. Cohen
Milton L. Cohen Director March 29, 2002

/s/ Ronald Shiftan
Ronald Shiftan Director March 29, 2002

/s/ Howard Bernstein
Howard Bernstein Director March 29, 2002

/s/ Leonard Florence
Leonard Florence Director March 29, 2002

Exhibit 21. Subsidiaries of the Registrant

Outlet Retail Stores, Inc.
Incorporated in the state of Delaware

Roshco, Inc.
Incorporated in the state of Illinois

Prestige Italiana, Spa.
Incorporated in the country of Italy

Prestige Haushaltswaren GmbH
Incorporated in the country of Germany

M. Kamenstein Corp.
Incorporated in the state of Delaware
Exhibit 23. Consent of Ernst & Young LLPIndependent Auditors

We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-51774) of Lifetime Hoan Corporation
pertaining to the 1991 Stock Option Plan, of our report dated
February 14, 2002, with respect to the consolidated financial
statements and schedule of Lifetime Hoan Corporation included in
the Annual Report (Form 10-K) for the year ended December 31,
2001.

Ernst & Young LLP

Melville, New York
March 29, 2002

EXHIBIT

Exhibit 10.32 Credit Facility Agreement between Lifetime Hoan
Corporation and The Bank of New York, HSBC Bank USA, Citibank,
N.A., Wells Fargo Bank, N.A., and Bank Leumi USA, dated November
9, 2001.

CREDIT AGREEMENT

dated as of November 8, 2001,

among

LIFETIME HOAN CORPORATION
as Borrower,

the Lenders party hereto

and

THE BANK OF NEW YORK,
as Administrative Agent

___________________________

BNY CAPITAL MARKETS, INC.
as Lead Arranger and Book Manager
TABLE OF CONTENTS

ARTICLE 1. DEFINITIONS 1
SECTION 1.01 DEFINED TERMS 1
SECTION 1.02 CLASSIFICATION OF LOANS AND BORROWINGS 17
SECTION 1.03 TERMS GENERALLY 17
SECTION 1.04 ACCOUNTING TERMS; GAAP 17
ARTICLE 2. THE CREDITS 18
SECTION 2.01 COMMITMENTS 18
SECTION 2.02 LOANS AND BORROWINGS 18
SECTION 2.03 REQUESTS FOR BORROWINGS 18
SECTION 2.04 FUNDING OF BORROWINGS 19
SECTION 2.05 SWING LINE LOANS 19
SECTION 2.06 TERMINATION AND REDUCTION OF COMMITMENTS 20
SECTION 2.07 REPAYMENT OF LOANS; EVIDENCE OF DEBT 21
SECTION 2.08 PREPAYMENT OF LOANS 21
SECTION 2.09PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS22
SECTION 2.10 LETTERS OF CREDIT 23
SECTION 2.11 BANKERS ACCEPTANCES 26
SECTION 2.12 CASH COLLATERAL ACCOUNT 28
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC. 29
SECTION 3.01 INTEREST 29
SECTION 3.02 INTEREST ELECTIONS 29
SECTION 3.03 FEES 30
SECTION 3.04 ALTERNATE RATE OF INTEREST 31
SECTION 3.05 INCREASED COSTS; ILLEGALITY 31
SECTION 3.06 BREAK FUNDING PAYMENTS 32
SECTION 3.07 TAXES 34
SECTION 3.08 MITIGATION OBLIGATIONS 34
SECTION 3.09 SUBSTITUTION OF LENDERS 35
ARTICLE 4. REPRESENTATIONS AND WARRANTIES 35
SECTION 4.01 ORGANIZATION; POWERS 35
SECTION 4.02 AUTHORIZATION; ENFORCEABILITY 35
SECTION 4.03 GOVERNMENTAL APPROVALS; NO CONFLICTS 35
SECTION 4.04FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE 36
SECTION 4.05 PROPERTIES 36
SECTION 4.06 LITIGATION AND ENVIRONMENTAL MATTERS 36
SECTION 4.07 COMPLIANCE WITH LAWS AND AGREEMENTS 36
SECTION 4.08 INVESTMENT AND HOLDING COMPANY STATUS 36
SECTION 4.09 TAXES 36
SECTION 4.10 ERISA 37
SECTION 4.11 DISCLOSURE 37
SECTION 4.12 SUBSIDIARIES 37
SECTION 4.13 INSURANCE 37
SECTION 4.14 LABOR MATTERS 37
SECTION 4.15 SOLVENCY 37
SECTION 4.16 FEDERAL RESERVE REGULATIONS 38
SECTION 4.17 SECURITY DOCUMENTS 38
ARTICLE 5. CONDITIONS 38
SECTION 5.01 EFFECTIVE DATE 38
SECTION 5.02 EACH EXTENSION OF CREDIT 41
ARTICLE 6. AFFIRMATIVE COVENANTS 41
SECTION 6.01 FINANCIAL STATEMENTS AND OTHER INFORMATION 42
SECTION 6.02 NOTICES OF MATERIAL EVENTS 42
SECTION 6.03 EXISTENCE; CONDUCT OF BUSINESS 43
SECTION 6.04 PAYMENT OF OBLIGATIONS 43
SECTION 6.05 MAINTENANCE OF PROPERTIES 43
SECTION 6.06 BOOKS AND RECORDS; INSPECTION RIGHTS 43
SECTION 6.07 COMPLIANCE WITH LAWS 43
SECTION 6.08 USE OF PROCEEDS 44
SECTION 6.09 NOTICE OF CERTAIN CHANGES 44
SECTION 6.10 INSURANCE 44
SECTION 6.11 ADDITIONAL SUBSIDIARIES 44
SECTION 6.12 INFORMATION REGARDING COLLATERAL 45
SECTION 6.13 CASUALTY AND CONDEMNATION 45
SECTION 6.14 COLLATERAL MONITORING 45
SECTION 6.15 FURTHER ASSURANCES 46
SECTION 6.16 INTELLECTUAL PROPERTY LICENSES 46
ARTICLE 7. NEGATIVE COVENANTS 46
SECTION 7.01 INDEBTEDNESS 47
SECTION 7.02 LIENS 47
SECTION 7.03 FUNDAMENTAL CHANGES 48
SECTION 7.04INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS 48
SECTION 7.05 ASSET SALES 49
SECTION 7.06 SALE AND LEASE-BACK TRANSACTIONS 49
SECTION 7.07 HEDGING AGREEMENTS 50
SECTION 7.08 RESTRICTED PAYMENTS 50
SECTION 7.09 TRANSACTIONS WITH AFFILIATES 50
SECTION 7.10 RESTRICTIVE AGREEMENTS 50
SECTION 7.11 AMENDMENT OF MATERIAL DOCUMENTS 50
SECTION 7.12 LEVERAGE RATIO 51
SECTION 7.13 FIXED CHARGE COVERAGE RATIO 51
SECTION 7.14 NET WORTH 51
SECTION 7.15 NET INCOME 51
SECTION 7.16 RETAIL STORES 51
SECTION 7.17 PREPAYMENTS OF INDEBTEDNESS 51
ARTICLE 8. EVENTS OF DEFAULT 51
SECTION 8.01 EVENTS OF DEFAULT 51
SECTION 8.02 CONTRACT REMEDIES 53
ARTICLE 9. THE ADMINISTRATIVE AGENT 53
ARTICLE 10. MISCELLANEOUS 55
SECTION 10.01 NOTICES 55
SECTION 10.02 WAIVERS; AMENDMENTS 55
SECTION 10.03 EXPENSES; INDEMNITY; DAMAGE WAIVER 56
SECTION 10.04 SUCCESSORS AND ASSIGNS 57
SECTION 10.05 SURVIVAL 59
SECTION 10.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS 59
SECTION 10.07 SEVERABILITY 59
SECTION 10.08 RIGHT OF SETOFF 59
SECTION 10.09GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS 60
SECTION 10.10 WAIVER OF JURY TRIAL 60
SECTION 10.11 HEADINGS 60
SECTION 10.12 INTEREST RATE LIMITATION 60

SCHEDULES:
SCHEDULE EXISTING LETTERS OF CREDIT AND BANKERS
1.01 ACCEPTANCES
SCHEDULE COMMITMENTS
2.01
Schedule Disclosed Matters
4.06
Schedule Subsidiaries
4.12
Schedule Insurance
4.13
Schedule Existing Indebtedness
7.01
Schedule Existing Liens
7.02
Schedule Existing Investments
7.04
Schedule Existing Restrictions
7.10

EXHIBITS:

Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Opinion of McMillan, Rather,
Bennett & Rigano, P.C.
Exhibit C-1 Form of Revolving Note
Exhibit C-2 Form of Swing Line Note
Exhibit D Form of Guaranty Agreement
Exhibit E Form of Security Agreement
Exhibit F Form of Borrowing Base Certificate

CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of November 8, 2001 (this
"Agreement"), among LIFETIME HOAN CORPORATION, a Delaware
corporation (the "Borrower"), the Lenders party hereto (the
"Lenders") and THE BANK OF NEW YORK, as Administrative Agent (in
such capacity, the "Administrative Agent").
The Borrower has requested the Lenders to extend credit to it and
the Lenders are willing to do so subject to the terms and
conditions set forth herein.
Accordingly, for good and valuable consideration, the parties
hereto agree as follows:
DEFINITIONS
Defined Terms
As used in this Agreement, the following terms have the
meanings specified below:
"ABR", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such
Borrowing, are bearing interest at a rate determined by
reference to the Alternate Base Rate.
"Account Receivable" means any right of the Borrower to
payment for goods sold, whether now existing or hereafter
arising.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per
annum (rounded upwards, if necessary, to the next 1/16 of
1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means BNY, in its capacity as
administrative agent for the Lenders hereunder.
"Administrative Questionnaire" an Administrative
Questionnaire in a form supplied by the Administrative
Agent.
"Affiliate" means, with respect to a specified Person,
another Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by or is
under common Control with the Person specified.
"Aggregate Revolving Exposure" means, at any time, the sum at such
time of (i) the outstanding principal balance of the Revolving Loans
of all Lenders, plus (ii) the outstanding principal balance of the
Swing Line Loans, plus (iii) an amount equal to the Letter of Credit
Exposure of all Lenders, plus (iv) an amount equal to the Bankers
Acceptance Exposure of all Lenders.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greater of (a) the Prime Rate in effect on such
day and (b) the Federal Funds Rate in effect on such day
plus 1/2 of 1% per annum. Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective from and including the effective
date of such change in the Prime Rate or the Federal Funds
Rate, respectively.
"Applicable Margin" means, at all times during the
applicable periods set forth below: (a) with respect to ABR
Borrowings, the percentage set forth below under the heading "ABR
Margin" and adjacent to such period, (b) with respect to
Eurodollar Borrowings, the percentage set forth below under the
heading "Eurodollar Margin" and adjacent to such period and (c)
with respect to the commitment fees payable under
Section 3.03(b), the percentage set forth below under the heading
"Fee Margin" and adjacent to such period:

Changes in the Applicable Margin resulting from a change in
the Fixed Charge Ratio shall be based upon the certificate
most recently delivered under Section 6.01(c) and shall
become effective on the date such certificate is delivered
to the Administrative Agent. Notwithstanding anything to
the contrary in this definition, (i) if the Borrower shall
fail to deliver to the Administrative Agent such a
certificate on or prior to any date required hereby, the
Fixed Charge Ratio shall be deemed to be less than 1.45:1.00
from and including such date to the date of delivery to the
Administrative Agent of such certificate and (ii) during the
period commencing on the Effective Date and ending on the
date that is six months after the Effective Date, the
Applicable Margin shall be the higher of (A) 0.500% for ABR
Borrowings, 1.750% for Eurodollar Borrowings and 0.375% with
respect to the commitment fee payable under Section 3.03(b)
and (B) the applicable percentage set forth above based on
the Fixed Charge Ratio set forth in the certificate most
recently delivered under Section 6.01(c).
"Appraised Value" means the value of the Designated Real
Property as determined pursuant to the appraisal of the
Designated Real Property to be delivered to the
Administrative Agent pursuant to Section 5.01(q).
"Approved Fund" means, with respect to any Lender that is a
fund that invests in commercial loans, (a) any other fund
that invests in commercial loans and is managed or advised
by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any bank or
Affiliate thereof that manages or controls such Lender.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender and an assignee (with
the consent of any party whose consent is required by
Section 10.04), and accepted by the Administrative Agent,
substantially in the form of Exhibit A or any other form
approved by the Administrative Agent.
"Availability Period" means the period from and including
the Effective Date to but excluding the earlier of the
Revolving Maturity Date and the date of termination of the
Revolving Commitments.
"Available Revolving Commitment Amount" means , at any time,
an amount equal to the aggregate Revolving Commitments at
such time minus the Revolving Exposure at such time.
"BA Issuer" means BNY.
"BA Obligations" means, collectively, the obligation of the
Borrower to the BA Issuer with respect to each Bankers
Acceptance and all documents, instruments and other
agreements related thereto, including the obligation of the
Borrower to reimburse the BA Issuer for amounts drawn under
such Bankers Acceptance.
"Bankers Acceptance Commitment" means the commitment of the
Issuer to create Bankers Acceptances in an aggregate
principal amount of up to $10,000,000.
"Bankers Acceptance Documents" has the meaning set forth in
Section 2.11(a).
"Bankers Acceptance Exposure" means in respect of any Lender
at any time, an amount equal to (i) the sum (without
duplication) of (x) the aggregate face amount of the
outstanding Bankers Acceptances, (y) the aggregate amount of
unpaid drafts drawn on all Bankers Acceptances and (z) the
aggregate unpaid BA Obligations, multiplied by (ii) such
Lender's Revolving Percentage at such time.
"Bankers Acceptance Fee" has the meaning set forth in
Section 3.03(c).
"Bankers Acceptances" means bankers acceptances created by the BA
Issuer pursuant to Section 2.11 by the acceptance, for the account of
the Borrower, of drafts drawn upon it by the Borrower having not more
than 180 days' sight to run, exclusive of days of grace, which grow
out of transactions involving the importation, exportation or the
domestic shipment of goods. All such drafts shall be subject to the
provisions of the Federal Reserve Act, as amended, and the rules and
regulations thereunder, including, without limitation, provisions
relating to maturity of the acceptance, relationship to the underlying
c.i.f. value and date of the shipment upon which the acceptance is
based and date of creation of the acceptance. All such drafts shall
be eligible for purchase by, discount with and pledge to, the Federal
Reserve Bank of New York and each request for the creation of a
Bankers Acceptance shall be accompanied by any certification required
by the BA Issuer as to the necessary elements supporting such
eligibility.
"BNY" means The Bank of New York.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" has the meaning ascribed thereto in the preamble
to this Agreement.
"Borrowing" means Revolving Loans or Swing Line Loans, as
applicable, of the same Type made, converted or continued on
the same date and, in the case of Eurodollar Loans, as to
which a single Interest Period is in effect; provided,
however, that Swing Line Loans may not be made or converted
into Eurodollar Loans.
"Borrowing Base Amount" means, as of any date of
determination, a sum equal to (a) the Borrowing Base
Percentage of the book value of Eligible Receivables (less
reserves with respect to such Eligible Receivables which the
Required Lenders may deem necessary in their sole discretion
from time to time) based upon the Borrowing Base Certificate
most recently delivered to the Administrative Agent under
Section 6.01(e) plus (b) the Borrowing Base Percentage of
all Factored Credit Balances plus (c) the lesser of (i)
$20,000,000 and (ii) the sum of (x) the Borrowing Base
Percentage of the value (determined at the lower of cost (on
a first-in, first-out basis in accordance with GAAP) or
market value) of Eligible Inventory (other than Eligible
Outlet Inventory) based upon the Borrowing Base Certificate
most recently delivered to the Administrative Agent under
Section 6.01(e) plus (y) the Borrowing Base Percentage of
the value (determined at the lower of cost (on a first-in,
first-out basis in accordance with GAAP) or market value) of
Eligible Outlet Inventory based upon the Borrowing Base
Certificate most recently delivered to the Administrative
Agent under Section 6.01(e) plus (d) the Borrowing Base
Percentage of the Appraised Value of the Designated Real
Property. Notwithstanding anything to the contrary in this
definition, if the Borrower shall fail to deliver to the
Administrative Agent a Borrowing Base Certificate on or
prior to any date required hereby, the Borrowing Base Amount
shall be deemed to be zero ($0.00) from and including such
date to the date of delivery to the Administrative Agent of
such Borrowing Base Certificate.
"Borrowing Base Certificate" means a certificate, duly
executed by a Financial Officer of the Borrower and in the
form of Exhibit F.
"Borrowing Base Percentage" means (a) with respect to
Eligible Receivables, initially 80%, (b) with respect to
Factored Credit Balances, initially 80%, (c) with respect to
Eligible Inventory (other than Eligible Outlet Inventory),
initially 50%, (d) with respect to Eligible Outlet
Inventory, initially 25%, and (e) with respect to the
Designated Real Property, initially 60%, or, in each case,
such percentage as the Required Lenders shall reasonably
determine.
"Borrowing Date" means the date of (a) the making,
conversion or continuation of any Loan, (b) the issuance of
any Letter of Credit or (c) the creation of any Bankers
Acceptance.
"Business Day" means any day that is not a Saturday, Sunday
or other day on which commercial banks in New York City are
authorized or required by law to remain closed, provided
that, when used in connection with a Eurodollar Loan, the
term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the
London interbank market.
"Capital Expenditures" of any Person means expenditures
(whether paid in cash or other consideration or accrued as a
liability) for fixed or capital assets (excluding any
capitalized interest and any such asset acquired in
connection with normal replacement and maintenance programs
properly charged to current operations and excluding any
replacement assets acquired with the proceeds of insurance)
made by such Person.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts
under any lease of (or other arrangement conveying the right
to use) real or personal property, or a combination thereof,
which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such
Person under GAAP, and the amount of such obligations shall
be the capitalized amount thereof determined in accordance
with GAAP.
"Cash Collateral" has the meaning set forth in Section 2.12.
"Cash Collateral Account" has the meaning set forth in
Section 2.12.
"Change in Control" means on or after the Effective Date, any "person"
or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of 25% or
more of the total voting power of the then outstanding capital stock
of the Borrower entitled to vote generally in the election of the
directors of the Borrower, other than any Person who is a stockholder
of the Borrower on the Effective Date.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c)
compliance by any Credit Party (or, for purposes of Section 3.05(b),
by any lending office of such Credit Party or by such Credit Party's
holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means any and all "Collateral", as defined in
any applicable Security Document.
"Commitment Fee" has the meaning set forth in Section
3.03(a).
"Commitment Percentage" means, with respect to any Lender, a
fraction (expressed as a percentage), the numerator of which
is such Lender's Revolving Commitment and the denominator of
which is the aggregate Revolving Commitments of all Lenders.
"Consolidated": means the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"Consolidated EBITDA" means, for any period, net income of
the Borrower and its Subsidiaries for such period,
determined on a Consolidated basis plus the sum of, without
duplication, (a) Consolidated Interest Expense for such
period, (b) provision for income taxes accrued for such
period, (c) depreciation, amortization and other non-cash
charges of the Borrower and its Subsidiaries and (d) if such
period includes the fourth fiscal quarter of the Borrower's
fiscal year 2000, $4,000,000 (representing a one-time charge
taken in such fiscal quarter relating to an inventory
shortfall in such amount), each to the extent deducted in
determining such net income for such period, minus the sum
of (i) extraordinary gains from sales, exchanges and other
dispositions of Property not in the ordinary course of
business, and (ii) if such period includes the Borrower's
fiscal year 2001 or the Borrower's first fiscal quarter of
2002, up to $2,500,000 (representing a one-time charge taken
in such fiscal year relating to shut down, lease
termination, equipment write-off, moving and other costs and
expenses of the Borrower associated with the Borrower's
transferring its warehouse and related operations to, and
commencing operations at, the Borrower's new warehouse
facility located at 12 Applegate Drive, Robbinsville, New
Jersey), in each case solely to the extent such items would
be classified as an operating expense in accordance with
GAAP.
"Consolidated Fixed Charges" means, for any period, the sum
of, without duplication, (i) Capital Expenditures made
during such period by the Borrower and its Subsidiaries
(excluding Capital Expenditures for leasehold improvements
and equipment for the warehouse of the Borrower located at
12 Applegate Drive, Robbinsville, New Jersey 08691 in an
aggregate amount not to exceed $13,000,000), (ii) income
taxes accrued during such period by the Borrower and the
Subsidiaries, (iii) Consolidated Interest Expense for such
period and (iv) the aggregate amount of cash dividends paid
by the Borrower in respect of, and purchases by the Borrower
of, its capital stock permitted to be made pursuant to
Section 7.08 during such period.
"Consolidated Interest Expense" means, for any period,
interest and fees accrued or paid by the Borrower and its
Subsidiaries during such period in respect of the
Indebtedness of the Borrower and its Subsidiaries,
determined on a Consolidated basis, including (a) the
amortization of debt discounts to the extent included in
interest expense in accordance with GAAP, (b) the
amortization of all fees (including fees with respect to
interest rate cap agreements or other agreements or
arrangements entered into by the Borrower or any Subsidiary
thereof designed to protect the Borrower or such Subsidiary,
as applicable, against fluctuations in interest rates)
payable in connection with the incurrence of Indebtedness to
the extent included in interest expense in accordance with
GAAP, (c) the portion of any rents payable under capital
leases allocable to interest expense in accordance with
GAAP, and (d) capitalized interest.
"Consolidated Net Income" means, for any period, net income
(or loss) of the Borrower and its Subsidiaries on a
Consolidated basis for such period taken as a single
accounting period determined in accordance with GAAP.
"Consolidated Net Worth" means, at any date of
determination, the sum of all amounts which would be
included under "Shareholders' Equity" or analogous entry on
a Consolidated balance sheet of the Borrower determined in
accordance with GAAP as at such date.
"Consolidated Total Debt" means, as of any date, the aggregate
principal amount of all Indebtedness of the Borrower and its
Subsidiaries that would be reflected as liabilities on a Consolidated
balance sheet of the Borrower as of such date prepared in accordance
with GAAP; provided, however, that for purposes of this definition,
(i) the term "Indebtedness" shall not include obligations as an
account party in respect of commercial Letters of Credit and (ii) the
principal amount of Indebtedness of the Prestige Subsidiaries included
in the calculation of Consolidated Total Debt shall be limited to an
amount equal to (x) the aggregate principal amount of all Indebtedness
of the Prestige Subsidiaries that would be reflected as liabilities on
a balance sheet of each Prestige Subsidiary (other than Indebtedness
of such Prestige Subsidiary due to the Borrower or any Domestic
Subsidiary) multiplied by (y) the ownership interest (expressed as a
percentage) of the Borrower and its Subsidiaries in such Prestige
Subsidiary as of the date of determination of Consolidated Total Debt.
"Control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management
or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. The terms
"Controlling" and "Controlled" have meanings correlative
thereto.
"Credit Parties" means the Administrative Agent, the Issuer,
the BA Issuer and the Lenders.
"Credit Request" means a request for Revolving Loans,
Bankers Acceptances, Swing Line Loans or Letters of Credit.
"Default" means any event or condition which constitutes an
Event of Default or that upon notice, lapse of time or both
would, unless cured or waived, become an Event of Default.
"Designated Real Property" means the Real Property of the
Borrower located at One Merrick Avenue, Westbury, New York.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 4.06.
"dollars" or "$" refers to lawful money of the United States
of America.
"Domestic Subsidiary" means any wholly-owned Subsidiary of
the Borrower organized under the laws of the United States
of America or any State thereof.
"Effective Date" means the date on which the conditions
specified in Section 5.01 are satisfied (or waived in
accordance with Section 10.02).
"Eligible Inventory" means Inventory subject to a fully
perfected first priority security interest in favor of the
Administrative Agent, for the ratable benefit of the Secured
Parties, pursuant to the Security Agreement which is not on
consignment from any third party and which conforms to the
representations and warranties contained in the Security
Agreement, less (a) obsolete or damaged Inventory, (b)
Inventory consisting of samples or otherwise not of a type
held for sale in the ordinary course of the Borrower's or a
Domestic Subsidiary's business, (c) Inventory not saleable
within one year from the date of acquisition or creation
thereof, (d) Inventory to be returned to suppliers, (e)
Inventory held by, or in transit to, third parties
(including to warehouses), (f) any reserves reasonably
required by Required Lenders for special order goods, market
value declines, bill and hold (deferred shipment) sales, and
any other matters in the reasonable determination of the
Required Lenders, and (g) Inventory which is not located on
such Loan Party's owned or leases premises in the United
States of America.
"Eligible Outlet Inventory" means Inventory of the
Borrower's wholly-owned Subsidiary, Outlet Retail Stores,
Inc., held for sale in the ordinary course of business that
satisfies the criteria of the definition of Eligible
Inventory except that such Inventory may be obsolete or
discontinued merchandise.
"Eligible Receivable" means a Non-Purchased Account
Receivable which conforms to the representations and
warranties contained in the Security Agreement and as to
which the following requirements have been fulfilled to the
reasonable satisfaction of the Required Lenders: (a) the
Borrower or any Domestic Subsidiary has lawful title to such
Account Receivable, subject to the Lien granted to the
Administrative Agent for the benefit of the Secured Parties
pursuant to the Security Agreement; (b) such Account
Receivable arose through the sale of finished goods or
merchandise or the rendition of services by the Borrower or
such Domestic Subsidiary and not on a barter basis; (c) the
goods or merchandise, the sale of which gave rise to such
Account Receivable, have been shipped, or the services, the
rendition of which gave rise to such Account Receivable,
have been performed; (d) such Account Receivable shall have
had excluded therefrom (i) any portion that is subject to
any dispute, offset, counterclaim or other claim or defense
on the part of the account debtor or to any claim on the
part of the account debtor denying liability with respect to
such Account Receivable, which dispute, offset,
counterclaim, claim or defense remains unresolved for a
period of 60 days after the Borrower has received notice of
such dispute, offset, counterclaim, claim or defense, and
(ii) any returns, discounts, claims, credits and allowances;
(e) no return, rejection or repossession of the merchandise
in respect of such Account Receivable has occurred; (f) the
Borrower or such Domestic Subsidiary has the full and
unqualified right to assign and grant a security interest in
such Account Receivable under and pursuant to the Security
Agreement; (g) such Account Receivable is evidenced by an
invoice rendered to the account debtor and no portion of
such Account Receivable is evidenced by any chattel paper,
promissory note or other instrument; (h) such Account
Receivable is subject to a fully perfected first priority
security interest in favor of the Administrative Agent for
the benefit of the Secured Parties pursuant to the Security
Agreement; (i) no portion of such Account Receivable is
subject to any security interest or Lien in favor of any
Person other than the Lien of the Secured Parties pursuant
to the Security Agreement or a Permitted Lien; (j) such
Account Receivable did not arise out of a transaction with a
Subsidiary or any employee, officer, agent, director,
shareholder or Affiliate of the Borrower or any Subsidiary;
(k) the account debtor of such Account Receivable is not
subject to any reorganization, bankruptcy, receivership,
custodianship, insolvency or other like condition (unless
such Account Receivable is subject to the Permitted
Factoring Arrangement described in clause (ii) of the
definition thereof); (l) such Account Receivable has not
been outstanding more than the earlier of 60 days from the
original due date thereof and 120 days (or in respect of
Accounts Receivable having an aggregate book value of up to
$5,000,000, 150 days) from the date of the invoice therefor;
(m) such Account Receivable is payable in dollars; (n) such
Account Receivable does not arise from an account debtor in
respect of which more than 25% of such account debtor's
Account Receivables have been outstanding longer than the
maximum period allowable under clause (l) hereof; (o) such
Account Receivable, when added to all other Accounts
Receivable of the same account debtor, does not exceed (x)
25% with respect to Accounts Receivable the account debtor
on which is WalMart Stores, Inc. and (y) in all other cases
15% of the total Accounts Receivable of the Borrower and the
Domestic Subsidiaries; (p) the account debtor with respect
to such Account Receivable is not any foreign government,
the United States of America, any State, political
subdivision, department, agency or instrumentality thereof,
unless, if such account debtor is the United States of
America, any State, political subdivision, department,
agency or instrumentality thereof, upon the Required
Lenders' request, the Federal Assignment of Claims Act of
1940, as amended, or any similar State or local law, if
applicable, has been complied with in a manner satisfactory
to the Administrative Agent, (q) the Required Lenders are,
and continue to be, reasonably satisfied with the credit
standing of the account debtor in relation to the amount of
credit extended; (r) such Account Receivable is from an
account debtor resident of the United States; (s) such
Account Receivable was not purchased or otherwise acquired
by the Borrower or any Domestic Subsidiary other than
through the sale of finished goods and merchandise or
through the rendition of services by the Borrower or such
Domestic Subsidiary; (t) such Account Receivable is not
subject to any repurchase obligation or return right, as
with sales made on a bill-and-hold, guaranteed sale, sale-
and-return or consignment or other recourse basis; (u) the
account debtor of such Account Receivable is not a resident
of any jurisdiction other than the United States of America;
and (v) such Account Receivable does not arise from progress
billings, invoices for deposits, rebills of amounts
previously credited or other similar contra accounts.
"Environmental Laws" means all applicable laws, rules,
regulations, codes, ordinances, orders, decrees, judgments,
injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or
reclamation of natural resources, the management, release or
threatened release of any Hazardous Material or to health
and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of
environmental remediation, fines, penalties or indemnities),
of any Loan Party directly or indirectly resulting from or
based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is
assumed or imposed with respect to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) that, together with the Borrower or any
Subsidiary, is treated as a single employer under
Section 414(b) or 414(c) of the Code or, solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined
in Section 4043 of ERISA or the regulations issued
thereunder with respect to a Plan (other than an event for
which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (c) the filing
pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (d) the incurrence by the
Borrower or any ERISA Affiliate of any liability under Title
IV of ERISA with respect to the termination of any Plan; (e)
the receipt by the Borrower or any ERISA Affiliate from the
PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by the
Borrower or any ERISA Affiliate of any liability with
respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by the
Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer
Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or
Borrowing, refers to whether such Loan, or the Loans
comprising such Borrowing, are bearing interest at a rate
determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Section 8.01.
"Excluded Taxes" means, with respect to any Credit Party or
any other recipient of any payment to be made by or on
account of any obligation of any Loan Party under any Loan
Document, (a) income or franchise taxes imposed on (or
measured by) its net income by the United States of America,
or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is
located or, in the case of any Credit Party, in which its
applicable lending office is located, (b) any branch profits
taxes imposed by the United States of America or any similar
tax imposed by any other jurisdiction in which such Loan
Party is located, (c) any Taxes that would not have been
imposed but for such Credit Party's or recipient's present
or former connection (other than a connection solely
resulting from the transaction contemplated by the Loan
Documents) with the jurisdiction (or any political
subdivision thereof or therein) imposing such taxes,
provided that it is determinable that such Taxes were
imposed solely as a result of such Credit Party's or
recipient's present or former connection (other than a
connection solely resulting from the transaction
contemplated by the Loan Documents) with the jurisdiction
(or any political subdivision thereof or therein) imposing
such taxes, and (d) in the case of a Foreign Lender, any
withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a
party to this Agreement (or designates a new lending office)
or is attributable to such Foreign Lender's failure to
comply with Section 3.07(e), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at
the time of designation of a new lending office (or
assignment), to receive additional amounts from such Loan
Party with respect to such withholding tax pursuant to
Section 3.07(a).
"Existing Bankers Acceptances" means the Bankers Acceptances
outstanding on the Effective Date and identified on Schedule
1.01.
"Existing Letters of Credit" means the Letters of Credit
outstanding on the Effective Date and identified on Schedule
1.01.
"Extensions of Credit" means, collectively, the Loans, the Bankers
Acceptances, the Letters of Credit and any participations in the
Bankers Acceptances or Letters of Credit pursuant to Section 2.10(c)
or 2.11(c).
"Factored Credit Balances" means the aggregate net amount then due to
M. Kamenstein, Corp. from HSBC Business Credit (USA) Inc. (successor
to Republic Business Credit) pursuant to the Permitted Factoring
Arrangement described in clause (ii) of the definition of "Permitted
Factoring Arrangements", after deduction for all chargebacks,
commissions and other reasonable deductions made or entitled to be
made by HSBC Business Credit (USA) Inc., as factor.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded, if necessary, to the next greater 1/100 of 1%)
equal to the rate per annum at which the Administrative
Agent is offered overnight Federal funds by a Federal funds
broker selected by the Administrative Agent at or about 2:00
p.m. on such day, provided that if such day is not a
Business Day, the Federal Funds Rate for such day shall be
such rate at which the Administrative Agent is offered
overnight Federal funds by such Federal funds broker at or
about 2:00 p.m. on the next preceding Business Day.
"Financial Officer" means, with respect to any Person, the
president, chief financial officer, principal accounting
officer, treasurer or controller of such Person.
"Fixed Charge Coverage Ratio" means, at any date of
determination, the ratio of Consolidated EBITDA to
Consolidated Fixed Charges for the four fiscal quarter
period ending on such date or, if such date is not the last
day of a fiscal quarter, for the immediately preceding four
fiscal quarter period.
"Foreign Lender" means any Lender that is organized under
the laws of a jurisdiction other than that in which the
applicable Loan Party is located. For purposes of this
definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a
single jurisdiction.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Governmental Authority" means the government of the United
States of America, any other nation or any political
subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central
bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing
any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security
for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner
of such Indebtedness or other obligation of the payment
thereof, (c) to maintain working capital, equity capital or
any other financial statement condition or liquidity of the
primary obligor as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation, provided
that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business.
The term "Guaranteed" has a meaning correlative thereto.
"Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit D, among the Borrower,
the Guarantors and the Administrative Agent, for the benefit
of the Credit Parties.
"Guarantor" means each of the entities set forth on Schedule
4.12 and any other Subsidiary of the Borrower organized
under the laws of the United States of America or any state
thereof that executes and delivers the Guarantee Agreement,
in each case in accordance with Section 5.01(c), 6.11 or
6.15. The Prestige Subsidiaries are not and shall not be
required to become Guarantors.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances,
wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical
wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity
price protection agreement or other interest or currency
exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or in
connection with deposits or advances of any kind paid to,
received by or otherwise for the account of, such Person,
(b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are
customarily paid (other than as a penalty for non-payment),
(d) all obligations of such Person under conditional sale or
other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person
in respect of the deferred purchase price of property or
services (excluding accounts payable incurred in the
ordinary course of business), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person,
whether or not the Indebtedness secured thereby has been
assumed, (g) all Guarantees by such Person of Indebtedness
of others, (h) all Capital Lease Obligations of such Person,
(i) all obligations, contingent or otherwise, of such Person
as an account party in respect of letters of credit and
letters of guaranty and (j) all obligations, contingent or
otherwise, of such Person in respect of bankers'
acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of
such Person's ownership interest in or other relationship
with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable
therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned to such term in
Section 10.03(b).
"Interest Election Request" means a request by the Borrower
to convert or continue a Borrowing in accordance with
Section 3.02.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each January, April, July and October
and (b) with respect to any Eurodollar Loan, the last day of
the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest
Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar
Borrowing, the period commencing on the date of such
Borrowing and ending on the numerically corresponding day in
the calendar month that is one, two, three or six months
thereafter or, if made available by all of the applicable
Lenders, the period (x) commencing on the date of such
Borrowing and ending on the corresponding day of the week
that is two weeks thereafter or (y) commencing on the date
of such Borrowing and ending on the numerically
corresponding day in the calendar month that is nine or
twelve months thereafter, as the Borrower may elect,
provided that (a) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day, unless 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, (b) any Interest Period that
commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day
in the last calendar month of such Interest Period) shall
end on the last Business Day of the last calendar month of
such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date
of the most recent conversion or continuation of such
Borrowing.
"Inventory" means all finished goods and other merchandise
of the Borrower and the Domestic Subsidiaries, whether now
owned or hereafter acquired, held for sale, excluding, to
the extent included therein, raw materials, intermediates,
work-in-process, packaging materials, semi-finished
inventory, scrap inventory, manufacturing supplies and spare
parts.
"Issuer" means BNY.
"Lenders" means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant
to an Assignment and Acceptance, other than any such Person
that ceases to be a party hereto pursuant to an Assignment
and Acceptance.
"Letter of Credit" has the meanings set forth in Section 2.10(a).
"Letter of Credit Commitment" means the commitment of the Issuer to
issue Letters of Credit having an aggregate outstanding face amount up
to $10,000,000.
"Letter of Credit Documentation" has the meaning set forth in Section
2.10(a).
"Letter of Credit Exposure" means in respect of any Lender at any
time, an amount equal to (i) the sum (without duplication) at such
time of (x) the aggregate undrawn face amount of the outstanding
Letters of Credit, (y) the aggregate amount of unpaid drafts drawn on
all Letters of Credit, and (z) the aggregate unpaid Reimbursement
Obligations, multiplied by (ii) such Lender's Revolving Percentage at
such time.
"Letter of Credit Fees" has the meaning set forth in Section 3.03(b).
"Leverage Ratio" means, as of any date of determination, the ratio of
(i) Consolidated Total Debt as of such date to (ii) Consolidated
EBITDA of the Borrower for the four consecutive fiscal quarter period
ending on the last day of the most recent fiscal quarter for which the
financial statements required by Sections 6.01(a) or 6.01(b), as the
case may be, have been delivered.
"LIBO Rate" means, with respect to the Interest Period
applicable to any Eurodollar Borrowing, a rate of interest
per annum, as determined by the Administrative Agent, equal
to the rate for deposits in dollars for a period comparable
to such Interest Period which appears on Telerate Page 3750
as of 11:00 a.m., London time, on the day that is two
Business Days prior to the first day of such Interest
Period. If such rate does not appear on Telerate Page 3750,
the LIBO Rate shall be the rate per annum (rounded, if
necessary, to the nearest one hundred-thousandth of a
percentage point) at which deposits in dollars are offered
by four major banks in the London interbank market at
approximately 11:00 a.m., London time, on the day that is
two Business Days prior to the first day of such Interest
Period to prime banks in the London interbank market for a
period of one month commencing on the first day of such
Interest Period in an amount comparable to the principal
amount of such Eurodollar Borrowing. The Administrative
Agent will request the principal London office of each such
bank to provide a quotation of its rate. If at least two
such quotations are provided as requested, the rate for such
Interest Period shall be the arithmetic mean of the
quotations. If fewer then two quotations are provided as
requested, the rate for such Interest Period shall be the
arithmetic mean of the rates quoted by major banks in New
York City, selected by the Administrative Agent, at
approximately 11:00 a.m., New York City time, on the date
that is two Business Days prior to the first day of such
Interest Period for loans in dollars to leading European
banks for a period of one month commencing on the first day
of such Interest Period in an amount comparable to such
Eurodollar Borrowing.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance,
charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement
relating to such asset and (c) in the case of securities,
any purchase option, call or similar right of a third party
with respect to such securities.
"Loan Documents" means this Agreement, the Notes, the
Guarantee Agreement, the Security Documents and all other
agreements, instruments and documents executed or delivered
in connection herewith.
"Loan Parties" means the Borrower and the Guarantors.
"Loans" means the Revolving Loans or the Swing Line Loans,
as the case may be.
"Margin Stock" has the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or
condition, financial or otherwise, of the Borrower and the
Subsidiaries, taken as a whole, (b) the ability of any Loan
Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to any
Credit Party under any Loan Document.
"Material Indebtedness" means Indebtedness (other than
Indebtedness under the Loan Documents) or obligations in
respect of one or more Hedging Agreements, of any one or
more of the Borrower and the Subsidiaries, whether arising
pursuant to one or more instruments or agreements, in an
aggregate principal amount exceeding $1,000,000. For
purposes of determining Material Indebtedness, the
"principal amount" of the obligations of the Borrower or any
Subsidiary in respect of any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any
netting agreements) that the Borrower or such Subsidiary, as
applicable, would be required to pay if such Hedging
Agreement were terminated at such time.
"Monitoring" has the meaning assigned thereto in Section
6.14.
"Mortgage" has the meaning assigned thereto in Section
5.01(q).
"Mortgage Documents" has the meaning assigned thereto in
Section 5.01(q).
"Multiemployer Plan" means a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any
Prepayment/Reduction Event, (a) the cash proceeds received
in respect of such Prepayment/Reduction Event, including (i)
any cash received in respect of any non-cash proceeds, but
only as and when received, (ii) in the case of a casualty,
insurance proceeds and (iii) in the case of a condemnation
or similar event, condemnation awards and similar payments,
minus (b) the sum of (i) all reasonable fees and
out-of-pocket expenses paid by the Borrower or any of the
Subsidiaries to third parties in connection with such
Prepayment/Reduction Event, (ii) in the case of a sale,
transfer, lease or other disposition of an asset (including
pursuant to a sale and leaseback transaction), the amount of
all payments required to be made by such Borrower and the
Subsidiaries as a result thereof to repay Indebtedness
(other than the Loans) secured by such asset or otherwise
subject to mandatory payment as a result thereof and (iii)
the amount of all taxes paid (or reasonably estimated to be
payable) by such Borrower and the Subsidiaries, and the
amount of any reserves established by such Borrower and the
Subsidiaries to fund contingent liabilities reasonably
estimated to be payable, in each case during the year that
such event occurred or the next succeeding year and that are
directly attributable to such event (as determined
reasonably and in good faith by the chief financial officer
of such Borrower).
"Non-Purchased Account Receivable" means all Accounts
Receivable other than Accounts Receivable that have been
purchased by a factor pursuant to a Permitted Factoring
Agreement.
"Note" means a Revolving Note or the Swing Line Note, as the
case may be.
"Obligations" means (a) the due and punctual payment of (i)
principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such
proceeding) on the Loans, the Bankers Acceptance Exposure or
the Letter of Credit Exposure, when and as due, whether at
maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (ii) all other monetary
obligations, including fees, commissions, costs, expenses
and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such
proceeding), of the Borrower or any other Loan Party to the
Administrative Agent, the Lenders, the BA Issuer, the Issuer
or the Swing Line Lender, or that are otherwise payable to
the Administrative Agent, the Lenders, the BA Issuer, the
Issuer or the Swing Line Lender, under this Agreement and
the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and
liabilities of the Borrower or any other Loan Party under or
pursuant to this Agreement and the other Loan Documents and
(c) unless otherwise agreed upon in writing by the Lenders,
all obligations of the Borrower, monetary or otherwise,
under each Hedging Agreement entered into with any Lender
(or an Affiliate thereof) as a counterparty.
"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes,
charges or similar levies arising from any payment made
hereunder or from the execution, delivery or enforcement of,
or otherwise with respect to, the Loan Documents, other than
Excluded Taxes.
"Participant" has the meaning assigned to such term in
Section 10.04(e).
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA and any successor entity
performing similar functions.
"Perfection Certificate" means a certificate in the form of
Annex 1 to the Security Agreement or any other form approved
by the Administrative Agent.
"Permitted Acquisition" means the purchase, holding or acquisition of
(including pursuant to any merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of any other Person, or
the purchase or acquisition of (in one transaction or a series of
transactions (including pursuant to any merger)) any assets of any
other Person constituting a business unit (each an "acquisition"),
provided that, (i) at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing, (ii)
the aggregate amount of consideration paid, and Indebtedness assumed,
by the Borrower and the Subsidiaries shall not exceed $10,000,000 with
respect to any single acquisition or $20,000,000 in the aggregate for
all acquisitions, (iii) such Person or business unit, as the case may
be, is in substantially the same business as the Borrower and (iv) the
Borrower shall have complied with the provisions of Section 6.11 with
respect to such Person.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 6.04;
(b) landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's and other like Liens imposed by law,
arising in the ordinary course of business and securing
obligations that are not overdue by more than 60 days or are
being contested in compliance with Section 6.04;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance
and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each
case in the ordinary course of business;
(e) attachment or judgment liens in respect of judgments, writs
or warrants of attachment or similar process that do not
constitute an Event of Default under clause (k) of Article 8;
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the
ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of
business of the Borrower or any Subsidiary; and
(g) Liens on patents, patent applications, trademarks, trademark
applications, trade names, copyrights, technology and know-how to
the extent such Liens arise from the granting (i) of exclusive
licenses with respect to the foregoing if it relates to either
(x) intellectual property which is immaterial and not necessary
for the on-going conduct of the Borrower's or any Subsidiary's
business or (y) uses that would not materially restrict the
conduct of the Borrower's or any Subsidiary's on-going businesses
and (ii) of non-exclusive licenses to use any of the foregoing to
any Person, in either case in the ordinary course of business of
the Borrower or any of its Subsidiaries.
"Permitted Factoring Arrangements" means, collectively, (i) the
factoring, sale or assignment by the Borrower or any Subsidiary of its
accounts receivable in the ordinary course of business on terms and
conditions satisfactory to the Required Lenders; provided, that (x)
the aggregate amount of accounts receivable of the Borrower and its
Subsidiaries subject to all such arrangements shall not to exceed
$3,000,000 at any one time, (y) the factor, purchaser or assignee of
such accounts receivable shall not, and shall agree not to, make or
permit to exist any loan, anticipated payment or advance to, or
otherwise extend credit to or for the benefit of, or guarantee to
others any obligation of, the Borrower or any Subsidiary and (z)
before and after entering into any such arrangement, no Default shall
have occurred and be continuing or would result therefrom and (ii) the
agreement dated May 1, 1996 between Republic Business Credit (formerly
known as Republic Factors Corp.) and M. Kamenstein, Inc., as amended
through the Effective Date.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent that
such obligations are backed by the full faith and credit of the
United States of America), in each case measuring within one year
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies,
or any successor thereto, or from Moody's Investors Service, Inc.
or any successor thereto;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic
office of any commercial bank organized under the laws of the
United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than
$500,000,000; and
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) of
this definition and entered into with a financial institution
satisfying the criteria described in clause (c) of this
definition.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association,
company, partnership, Governmental Authority or other
entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of
ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Borrower, any Subsidiary or any
ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer"
as defined in Section 3(5) of ERISA.
"Pledged Debt" has the meaning assigned thereto in the
Security Agreement.
"Pledged Equity" has the meaning assigned thereto in the
Security Agreement.
"Prepayment/Reduction Event" means:
(a) any non-ordinary course sale, transfer, lease or other
disposition (including pursuant to a sale and leaseback
transaction) of any property or asset of the Borrower or any of
the Subsidiaries, other than (i) dispositions described in clause
(a), (b), (c) or (d) of Section 7.05 and (ii) other dispositions
resulting in aggregate Net Proceeds not exceeding $1,000,000
during any fiscal year of the Borrower;
(b) any casualty or other insured damage to, or any taking under
power of eminent domain or by condemnation or similar proceeding
of, any property or asset of the Borrower or any of the
Subsidiaries, other than casualties, insured damage or takings
resulting in aggregate Net Proceeds not exceeding $1,000,000
during any fiscal year; and
(c) the incurrence by the Borrower or any of the Subsidiaries of
any Indebtedness prohibited by any Loan Document.
"Prestige Subsidiaries" means, collectively, Prestige
Italiana S.p.A., an Italian company, and Prestige
Haushaltswaren GmbH, a German company, each a non-wholly
owned Subsidiary of the Borrower.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by BNY as its prime commercial
lending rate; each change in the Prime Rate being effective
from and including the date such change is publicly
announced as being effective. The Prime Rate is not intended
to be lowest rate of interest charged by BNY in connection
with extensions of credit to borrowers.
"Real Property" means all real property owned or leased by
the Borrower or any Domestic Subsidiary.
"Register" has the meaning assigned to such term in
Section 10.04(c).
"Regulation T" means Regulation T of the Board as from time
to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board as from time
to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board as from time
to time in effect and all official rulings and
interpretations thereunder or thereof.
"Reimbursement Obligation" means, collectively, the
obligation of the Borrower to the Issuer with respect to
each Letter of Credit and all documents, instruments and
other agreements related thereto, including the obligation
of the Borrower to reimburse the Issuer for amounts drawn
under such Letter of Credit.
"Related Parties" means, with respect to any specified
Person, such Person's Affiliates and the respective
directors, officers, employees, agents and advisors of such
Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having
Revolving Exposures and unused Revolving Commitments
representing 75% of the sum of the total Revolving Exposures
and unused Revolving Commitments at such time.
"Restricted Payment" means, as to any Person, any dividend
or other distribution by such Person (whether in cash,
securities or other property) with respect to any shares of
any class of equity securities of such Person, or any
payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares or any
option, warrant or other right to acquire any such shares.
"Revolving Commitment" means, with respect to each Lender
having a Revolving Commitment, the commitment of such Lender
to make Revolving Loans and create Bankers Acceptances
hereunder, as such commitment may be reduced or increased
from time to time pursuant to Section 2.06 or pursuant to
assignments by or to such Lender pursuant to Section 10.04.
The initial amount of each applicable Lender's Revolving
Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender
shall have assumed its Revolving Commitment, as applicable.
The aggregate amount of the Revolving Commitments on the
Effective Date is $45,000,000.
"Revolving Exposure" means, with respect to any Lender at
any time, the sum as of such time of (i) the outstanding
principal balance of such Lender's Revolving Loans, plus
(ii) such Lender's Swing Line Exposure, plus (iii) such
Lender's Letter of Credit Exposure, plus (iv) such Lender's
Bankers Acceptance Exposure.
"Revolving Loan" means a Loan referred to in Section 2.01
and made pursuant to Section 2.03.
"Revolving Maturity Date" means November 8, 2004.
"Revolving Note" means, with respect to each Lender, a
promissory note evidencing such Lender's Revolving Loans
payable to the order of such Lender (or, if required by such
Lender, to such Lender and its registered assigns)
substantially in the form of Exhibit C-1.
"Revolving Percentage" means, as of any date and with
respect to each Lender, the percentage equal to a fraction
(i) the numerator of which is the Revolving Commitment of
such Lender on such date (or, if there are no Revolving
Commitments on such date, on the last date upon which one or
more Revolving Commitments were in effect), and (ii) the
denominator of which is sum of the Revolving Commitments of
all Lenders on such date (or, if there are no Revolving
Commitments on such date, on the last date upon which one or
more Revolving Commitments were in effect).
"Secured Parties" means the "Secured Parties" as defined in
the Security Agreement.
"Security Agreement" means the Security Agreement,
substantially in the form of Exhibit E, among the Borrower,
the Guarantors and the Administrative Agent, for the benefit
of the Secured Parties.
"Security Documents" means the Security Agreement, the
Mortgage Documents and each other security agreement,
instrument or other document executed or delivered pursuant
to Section 6.11 or 6.15 to secure any of the Obligations.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate
of the maximum reserve percentages (including any marginal,
special, emergency or supplemental reserves) expressed as a
decimal established by the Board to which the Administrative
Agent is subject for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of
the Board). Such reserve percentages shall include those
imposed pursuant to such Regulation D. Eurodollar Loans
shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory
Reserve Rate shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Subsidiary" means, with respect to any Person (the
"parent") at any date, any corporation, limited liability
company, partnership, association or other entity the
accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if
such financial statements were prepared in accordance with
GAAP as of such date, as well as any other corporation,
limited liability company, partnership, association or other
entity of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of
the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as
of such date, owned, controlled or held by the parent or one
or more subsidiaries of the parent. Unless the context
otherwise requires, "Subsidiary" means any Subsidiary of the
Borrower.
"Swing Line Commitment" means the Swing Line Lender's
undertaking pursuant hereto to make Swing Line Loans in an
aggregate amount up to $5,000,000.
"Swing Line Exposure" means in respect of any Lender at any
time, an amount equal to the aggregate outstanding principal
amount of the Swing Line Loans at such time multiplied by
such Lender's Revolving Percentage at such time.
"Swing Line Lender" means BNY.
"Swing Line Loan" and "Swing Line Loans" have the meanings
set forth in Section 2.05(a).
"Swing Line Note" means a promissory note evidencing the
Swing Line Loans payable to the order of the Swing Line
Lender substantially in the form of Exhibit C-2.
"Swing Line Participation Amount" has the meaning set forth
in Section 2.05(d).
"Taxes" means any and all current or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed
by any Governmental Authority.
"Transactions" means (a) the execution, delivery and
performance by each Loan Party of each Loan Document to
which it is a party, (b) the incurrence of Extensions of
Credit and (c) the use of the proceeds of the Loans.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on
the Loans comprising such Borrowing, is determined by
reference to the Adjusted LIBO Rate or the Alternate Base
Rate.
"Withdrawal Liability" means liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from
such Multiemployer Plan, as such terms are defined in Part I
of Subtitle E of Title IV of ERISA.
Classification of Loans and Borrowings
For purposes of this Agreement, Loans may be classified and
referred to by class (e.g., a "Revolving Loan") or by Type
(e.g., a "Eurodollar Loan") or by class and Type (e.g., a
"Eurodollar Revolving Loan"). Borrowings also may be
classified and referred to by class (e.g., a "Revolving
Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or
by class and Type (e.g., a "Eurodollar Revolving
Borrowing").
Terms Generally
The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The
words "include", "includes" and "including" shall be deemed
to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires
otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or
otherwise modified, (b) any reference herein to any Person
shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder",
and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property"
shall be construed to have the same meaning and effect and
to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and
contract rights. Any reference to an "applicable Lender"
shall mean (a) in the case of Revolving Borrowings, Lenders
having a Revolving Commitment and (b) in the case of Swing
Line Borrowings, the Swing Line Lender.
Accounting Terms; GAAP
Except as otherwise expressly provided herein, all terms of
an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time,
provided that, if the Borrower notify the Administrative
Agent that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or
if the Administrative Agent notifies the Borrower that the
Required Lenders request an amendment to any provision
hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied
immediately before such change shall have become effective
until such notice shall have been withdrawn or such
provision amended in accordance herewith. Unless the
context otherwise requires, any reference to a fiscal period
shall refer to the relevant fiscal period of the Borrower.
THE CREDITS
Commitments
Subject to the terms and conditions set forth herein,
each Lender having a Revolving Commitment agrees to make
Revolving Loans to the Borrower from time to time during the
Availability Period in an aggregate principal amount up to the
lesser of (i) an amount that will not result in such Lender's
Revolving Exposure exceeding such Lender's Revolving Commitment
and (ii) such Lender's Commitment Percentage of the Borrowing
Base Amount. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow,
prepay and reborrow Revolving Loans.
Loans and Borrowings
Each Revolving Loan shall be made as part of a Borrowing consisting of
Revolving Loans made by the applicable Lenders ratably in accordance
with their respective Revolving Commitments. The failure of any
Lender to make any Loan required to be made by it shall not relieve
any other Lender of its obligations hereunder, provided that the
Revolving Commitments of the applicable Lenders are several, and no
Lender shall be responsible for any other Lender's failure to make
Loans as required.
Subject to Section 3.04, each Borrowing shall be comprised entirely of
ABR Loans or Eurodollar Loans, as applicable, in each case as the
Borrower may request in accordance herewith. Each applicable Lender
at its option may make any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan, provided
that any exercise of such option shall not affect the obligation of
the Borrower to repay such Loan in accordance with the terms of this
Agreement.
At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is
equal to $1,500,000 or an integral multiple of $300,000 in excess
thereof. At the time that each ABR Borrowing is made, such Borrowing
shall be in an aggregate amount that is equal to $100,000 or an
integral multiple thereof, provided that an ABR Revolving Borrowing
may be in an aggregate amount that is equal to the entire unused
balance of the total Revolving Commitments. Borrowings of more than
one Type may be outstanding at the same time, provided that there
shall not at any time be more than a total of 8 Eurodollar Borrowings
outstanding.
Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto
would end after the Revolving Maturity Date, in the case of Revolving
Loans.
Requests for Borrowings
To request a Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of
the proposed Borrowing or (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, on
the date of the proposed Borrowing. Each such telephonic
Credit Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative
Agent of a written Credit Request in a form approved by the
Administrative Agent signed by the Borrower. Each such
telephonic and written Credit Request shall specify the
following information in compliance with Section 2.02:
the aggregate amount of the requested Borrowing;
the date of such Borrowing, which shall be a Business Day;
whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period"; and
the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of
Section 2.04.
If no election as to the Type of Borrowing is specified, then the
requested Borrowing shall be an ABR Borrowing. If no Interest
Period is specified with respect to any requested Eurodollar
Borrowing, then the Borrower shall be deemed to have selected an
Interest Period of one month's duration. Promptly following
receipt of a Credit Request in accordance with this Section, the
Administrative Agent shall advise each applicable Lender of the
details thereof and of the amount of such Lender's Loan to be
made as part of the requested Borrowing.
Funding of Borrowings
Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds
by 1:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the
Lenders. The Administrative Agent will make such Loans available to
the Borrower by promptly crediting or otherwise transferring the
amounts so received, in like funds, to an account of the Borrower
maintained with the Administrative Agent and designated by the
Borrower in the applicable Credit Request.
Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender
will not make available to the Administrative Agent such Lender's
share of such Borrowing, the Administrative Agent may assume that such
Lender has made such share available on such date in accordance with
Section 2.04(a) and may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. In such event, if a
Lender has not in fact made its share of the applicable Borrowing
available to the Administrative Agent, then the applicable Lender and
the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon,
for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater
of the Federal Funds Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank
compensation or (ii) in the case of the Borrower, the interest rate
that would be otherwise applicable to such Borrowing. If such Lender
pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
Swing Line Loans
Subject to the terms and conditions hereof, the Swing Line Lender
agrees to make swing line loans (each a "Swing Line Loan" and,
collectively, the "Swing Line Loans") to the Borrower from time to
time on any Business Day during the period from the Effective Date to
the sixth Business Day preceding the Revolving Maturity Date, provided
that (i) immediately after making each Swing Line Loan, the aggregate
outstanding principal balance of the Swing Line Loans will not exceed
the Swing Line Commitment, and the Aggregate Revolving Exposure will
not exceed the lesser of (A) the Aggregate Revolving Commitment and
(B) the Borrowing Base Amount, (ii) prior thereto or simultaneously
therewith the Borrower shall have borrowed Revolving Loans, (iii) no
Lender shall be in default of its obligations under this Agreement and
(iv) no Credit Party shall have notified the Swing Line Lender and the
Borrower in writing at least one Business Day prior to the Borrowing
Date with respect to such Swing Line Loan, that the conditions set
forth in Section 5.02 have not been satisfied and such conditions
remain unsatisfied as of the requested time of the making such Swing
Line Loan.
To request a Swing Line Loan, the Borrower shall notify the
Administrative Agent and the Swing Line Lender by the delivery of a
Credit Request, which shall be sent by facsimile and shall be
irrevocable (confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Credit Request in a form approved by
the Administrative Agent signed by the Borrower), no later than: 11:00
a.m., on the requested Borrowing Date, specifying (i) the aggregate
principal amount to be borrowed and (ii) the requested Borrowing Date.
The Swing Line Lender will, subject to its determination that the
terms and conditions of this Agreement have been satisfied, make the
requested amount available promptly on that same day, to the
Administrative Agent (for the account of the Borrower) who, thereupon,
will promptly make such amount available to the Borrower by crediting
the account of the Borrower pursuant to Section 2.04. Each Borrowing
of a Swing Line Loan shall be in an aggregate principal amount equal
to $100,000 or, if less, the unused portion of the Swing Line
Commitment.
The Swing Line Lender shall not be obligated to make any Swing Line
Loan at a time when any Lender shall be in default of its obligations
under this Agreement unless arrangements to eliminate the Swing Line
Lender's risk with respect to such defaulting Lender's participation
in such Swing Line Loan shall have been made for the benefit of the
Swing Line Lender and such arrangements are satisfactory to the Swing
Line Lender. The Swing Line Lender will not make a Swing Line Loan if
the Administrative Agent, or any Lender by notice to the Swing Line
Lender and the Borrower no later than one Business Day prior to the
Borrowing Date with respect to such Swing Line Loan, shall have
determined that the conditions set forth in Section 5.02 have not been
satisfied and such conditions remain unsatisfied as of the requested
time of the making of such Swing Line Loan. Each Swing Line Loan
shall be due and payable on the earliest to occur of the seventh day
after the Borrowing Date thereof, the fifth Business Day prior to the
Revolving Credit Commitment Termination Date, the date on which the
Swing Line Commitment shall have been voluntarily terminated by the
Borrower or the Swing Line Lender in accordance with Section 2.06, and
the date on which the Swing Line Loans shall become due and payable
pursuant to the provisions hereof, whether by acceleration or
otherwise.
Upon each receipt by a Lender of notice of an Event of Default from
the Administrative Agent pursuant to Article 9, such Lender shall
purchase unconditionally, irrevocably, and severally from the Swing
Line Lender a participation in the outstanding Swing Line Loans
(including accrued interest thereon) in an amount equal to the product
of its Commitment Percentage and the outstanding amount of the Swing
Line Loans (the "Swing Line Participation Amount"). Each Lender shall
also be liable for an amount equal to the product of its Commitment
Percentage and any amounts paid by the Borrower pursuant to this
subsection (d) that are subsequently rescinded or avoided, or must
otherwise be restored or returned. Such liabilities shall be
unconditional and without regard to the occurrence of any Default or
the compliance by the Borrower with any of its obligations under the
Loan Documents. In furtherance of this subsection, upon each receipt
by a Lender of notice of an Event of Default from the Administrative
Agent, such Lender shall promptly make available to the Administrative
Agent for the account of the Swing Line Lender its Swing Line
Participation Amount, in lawful money of the United States and in
immediately available funds. The Administrative Agent shall deliver
the payments made by each Lender pursuant to the immediately preceding
sentence to the Swing Line Lender promptly upon receipt thereof in
like funds as received. If a Lender does not make its Swing Line
Participation Amount so available, such Lender shall be required to
pay interest to the Administrative Agent for the account of the Swing
Line Lender from the date such amount was due until paid in full, on
the unpaid portion thereof, at the rate set forth in Section 2.04(b),
payable upon demand by the Swing Line Lender. The Administrative
Agent shall distribute such interest payments to the Swing Line Lender
upon receipt thereof in like funds as received. Whenever the
Administrative Agent is reimbursed by the Borrower, for the account of
the Swing Line Lender, for any payment in connection with Swing Line
Loans and such payment relates to an amount previously paid by a
Lender pursuant to this Section, the Administrative Agent will
promptly pay over such payment to such Lender.
Termination and Reduction of Commitments
Unless previously terminated, (i) the Revolving Commitments shall
terminate on the Revolving Maturity Date and (ii) the Swing Line
Commitment shall terminate on the sixth Business Day prior to the
Revolving Maturity Date.
The aggregate Revolving Commitments of all Lenders shall be reduced to
(i) $40,000,000 on December 31, 2002 and (ii) $35,000,000 on December
31, 2003, and, in the event that Aggregate Revolving Exposure shall
exceed the aggregate Revolving Commitments after giving effect to each
such reduction, the Borrower shall prepay the Revolving Loans in
accordance with Section 2.08(d).
The Borrower may at any time terminate, or from time to time reduce,
the Revolving Commitments, provided that (i) the Borrower shall not
terminate or reduce the Revolving Commitments if, after giving effect
to any concurrent prepayment of the Revolving Loans in accordance with
Section 2.08, the sum of the Revolving Exposures would exceed the
total Revolving Commitments and (ii) each such reduction shall be in
an amount that is an integral multiple of $500,000 and not less than
$1,000,000.
The Borrower may at any time terminate, or from time to time reduce,
the Swing Line Commitment, provided that the Borrower shall not
terminate or reduce the Swing Line Commitment if, after giving effect
to any concurrent prepayment of the Swing Line Loans in accordance
with Section 2.05(c), the aggregate outstanding principal amount of
all Swing Line Loans would exceed the Swing Line Commitments.
Each reduction of the Revolving Commitments hereunder shall be made
ratably among the applicable Lenders in accordance with their
respective Revolving Commitments. The Borrower shall notify the
Administrative Agent of any election to terminate or reduce the
Revolving Commitments under Section 2.06(c) at least three Business
Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise
the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section 2.06 shall be irrevocable, provided
that a notice of termination of the Revolving Commitments delivered by
the Borrower may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice
may be revoked by the Borrower (by notice to the Administrative Agent
on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Revolving Commitments
hereunder shall be permanent.
Repayment of Loans; Evidence of Debt
The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each applicable Lender the
then unpaid principal amount of each Revolving Loan and each Swing
Line Loan on the Revolving Maturity Date.
Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the debt of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to
time hereunder.
The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (iii) the amount of any
sum received by the Administrative Agent hereunder for the account of
the Lenders and each Lender's share thereof.
The entries made in the accounts maintained pursuant to paragraphs (c)
or (d) of this Section 2.07 shall, to the extent not inconsistent with
any entries made in any Note, be prima facie evidence of the existence
and amounts of the obligations recorded therein, provided that the
failure of any Lender or the Administrative Agent to maintain such
accounts or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loans in accordance with the
terms of this Agreement.
The Revolving Loans of each Lender and interest thereon shall at all
times (including after assignment pursuant to Section 10.04) be
represented by one or more Revolving Notes payable to the order of
such Lender (or, if such Revolving Note is a registered note, to such
Lender and its registered assigns). The Swing Line Loans and interest
thereon shall at all times be represented by a Swing Line Note payable
to the order of the Swing Line Lender.
Prepayment of Loans
The Borrower shall have the right at any time and from time to time to
prepay any Borrowing in whole or in part, subject to the requirements
of this Agreement, including, without limitation, Section 3.06.
In the event and on each occasion that any Net Proceeds are received
by or on behalf of the Borrower or any Subsidiary in respect of any
Prepayment/Reduction Event, then, immediately after such Net Proceeds
are received, the Borrower shall prepay Revolving Borrowings in an
amount equal to such Net Proceeds; provided, however, with respect to
Net Proceeds received in respect of a Prepayment/Reduction Event
described in clause (b) of the definition thereof, so long as no
Default has occurred and is continuing, the Borrower shall not be
required to use such Net Proceeds to prepay the Loans if (i) on or
prior to receipt of such proceeds the Borrower shall have notified the
Administrative Agent in writing that it intends to use such proceeds
to replace or restore any property within 180 days of such
Prepayment/Reduction Event and (ii) the Borrower shall have replaced
or restored such property within such 180-day period (or, in the event
that such property is incapable of being replaced or restored during
such 180-day period, the Borrower shall have commenced the replacement
or restoration of such property during such 180-day period).
If as of any date the Aggregate Revolving Exposure (excluding the
aggregate undrawn face amount of the outstanding commercial Letters of
Credit) as of such date exceeds the Borrowing Base Amount, then in
such event the Borrower shall immediately prepay the Revolving Loans
by an amount necessary to eliminate any such excess (and if the
Revolving Loans have been paid in full and the Bankers Acceptance
Exposure or the Letter of Credit Exposure of all Lenders is greater
than zero, deposit into the Cash Collateral Account an amount equal to
such excess).
In the event of any partial reduction or termination of the Revolving
Commitments, then (i) at or prior to the date of such reduction or
termination, the Administrative Agent shall notify the Borrower and
the applicable Lenders of the sum of the Revolving Exposures after
giving effect thereto and (ii) if such sum would exceed the total
Revolving Commitments after giving effect to such reduction or
termination, then the Borrower shall, on the date of such reduction or
termination, prepay Revolving Borrowings in an amount sufficient to
eliminate such excess; provided, however, that if on the date of such
a reduction of the Aggregate Revolving Commitment, the Aggregate
Revolving Exposure exceeds the aggregate Revolving Commitments of all
of the Lenders after giving effect to such reduction and, if the
Revolving Loans have been paid in full and the Bankers Acceptance
Exposure or the Letter of Credit Exposure of all Lenders is greater
than zero, the Borrower shall deposit into the Cash Collateral Account
an amount in cash which would cause the balance on deposit in the Cash
Collateral Account to equal the sum of the Bankers Acceptance Exposure
and the Letter of Credit Exposure of all Lenders.
The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment or
(ii) in the case of prepayment of an ABR Borrowing, not later than
11:00 a.m., New York City time, one Business Day before the date of
prepayment. Each such notice shall be irrevocable and shall specify
the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid, provided that, if a notice of
prepayment is given in connection with a conditional notice of
termination of the Revolving Commitments as contemplated by
Section 2.06(e), then such notice of prepayment may be revoked if such
notice of termination is revoked in accordance with Section 2.06(e).
Promptly following receipt of any such notice relating to a Borrowing,
the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial prepayment of any Borrowing under Sections
2.06(c) and 2.08(a) shall be in an integral multiple of $100,000 and
not less than $500,000. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent
required by Section 3.01.
Payments Generally; Pro Rata Treatment; Sharing of Setoffs
Each Loan Party shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal of
Loans, interest or fees, or of amounts payable under Sections 3.05,
3.06, 3.07 or 10.03, or otherwise) prior to 12:00 noon, New York City
time, on the date when due, in immediately available funds, without
setoff or counterclaim. Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to
have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at its office at One Wall Street, New York, New
York, or such other office as to which the Administrative Agent may
notify the other parties hereto, except that payments pursuant to
Sections 3.05, 3.06, 3.07 and 10.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute
any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If
any payment hereunder shall be due on a day that is not a Business
Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in dollars.
If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal of Loans,
interest, fees and commissions then due hereunder, such funds shall be
applied (i) first, towards payment of interest, fees and commissions
then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest, fees and commissions then due
to such parties and (ii) second, towards payment of principal of Loans
then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal of Loans then due to such
parties.
If any Lender shall, by exercising any right of setoff or counterclaim
or otherwise, obtain payment in respect of any principal of, or
interest on, any of its Loans resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of its Loans
and accrued interest thereon than the proportion received by any other
applicable Lender, then the applicable Lender receiving such greater
proportion shall purchase (for cash at face value) participations in
the Loans of other applicable Lenders to the extent necessary so that
the benefit of all such payments shall be shared by the applicable
Lenders ratably in accordance with the aggregate amount of principal
of, and accrued interest on, their respective Loans, provided that (i)
if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower
pursuant to and in accordance with the express terms of this Agreement
or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans to any
assignee or participant, other than to the Borrower or any Subsidiary
or Affiliate thereof (as to which the provisions of this paragraph
shall apply). Each Loan Party consents to the foregoing and agrees,
to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Loan Party rights of setoff and
counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Loan Party in the amount of such
participation.
Unless the Administrative Agent shall have received notice from a Loan
Party prior to the date on which any payment is due to the
Administrative Agent for the account of the applicable Credit Parties
hereunder that such Loan Party will not make such payment, the
Administrative Agent may assume that such Loan Party has made such
payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to such Credit Parties the amount due. In
such event, if such Loan Party has not in fact made such payment, then
each such Credit Party severally agrees to repay to the Administrative
Agent forthwith on demand the amount so distributed to such Credit
Party with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Rate
and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.
If any Credit Party shall fail to make any payment required to be made
by it pursuant to Section 2.04, then the Administrative Agent may, in
its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the
account of such Credit Party to satisfy such Credit Party's
obligations under such Section until all such unsatisfied obligations
are fully paid.
Letters of Credit
The Borrower may request the Issuer to issue letters of credit (the
"Letters of Credit"; each, individually, a "Letter of Credit") during
the period from the Effective Date to the thirtieth Business Day prior
to the Revolving Maturity Date, provided that immediately after the
issuance of each Letter of Credit (i) the Letter of Credit Exposure of
all Lenders would not exceed the Letter of Credit Commitment, (ii) (A)
if such Letter of Credit is a standby Letter of Credit, the Aggregate
Revolving Exposure would not exceed the lesser of (1) the Aggregate
Revolving Commitment and (2) the Borrowing Base Amount, and (B) if
such Letter of Credit is a commercial Letter of Credit, the Aggregate
Revolving Exposure would not exceed the Aggregate Revolving
Commitment, and (iii) the sum of the Letter of Credit Exposure of all
Lenders plus the Bankers Acceptance Exposure of all Lenders would not
exceed $10,000,000. To request the issuance of a Letter of Credit,
the Borrower shall notify the Administrative Agent and the Issuer by
the delivery of a Credit Request, which shall be sent by facsimile and
shall be irrevocable (confirmed promptly, and in any event within five
Business Days, by the delivery to the Administrative Agent of a Credit
Request manually signed by the Borrower), at least three Business Days
prior to the requested date of issuance, specifying (A) the
beneficiary of such Letter of Credit, (B) the Borrower's proposal as
to the conditions under which a drawing may be made under such Letter
of Credit and the documentation to be required in respect thereof, (C)
the maximum amount to be available under such Letter of Credit, and
(D) the requested dates of issuance and expiration. Such Credit
Request shall be accompanied by a duly completed application for such
Letter of Credit on such forms as may be made available from time to
time by the Issuer and such other certificates, documents (including a
reimbursement agreement) and other information as may be required by
the Issuer in accordance with its customary procedures (collectively,
the "Letter of Credit Documentation"). Upon receipt of such Credit
Request from the Borrower, the Administrative Agent shall promptly
notify each Lender thereof. Subject to the satisfaction of the terms
and conditions of this Agreement, the Issuer shall issue each
requested Letter of Credit. In the event of any conflict between the
provisions of this Agreement and any Letter of Credit Documentation,
the provisions of this Agreement shall control. Each of the Credit
Parties hereby acknowledges and agrees that the Existing Letters of
Credit are Letters of Credit hereunder and the Lenders hereby assume
and are jointly and severally obligated with respect to all
Reimbursement Obligations related thereto.
Each Letter of Credit shall (i) be denominated in dollars, (ii) be
issued for the account of the Borrower and in support of obligations,
contingent or otherwise, of the Borrower or any Subsidiary arising in
the ordinary course of business, and (iii) have an expiration date
which shall be not later than one year from the date of issuance
thereof, but in any event, with respect to all Letters of Credit, five
Business Days before the Revolving Loan Maturity Date, provided that
the expiration date of such Letter of Credit may be extended or such
Letter of Credit may be renewed, provided, further, that any renewal,
or any extension of any expiry date, of a Letter of Credit shall
constitute the issuance of such Letter of Credit for all purposes of
this Agreement.
Immediately upon the issuance of a Letter of Credit, the Issuer shall
be deemed to have sold and transferred to each Lender, and each Lender
shall be deemed to have irrevocably and unconditionally purchased and
received from the Issuer, without recourse or warranty, an undivided
interest and participation, to the extent of such Lender's Revolving
Percentage thereof, in such Letter of Credit and the obligations of
the Borrower with respect thereto and any security therefor and any
guaranty pertaining thereto at any time existing. Each Lender, with
respect to each Existing Letter of Credit, hereby purchases, without
recourse or warranty, an undivided interest and participation, to the
extent of such Lender's Revolving Percentage thereof, in each Existing
Letter of Credit and the obligations of the Borrower with respect
thereto and any such security therefor and guaranty pertaining thereto
at any time existing.
The Issuer shall promptly notify (i) each Lender of the Issuer's
receipt of a drawing request under any Letter of Credit, stating the
amount of such Lender's Revolving Percentage of such drawing request
and the date on which such request will be honored and (ii) the
Administrative Agent and the Borrower of the amount of such drawing
request and the date on which such request will be honored. Any
failure of the Issuer to give or any delay in the Issuer's giving any
such notice shall not release or diminish the obligations of the
Borrower or any Lender hereunder. In determining whether to pay under
any Letter of Credit, the Issuer shall have no obligation to any
Lender or the Borrower other than to confirm that any documents
required to be delivered under such Letter of Credit have been
delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. In the absence of gross
negligence or willful misconduct on the part of the Issuer, the Issuer
shall have no liability to any Lender or the Borrower for any action
taken or omitted to be taken by it under or in connection with any
Letter of Credit, including any such action negligently taken or
negligently omitted to be taken by it.
The Borrower shall pay to the Administrative Agent for the account of
the Issuer on demand therefor, in dollars in immediately available
funds, the amount of all Reimbursement Obligations then owing to the
Issuer under any Letter of Credit, together with interest thereon as
provided in Section 3.01, irrespective of any claim, setoff, defense
or other right which the Borrower may have at any time against the
Issuer or any other Person. In the event that the Issuer makes any
payment under any Letter of Credit and the Borrower shall not have
repaid such amount to the Issuer when due, the Issuer shall promptly
notify each Lender of such failure, and each Lender shall promptly and
unconditionally pay to the Administrative Agent, for the account of
the Issuer, the amount of such Lender's Revolving Percentage of such
payment in dollars in immediately available funds on the Business Day
the Issuer so notifies such Lender if such notice is given prior to
12:00 Noon or, if such notice is given after 12:00 Noon, such Lender
shall make its Revolving Percentage of such payment available to the
Issuer prior to 12:00 Noon on the next succeeding Business Day.
If and to the extent any Lender shall not make such Lender's Revolving
Percentage of any Reimbursement Obligations available to the Issuer
when due in accordance with Section 2.10(e), such Lender shall pay
interest to the Issuer on such unpaid amount for each day from the
date such payment is due until the date such amount is paid in full to
the Issuer at the Federal Funds Rate until (and including) the third
Business Day after the date due and thereafter at the Alternate Base
Rate. The obligations of the Lenders under this Section 2.10(f) are
several and not joint or joint and several, and the failure of any
Lender to make available to the Issuer its Revolving Percentage of any
Reimbursement Obligations when due in accordance with Section 2.10(e)
shall not relieve any other Lender of its obligation hereunder to make
its Revolving Percentage of such Reimbursement Obligations so
available when so due, but no Lender shall be responsible for the
failure of any other Lender to make such other Lender's Revolving
Percentage of such Reimbursement Obligations so available when so due.
Whenever the Issuer receives a payment of a Reimbursement Obligation
from or on behalf of the Borrower as to which the Issuer has received
any payment from a Lender pursuant to Section 2.10(e), the Issuer
shall promptly pay to such Lender an amount equal to such Lender's
Revolving Percentage of such payment from or on behalf of the
Borrower. If any payment by or on behalf of the Borrower and received
by the Issuer with respect to any Letter of Credit is rescinded or
must otherwise be returned by the Issuer for any reason and the Issuer
has paid to any Lender any portion thereof, each such Lender shall
forthwith pay over to the Issuer an amount equal to such Lender's
Revolving Percentage of the amount which must be so returned by the
Issuer.
Each Lender, upon the demand of the Issuer, shall reimburse the
Issuer, to the extent the Issuer has not been reimbursed by the
Borrower after demand therefor, for the reasonable costs and expenses
(including reasonable attorneys' fees) incurred by the Issuer in
connection with the collection of amounts due under, and the
preservation and enforcement of any rights conferred by, any Letter of
Credit or the performance of the Issuer's obligations as issuer of the
Letters of Credit under this Agreement in respect thereof, to the
extent of such Lender's Revolving Percentage of the amount of such
costs and expenses provided, however, that no Lender shall be liable
for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements to the extent the same result solely from the gross
negligence or willful misconduct of the Issuer. The Issuer shall
refund any costs and expenses reimbursed by such Lender that are
subsequently recovered from the Borrower in an amount equal to such
Lender's Revolving Percentage thereof.
The obligation of the Borrower to reimburse the Issuer pursuant to
this Section 2.10, and the obligation of each Lender to make available
to the Issuer the amounts set forth in this Section 2.10 shall be
absolute, unconditional and irrevocable under any and all
circumstances, shall be made without reduction for any set-off,
counterclaim or other deduction of any nature whatsoever, may not be
terminated, suspended or delayed for any reason whatsoever, shall not
be subject to any qualification or exception and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including any of the following circumstances: (1) any
lack of validity or enforceability of this Agreement or any of the
other Loan Documents, (2) the existence of any claim, setoff, defense
or other right which the Borrower may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter
of Credit (or any Person for whom any such transferee may be acting),
the Issuer, any Lender or any other Person, whether in connection with
this Agreement, any other Loan Document, any Letter of Credit, the
transactions contemplated in the Loan Documents or any unrelated
transactions (including any underlying transaction between the
Borrower and the beneficiary named in any such Letter of Credit), (3)
any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect, (4) the surrender or impairment of any
collateral for the performance or observance of any of the terms of
any of the Loan Documents, (5) the occurrence of any Default or Event
of Default or (6) any other event or circumstance whatsoever, whether
or not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable discharge
of, or provide a right of setoff against, the Borrower's or such
Lender's obligations hereunder. The Issuer shall not have any
liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or delivery of
any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuer. The
parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the Issuer (as finally
determined by a court of competent jurisdiction), the Issuer shall be
deemed to have exercised care in each such determination. In
furtherance of the foregoing and without limiting the generality
thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the
terms of a Letter of Credit, the Issuer may, in its sole discretion,
either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon
such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
Bankers Acceptances
The Borrower may request the BA Issuer to create Bankers Acceptances
during the period from the Effective Date to the thirtieth Business
Day prior to the Revolving Maturity Date, provided that immediately
after the creation of each Bankers Acceptance (i) the Bankers
Acceptance Exposure of all Lenders would not exceed the Bankers
Acceptance Commitment, (ii) the Aggregate Revolving Exposure would not
exceed the lesser of (a) the Aggregate Revolving Commitment and (B)
the Borrowing Base Amount, and (iii) the sum of the Letter of Credit
Exposure of all Lenders plus the Bankers Acceptance Exposure of all
Lenders would not exceed $10,000,000. To request the creation of a
Bankers Acceptance, the Borrower shall notify the Administrative Agent
and the BA Issuer by the delivery of a Credit Request, which shall be
sent by facsimile and shall be irrevocable (confirmed promptly, and in
any event within five Business Days, by the delivery to the
Administrative Agent of a Credit Request manually signed by the
Borrower), at least three Business Days prior to the requested date of
creation, specifying such information in connection with the creation
of such Bankers Acceptance as the BA Issuer may request from time to
time. Such Credit Request shall be accompanied by a duly completed
application for such Bankers Acceptance on such forms as may be made
available from time to time by the BA Issuer and such other
certificates, documents and other information as may be required by
the BA Issuer in accordance with its customary procedures
(collectively, the "Bankers Acceptance Documentation"). Upon receipt
of such Credit Request from the Borrower, the Administrative Agent
shall promptly notify each Lender thereof. Subject to the
satisfaction of the terms and conditions of this Agreement, the BA
Issuer shall issue each requested Bankers Acceptance. In the event of
any conflict between the provisions of this Agreement and any Bankers
Acceptance Documentation, the provisions of this Agreement shall
control. Each of the Credit Parties hereby acknowledges and agrees
that the Existing Bankers Acceptances are Bankers Acceptances
hereunder and the Lenders hereby assume and are jointly and severally
obligated with respect to all BA Obligations related thereto.
Each Bankers Acceptance shall (i) be denominated in dollars, (ii) be
issued for the account of the Borrower and in support of obligations,
contingent or otherwise, of the Borrower or any Subsidiary arising in
the ordinary course of business (as specified in the definition of
"Bankers Acceptance", (iii) have drafts drawn upon it having not more
than 180 days sight to run, and (iv) otherwise conform to the
requirements set forth in the definition of "Bankers Acceptance").
Immediately upon the creation of a Bankers Acceptance, the BA Issuer
shall be deemed to have sold and transferred to each Lender, and each
Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the BA Issuer, without recourse or
warranty, an undivided interest and participation, to the extent of
such Lender's Revolving Percentage thereof, in such Bankers Acceptance
and the obligations of the Borrower with respect thereto and any
security therefor and any guaranty pertaining thereto at any time
existing. Each Lender, with respect to each Existing Bankers
Acceptance, hereby purchases, without recourse or warranty, an
undivided interest and participation, to the extent of such Lender's
Revolving Percentage thereof, in each Existing Bankers Acceptance and
the obligations of the Borrower with respect thereto and any security
therefor and guaranty pertaining thereto at any time existing.
The BA Issuer shall promptly notify (i) each Lender of the BA Issuer's
receipt of a drawing request under any Bankers Acceptance, stating the
amount of such Lender's Revolving Percentage of such drawing request
and the date on which such request will be honored and (ii) the
Administrative Agent and the Borrower of the amount of such drawing
request and the date on which such request will be honored. Any
failure of the BA Issuer to give or any delay in the BA Issuer's
giving any such notice shall not release or diminish the obligations
of the Borrower or any Lender hereunder. In determining whether to
accept any drawing, the BA Issuer shall have no obligation to any
Lender or the Borrower other than to confirm that any documents
required to be delivered with respect to such Bankers Acceptance have
been delivered and that they appear to comply on their face with the
requirements of such Bankers Acceptance. In the absence of gross
negligence or willful misconduct on the part of the BA Issuer, the BA
Issuer shall have no liability to any Lender or the Borrower for any
action taken or omitted to be taken by it under or in connection with
any Bankers Acceptance, including any such action negligently taken or
negligently omitted to be taken by it.
The Borrower shall pay to the Administrative Agent for the account of
the BA Issuer on demand therefor, in dollars in immediately available
funds, the amount of all BA Obligations then owing to the BA Issuer in
respect of any Bankers Acceptance, together with interest thereon as
provided in Section 3.01, irrespective of any claim, setoff, defense
or other right which the Borrower may have at any time against the BA
Issuer or any other Person. In the event that the BA Issuer makes any
payment under any Bankers Acceptance and the Borrower shall not have
repaid such amount to the BA Issuer when due, the BA Issuer shall
promptly notify each Lender of such failure, and each Lender shall
promptly and unconditionally pay to the Administrative Agent, for the
account of the BA Issuer, the amount of such Lender's Revolving
Percentage of such payment in dollars in immediately available funds
on the Business Day the BA Issuer so notifies such Lender if such
notice is given prior to 12:00 Noon or, if such notice is given after
12:00 Noon, such Lender shall make its Revolving Percentage of such
payment available to the Issuer prior to 12:00 Noon on the next
succeeding Business Day.
If and to the extent any Lender shall not make such Lender's Revolving
Percentage of any BA Obligations available to the BA Issuer when due
in accordance with Section 2.11(e), such Lender agrees to pay interest
to the BA Issuer on such unpaid amount for each day from the date such
payment is due until the date such amount is paid in full to the BA
Issuer at the Federal Funds Rate until (and including) the third
Business Day after the date due and thereafter at the Alternate Base
Rate. The obligations of the Lenders under this Section 2.11(f) are
several and not joint or joint and several, and the failure of any
Lender to make available to the BA Issuer its Revolving Percentage of
any BA Obligations when due in accordance with Section 2.11(e) shall
not relieve any other Lender of its obligation hereunder to make its
Revolving Percentage of such BA Obligations so available when so due,
but no Lender shall be responsible for the failure of any other Lender
to make such other Lender's Revolving Percentage of such BA
Obligations so available when so due.
Whenever the BA Issuer receives a payment of a BA Obligation from or
on behalf of the Borrower as to which the BA Issuer has received any
payment from a Lender pursuant to Section 2.11(e), the BA Issuer shall
promptly pay to such Lender an amount equal to such Lender's Revolving
Percentage of such payment from or on behalf of the Borrower. If any
payment by or on behalf of the Borrower and received by the BA Issuer
with respect to any Bankers Acceptance is rescinded or must otherwise
be returned by the BA Issuer for any reason and the BA Issuer has paid
to any Lender any portion thereof, each such Lender shall forthwith
pay over to the BA Issuer an amount equal to such Lender's Revolving
Percentage of the amount which must be so returned by the BA Issuer.
Each Lender, upon the demand of the BA Issuer, shall reimburse the BA
Issuer, to the extent the BA Issuer has not been reimbursed by the
Borrower after demand therefor, for the reasonable costs and expenses
(including reasonable attorneys' fees) incurred by the BA Issuer in
connection with the collection of amounts due under, and the
preservation and enforcement of any rights conferred by, any Bankers
Acceptance or the performance of the BA Issuer's obligations as the
creator of the Bankers Acceptances under this Agreement in respect
thereof, to the extent of such Lender's Revolving Percentage of the
amount of such costs and expenses provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent the same result solely
from the gross negligence or willful misconduct of the BA Issuer. The
BA Issuer shall refund any costs and expenses reimbursed by such
Lender that are subsequently recovered from the Borrower in an amount
equal to such Lender's Revolving Percentage thereof.
The obligation of the Borrower to reimburse the BA Issuer pursuant to
this Section 2.11, and the obligation of each Lender to make available
to the BA Issuer the amounts set forth in this Section 2.11 shall be
absolute, unconditional and irrevocable under any and all
circumstances, shall be made without reduction for any set-off,
counterclaim or other deduction of any nature whatsoever, may not be
terminated, suspended or delayed for any reason whatsoever, shall not
be subject to any qualification or exception and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including any of the following circumstances: (1) any
lack of validity or enforceability of this Agreement or any of the
other Loan Documents, (2) the existence of any claim, setoff, defense
or other right which the Borrower may have at any time against a
beneficiary named in a Bankers Acceptance, any transferee of any
Bankers Acceptance (or any Person for whom any such transferee may be
acting), the BA Issuer, any Lender or any other Person, whether in
connection with this Agreement, any other Loan Document, any Bankers
Acceptance, the transactions contemplated in the Loan Documents or any
unrelated transactions (including any underlying transaction between
the Borrower and the beneficiary named in any such Bankers
Acceptance), (3) any draft, certificate or any other document issued
or delivered in connection with any Bankers Acceptance proving to be
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect, (4) the
surrender or impairment of any collateral for the performance or
observance of any of the terms of any of the Loan Documents, (5) the
occurrence of any Default or Event of Default or (6) any other event
or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of, or provide a right of
setoff against, the Borrower's or such Lender's obligations hereunder.
The BA Issuer shall not have any liability or responsibility by reason
of or in connection with the creation or transfer of any Bankers
Acceptance or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication
under or relating to any Bankers Acceptance, any error in
interpretation of technical terms or any consequence arising from
causes beyond the control of the BA Issuer. The parties hereto
expressly agree that, in the absence of gross negligence or willful
misconduct on the part of the Issuer (as finally determined by a court
of competent jurisdiction), the BA Issuer shall be deemed to have
exercised care in each such determination.
Cash Collateral Account
At, or at any time before, the time the Borrower shall be required to
make a deposit into the Cash Collateral Account, the Administrative
Agent shall establish and maintain at its offices at One Wall Street,
New York, New York in the name of the Borrower but under the sole
dominion and control of the Administrative Agent, a cash collateral
account (the "Cash Collateral Account"). The Borrower may from time
to time make one or more deposits into the Cash Collateral Account and
shall from time to time make such deposits as are required by this
Agreement. The Borrower hereby pledges to the Administrative Agent
for the benefit of the Credit Parties, a Lien on and security interest
in the Cash Collateral Account and all sums at any time and from time
to time on deposit therein (the Cash Collateral Account, together with
all sums on deposit therein, being sometimes hereinafter collectively
referred to as the "Cash Collateral"), as collateral security for the
prompt payment in full when due, whether at stated maturity, by
acceleration or otherwise, of the Obligations. The Borrower shall, at
any time and from time to time at its expense, promptly execute and
deliver to the Administrative Agent any further instruments and
documents, and take any further actions, that may be necessary or that
the Administrative Agent may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted
hereby or to enable the Administrative Agent to exercise and enforce
its rights and remedies hereunder with respect to any Cash Collateral.
The Borrower shall not (i) sell or otherwise dispose of any of the
Cash Collateral, or (ii) create or permit to exist any Lien upon any
of the Cash Collateral. The Borrower hereby authorizes the
Administrative Agent, promptly after each drawing under any Letter of
Credit or Bankers Acceptance shall become due and payable, to apply
any and all cash on deposit in the Cash Collateral Account towards the
reimbursement of the Issuer or the BA Issuer, as the case may be, for
all sums paid in respect of such drawing, and all other Obligations
which shall then be due and owing.
INTEREST, FEES, YIELD PROTECTION, ETC.
Interest
ABR Revolving Loans shall, in each case, bear interest at the
Alternate Base Rate plus the Applicable Margin.
Eurodollar Revolving Borrowings shall, in each case, bear interest at
the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin.
Swing Line Loans shall, in each case, bear interest at a rate per
annum equal to the Swing Line Lender's cost of funds in making such
Swing Line Loan plus the Applicable Margin in respect of Eurodollar
Borrowings.
Notwithstanding the foregoing, if an Event of Default has occurred and
is continuing, then, so long as such Event of Default is continuing,
all principal of each Loan and each fee and other amount then due and
payable by the Borrower hereunder shall bear interest, after as well
as before judgment, at a rate per annum equal to (i) in the case of
principal of any Loan, 2% plus the rate otherwise applicable to such
Loan as provided in the preceding paragraphs of this Section or (ii)
in the case of any other amount, 2% plus the Alternate Base Rate plus
the Applicable Margin for ABR Loans.
Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan, provided that (i) interest
accrued pursuant to paragraph (d) of this Section 3.01 shall be
payable on demand, (ii) in the event of any repayment or prepayment of
any Loan, accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any Eurodollar Loan prior to the end
of the current Interest Period therefor, accrued interest on such Loan
shall be payable on the effective date of such conversion.
All interest hereunder shall be computed on the basis of a year of 360
days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate
shall be computed on the basis of a year of 365 days (or 366 days in a
leap year), and in each case shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate
shall be determined by the Administrative Agent, and such
determination shall be conclusive absent clearly demonstrable error.
Interest Elections
Each Borrowing initially shall be of the Type specified in the
applicable Credit Request and, in the case of a Eurodollar Borrowing,
shall have an initial Interest Period as specified in such Credit
Request. Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of
a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section 3.02. The Borrower may elect different
options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the
applicable Lenders holding the Loans comprising such Borrowing, and
the Loans comprising each such portion shall be considered a separate
Borrowing. Notwithstanding the foregoing, Swing Line Loans shall be
solely ABR Borrowings and shall not be made or converted to Eurodollar
Borrowings.
To make an election pursuant to this Section 3.02, the Borrower shall
notify the Administrative Agent of such election by telephone by the
time that a Credit Request would be required under Section 2.03 if the
Borrower were requesting a Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Interest Election Request in a form approved by the
Administrative Agent and signed by the Borrower.
Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.02 and this
Section 3.02:
the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated
to each resulting Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) of this paragraph
shall be specified for each resulting Borrowing);
the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to
such election, which shall be a period contemplated by the
definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar
Borrowing but does not specify an Interest Period, then the
Borrower shall be deemed to have selected an Interest Period of
one month's duration.

Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each applicable Lender of the
details thereof and of such Lender's portion of each resulting
Borrowing.
If the Borrower fails to deliver a timely Interest Election Request
prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such
Interest Period, such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event
of Default has occurred and is continuing and the Administrative
Agent, at the request of the Required Lenders, so notifies the
Borrower, then, so long as an Event of Default is continuing, (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar
Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period
applicable thereto.
Fees
The Borrower agrees to pay to the Administrative Agent, for the
account of the Lenders in accordance with each Lender's Commitment
Percentage, a commitment fee (the "Commitment Fee"), during the period
from the Effective Date through the Revolving Maturity Date at a rate
per annum equal to the Fee Margin on the average daily Available
Revolving Commitment Amount. The Commitment Fee shall be payable
quarterly in arrears on the last day of each March, June, September
and December during such period commencing on the first such day
following the Effective Date, on the date of any reduction in the
Revolving Commitments (to the extent of such reduction) and on the
Revolving Maturity Date.
The Borrower shall pay to the Administrative Agent, for the account of
the Lenders in accordance with each Lender's Revolving Percentage,
commissions (the "Letter of Credit Fees") with respect to (i)
commercial Letters of Credit for the period from and including the
date of issuance of each thereof through the expiration date thereof,
at a rate per annum equal to 1.00% and (ii) standby Letters of Credit
for the period from and including the date of issuance of each thereof
through the expiration date thereof, at a rate per annum equal to the
Eurodollar Margin, in each case on the average daily maximum amount
available under any contingency to be drawn under such Letter of
Credit. The Letter of Credit Fees shall be payable quarterly in
arrears on the last Business Day of each March, June, September and
December of each year, commencing on the first such day following the
Effective Date, and on the date that the Revolving Commitments shall
expire. In addition to the Letter of Credit Fees, the Borrower shall
pay to the Issuer, for its own account, its standard fees and charges
customarily charged to customers similar to the Borrower with respect
to any Letter of Credit.
The Borrower shall pay to the Administrative Agent, for the account of
the Lenders in accordance with each Lender's Revolving Percentage, a
fee (the "Bankers Acceptance Fee") with respect to Bankers Acceptances
for the period from and including the date of creation of each thereof
through the expiration date thereof, at a rate per annum equal to the
Eurodollar Margin, in each case on the average daily maximum amount
available under any contingency to be drawn under such Bankers
Acceptance. The Bankers Acceptance Fee shall be payable quarterly in
arrears on the last Business Day of each March, June, September and
December of each year, commencing on the first such day following the
Effective Date, and on the date that the Revolving Commitments shall
expire. In addition to the Bankers Acceptance Fee, the Borrower shall
pay to the BA Issuer, for its own account, its standard fees and
charges customarily charged to customers similar to the Borrower with
respect to any Bankers Acceptance.
The Borrower shall pay to each Credit Party, for its own account, fees
and other amounts payable in the amounts and at the times separately
agreed upon between the Borrower and such Credit Party.
Fees and other amounts paid shall not be refundable under any
circumstances. All commitment fees shall be computed on the basis of
a 360-day year for the actual number of days elapsed (including the
first day but excluding the last day).
Alternate Rate of Interest
If prior to the commencement of any Interest Period for a
Eurodollar Borrowing:
the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate or the
LIBO Rate, as applicable, for such Interest Period; or
the Administrative Agent is advised by any applicable Lender that
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost
to such Lender of making or maintaining its Loan included in such
Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the
Borrower and the applicable Lenders by telephone or telecopy as
promptly as practicable thereafter and, until the Administrative
Agent notifies the Borrower and the applicable Lenders that the
circumstances giving rise to such notice no longer exist, (i) any
Interest Election Request that requests the conversion of any
Borrowing to, or continuation of any Borrowing as, a Eurodollar
Borrowing shall be ineffective, and (ii) if any Credit Request
requests a Eurodollar Borrowing, such Borrowing shall be made as
an ABR Borrowing.
Increased Costs; Illegality
If any Change in Law shall:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any
Credit Party (except any such reserve requirement reflected in
the Adjusted LIBO Rate); or
(ii) impose on any Credit Party or the London
interbank market any other condition affecting this Agreement,
any Eurodollar Loans made by such Credit Party or any
participation therein;
and the result of any of the foregoing shall be to increase the cost
(other than Excluded Taxes) to such Credit Party of making or
maintaining any Eurodollar Loan hereunder or to increase the cost
(other than Excluded Taxes) to such Credit Party or to reduce the
amount of any sum received or receivable by such Credit Party
hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Credit Party such additional amount or
amounts as will compensate such Credit Party for such additional costs
incurred or reduction suffered. Failure to demand compensation
pursuant to this Section shall not constitute a waiver of such Credit
Party's right to demand such compensation.
If any Credit Party determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate
of return on such Credit Party's capital or on the capital of such
Credit Party's holding company, if any, as a consequence of this
Agreement or the Extensions of Credit made by such Credit Party to a
level below that which such Credit Party or such Credit Party's
holding company could have achieved but for such Change in Law (taking
into consideration such Credit Party's policies and the policies of
such Credit Party's holding company with respect to capital adequacy),
then from time to time the Borrower will pay to such Credit Party such
additional amount or amounts as will compensate such Credit Party or
such Credit Party's holding company for any such reduction suffered.
A certificate of a Credit Party setting forth the amount or amounts
necessary to compensate such Credit Party or its holding company, as
applicable, as specified in paragraphs (a) or (b) of this Section
shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Credit Party the amount
shown as due on any such certificate within 15 days after receipt
thereof.
Notwithstanding any other provision of this Agreement, if, after the
date of this Agreement, any Change in Law shall make it unlawful for
any Lender to make or maintain any Eurodollar Loan or to give effect
to its obligations as contemplated hereby with respect to any
Eurodollar Loan, then, by written notice to the Borrower and to the
Administrative Agent:
such Lender may declare that Eurodollar Loans will not thereafter
(for the duration of such unlawfulness) be made by such Lender
hereunder (or be continued for additional Interest Periods and
ABR Loans will not thereafter (for such duration) be converted
into Eurodollar Loans), whereupon any request for a Eurodollar
Borrowing or to convert an ABR Borrowing to a Eurodollar
Borrowing or to continue a Eurodollar Borrowing, as applicable,
for an additional Interest Period shall, as to such Lender only,
be deemed a request for an ABR Loan (or a request to continue an
ABR Loan as such for an additional Interest Period or to convert
a Eurodollar Loan into an ABR Loan, as applicable), unless such
declaration shall be subsequently withdrawn; and
such Lender may require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all such
Eurodollar Loans shall be automatically converted to ABR Loans,
as of the effective date of such notice as provided in the last
sentence of this paragraph.
In the event any Lender shall exercise its rights under clauses
(i) or (ii) of this Section 3.05(d), all payments and prepayments
of principal that would otherwise have been applied to repay the
Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be
applied to repay the ABR Loans made by such Lender in lieu of, or
resulting from the conversion of, such Eurodollar Loans, as
applicable. For purposes of this Section 3.05(d), a notice to
the Borrower by any Lender shall be effective as to each
Eurodollar Loan made by such Lender, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar
Loan; in all other cases such notice shall be effective on the
date of receipt by the Borrower.
Break Funding Payments
In the event of (a) the payment or prepayment (voluntary or
otherwise) of any principal of any Eurodollar Loan other
than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last
day of the Interest Period applicable thereto or (c) the
failure to borrow, convert, continue or prepay any
Eurodollar Loan on the date specified in any Credit Request
or other notice delivered pursuant Section 2.06, 2.08 or
3.02 (regardless of whether such notice may be revoked under
Section 2.08(e) and is revoked in accordance therewith),
then, in any such event, the Borrower shall compensate each
Lender for the loss, cost and expense attributable to such
event. If such Credit Request or other notice relates to a
Eurodollar Loan (in all cases other than a revocation
permitted under Section 2.08(e)), such loss, cost or expense
to any Lender shall be deemed to include an amount
reasonably determined by such Lender to be the excess, if
any, of (i) the amount of interest that would have accrued
on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of
such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of
interest that would accrue on such principal amount for such
period at the interest rate that such Lender would in good
faith bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market. A
certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to
this Section 3.06 shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower
shall pay such Lender the amount shown as due on any such
certificate within 15 days after receipt thereof.
Taxes
Any and all payments by or on account of any obligation of any Loan
Party hereunder and under any other Loan Document shall be made free
and clear of and without deduction for any Indemnified Taxes or Other
Taxes, provided that, if such Loan Party shall be required to deduct
any Indemnified Taxes or Other Taxes from such payments, then (i) the
sum payable shall be increased as necessary so that, after making all
required deductions (including deductions applicable to additional
sums payable under this Section 3.07), the applicable Credit Party
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Loan Party shall make such deductions
and (iii) such Loan Party shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
In addition, the Loan Parties shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
Each Loan Party shall indemnify each Credit Party, within ten days
after receipt of written demand therefor describing the amount and the
basis in reasonable detail, for the full amount of any Indemnified
Taxes or Other Taxes paid by such Credit Party on or with respect to
any payment by or on account of any obligation of such Loan Party
under the Loan Documents (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this
Section 3.07) and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by a
Credit Party, or by the Administrative Agent on its own behalf or on
behalf of a Credit Party, shall be conclusive absent manifest error.
Following any indemnification pursuant to this Section 3.07(c), the
applicable Credit Party, at the request of the applicable Loan Party,
shall deliver to such Loan Party evidence of such payment reasonably
satisfactory to such Loan Party.
As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy
of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence
of such payment reasonably satisfactory to the Administrative Agent.
Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which the
relevant Loan Party is located, or any treaty to which such
jurisdiction is a party, with respect to payments under the Loan
Documents shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Borrower as will permit
such payments to be made without withholding or at a reduced rate.
Any Credit Party that is not a Foreign Lender shall, at the request of
the Borrower, deliver to the Borrower (with a copy to the
Administration Agent) any documentation as will permit payments to
such Credit Party under the Loan Documents to be made without
withholding of Tax or at a reduced rate of Tax.
Mitigation Obligations
If any Lender requests compensation under Section 3.05, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to
Section 3.07, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans
(or any participation therein) hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to
Sections 3.05 or 3.07, as applicable, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender
in connection with any such designation or assignment.
Substitution of Lenders
If any Lender requests compensation under Section 3.05,
or if the Borrower is required to pay any additional amount to
any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 3.07, or if any Lender defaults in its
obligation to fund Loans hereunder, then the Borrower may, at its
sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the
restrictions contained in Section 10.04), all its interests,
rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that (i)
the Borrower shall have received the prior written consent of the
Administrative Agent to such assignee, which consent shall not
unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its
Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the assignee (to the extent
of such outstanding principal and accrued interest and fees) or
the Borrower (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for
compensation under Section 3.05 or payments required to be made
pursuant to Section 3.07, such assignment will result in a
reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Credit Parties
that:
Organization; Powers
Each of the Borrower and each Subsidiary is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power
and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a
Material Adverse Effect, is qualified to do business in, and
is in good standing in, every jurisdiction where such
qualification is required.
Authorization; Enforceability
The Transactions are within the corporate, partnership or
other analogous powers of each of the Borrower and each
Subsidiary to the extent it is a party thereto and have been
duly authorized by all necessary corporate, partnership or
other analogous and, if required, equityholder action. Each
Loan Document has been duly executed and delivered by each
of the Borrower and each Subsidiary to the extent it is a
party thereto and constitutes a legal, valid and binding
obligation thereof, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting
creditors' rights generally.
Governmental Approvals; No Conflicts
The Transactions (a) do not require any consent or approval
of, registration or filing with, or any other action by, any
Governmental Authority, except such as have been obtained or
made and are in full force and effect, (b) will not violate
any applicable law or regulation or the charter, by-laws or
other organizational documents of the Borrower or any of the
Subsidiaries or any order of any Governmental Authority, (c)
will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or
any of the Subsidiaries or its assets, or give rise to a
right thereunder to require any payment to be made by the
Borrower or any of the Subsidiaries, and (d) will not result
in the creation or imposition of any Lien on any asset of
the Borrower or any of the Subsidiaries (other than Liens
permitted by Section 7.02).
Financial Condition; No Material Adverse Change
The Borrower has heretofore furnished to the Credit Parties: (i) the
Consolidated balance sheet and statements of income, stockholders'
equity and cash flows of the Borrower as of and for the fiscal year
ended December 31, 2000, reported on by Ernst & Young LLP, independent
public accountants and (ii) the Consolidated balance sheet and
statement of income, stockholders' equity and cash flows of the
Borrower as of and for the fiscal quarter ended June 30, 2001,
prepared by the Borrower. The financial statements referred to above
present fairly, in all material respects, the financial position and
results of operations and cash flows of the Persons referred to
therein as of such dates and for the indicated periods in accordance
with GAAP (subject, with respect to the interim financial statements,
to footnotes and normal year-end audit adjustments).
Since the dates of the financial statements referred to in clause (ii)
of Section 4.04(a), there has been no material adverse change in the
business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries taken as a whole.
Properties
Each of the Borrower and each Subsidiary has good title to, or valid
leasehold interests in, all its real and personal property material to
its business, except for minor defects in title that do not interfere
with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
Each of the Borrower and each Subsidiary owns, or is entitled to use,
all trademarks, trade names, copyrights, patents and other
intellectual property material to its business, and to the knowledge
of the Borrower the use thereof by the Borrower and the Subsidiaries
does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
Litigation and Environmental Matters
There are no actions, suits or proceedings by or before any arbitrator
or Governmental Authority pending against or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any of the
Subsidiaries (i) that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material
Adverse Effect (other than the Disclosed Matters) or (ii) that
challenge the validity of any Loan Document or the Transactions.
Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii)
has, to its knowledge, become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any
Environmental Liability.
There has been no change in the status of the Disclosed Matters that,
individually or in the aggregate, has resulted in, or materially
increased the likelihood of, a Material Adverse Effect.
Compliance with Laws and Agreements
Each of the Borrower and each Subsidiary is in compliance
with all laws, regulations and orders of any Governmental
Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it
or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default
has occurred and is continuing.
Investment and Holding Company Status
Neither the Borrower nor any of the Subsidiaries are (a) an
"investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940 or (b) a "holding
company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
Taxes
Each of the Borrower and each Subsidiary has timely filed
(or validly extended) or caused to be filed (or validly
extended) all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for
which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves or (b) to the
extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
ERISA
Neither the Borrower nor any ERISA Affiliate of the Borrower
has any direct or contingent obligation or liability under
or in respect of any person or other employee benefit plan
which is subject to the provisions of Title IV of ERISA
which has, or would in the foreseeable future have, in the
judgment of the responsible officers of the Borrower, a
Material Adverse Effect.
Disclosure
The Borrower has disclosed to the Credit Parties all
agreements, instruments and corporate or other restrictions
to which it or any of the Subsidiaries is subject, and all
other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a
Material Adverse Effect. No representation or warranty
contained in any Loan Document and no certificate or report
from time to time furnished by the Borrower or any of its
Subsidiaries in connection with the transactions
contemplated thereby, contains or will contain a
misstatement of material fact, or, to the best knowledge of
the Borrower, omits or will omit to state a material fact
required to be stated in order to make the statements
therein contained not misleading in the light of the
circumstances under which made, provided that any
projections or pro-forma financial information contained
therein are based upon good faith estimates and assumptions
believed by the Borrower to be reasonable at the time made,
it being recognized by the Lender that such projections as
to future events are not to be viewed as facts, and that
actual results during the period or periods covered thereby
may differ from the projected results.
Subsidiaries
Schedule 4.12 sets forth the name of, and the ownership
interest of the Borrower in, each Subsidiary, in each case
as of the Effective Date.
Insurance
Schedule 4.13 sets forth a description of all insurance
maintained by or on behalf of the Borrower and the
Subsidiaries as of the Effective Date. As of the Effective
Date, all premiums in respect of such insurance that are due
and payable have been paid.
Labor Matters
As of the Effective Date, there are no strikes, lockouts or
slowdowns against the Borrower or any Subsidiary pending or,
to the knowledge of the Borrower, threatened. The hours
worked by and payments made to employees of the Borrower and
the Subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable Federal, state,
local or foreign law dealing with such matters, except where
any such violations, individually and in the aggregate,
would not be reasonably likely to result in a Material
Adverse Effect. All material payments due from the Borrower
or any Subsidiary, or for which any claim may be made
against the Borrower or any Subsidiary, on account of wages
and employee health and welfare insurance and other
benefits, have been paid or accrued as a liability on the
books of the Borrower or such Subsidiary. The consummation
of the Transactions will not give rise to any right of
termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the
Borrower or any Subsidiary is bound.
Solvency
Immediately after the consummation of each Transaction, (a)
the fair value of the assets of the Borrower and the
Guarantors taken as a whole, at a fair valuation, will
exceed their debts and liabilities, subordinated, contingent
or otherwise; (b) the present fair saleable value of the
property of the Borrower and the Guarantors, taken as a
whole, will be greater than the amount that will be required
to pay the probable liability of their debts and other
liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (c)
each of the Borrower and each Guarantor will be able to pay
its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and
matured; and (d) each of the Borrower and each Guarantor
will not have unreasonably small capital with which to
conduct the business in which it is engaged as such business
is now conducted and is proposed to be conducted following
such date.
Federal Reserve Regulations
Neither the Borrower nor any of the Subsidiaries are engaged
principally, or as one of their important activities, in the business
of extending credit for the purpose of buying or carrying Margin
Stock.
No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to
purchase, acquire or carry any Margin Stock or for any purpose that
entails a violation of, or that is inconsistent with, the provisions
of the regulations of the Board, including Regulation T, U or X.
Security Documents
The Security Agreement is effective to create in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties,
a legal, valid and enforceable security interest in the Collateral (as
defined in the Security Agreement) and, when (i) the pledged property
constituting such Collateral is delivered to the Administrative Agent,
(ii) financing statements in appropriate form are filed in the offices
of the secretary of state of the jurisdiction of organization of each
Loan Party or such other office specified by the Uniform Commercial
Code and (iii) all other applicable filings under the Uniform
Commercial Code or otherwise that are required or permitted under the
Loan Documents are made, the Security Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title
and interest of the grantors thereunder in such Collateral (other than
the Intellectual Property (as defined in the Security Agreement) or
any other Collateral for which perfection of a security interest is
not governed by the Uniform Commercial Code), in each case prior and
superior in right to any other Person, other than with respect to
Liens expressly permitted by Section 7.02.
Except to the extent that the recording of an assignment or other
transfer of title to the Administrative Agent or the recording of
other applicable documents in the United States Patent and Trademark
Office, the United States Copyright Office or the filing of financing
statements in the appropriate form in the offices of the secretary of
state of the jurisdiction of organization of each Loan Party or such
other office specified by the Uniform Commercial Code may be necessary
for perfection, the Security Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and
interest of the Borrowers and the Guarantors in the Intellectual
Property in which a security interest may be perfected by filing,
recording or registering a security agreement, financing statement or
analogous document in the United States Patent and Trademark Office or
the United States Copyright Office, as applicable, in each case to the
extent permitted by applicable law prior and superior in right to any
other Person, other than with respect to Liens expressly permitted by
Section 7.02.
CONDITIONS
Effective Date
The obligations of the Lenders to make Extensions of Credit hereunder
shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with
Section 10.02):
The Administrative Agent (or its counsel) shall have received from
each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a
signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.
The Administrative Agent shall have received a Revolving Note for each
Lender, and the Swing Line Note for the Swing Line Lender, each signed
on behalf of the Borrower.
The Administrative Agent shall have received a counterpart of the
Guarantee Agreement signed on behalf of each Guarantor.
The Administrative Agent shall have received counterparts of the
Security Agreement signed on behalf of the Borrower and each Guarantor
party thereto, together with the following:
any stock certificates or other instruments representing the
Pledged Equity owned by or on behalf of any Loan Party as of the
Effective Date;
any promissory notes and other instruments evidencing the Pledged
Debt owed or owing to any Loan Party as of the Effective Date;
stock powers and instruments of transfer, endorsed in blank, with
respect to such stock certificates, promissory notes and other
instruments;
all instruments and other documents, including Uniform Commercial
Code financing statements, required by law or reasonably
requested by the Administrative Agent to be filed, registered or
recorded to create or perfect the Liens intended to be created
under the Security Agreement; and
a completed Perfection Certificate, dated the Effective Date and
signed by a Vice President or a Financial Officer of the
Borrower, together with all attachments contemplated thereby.
The Administrative Agent shall have received a favorable written
opinion (addressed to the Credit Parties and dated the Effective Date)
from McMillan, Rather, Bennett & Rigano, P.C., on behalf of the Loan
Parties, substantially in the form of Exhibit B and covering such
other matters relating to the Loan Parties, the Loan Documents or the
Transactions as the Required Lenders shall reasonably request. The
Borrower hereby requests such counsel to deliver such opinion.
The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of
each Loan Party, the authorization of the Transactions and any other
legal matters relating to the Loan Parties, the Loan Documents or the
Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions set forth in paragraphs (a)
and (b) of Section 5.02.
The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including,
to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder.
The Administrative Agent shall have received evidence satisfactory to
it that the insurance required by Section 6.10 is in effect.
The performance by each Loan Party of its obligations under each Loan
Document shall not (i) violate any applicable law, statute, rule or
regulation or (ii) conflict with, or result in a default or event of
default under, any material agreement of any Loan Party, and the
Administrative Agent shall have received one or more legal opinions
and/or officer's certificates to such effect, satisfactory to the
Administrative Agent.
The Lenders shall be reasonably satisfied as to the amount and nature
of any environmental and employee health and safety exposures to which
the Borrower and the Subsidiaries may be subject, and with the plans
of the Borrower with respect thereto.
The Lenders shall be reasonably satisfied (i) that there shall be no
litigation or administrative proceeding, or regulatory development,
that would reasonably be expected to have a material adverse effect on
(a) the business, assets, operations, prospects, condition (financial
or otherwise) or material agreements of the Borrower and the
Subsidiaries, (b) the ability of any Loan Party to perform any of its
obligations under any Loan Document or (c) the rights of or benefits
available to any Credit Party under any Loan Document and (ii) with
the current status of, and the terms of any settlement or other
resolution of, any litigation or other proceedings brought against the
Borrower or any Subsidiary.
(i) All indebtedness of the Borrower to (A) BNY arising out of that
certain letter agreement dated September 21, 2000 (the "BNY Line" and
(B) The Chase Manhattan Bank arising out of (1) the Promissory Note
dated September 28, 2001 made by the Borrower payable to The Chase
Manhattan Bank in the principal amount of $10,000,000 and (2) the
letter agreement dated December 13, 2000 between the Borrower and The
Chase Manhattan Bank (collectively, the "Chase Line"), shall have been
unconditionally paid in full, the Borrower shall have terminated the
BNY Line and the Chase Line and all liens, if any, securing the BNY
Line and/or the Chase Line covering the Collateral shall have been
released or terminated, and all other obligations, if any, with
respect thereto shall have been duly and finally extinguished.
(ii) After giving effect to the Transactions, none
of the Borrower or any of the Subsidiaries shall have outstanding
any shares of preferred equity securities or any Indebtedness,
other than (i) Indebtedness incurred under the Loan Documents and
(ii) Indebtedness set forth on Schedule 7.01.
The Lenders shall be reasonably satisfied that no material adverse
change or material adverse condition in the business, assets,
operations, properties, condition (financial or otherwise),
liabilities (including contingent liabilities), prospects or material
agreements of the Borrower and the Subsidiaries has occurred since
December 31, 2000.
The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by a Financial Officer of the Borrower,
setting forth reasonably detailed calculations demonstrating
compliance with Section 7.12 on a pro forma basis as of the Effective
Date, immediately after giving effect to the Transactions.
The Administrative Agent shall have received a Borrowing Base
Certificate, duly completed and setting forth the calculations
required thereby, as of the Effective Date.
The Administrative Agent shall have received counterparts of
mortgages, deeds of trust or similar documents in form and substance
satisfactory to the Administrative Agent (collectively, as amended,
restated, supplemented or otherwise modified from time to time, the
"Mortgage") covering the Designated Real Property signed on behalf of
the Borrower, together with mortgagee title insurance policies issued
by the title insurers reasonably satisfactory to the Administrative
Agent in amounts satisfactory to the Administrative Agent (which
policies shall include, without limitation, a "last dollars"
endorsement), a survey, in form and substance satisfactory to the
Administrative Agent, of the Designated Real Property certified by a
licensed professional surveyor satisfactory to the Administrative
Agent, an appraisal of the Designated Real Property in form and
substance satisfactory to the Administrative Agent conducted by a real
estate appraiser satisfactory to the Administrative Agent, such phase
I environmental reports, and, if deemed necessary or appropriate by
the Administrative Agent, phase II environmental reports, in form and
substance satisfactory to the Administrative Agent, as the
Administrative Agent may reasonably require, and such other
instruments, documents and agreements in connection with the
execution, delivery and recording of the Mortgage and the granting of
a Lien on the Designated Real Property in favor of the Administrative
Agent as the Administrative Agent may reasonably request (collectively
with the Mortgage, the "Mortgage Documents").
The Administrative Agent shall have received a collateral audit report
prepared by J.H. Cohn, which report shall be satisfactory in form and
substance to all of the Lenders.
The Administrative Agent shall notify the Borrower and the Credit
Parties of the Effective Date, and such notice shall be
conclusive and binding. Notwithstanding the foregoing, the
obligations of the Lenders to make Extensions of Credit hereunder
shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 10.02) at
or prior to 3:00 p.m., New York City time, on November 30, 2001
(and, in the event such conditions are not so satisfied or
waived, the Revolving Commitments shall terminate at such time).
Each Extension of Credit
The obligation of each Lender to make an Extension of Credit
is subject to the satisfaction of the following conditions:
The representations and warranties of each Loan Party set forth in
each Loan Document shall be true and correct in all material respects
on and as of the date of such Extension of Credit, except to the
extent such representations and warranties relate to an earlier date.
At the time of and immediately after giving effect to such Extension
of Credit, no Default shall have occurred and be continuing and the
Aggregate Revolving Exposure (excluding the aggregate undrawn face
amount of the outstanding commercial Letters of Credit) shall not
exceed the Borrowing Base Amount.
The Administrative Agent shall have received such other documentation
and assurances as shall be reasonably required by it in connection
with such Extension of Credit.
If, on the date of such Extension of Credit and before giving effect
thereto, the Aggregate Revolving Exposure is less than $5,500,000, the
Administrative Agent shall have received a Mortgage covering the
Designated Real Property and such other Mortgage Documents as the
Administrative Agent may reasonably require, each in form and
substance satisfactory to the Administrative Agent.
Each Extension of Credit shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof
as to the matters specified in paragraphs (a) and (b) of this
Section 5.02.
AFFIRMATIVE COVENANTS
Until the Revolving Commitments have expired or been terminated
and the principal of and interest on each Extension of Credit, all
Reimbursement Obligations, all BA Obligations and all fees and other
amounts (other than contingent indemnity obligations) payable under
the Loan Documents shall have been paid in full, the Borrower
covenants and agrees with the Lenders that:
Financial Statements and Other Information
The Borrower will furnish to the Administrative Agent and
each Lender:
within 90 days after the end of each fiscal year, the audited
Consolidated balance sheet and related statements of income,
stockholders' equity and cash flows of the Borrower and the
Subsidiaries as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all
reported on by independent public accountants of recognized national
standing (without a "going concern" or like qualification or exception
and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and
results of operations of the Borrower and the Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, the Consolidated balance sheets and
related statements of income and cash flows of the Borrower and the
Subsidiaries as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding fiscal quarter end,
and period or periods, of the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the
Borrower and the Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal year-end audit
adjustments;
concurrently with any delivery of financial statements under clauses
(a) or (b) of this Section 6.01, a certificate of a Financial Officer
of the Borrower (i) certifying as to whether a Default has occurred
and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii)
setting forth (A) reasonably detailed calculations demonstrating
compliance with Sections 7.12, 7.13, 7.14, 7.15 and 7.16 and (B) any
change in the Guarantors as of the date of such certificate and (iii)
stating whether any change in GAAP or in the application thereof has
occurred since the date of the financial statements referred to in
Section 4.04(a) and, if any such change has occurred, specifying the
effect of such change on the financial statements accompanying such
certificate;
promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed
by the Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of
the functions of the Securities and Exchange Commission, or with any
national securities exchange, or distributed by the Borrower or any
Subsidiary to its shareholders generally, as the case may be, and
delivery by the Borrower of its (i) Annual Report on Form 10-K for
each fiscal year of the Borrower containing financial statements
reported on in a manner acceptable to the Securities and Exchange
Commission by independent public accountants of recognized national
standing and (ii) report on Form 10-Q for each of the first three
fiscal quarters of each fiscal year of the Borrower with the financial
statements contained therein certified by one of its Financial
Officers as presenting fairly in all material respects the financial
condition and results of operations of the Borrower and the
Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments, in
each case within the time periods prescribed by Section 6.01(a) or
6.01(b), respectively, shall be deemed to satisfy the requirements of
Section 6.01(a) or 6.01(b), as the case may be;
within 10 Business Days after the last day of each month, a Borrowing
Base Certificate, duly completed and setting forth the calculations
required thereby, as of such last day; and
promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of
the Borrower or any Subsidiary, or compliance with the terms of the
Loan Documents, as the Administrative Agent or any Lender may
reasonably request.
Notices of Material Events
The Borrower will furnish to the Administrative Agent and
each Lender prompt written notice of the following:
the occurrence of any Default;
the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting
the Borrower or any Affiliate thereof that, if adversely determined,
could in the good faith opinion of the Borrower reasonably be expected
to result in a Material Adverse Effect;
the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and the Subsidiaries in an
aggregate amount exceeding $500,000; and
any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
Each notice delivered under this Section 6.02 shall be
accompanied by a statement of a Financial Officer or other
executive officer of the Borrower setting forth the details of
the event or development requiring such notice and any action
taken or proposed to be taken with respect thereto.
Existence; Conduct of Business
The Borrower will, and will cause each of the Subsidiaries
to, do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence
and the rights, licenses, permits, privileges and franchises
material to the conduct of its business, provided that the
foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 7.03.
Payment of Obligations
The Borrower will, and will cause each of the Subsidiaries
to, pay its obligations, including Tax liabilities, that, if
not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where
(a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse
Effect.
Maintenance of Properties
The Borrower will, and will cause each of the Subsidiaries to, keep
and maintain all property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
Books and Records; Inspection Rights
The Borrower will, and will cause each of the Subsidiaries
to, keep, in all material respects, proper books of record
and account in which full, true and correct entries are made
of all dealings and transactions in relation to its business
and activities. The Borrower will, and will cause each of
the Subsidiaries to, permit any representatives designated
by the Administrative Agent or any Lender, upon reasonable
prior notice, to visit and inspect its properties, to
examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its
officers and independent accountants, all at such reasonable
times during normal business hours and as often as
reasonably requested. Each Credit Party and its agents may
enter upon any of the Borrower's or any Subsidiary's
premises (prior to the occurrence of an Event of Default,
upon reasonable notice) at any time during business hours
and at any other reasonable time, and, from time to time,
for the purpose of inspecting the Collateral and any and all
records pertaining thereto and the operation of the
Borrower's or such Subsidiary's business.
Compliance with Laws
The Borrower will, and will cause each of the Subsidiaries
to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its property,
except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a
Material Adverse Effect.
Use of Proceeds
The proceeds of the Loans will be used only for general
corporate purposes not inconsistent with the terms hereof.
No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately,
incidentally or ultimately, to purchase, acquire or carry
any Margin Stock or for any purpose that entails a violation
of any of the regulations of the Board, including
Regulations T, U and X.
Notice of Certain Changes
The Borrower will furnish to the Administrative Agent prompt written
notice of any change in (i) the legal name of any Loan Party or in any
trade name used to identify it in the conduct of its business or in
the ownership of its properties, (ii) the jurisdiction of organization
or the location of the chief executive office of any Loan Party, its
principal place of business, any office in which it maintains its
books or records, (iii) the identity or organizational structure of
any Loan Party or (iv) the organizational identification number or the
Federal Taxpayer Identification Number of any Loan Party.
Insurance
The Borrower will, and will cause each of the Subsidiaries
to, maintain, with financially sound and reputable insurance
companies, (i) adequate insurance for its insurable
properties, all to such extent and against such risks,
including fire, casualty, business interruption and other
risks insured against by extended coverage, as is customary
with companies in the same or similar businesses operating
in the same or similar locations and (ii) such other
insurance as is required pursuant to the terms of any
Security Document.
Additional Subsidiaries
If any Subsidiary organized under the laws of the United
States of America or any state thereof is formed or acquired
after the Effective Date, the Borrower will notify the
Administrative Agent and the Lenders in writing thereof
within five Business Days after the date on which such
Subsidiary is formed or acquired and (i) the Borrower will
cause such Subsidiary to (A) execute and deliver the
Guarantee Agreement (or otherwise become a party thereto in
the manner provided therein) and (B) become a party to each
applicable Security Document in the manner provided therein,
in each case within five Business Days after the date on
which such Subsidiary is formed or acquired, and (ii)
promptly take such actions to create and perfect Liens on
such Subsidiary's assets to secure the Obligations as the
Administrative Agent or the Required Lenders shall
reasonably request and (b) if any equity securities issued
by any such Subsidiary are owned or held by or on behalf of
the Borrower or any Subsidiary or any loans, advances or
other debt is owed or owing by any such Subsidiary to the
Borrower or any Subsidiary, the Borrower will cause such
equity securities and promissory notes and other instruments
evidencing such loans, advances and other debt to be pledged
pursuant to the Security Agreement within five Business Days
after the date on which such Subsidiary is formed or
acquired.
Information Regarding Collateral
The Borrower will furnish to the Administrative Agent prompt written
notice of any change in (i) the legal name of any Loan Party, (ii) the
jurisdiction of organization of any Loan Party, (iii) the location of
the chief executive office of any Loan Party, its principal place of
business, any office in which it maintains books or records relating
to Collateral owned or held by it or on its behalf or any office or
facility at which Collateral owned or held by it or on its behalf is
located (including the establishment of any such new office or
facility), (iv) the identity or organizational structure of any Loan
Party such that a filed financing statement becomes misleading or (v)
the organizational identification number or the Federal Taxpayer
Identification Number of any Loan Party. The Borrower shall not
effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or
otherwise that are required in order for the Administrative Agent to
continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral. The Borrower shall
promptly notify the Administrative Agent if any material portion of
the Collateral is damaged or destroyed.
Each year, at the time of delivery of annual financial statements with
respect to the preceding fiscal year pursuant to Section 6.01(a), the
Borrower shall deliver to the Administrative Agent a certificate of a
Financial Officer of the Borrower, (i) setting forth the information
required pursuant to Sections 1, 2, 4, 5 and 6 of the Perfection
Certificate or confirming that there has been no change in such
information since the date of the Perfection Certificate or the date
of the most recent certificate delivered pursuant to this Section and
(ii) certifying that the Loan Parties are in compliance with all of
the terms of the Security Agreement.
Casualty and Condemnation
The Borrower will furnish to the Administrative Agent and the Lenders
prompt written notice of any casualty or other insured damage to any
portion of any Collateral or the commencement of any action or
proceeding for the taking of any Collateral or any part thereof or
interest therein under power of eminent domain or by condemnation or
similar proceeding.
If any event described in Section 6.13(a) results in Net Proceeds
(whether in the form of insurance proceeds, condemnation award or
otherwise), the Administrative Agent is authorized to collect such Net
Proceeds and, if received by the Borrower or any Subsidiary, such Net
Proceeds shall be paid over to the Administrative Agent, provided that
(i) to the extent that the Borrower or such Subsidiary intends to use
any such Net Proceeds to repair, restore, reinvest or replace assets
of the Borrower or such Subsidiary as provided in the proviso to
Section 2.08(b), the Administrative Agent shall, subject to the
provision of such proviso, deliver such Net Proceeds to the Borrower
or the applicable Subsidiary, (ii) otherwise, the Administrative Agent
shall, and the Borrower and the Subsidiaries hereby authorize the
Administrative Agent to, apply such Net Proceeds, to the extent that
they are Net Proceeds, to prepay the Loans in accordance with
Section 2.08 and (iii) all proceeds of business interruption insurance
shall be paid over to the Borrower unless a Default has occurred and
is continuing.
If any Net Proceeds retained by or paid over to the Administrative
Agent as provided in Section 6.13(b) continue to be held by the
Administrative Agent on the date that is 365 days after the receipt of
such Net Proceeds, then such Net Proceeds shall be applied to prepay
Borrowings as provided in Section 2.08.
Collateral Monitoring
Following any fiscal quarter in which the
Administrative Agent, any Related Party, or any agent of the
Administrative Agent or the Lenders performs any field
examination, Collateral analysis or other business analysis or
audit relating to the Borrower or any Subsidiary (each a
"Monitoring"), the need for which shall be determined by the
Administrative Agent or at the request of Required Lenders, which
Monitoring is undertaken by the Administrative Agent, any Related
Party or by any such agent, the Borrower shall pay to the
Administrative Agent, promptly after demand therefor, (i) all
reasonable out-of-pocket costs and expenses incurred by the
Administrative Agent and the Lenders in connection therewith, and
(ii) in the event that such Monitoring is conducted by the
Administrative Agent or any Related Party, all reasonable and
customary fees and expenses of each person employed in connection
with such Monitoring.
Further Assurances
The Borrower will, and will cause each Subsidiary to, execute any and
all further documents, financing statements, agreements and
instruments, and take all such further actions (including the filing
and recording of financing statements, fixture filings, and other
documents), that may be required under any applicable law, or which
the Administrative Agent or the Required Lenders may reasonably
request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created
or intended to be created by the Security Documents or the validity or
priority of any such Lien, all at the expense of the Borrower. The
Borrower shall provide to the Administrative Agent, from time to time
upon request, evidence reasonably satisfactory to the Administrative
Agent as to the perfection and priority of the Liens created or
intended to be created by the Security Documents.
If any material assets are acquired by the Borrower or any Subsidiary
after the Effective Date (other than assets constituting Collateral
under the Security Agreement that become subject to the Lien of the
Security Agreement upon acquisition thereof), the Borrower will notify
the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrower will
cause such assets to be subjected to a Lien securing the Obligations
and will take, and cause the Subsidiaries to take, such actions as
shall be necessary or reasonably requested by the Administrative Agent
to grant and perfect such Liens, including actions described in
Section 6.15(a), all at the expense of the Borrower.
The Administrative Agent, promptly at the direction of the Required
Lenders by notice to the Administrative Agent, shall file the Security
Agreement (or any other instrument or agreement of assignment that the
Administrative Agent may reasonably request) in the United States
Patent and Trademark Office and the United States Copyright Office.
Intellectual Property Licenses
The Borrower shall (a) use its best efforts to obtain, on or before
the date that is 60 days after the Effective Date, the written consent
(in form and substance reasonably satisfactory to the Administrative
Agent) of Microban Products Company to the assignment by the Borrower
to the Administrative Agent pursuant to the Security Documents of the
license agreement between the Borrower and Microban Products Company
and to the disposition by the Administrative Agent upon the occurrence
of an Event of Default of Inventory bearing the intellectual property
covered by such licensing agreement and (b) obtain, on or before the
date that is 60 days after the Effective Date, the written consent (in
form and substance reasonably satisfactory to the Administrative
Agent) of Whirlpool Corporation to the assignment by the Borrower to
the Administrative Agent pursuant to the Security Documents of the
license agreement between the Borrower and Whirlpool Corporation and
to the disposition by the Administrative Agent upon the occurrence of
an Event of Default of Inventory bearing the intellectual property
covered by such licensing agreement; provided, however, that the
failure by the Borrower to obtain the written consent of Whirlpool
Corporation within such 60-day period shall not constitute an Event of
Default but shall result in all Inventory of the Borrower or any
Subsidiary bearing the intellectual property covered by such licensing
agreement being deemed not Eligible Inventory until such time as such
written consent is obtained.
NEGATIVE COVENANTS
Until the Revolving Commitments have expired or been terminated
and the principal of and interest on each Extension of Credit, all
Reimbursement Obligations, all BA Obligations and all fees and other
amounts (other than contingent liability obligations) payable under
the Loan Documents shall have been paid in full, the Borrower
covenants and agrees with the Lenders that:
Indebtedness
The Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
Indebtedness under the Loan Documents;
Indebtedness existing on the Effective Date and set forth in
Schedule 7.01, including any extensions, renewals or replacements
of any such Indebtedness that do not increase the outstanding
principal amount thereof;
Indebtedness incurred to finance the acquisition, construction or
improvement of any fixed or capital assets, including Capital
Lease Obligations and any Indebtedness assumed in connection with
the acquisition of any such assets or secured by a Lien on any
such assets prior to the acquisition thereof, and extensions,
renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof, provided that
(A) such Indebtedness is incurred prior to or within 90 days
after such acquisition or the completion of such construction or
improvement and (B) the aggregate principal amount of
Indebtedness permitted by this clause (iii) shall not exceed
$3,000,000 at any time outstanding;
Indebtedness of any Person that becomes a Subsidiary after the
Effective Date, provided that (A) such Indebtedness exists at the
time such Person becomes a Subsidiary and is not created in
contemplation of or in connection with such Person becoming a
Subsidiary and (B) the aggregate principal amount of Indebtedness
permitted by this clause (iv) shall not exceed $3,000,000 at any
time outstanding;
Indebtedness of a Subsidiary to any other Subsidiary and of any
Subsidiary to the Borrower;
Guarantees by a Subsidiary of Indebtedness of any other
Subsidiary and by any Subsidiary of Indebtedness of the Borrower;
provided that the aggregate amount of all Indebtedness of all
Subsidiaries that are not a Domestic Subsidiary Guaranteed by the
Borrower and the Domestic Subsidiaries shall not exceed
$3,000,000 at any time outstanding;
Indebtedness of the Prestige Subsidiaries to any Person that is
not an Affiliate of the Prestige Subsidiaries in an aggregate
principal not exceeding $6,000,000 at any time outstanding;
Guarantees by the Borrower of Indebtedness of any Subsidiary;
provided that the aggregate amount of all Indebtedness of all
Subsidiaries that are not a Domestic Subsidiary Guaranteed by the
Borrower and the Domestic Subsidiaries shall not exceed
$3,000,000 at any time outstanding; and
other unsecured Indebtedness in an aggregate principal amount not
exceeding $1,000,000 at any time outstanding.
The Borrower will not, and it will not permit any Subsidiary to, (i)
issue any preferred equity securities or (ii) be or become liable in
respect of any obligation (contingent or otherwise) to purchase,
redeem, retire, acquire or make any other payment in respect of any
shares of equity securities of the Borrower or any Subsidiary or any
option, warrant or other right to acquire any such shares of equity
securities, except as permitted by Section 7.08.
Liens
The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights
in respect of any thereof, except:
Permitted Encumbrances;
any Lien on any property or asset of the Borrower or any Subsidiary
existing on the Effective Date and set forth in Schedule 7.02,
provided that (i) such Lien shall not apply to any other property or
asset of the Borrower or any Subsidiary and (ii) such Lien shall
secure only those obligations which it secures on the date hereof and
any extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;
any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Subsidiary or existing on any property
or asset of any Person that becomes a Subsidiary after the Effective
Date prior to the time such Person becomes a Subsidiary, provided that
(i) such Lien is not created in contemplation of or in connection with
such acquisition of such Person becoming a Subsidiary, as applicable,
(ii) such Lien shall not apply to any other property or assets of the
Borrower or any Subsidiary and (iii) such Lien shall secure only those
obligations that it secures on the date of such acquisition or the
date such Person becomes a Subsidiary, as applicable, and any
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
Liens on fixed or capital assets acquired, constructed or improved by
the Borrower or any Subsidiary, provided that (i) such security
interests secure Indebtedness permitted by clause (iii) of
Section 7.01(a), (ii) such security interests and the Indebtedness
secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement,
(iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or
assets of the Borrower or any Subsidiary;
possessory Liens in favor of lessees or sublessees of property leased
or subleased by the Borrower or any Subsidiary to such Person in the
ordinary course of business of the Borrower or such Subsidiary,
provided that such Liens attach only to such property;
Liens incurred in connection with the Permitted Factoring Arrangement
described in clause (ii) of the definition thereof; provided, that,
(i) such Liens attach only to the accounts receivable of the Borrower
and its Subsidiaries that are the subject of such Permitted Factoring
Arrangement and not to any other property or assets of the Borrower or
any Subsidiary and (ii) such Liens shall secure only the obligations
of the Borrower or such Subsidiary to Republic Business Credit under
such Permitted Factoring Arrangement; and
Liens created under the Security Documents.
Fundamental Changes
The Borrower will not, and will not permit any Subsidiary to, merge
into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets, or all or
substantially all of the equity securities of any of the Subsidiaries
(in each case, whether now owned or hereafter acquired), or liquidate
or dissolve, except that, if at the time thereof and immediately after
giving effect thereto, no Default shall have occurred and be
continuing:
any Subsidiary may merge into the Borrower in a transaction in
which the Borrower is the surviving entity, and any Subsidiary
may merge into any other Subsidiary;
any Subsidiary may merge with any Person in a transaction that is
not permitted by clause (i) of this Section 7.03(a), provided
that such merger is permitted by Section 7.04 or 7.05, as
applicable, and the surviving entity of such merger complies with
the provisions of Section 6.11;
any Subsidiary may sell, transfer, lease or otherwise dispose of
its assets to the Borrower or to any other Subsidiary; and
any Subsidiary may sell, transfer, lease or otherwise dispose of
its assets in a transaction that is not permitted by clause (iii)
of this Section 7.03(a), provided that such sale, transfer, lease
or other disposition is also permitted by Section 7.05.
The Borrower will not, and will not permit any of the Subsidiaries to,
engage to any material extent in any business other than businesses of
the type conducted by the Borrower and the Subsidiaries on the
Effective Date and businesses or activities that are substantially
similar, related or incidental thereto.
Investments, Loans, Advances, Guarantees and Acquisitions
The Borrower will not, and will not permit any of the
Subsidiaries to, purchase, hold or acquire (including
pursuant to any merger) any capital stock, evidences of
Indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of,
make or permit to exist any loans or advances to, Guarantee
any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a
series of transactions (including pursuant to any merger))
any assets of any other Person constituting a business unit,
or purchase, hold or acquire any "derivative" (other than a
Hedging Agreement permitted by Section 7.07), except:
Permitted Investments;
investments existing on the Effective Date and set forth in
Schedule 7.04;
investments made by the Borrower in the equity securities of
the Subsidiaries; provided that any such equity securities
owned by the Borrower shall become Pledged Equity pursuant
to the Security Agreement;
investments made by a Subsidiary in the equity securities of
any other Subsidiary; provided that any such equity
securities owned by such Subsidiary shall become Pledged
Equity pursuant to the Security Agreement;
loans or advances made by any Subsidiary to any other
Subsidiary; provided that (i) any such loans or advances
constituting Pledged Debt shall be evidenced by a promissory
note which shall be pledged pursuant to the Security
Agreement and (ii) the aggregate amount of all loans and
advances made by the Borrower and the Domestic Subsidiaries
to all Subsidiaries that are not a Domestic Subsidiary shall
not exceed $3,000,000 at any time outstanding;
loans or advances made by the Borrower to any Subsidiary;
provided that (i) any such loans or advances constituting
Pledged Debt shall be evidenced by a promissory note which
shall be pledged pursuant to the Security Agreement and (ii)
the aggregate amount of all loans and advances made by the
Borrower and the Domestic Subsidiaries to all Subsidiaries
that are not a Domestic Subsidiary shall not exceed
$3,000,000 at any time outstanding;
acquisitions made by any Subsidiary from any other
Subsidiary;
acquisitions made by the Borrower from any Subsidiary;
Permitted Acquisitions by the Borrower or any Subsidiary;
provided that the Borrower shall have delivered to the
Administrative Agent and the Lenders not less than 10
Business Days prior to the consummation of any such
Permitted Acquisition a certificate of a Financial Officer
of the Borrower in form and substance satisfactory to the
Administrative Agent and the Required Lenders evidencing
projected pro forma compliance with Sections 7.12, 7.13 and
7.14 after giving effect to such Permitted Acquisition for
the period from the date of such Permitted Acquisition to
the Revolving Maturity Date;
Indebtedness permitted to be incurred pursuant to Section
7.01(a); and
Investments made by the Borrower or any Subsidiary in any
new Subsidiary of the Borrower or any Subsidiary (including,
without limitation, a new Subsidiary acquired in connection
with a Permitted Acquisition); provided, that after giving
effect to such investment the aggregate stockholders' equity
of all direct or indirect non-wholly-owned Subsidiaries of
the Borrower is not greater than 10% of the Consolidated
stockholders' equity of the Borrower determined in
accordance with GAAP on a basis consistent with the
financial statements delivered pursuant to Section 6.01(a).
Asset Sales
The Borrower will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose
(including pursuant to a merger) of any asset, including any
equity securities, nor will the Borrower permit any of the
Subsidiaries to issue any additional shares of its equity
securities, except:
sales, transfers and other dispositions of inventory, used
or surplus equipment, intellectual property and Permitted
Investments, in each case in the ordinary course of
business;
sales, transfers, leases and other dispositions made by any
Subsidiary to any other Subsidiary;
sales, transfers, leases and other dispositions made by the
Borrower to any Subsidiary; and
sales or assignments of the Borrower's or any Subsidiary's
accounts receivable in connection with Permitted Factoring
Arrangements.
Sale and Lease-Back Transactions
The Borrower will not, and will not permit any of the
Subsidiaries to, enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or
transfer any property, real or personal, used or useful in
its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property
that it intends to use for substantially the same purpose or
purposes as the property being sold or transferred.
Hedging Agreements
The Borrower will not, and will not permit any of the
Subsidiaries to, enter into any Hedging Agreement, other
than Hedging Agreements entered into in the ordinary course
of business to hedge or mitigate risks to which the Borrower
or any Subsidiary is exposed in the conduct of its business
or the management of its liabilities.
Restricted Payments
The Borrower will not, and will not permit any of the Subsidiaries to,
declare or make, or agree to pay for or make, directly or indirectly,
any Restricted Payment, except that (a) the Borrower may (i) declare
and pay dividends with respect to its equity securities payable (1) in
additional shares of its equity securities or (2) in cash and (ii)
repurchase shares of its common stock in open market transactions;
provided that, (x) after giving effect to any such payment of
dividends or stock repurchase, the Fixed Charge Coverage Ratio,
calculated on a pro forma basis as if such dividends or stock
repurchases had been made on the last day of the most recently ended
fiscal quarter of the Borrower, shall not be less than the amount set
forth in Section 7.13 with respect to such fiscal quarter and (y)
before and after giving effect to such dividends or repurchase no
Default shall exist or result therefrom and (b) any Subsidiary may
declare and pay dividends to the Borrower or any other Subsidiary.
Transactions with Affiliates
The Borrower will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose
(including pursuant to a merger) any property or assets to,
or purchase, lease or otherwise acquire (including pursuant
to a merger) any property or assets from, or otherwise
engage in any other transactions with, any of its
Affiliates, except at prices and on terms and conditions not
less favorable to the Borrower or such Subsidiary than could
be obtained on an arms-length basis from unrelated third
parties, provided that this Section shall not apply to any
transaction that is permitted under Sections 7.01, 7.03,
7.04, 7.05 or 7.08 between or among the Loan Parties and not
involving any other Affiliate.
Restrictive Agreements
The Borrower will not, and will not permit any of the
Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur
or permit to exist any Lien upon any of its property or
assets or (b) the ability of any Subsidiary to pay dividends
or other distributions with respect to any shares of its
equity securities or to make or repay loans or advances to
the Borrower or any other Subsidiary or to Guarantee
Indebtedness of the Borrower or any other Subsidiary,
provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by this
Agreement, (ii) the foregoing shall not apply to
restrictions and conditions existing on the Effective Date
identified on Schedule 7.10 (but shall apply to any
extension or renewal of, or any amendment or modification
expanding the scope of, any such restriction or condition),
(iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided that
such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted
hereunder, (iv) clause (a) of this Section 7.10 shall not
apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement
if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (v) clause
(a) of this Section 7.10 shall not apply to customary
provisions in leases restricting the assignment thereof.
Amendment of Material Documents
The Borrower will not, and will not permit any Subsidiary
to, amend, modify or waive any of its rights under its
certificate of incorporation, by-laws or other
organizational documents, other than immaterial amendments,
modifications or waivers that would not reasonably be
expected to adversely affect the Credit Parties.
Leverage Ratio
The Borrower will not permit the Leverage Ratio at any time
during any period set forth below to be greater than the
ratio set forth below with respect to such period:

Fixed Charge Coverage Ratio
The Borrower will not permit the Fixed Charge Coverage Ratio as of the
end of any fiscal quarter ending during any period set forth below to
be less than the ratio set forth below with respect to such period:

Net Worth
The Borrower will not permit Consolidated Net Worth at any time to be
less than the sum of (i) $66,130,000, (ii) 50% of the Borrower's
Consolidated net income (if positive) for each fiscal quarter
commencing October 1, 2001 to such date of determination and (iii) any
increase to Consolidated Net Worth resulting from any equity issuance
by the Borrower or any of its Subsidiaries.
Net Income
The Borrower shall not permit Consolidated Net Income for any fiscal
year to be less than $1.00.
Retail Stores
The Borrower will not, and will not permit any Subsidiary to,
establish or become obligated to establish any retail store after the
Effective Date, except that, if at the time thereof (a) no Default
shall have occurred and be continuing or result therefrom and (b) the
combined net income of all of the retail stores of the Borrower and
the Subsidiaries for the four full fiscal quarters immediately
preceding such time determined in accordance with GAAP applied on a
basis consistent with the preparation of the financial statements most
recently delivered pursuant to Section 6.01(a) is not less than $1.00,
the Borrower and the Subsidiaries may establish not more than six
retail stores in the aggregate in any fiscal year of the Borrower.
Prepayments of Indebtedness
The Borrower will not, and shall not permit any Subsidiary
to, pay or obligate itself to prepay any Indebtedness (other
than Indebtedness under the Loan Documents).
EVENTS OF DEFAULT
Events of Default
Each of the following events shall constitute an "Event of Default":
the Borrower shall fail (i) to pay any principal of any Loan or in
respect of any BA Obligation or any Reimbursement Obligation when and
as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise or (ii)
make any deposit into the Cash Collateral Account when required
hereby; or
the Borrower shall fail to pay any interest on any Extension of Credit
or any fee, commission or any other amount (other than an amount
referred to in clause (a) of this Section 8.01) payable under any Loan
Document, when and as the same shall become due and payable, and such
failure shall continue unremedied for a period of three Business Days;
or
any representation or warranty made or deemed made by or on behalf of
any Loan Party in or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, or in any
report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment
or modification thereof or waiver thereunder, shall prove to have been
incorrect in any material respect when made or deemed made; or
the Borrower shall fail to observe or perform any covenant, condition
or agreement contained in Sections 6.02, 6.03, 6.08, 6.11, 6.12, 6.13
or 6.15 or in Article 7; or
any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document to which it is a
party (other than those specified in clauses (a), (b) or (d) of this
Section 8.01), and such failure shall continue unremedied for a period
of 30 days after such Loan Party shall have obtained knowledge
thereof; or
the Borrower or any Subsidiary shall fail to make any payment (whether
of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and
payable (after giving effect to any applicable grace period); or
any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that
enables or permits the holder or holders of any Material Indebtedness
or any trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity,
provided that this clause (g) shall not apply to secured Indebtedness
that becomes due solely as a result of the voluntary sale or transfer
of the property or assets securing such Indebtedness; or
an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower or any Guarantor or its debts,
or of a substantial part of its assets, under any federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the
Borrower or any Guarantor or for a substantial part of its assets,
and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering
any of the foregoing shall be entered; or
the Borrower or any Guarantor shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h)
of this Section 8.01, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Guarantor or for a substantial part
of its assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any
action for the purpose of effecting any of the foregoing; or
the Borrower or any Guarantor shall become unable, admit in writing
its inability or fail generally to pay its debts as they become due;
or
one or more judgments for the payment of money in an aggregate amount
in excess of $1,000,000 shall be rendered against the Borrower or any
Guarantor or any combination thereof and the same shall remain
undischarged, unvacated, unbonded or unstayed for a period of 60
consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to
attach or levy upon any assets of the Borrower or any Guarantor to
enforce any such judgment; or
an ERISA Event shall have occurred that, in the judgment of the
Required Lenders reasonably exercised, when taken together with all
other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect; or
any Loan Document shall cease, for any reason, to be in full force
and effect, or any Loan Party shall so assert in writing or shall
disavow any of its obligations thereunder; or
any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by any Loan Party not to be, a valid
and perfected Lien on any Collateral, with the priority required by
the applicable Security Document; or
a Change in Control shall occur.
Contract Remedies
Upon the occurrence of an Event of Default or at any time thereafter
during the continuance thereof,
in the case of an Event of Default specified in Section 8.01(h) or
8.01(i), without declaration or notice to the Borrower, the Revolving
Commitments (including the Letter of Credit Commitment and the Bankers
Acceptance Commitment) shall immediately and automatically terminate,
and the Loans, all accrued and unpaid interest thereon and all other
amounts owing under the Loan Documents shall immediately become due
and payable, and
in all other cases, upon the direction of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower, declare all of
the Revolving Commitments (including the Letter of Credit Commitment
and the Bankers Acceptance Commitment) to be terminated forthwith,
whereupon such Revolving Commitments (including the Letter of Credit
Commitment and the Bankers Acceptance Commitment) shall immediately
terminate, or declare the Loans, all accrued and unpaid interest
thereon and all other amounts owing under the Loan Documents to be due
and payable forthwith, whereupon the same shall immediately become due
and payable.
In the event that the Loans, all accrued and unpaid interest
thereon and all other amounts owing under the Loan Documents
shall have been declared due and payable pursuant to the
provisions of this Section 8.02, (i) the Administrative Agent (A)
upon the direction of the Required Lenders, shall proceed to
enforce the rights of the holders of the Notes, the BA
Obligations and the Reimbursement Obligations by suit in equity,
action at law and/or other appropriate proceedings, whether for
payment or the specific performance of any covenant or agreement
contained in the Loan Documents and (B) may exercise any and all
rights and remedies provided to the Administrative Agent by the
Loan Documents and (ii) the Borrower shall deposit in the Cash
Collateral Account Cash Collateral in an amount equal to the sum
of (x) the Bankers Acceptance Exposure and (y) the Letter of
Credit Exposure after giving effect to all payments required
under this Section 8.02. Except as otherwise expressly provided
in the Loan Documents, the Borrower expressly waives presentment,
demand, protest and all other notices of any kind in connection
with the Loan Documents. The Borrower hereby further expressly
waives and covenants not to assert any appraisement, valuation,
stay, extension, redemption or similar laws, now or at any time
hereafter in force which might delay, prevent or otherwise impede
the performance or enforcement of any Loan Document.
THE ADMINISTRATIVE AGENT
Each Credit Party hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the
Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent
by the terms hereof, together with such actions and powers as are
reasonably incidental thereto.
The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity
as a Lender as any other Lender and may exercise the same as
though it were not the Administrative Agent, and such Person and
its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if it were not the
Administrative Agent hereunder.
The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without
limiting the generality of the foregoing, (a) the Administrative
Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that the Administrative Agent
is required to exercise in writing by the Required Lenders (or
such other number or percentage of the Credit Parties as shall be
necessary under the circumstances as provided in Section 10.02),
and (c) except as expressly set forth herein, the Administrative
Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to
the Borrower, any of the Subsidiaries or any other Loan Party
that is communicated to or obtained by the Person serving as
Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the
Required Lenders (or such other number or percentage of the
Credit Parties as shall be necessary under the circumstances as
provided in Section 10.02) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall
be deemed not to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by
the Borrower or a Credit Party (and, promptly after its receipt
of any such notice, it shall give each Credit Party and the
Borrower notice thereof), and the Administrative Agent shall not
be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in
connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in
connection therewith, (iii) the performance or observance of any
of the covenants, agreements or other terms or conditions set
forth therein, (iv) the validity, enforceability, effectiveness
or genuineness thereof or any other agreement, instrument or
other document or (v) the satisfaction of any condition set forth
in Article 5 or elsewhere herein, other than to confirm receipt
of items expressly required to be delivered to the Administrative
Agent.
The Administrative Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to
have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it
orally or by telephone and believed by it to be made by the
proper Person, and shall not incur any liability for relying
thereon. The Administrative Agent may consult with legal counsel
(who may be counsel for the Borrower; provided such counsel has
not been retained by the Administrative Agent), independent
accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with
the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its
duties and exercise its rights and powers by or through any one
or more sub-agents appointed by the Administrative Agent,
provided that no such delegation shall serve as a release of the
Administrative Agent or waiver by the Borrower or the Borrower of
any rights hereunder. The Administrative Agent and any such sub-
agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to
any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities
as Administrative Agent.
Subject to the appointment and acceptance of a
successor Administrative Agent as provided in this paragraph, the
Administrative Agent may resign at any time by notifying the
Credit Parties and the Borrower. Upon any such resignation, the
Required Lenders shall have the right, with the approval of the
Borrower (provided that such approval shall not be required if a
Default has occurred and is continuing), to appoint a successor.
If no successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on
behalf of the Credit Parties, appoint a successor Administrative
Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations hereunder. The
fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor. After
the Administrative Agent's resignation hereunder, the provisions
of this Article 9 and Section 10.03 shall continue in effect for
the benefit of such retiring Administrative Agent, its sub-agents
and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while it was acting
as Administrative Agent.
Each Credit Party acknowledges that it has,
independently and without reliance upon the Administrative Agent
or any other Credit Party and based on such documents and
information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Credit
Party also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Credit Party
and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon any Loan
Document, any related agreement or any document furnished
thereunder.
MISCELLANEOUS
Notices
Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
if to the Borrower, to it at One Merrick Avenue, Westbury, New York
11590, Attention: Chief Financial Officer (Telephone No. (516) 683-
6000; Telecopy No. (516) 450-1017);
if to the Administrative Agent, to it at One Wall Street, New York,
New York 10286, Attention of: Tony Pinella, Agency Administrative
Function (Telephone No. (212) 635-4698; Telecopy No. (212) 635-6365,
6366 or 6367; with a copy to The Bank of New York, at One Wall Street,
New York, New York 10286, Attention of: Roger A. Grossman (Telephone
No. (212) 635-1309; Telecopy No. (212) 635-1480);
if to any other Credit Party, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other
parties hereto. All notices and other communications given to
any party hereto in accordance with the provisions of this
Agreement shall be deemed to have been given on the date of
receipt.
Waivers; Amendments
No failure or delay by any Credit Party in exercising any right or
power under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise
of any other right or power. The rights and remedies of the Credit
Parties under the Loan Documents are cumulative and are not exclusive
of any rights or remedies that they would otherwise have. No waiver
of any provision of any Loan Document or consent to any departure by
any Loan Party therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section 10.02, and
then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan shall not be
construed as a waiver of any Default, regardless of whether any Credit
Party may have had notice or knowledge of such Default at the time.
Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the
Borrower and the Administrative Agent with the consent of the Required
Lenders, provided that no such agreement shall (i) increase the
Revolving Commitment of any Lender without the written consent of such
Lender, (ii) reduce the principal amount of any Extension of Credit,
or reduce the rate of interest thereon, or reduce any fees or other
amounts payable under the Loan Documents, or reduce the amount of any
scheduled reduction of any Revolving Commitment, without the written
consent of each Credit Party affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any, or any
interest thereon (except in connection with a waiver of the
applicability of any post-default increase in interest rates), or any
fees or other amounts payable under the Loan Documents, or reduce the
amount of, waive or excuse any such payment, or postpone the scheduled
date of reduction or expiration of any Commitment, without the written
consent of each Credit Party affected thereby, (iv) change any
provision hereof in a manner that would alter the pro rata sharing of
payments required by any Loan Document, without the written consent of
each Credit Party, (v) change any of the provisions of this Section
10.02(b) or the definition of "Required Lenders" or any other
provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written
consent of each Lender, (vi) release any Guarantor from its Guarantee
under the Guarantee Agreement (except as expressly provided in the
Guarantee Agreement), or limit its liability in respect of such
Guarantee, without the written consent of each Lender or (vii) release
of any of the Collateral from the Liens of the Loan Documents (except
as expressly provided in the Security Agreement), without the consent
of each Lender, and provided, further, that no such agreement shall
amend, modify or otherwise affect the rights or duties of the
Administrative Agent, the Swing Line Lender, the BA Issuer or the
Issuer hereunder without the prior written consent of the
Administrative Agent, the Swing Line Lender, the BA Issuer or the
Issuer, as the case may be.
Expenses; Indemnity; Damage Waiver
The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the
Administrative Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of
this Agreement or any amendments, modifications or waivers of the
provisions of any Loan Document (whether or not the transactions
contemplated thereby shall be consummated) and (ii) all reasonable
out-of-pocket expenses (other than Taxes) incurred by any Credit
Party, including the fees, charges and disbursements of any counsel
(including any in-house counsel, whether or not on an out-of-pocket
basis) for any Credit Party, in connection with the enforcement or
protection of its rights in connection with the Loan Documents,
including its rights under this Section 10.03, or in connection with
the Loans made hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect
of such Loans.
The Borrower shall indemnify each Credit Party and each Related Party
thereof (each such Person being called an "Indemnitee") against, and
hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges
and disbursements of any counsel for any indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or
as a result of (i) the execution or delivery of any Loan Document or
any agreement or instrument contemplated thereby, the performance by
the parties to the Loan Documents of their respective obligations
thereunder or the consummation of the Transactions or any other
transactions contemplated thereby, (ii) any Loan or the use of the
proceeds, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or
any of the Subsidiaries, or any Environmental Liability related in any
way to the Borrower or any of the Subsidiaries or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to
any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto,
provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities
or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee or that
such indemnity relates to Taxes.
To the extent that the Borrower fails to pay any amount required to be
paid by it to the Administrative Agent under paragraphs (a) or (b) of
this Section 10.03, each Lender severally agrees to pay to the
Administrative Agent an amount equal to the product of such unpaid
amount multiplied by a fraction, the numerator of which is the sum of
such Lender's Revolving Commitment and the denominator of which is the
sum of the total of all Lenders' Revolving Commitments (in each case
determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought), provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as
applicable, was incurred by or asserted against the Administrative
Agent in its capacity as such.
To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, any Loan Document or any
agreement, instrument or other document contemplated thereby, the
Transactions or any Loan or the use of the proceeds thereof.
All amounts due under this Section 10.03 shall be payable promptly but
in no event later than thirty days after written demand therefor.
Successors and Assigns
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that the Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Credit Party (and any attempted
assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied,
shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and,
to the extent expressly contemplated hereby, the Related Parties of
each Credit Party) any legal or equitable right, remedy or claim under
or by reason of any Loan Document.
Any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a
portion of its Revolving Commitment and the Loans at the time owing to
it), provided that (i) except in the case of an assignment to a Lender
or an Affiliate or an Approved Fund of a Lender, each of the Borrower
and the Administrative Agent must give its prior written consent to
such assignment (such consents shall not be unreasonably withheld or
delayed), (ii) except in the case of an assignment to a Lender or an
Affiliate or an Approved Fund of a Lender or an assignment of the
entire remaining amount of the assigning Lender's Revolving
Commitment, the amount of the Revolving Commitment of the assigning
Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered
to the Administrative Agent) shall not be less than $5,000,000 unless
the Borrower and the Administrative Agent otherwise consent, (iii) the
parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance together with,
unless otherwise agreed by the Administrative Agent, a processing and
recordation fee of $3,500, and (iv) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire, and provided further, that any consent of the Borrower
otherwise required under this paragraph shall not be required if a
Default has occurred and is continuing. Subject to acceptance and
recording thereof pursuant to paragraph (d) of this Section 10.04,
from and after the effective date specified in each Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to
the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under the Loan Documents,
and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from
its obligations under the Loan Documents (and, in the case of an
Assignment and Acceptance covering all of the assigning Lender's
rights and obligations under the Loan Documents, such Lender shall
cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 3.05, 3.06, 3.07 and 10.03). Any assignment or
transfer by a Lender of rights or obligations under the Loan Documents
that does not comply with this paragraph shall be treated for purposes
of the Loan Documents as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (e) of this
Section 10.04. Notwithstanding anything to the contrary, an assignee
Lender shall not be entitled to receive any greater payment under
Sections 3.05 or 3.07 than the assigning Lender would have been
entitled to receive with respect to the interest so assigned unless
the assignment of such interest is made with the Borrower's prior
written consent
The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in New York City a copy
of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the
Commitment of, and principal amount of the Revolving Loans owing to,
each Lender pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive absent
clearly demonstrable error, and the Borrower and each Credit Party may
treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall
be available for inspection by the Borrower and any Credit Party, at
any reasonable time and from time to time upon reasonable prior
notice.
Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee
referred to in paragraph (b) of this Section 10.04 and any written
consent to such assignment required by paragraph (b) of this Section
10.04, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in
this paragraph.
Any Lender may, without the consent of the Borrower or any Credit
Party, sell participations to one or more banks or other entities
(each such bank or other entity being called a "Participant") in all
or a portion of such Lender's rights and obligations under the Loan
Documents (including all or a portion of its Commitment and the Loans
owing to it), provided that (i) such Lender's obligations under the
Loan Documents shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Loan Parties and the Credit Parties
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Loan
Documents. Any agreement or instrument pursuant to which a Lender
sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Loan Documents and to approve any
amendment, modification or waiver of any provision of any Loan
Documents, provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to
any amendment, modification or waiver described in the first proviso
to paragraph (b) of Section 10.02 that affects such Participant.
Subject to paragraph (f) of this Section 10.04, the Borrower agrees
that each Participant shall be entitled to the benefits of Sections
3.05 and 3.06 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this
Section 10.04. To the extent permitted by law, each Participant also
shall be entitled to the benefits of Section 10.08 as though it were a
Lender, provided that such Participant agrees to be subject to
paragraph (c) of Section 2.09 as though it were a Lender.
A Participant shall not be entitled to receive any greater payment
under Sections 3.05 or 3.07 than the Lender would have been entitled
to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with
the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 3.07 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees,
for the benefit of the Borrower, to comply with paragraph (e) of
Section 3.07 as though it were a Lender.
Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under the Loan Documents to secure
obligations of such Lender, including any pledge or assignment to
secure obligations to a Federal Reserve Bank, and this Section 10.04
shall not apply to any such pledge or assignment of a security
interest, provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations under the
Loan Documents or substitute any such pledgee or assignee for such
Lender as a party hereto.
Survival
All covenants, agreements, representations and warranties
made by the Borrower herein and in the certificates or other
instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of any
Loan Document and the making of any Loans, regardless of any
investigation made by any such other party or on its behalf
and notwithstanding that any Credit Party may have had
notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest
on any Loan or any fee or any other amount payable under the
Loan Documents is outstanding and unpaid and so long as the
Commitments have not expired or terminated. The provisions
of Sections 3.05, 3.06, 3.07 and 10.03 and Article 9 shall
survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby,
the repayment of the Loans and the termination of the
Commitments or the termination of this Agreement or any
provision hereof.
Counterparts; Integration; Effectiveness
This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of
which shall constitute an original, but all of which, when
taken together, shall constitute but one contract. This
Agreement and any separate letter agreements with respect to
fees payable to any Credit Party constitute the entire
contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject
matter hereof. Except as provided in Section 5.01, this
Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof
which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and
their respective successors and assigns. Delivery of an
executed counterpart of this Agreement by facsimile
transmission shall be effective as delivery of a manually
executed counterpart of this Agreement.
Severability
In the event any one or more of the provisions contained in
this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby (it
being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provisions.
Right of Setoff
If an Event of Default shall have occurred and be
continuing, each of the Lenders and their respective
Affiliates is hereby authorized at any time and from time to
time, to the fullest extent permitted by applicable law, to
setoff and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and
other obligations at any time owing by it to or for the
credit or the account of the Borrower against any of and all
the obligations of the Borrower now or hereafter existing
under this Agreement held by it, irrespective of whether or
not it shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of
each of the Lenders and their respective Affiliates under
this Section 10.08 are in addition to other rights and
remedies (including other rights of setoff) that it may
have.
Governing Law; Jurisdiction; Consent to Service of Process
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction
of any New York State court or Federal court of the United States of
America sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to
this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that, to the extent permitted
by applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to
the extent permitted by applicable law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that any
party hereto may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents in the courts
of any jurisdiction.
Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection
that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any court referred to in paragraph (b) of
this Section 10.09. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, the defense
of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.01. Nothing
in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.
WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
Headings
Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part
of this Agreement and shall not affect the construction of,
or be taken into consideration in interpreting, this
Agreement.
Interest Rate Limitation
Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to any Loan, together with
all fees, charges and other amounts that are treated as
interest on such Loan under applicable law (collectively the
"charges"), shall exceed the maximum lawful rate (the
"maximum rate") that may be contacted for, charged, taken,
received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable
in respect of such Loan hereunder, together with all of the
charges payable in respect thereof, shall be limited to the
maximum rate and, to the extent lawful, the interest and the
charges that would have been payable in respect of such Loan
but were not payable as a result of the operation of this
Section 10.12 shall be cumulated, and the interest and the
charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the maximum rate
therefor) until such cumulated amount, together with
interest thereon at the Federal Funds Rate to the date of
repayment, shall have been received by such Lender.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of
the day and year first above written.
LIFETIME HOAN CORPORATION

By:
Name:
Title:

THE BANK OF NEW YORK,
as Administrative Agent and Lender

By:
Name:
Title

HSBC BANK USA

By:
Name:
Title:
CITIBANK, N.A.

By:
Name:
Title:
BANK LEUMI USA

By:
Name:
Title:
WELLS FARGO BANK, N.A.

By:
Name:
Title:
SCHEDULE 1.01
Existing Bankers Acceptances
Amount Issuance Date
$12,949 9/25/01 (Matures 11/9/01)
$28,816 10/11/01
$7,920 10/23/01
$142,105 10/2/01
$33,639 10/5/01
$78,258 10/5/01
$38,491 10/12/01
$29,963 10/23/01
$577,034 11/06/01
$5,220 11/08/01

Existing Letters of Credit
Commercial
Amount Issuance Date
$158,613 12/6/00
$79,945 12/6/00
$32,824 1/8/01
$265,055 1/8/01
$187,397 1/10/01
$186,572 8/8/01
$21,000 11/1/01
$152,000 11/2/01

Standby

Amount Issuance Date
$279,200 1/10/95
$1,711,874 1/23/01

SCHEDULE 2.01
Effective Date Commitments

SCHEDULE 4.06
Disclosed Matters

SCHEDULE 4.12
Subsidiaries

SCHEDULE 4.13
Insurance
SCHEDULE 7.01
Existing Indebtedness

SCHEDULE 7.02
Existing Liens

SCHEDULE 7.04
Existing Investments

SCHEDULE 7.10
Existing Restrictions

EXHIBIT C-1

FORM OF REVOLVING NOTE

$_____________ November __, 2001
New York, New
York

FOR VALUE RECEIVED, the undersigned, LIFETIME HOAN
CORPORATION, a Delaware corporation (the "Borrower"), hereby
promises to pay to the order of
_______________________________________ (the "Lender")
______________ DOLLARS ($_____________) or if less, the unpaid
principal amount of the Revolving Loans made by the Lender to
the Borrower, in the amounts and at the times set forth in the
Credit Agreement, dated as of November __, 2001, among the
Borrower, the Lenders party thereto, and The Bank of New York,
as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the
"Credit Agreement"), and to pay interest from the date hereof
on the principal balance of such Revolving Loans from time to
time outstanding at the rate or rates and at the times set
forth in the Credit Agreement, in each case at the office of
the Administrative Agent located at One Wall Street, New York,
New York, or at such other place as the Administrative Agent
may specify from time to time, in lawful money of the United
States of America in immediately available funds. Terms
defined in the Credit Agreement are used herein with the same
meanings.
The Revolving Loans evidenced by this Revolving Note are prepayable
in the amounts, and under the circumstances, and their respective
maturities are subject to acceleration upon the terms, set forth in
the Credit Agreement. This Revolving Note is subject to, and
should be construed in accordance with, the provisions of the
Credit Agreement and is entitled to the benefits and security set
forth in the Loan Documents.
The Lender is hereby authorized to record on the schedule
annexed hereto, and any continuation sheets which the Lender
may attach hereto, (a) the date of each Revolving Loan made by
the Lender, (b) the class, Type and amount thereof, (c) the
interest rate (without regard to the Applicable Margin) and
Interest Period applicable to each Eurodollar Loan and (d) the
date and amount of each conversion of, and each payment or
prepayment of the principal of, any such Revolving Loan. The
entries made in such schedule shall be prima facie evidence of
the existence and amounts of the obligations recorded therein,
provided that the failure to so record or any error therein
shall not in any manner affect the obligation of the Borrower
to repay the Revolving Loans in accordance with the terms of
the Credit Agreement.
Except as specifically otherwise provided in the Credit Agreement,
the Borrower hereby waives presentment, demand, notice of dishonor,
protest, notice of protest and all other demands, protests and
notices in connection with the execution, delivery, performance,
collection and enforcement of this Revolving Note.
THIS REVOLVING NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
LIFETIME HOAN CORPORATION

By:
Name:
Title:
SCHEDULE TO REVOLVING NOTE

EXHIBIT C-2

FORM OF SWING LINE NOTE

$5,000,000.00 November __, 2001
New York, New
York

FOR VALUE RECEIVED, the undersigned, LIFETIME HOAN
CORPORATION, a Delaware corporation (the "Borrower"), hereby
promises to pay to the order of THE BANK OF NEW YORK (the
"Swing Line Lender") FIVE MILLION DOLLARS ($5,000,000.00) or
if less, the unpaid principal amount of the Swing Line Loans
made by the Swing Line Lender to the Borrower, in the amounts
and at the times set forth in the Credit Agreement, dated as
of November __, 2001, among the Borrower, the Lenders party
thereto, and The Bank of New York, as Administrative Agent (as
the same may be amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), and to pay
interest from the date hereof on the principal balance of such
Swing Line Loans from time to time outstanding at the rate or
rates and at the times set forth in the Credit Agreement, in
each case at the office of the Administrative Agent located at
One Wall Street, New York, New York, or at such other place as
the Administrative Agent may specify from time to time, in
lawful money of the United States of America in immediately
available funds. Terms defined in the Credit Agreement are
used herein with the same meanings.
The Swing Line Loans evidenced by this Swing Line Note are
prepayable in the amounts, and under the circumstances, and their
respective maturities are subject to acceleration upon the terms,
set forth in the Credit Agreement. This Swing Line Note is subject
to, and should be construed in accordance with, the provisions of
the Credit Agreement and is entitled to the benefits and security
set forth in the Loan Documents.
The Lender is hereby authorized to record on the schedule
annexed hereto, and any continuation sheets which the Lender
may attach hereto, (a) the date of each Swing Line Loan, (b)
the amount thereof and (c) the date and amount of each payment
or prepayment of the principal of any such Swing Line Loan.
The entries made in such schedule shall be prima facie
evidence of the existence and amounts of the obligations
recorded therein, provided that the failure to so record or
any error therein shall not in any manner affect the
obligation of the Borrower to repay the Swing Line Loans in
accordance with the terms of the Credit Agreement.
Except as specifically otherwise provided in the Credit Agreement,
the Borrower hereby waives presentment, demand, notice of dishonor,
protest, notice of protest and all other demands, protests and
notices in connection with the execution, delivery, performance,
collection and enforcement of this Swing Line Note.
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
LIFETIME HOAN CORPORATION

By:
Name:
Title:
SCHEDULE TO SWING LINE NOTE

Amount of
Date Amount of Loan principal Notation
paid or made by
prepaid

EXHIBIT D

FORM OF GUARANTEE AGREEMENT

GUARANTEE AGREEMENT, dated as of November __, 2001, among LIFETIME
HOAN CORPORATION, a Delaware corporation (the "Borrower"), each of
the subsidiaries of the Borrower listed on Schedule I hereto (each
such subsidiary, individually, a "Guarantor" and, collectively, the
"Guarantors") and THE BANK OF NEW YORK, as administrative agent
under the Credit Agreement referred to in the next paragraph.
Reference is made to the Credit Agreement, dated as of November __,
2001, among the Borrower, the Lenders from time to time party
thereto and The Bank of New York, as Administrative Agent (as
amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"). Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Credit
Agreement.
The Lenders have agreed to make Loans to the Borrower pursuant to,
and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors is a wholly-owned
Subsidiary, and each Guarantor acknowledges that it will derive
substantial benefit from the making of the Loans.
Accordingly, the parties hereto agree as follows:
Guarantee; Fraudulent Transfer, etc.; Contribution
Each Guarantor unconditionally guarantees, jointly with the
other Guarantors and severally, as a primary obligor and not
merely as a surety, the Obligations. Each Guarantor further
agrees that the Obligations may be extended or renewed, in
whole or in part, without notice to or further assent from it
and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Obligation.
Anything in this Guarantee Agreement to the contrary
notwithstanding, (i) the obligations of each Guarantor
hereunder shall be limited to a maximum aggregate amount equal
to the greatest amount that would not render such Guarantor's
obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the
United States Code or any provisions of applicable state law
(collectively, the "fraudulent transfer laws"), in each case
after giving effect to all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under
the fraudulent transfer laws (specifically excluding, however,
any liabilities of such Guarantor (A) in respect of debt owed
or owing to the Borrower or Affiliates of the Borrower to the
extent that such debt would be discharged in an amount equal
to the amount paid by such Guarantor hereunder and (B) under
any Guarantee of senior unsecured debt or Indebtedness
subordinated in right of payment to the Obligations, which
Guarantee contains a limitation as to maximum amount similar
to that set forth in this clause (i), pursuant to which the
liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum
amount) and after giving effect as assets to the value (as
determined under the applicable provisions of the fraudulent
transfer laws) of any rights to subrogation, contribution,
reimbursement, indemnity or similar rights of such Guarantor
pursuant to (1) applicable law or (2) any agreement providing
for an equitable allocation among such Guarantor and other
Affiliates of the Borrower of obligations arising under
guarantees by such parties (including the agreements in
paragraph (c) of this Section) and (ii) until all the
Obligations have been paid in full, each of the Guarantors
expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any
other claim that it may now or hereafter have against the
Borrower, any other Loan Party, any other guarantor or any
other Person directly or contingently liable for the
Obligations, or against or with respect to the property of the
Borrower, such other Loan Party, such other guarantor or such
other Person, arising from the existence or performance
hereof, and, in furtherance, and not in limitation, of the
preceding waiver, each of the Guarantors agrees that, in the
event that any money or property shall be transferred to any
Credit Party by any Guarantor pursuant to this Guarantee
Agreement in reduction of the Obligations, such transfer shall
be deemed to be a contribution to the capital of the
applicable Loan Party (in the case of the transfer of
property, in an amount equal to the fair market value of the
property so transferred) as of the date of such transfer, and
any such transfer shall not cause the Parent to be a creditor
of such Loan Party.
In addition to all rights of indemnity and subrogation the
Guarantors may have under applicable law (but subject to this
paragraph), the Borrower agrees that (i) in the event a
payment shall be made by any Guarantor hereunder, the Borrower
shall indemnify such Guarantor for the full amount of such
payment, and such Guarantor shall be subrogated to the rights
of the person to whom such payments shall have been made to
the extent of such payment, and (ii) in the event that any
assets of any Guarantor shall be sold pursuant to any Loan
Document to satisfy any claim of any Credit Party, the
Borrower shall indemnify such Guarantor in an amount equal to
the greater of the book value or the fair market value of the
assets so sold. Each Guarantor (a "contributing subsidiary
guarantor") agrees (subject to this paragraph) that, in the
event a payment shall be made by any other Guarantor hereunder
or assets of any other Guarantor shall be sold pursuant to any
Loan Document to satisfy a claim of any Credit Party and such
other Guarantor (the "claiming subsidiary guarantor") shall
not have been fully indemnified by the Borrower as provided in
this paragraph, the contributing subsidiary guarantor shall
indemnify the claiming subsidiary guarantor in an amount equal
to the amount of such payment or the greater of the book value
or the fair market value of such assets, as applicable, in
each case multiplied by a fraction of which the numerator
shall be the net worth of the contributing subsidiary
guarantor on the date hereof and the denominator shall be the
aggregate net worth of all the Guarantors on the date hereof
(or, in the case of any Guarantor becoming a party hereto
pursuant to Section 21, the date of the Supplement hereto
executed and delivered by such Guarantor). Any contributing
subsidiary guarantor making any payment to a claiming
subsidiary guarantor pursuant to this paragraph shall be
subrogated to the rights of such claiming subsidiary guarantor
under this paragraph to the extent of such payment.
Notwithstanding any provision of this paragraph to the
contrary, all rights of the Guarantors under this paragraph
and all other rights of indemnity, contribution or subrogation
under applicable law or otherwise shall be fully subordinated
to the indefeasible payment in full in cash of the
Obligations. No failure on the part of the Borrower or any
Guarantor to make the payments required by this paragraph (or
any other payments required under applicable law or otherwise)
shall in any respect limit the obligations and liabilities of
any Guarantor with respect to its obligations under this
paragraph, and each Guarantor shall remain liable for the full
amount of the obligations of such Guarantor under this
paragraph.
Obligations Not Waived
To the fullest extent permitted by applicable law, each
Guarantor waives presentment to, demand of payment from, and
protest to the Borrower of any of the Obligations, and also
waives notice of acceptance of its guarantee and notice of
protest for nonpayment. To the fullest extent permitted by
applicable law, the obligations of each Guarantor hereunder
shall not be affected by (a) the failure of the Administrative
Agent or any other Credit Party to assert any claim or demand
or to enforce or exercise any right or remedy against the
Borrowers or any other Guarantor under the provisions of the
Credit Agreement or any other Loan Document, or otherwise, (b)
any rescission, waiver, amendment or modification of, or any
release from, any of the terms or provisions of this Guarantee
Agreement, any other Loan Document, any Guarantee or any other
agreement, including with respect to any other Guarantor under
this Guarantee Agreement or (c) the failure to perfect any
security interest in, or the release of, any of the security
held by or on behalf of the Administrative Agent or any other
Credit Party.
Security
Each Guarantor authorizes the Administrative Agent and each
other Credit Party to (a) take and hold security for the
payment of the obligations under this Guarantee Agreement and
the Obligations and exchange, enforce, waive and release any
such security, (b) apply such security and direct the order or
manner of sale thereof as they in their sole discretion may
determine and (c) release or substitute any one or more
endorsees, other Guarantors or other obligors.
Guarantee of Payment
Each Guarantor further agrees that its guarantee hereunder
constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be
had by the Administrative Agent or any other Credit Party to
any of the security held for payment of the Obligations or to
any balance of any deposit account or credit on the books of
the Administrative Agent or any other Credit Party in favor of
the Borrower or any other person.
No Discharge or Diminishment of Guarantee
The obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or
termination for any reason (other than the indefeasible
payment in full in cash of the Obligations), including any
claim of waiver, release, surrender, alteration or compromise
of any of the Obligations, and shall not be subject to any
defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of
each Guarantor hereunder shall not be discharged or impaired
or otherwise affected by the failure of the Administrative
Agent or any other Credit Party to assert any claim or demand
or to enforce any remedy under the Credit Agreement, any other
Loan Document or any other agreement, by any waiver or
modification of any provision of any thereof, by any default,
failure or delay, willful or otherwise, in the performance of
the Obligations, or by any other act or omission that may or
might in any manner or to any extent vary the risk of any
Guarantor or that would otherwise operate as a discharge of
any Guarantor as a matter of law or equity (other than the
indefeasible payment in full in cash of all the Obligations).
Defenses of Borrower Waived
To the fullest extent permitted by applicable law, each of
the Guarantors waives any defense based on or arising out of
any defense of the Borrower or any other Loan Party or the
unenforceability of the Obligations or any part thereof from
any cause, or the cessation from any cause of the liability of
the Borrower or any other Loan Party, other than the final and
indefeasible payment in full in cash of the Obligations. The
Administrative Agent and the other Credit Parties may, at
their election, foreclose on any security held by one or more
of them by one or more judicial or nonjudicial sales, accept
an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Obligations, make any
other accommodation with the Borrower or any Guarantor or
exercise any other right or remedy available to them against
the Borrower or any Guarantor, without affecting or impairing
in any way the liability of any Guarantor hereunder except to
the extent the Obligations have been fully, finally and
indefeasibly paid in cash. Pursuant to applicable law, each
Guarantor waives any defense arising out of any such election
even though such election operates, pursuant to applicable
law, to impair or to extinguish any right of reimbursement or
subrogation or other right or remedy of such Guarantor against
the Borrower or any other Guarantor, as applicable, or any
security.
Agreement to Pay; Subordination
In furtherance of the foregoing and not in limitation of any
other right that the Administrative Agent or any other Credit
Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of the Borrower or any other Loan
Party to pay any Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, each Guarantor hereby promises to and
will forthwith pay, or cause to be paid, to the Administrative
Agent or such other Credit Party as designated thereby in cash
the amount of such unpaid Obligations. Upon payment by any
Guarantor of any sums to the Administrative Agent or any
Credit Party as provided above, all rights of such Guarantor
against the Borrower arising as a result thereof by way of
right of subrogation, contribution, reimbursement, indemnity
or otherwise shall in all respects be subordinate and junior
in right of payment to the prior indefeasible payment in full
in cash of all the Obligations. In addition, any debt of the
Borrower or any other Loan Party now or hereafter held by any
Guarantor is hereby subordinated in right of payment to the
prior indefeasible payment in full in cash of all of the
Obligations. If any amount shall erroneously be paid to any
Guarantor on account of (a) such subrogation, contribution,
reimbursement, indemnity or similar right or (b) any such debt
of the Borrower or such other Loan Party, such amount shall be
held in trust for the benefit of the Credit Parties and shall
forthwith be paid to the Administrative Agent to be credited
against the payment of the Obligations, whether matured or
unmatured, in accordance with the terms of the Loan Documents.
Information
Each Guarantor assumes all responsibility for being and
keeping itself informed of each Loan Party's financial
condition and assets, and of all other circumstances bearing
upon the risk of nonpayment of the Obligations and the nature,
scope and extent of the risks that such Guarantor assumes and
incurs hereunder, and agrees that none of the Administrative
Agent or the other Credit Parties will have any duty to advise
any of the Guarantors of information known to it or any of
them regarding such circumstances or risks.
Representations and Warranties
Each of the Guarantors represents and warrants as to
itself that all representations and warranties relating to it
contained in the Credit Agreement are true and correct.
Termination
The guarantees made hereunder (a) shall terminate when all
the Obligations have been indefeasibly paid in full in cash
and the Lenders have no further commitment to lend or
otherwise extend credit under the Credit Agreement and (b)
shall continue to be effective or be reinstated, as
applicable, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by
any Credit Party or any Guarantor upon the bankruptcy or
reorganization of any Loan Party or otherwise.
Binding Effect; Several Agreement; Assignments
Whenever in this Guarantee Agreement any of the parties
hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of any
Guarantor that are contained in this Guarantee Agreement shall
bind and inure to the benefit of each party hereto and its
successors and assigns. This Guarantee Agreement shall become
effective as to any Guarantor when a counterpart hereof
executed on behalf of such Guarantor shall have been delivered
to the Administrative Agent and a counterpart hereof shall
have been executed on behalf of the Administrative Agent, and
thereafter shall be binding upon such Guarantor and the
Administrative Agent and their respective successors and
assigns, and shall inure to the benefit of such Guarantor, the
Administrative Agent and the other Credit Parties, and their
respective successors and assigns, except that no Guarantor
shall have the right to assign its rights or obligations
hereunder or any interest herein (and any such attempted
assignment shall be void), except as expressly contemplated by
this Guarantee Agreement or the other Loan Documents. If any
of the equity interests in any Guarantor is sold, transferred
or otherwise disposed of pursuant to a transaction permitted
by the Loan Documents and, immediately after giving effect
thereto, such Guarantor shall no longer be a Subsidiary, then
the obligations of such Guarantor under this Guarantee
Agreement shall be automatically released. This Guarantee
Agreement shall be construed as a separate agreement with
respect to each Guarantor and may be amended, modified,
supplemented, waived or released with respect to any Guarantor
without the approval of any other Guarantor and without
affecting the obligations of any other Guarantor hereunder.
Waivers; Amendment
No failure or delay of the Administrative Agent in exercising
any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps
to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Administrative Agent
hereunder and of the other Credit Parties under the other Loan
Documents are cumulative and are not exclusive of any rights
or remedies that they would otherwise have. No waiver of any
provision of this Guarantee Agreement or any other Loan
Document or consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) of this Section, and then
such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or
demand on any Guarantor in any case shall entitle such
Guarantor to any other or further notice or demand in similar
or other circumstances.
Neither this Guarantee Agreement nor any provision hereof may
be waived, amended or modified except pursuant to a written
agreement entered into by, between or among the Administrative
Agent and the Guarantor or Guarantors with respect to which
such waiver, amendment or modification is to apply, subject to
any consent required in accordance with Section 10.02 of the
Credit Agreement.
GOVERNING LAW
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Notices
All communications and notices hereunder shall be in writing
and given as provided in Section 10.01 of the Credit
Agreement. All communications and notices hereunder to each
Guarantor shall be given to it at its address set forth in the
Schedule hereto.
Survival of Agreement; Severability
All covenants, agreements, representations and warranties made
by the Guarantors herein and in the certificates or other
instruments prepared or delivered in connection with or
pursuant to this Guarantee Agreement or any other Loan
Document shall be considered to have been relied upon by the
Administrative Agent and the other Credit Parties and shall
survive the execution and delivery of any Loan Document and
the making of any Loan, regardless of any investigation made
by the Credit Parties or on their behalf, and shall continue
in full force and effect until this Guarantee Agreement shall
terminate.
In the event any one or more of the provisions contained in
this Guarantee Agreement or in any other Loan Document should
be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way
be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of
such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
Counterparts
This Guarantee Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but
all of which, when taken together, shall constitute but one
contract (subject to Section 11), and shall become effective
as provided in Section 11. Delivery of an executed
counterpart of this Guarantee Agreement by facsimile
transmission shall be as effective as delivery of a manually
executed counterpart of this Guarantee Agreement.
Rules of Interpretation
The rules of interpretation specified in Section
1.03 of the Credit Agreement shall be applicable to this
Guarantee Agreement.

Jurisdiction; Consent to Service of Process
Each party hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding
arising out of or relating to this Guarantee Agreement or the
other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State
or, to the extent permitted by applicable law, in such Federal
court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in
this Guarantee Agreement shall affect any right that any party
hereto may otherwise have to bring any action or proceeding
relating to this Guarantee Agreement or the other Loan
Documents in the courts of any jurisdiction.
Each party hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively
do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out
of or relating to this Guarantee Agreement or the other Loan
Documents in any court referred to in paragraph (a) of this
Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of
an inconvenient forum to the maintenance of such action or
proceeding in any such court.
Each party to this Guarantee Agreement irrevocably consents to
service of process in the manner provided for notices in
Section 14. Nothing in this Guarantee Agreement will affect
the right of any party to this Guarantee Agreement to serve
process in any other manner permitted by law.
WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTEE
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTEE
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
Additional Guarantors
Upon execution and delivery after the date hereof by the
Administrative Agent and a Subsidiary of an instrument in the
form of Annex 1, such Subsidiary shall become a Guarantor
hereunder with the same force and effect as if originally
named as a Guarantor herein. The execution and delivery of
any such instrument shall not require the consent of any other
Guarantor hereunder. The rights and obligations of each
Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party
to this Guarantee Agreement.
Right of Setoff
If an Event of Default shall have occurred and be continuing,
each Credit Party is hereby authorized at any time and from
time to time, to the fullest extent permitted by applicable
law, to setoff and apply any and all deposits (general or
special, time or demand, provisional or final) at any time
held and other Indebtedness at any time owing by such Credit
Party to or for the credit or the account of any Guarantor
against any or all the obligations of such Guarantor now or
hereafter existing under this Guarantee Agreement and the
other Loan Documents held by such Credit Party, irrespective
of whether or not such Credit Party shall have made any demand
under this Guarantee Agreement or any other Loan Document and
although such obligations may be unmatured. The rights of
each Credit Party under this Section are in addition to other
rights and remedies (including other rights of setoff) which
such Credit Party may have.
Headings
Section headings used herein are for convenience of reference
only, are not part of this Guarantee Agreement and are not to
affect the construction of, or be taken into consideration in
interpreting, this Guarantee Agreement.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above
written.

LIFETIME HOAN CORPORATION

By:
Name:
Title:

EACH OF THE SUBSIDIARIES OF THE
PARENT LISTED ON THE SCHEDULE
HERETO

By:
Name:
Title:

THE BANK OF NEW YORK,

as Administrative Agent

By:
Name:
Title:

SCHEDULE I TO GUARANTEE AGREEMENT

GUARANTORS

Guarantor Address for Notices

Lifetime Hoan Corporation

Outlet Retail Stores, Inc.

Roshco, Inc.

M. Kamenstein Corp.

ANNEX 1 TO GUARANTEE AGREEMENT

FORM OF SUPPLEMENT

SUPPLEMENT NO.__, dated as of _______________, 200_, to the
GUARANTEE AGREEMENT, dated as of November __, 2001, among LIFETIME
HOAN CORPORATION, a ___________ corporation (the "Borrower"), each
of the subsidiaries of the Borrower listed on Schedule I thereto
and THE BANK OF NEW YORK, as administrative agent under the Credit
Agreement referred to in the next paragraph (as amended,
supplemented or otherwise modified from time to time, the
"Guarantee Agreement").
A. Reference is made to the Credit Agreement, dated as of
November __, 2001, among the Borrower, the Lenders from time to
time party thereto and The Bank of New York, as Administrative
Agent (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"). Capitalized terms used herein and
not defined herein shall have the meanings assigned to such terms
in the Credit Agreement and the Guarantee Agreement.
B. The Guarantors have entered into the Guarantee Agreement in
order to induce the Lenders to make Loans. Section 20 of the
Guarantee Agreement provides that additional Subsidiaries may
become Guarantors under the Guarantee Agreement by execution and
delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the "New Guarantor") is executing this
Supplement in accordance with the requirements of the Credit
Agreement to become a Guarantor under the Guarantee Agreement in
order to induce the Lenders to make additional Loans and as
consideration for Loans previously made.
Accordingly, the Administrative Agent and the New Guarantor agree
as follows:
In accordance with Section 20 of the Guarantee Agreement, the New
Guarantor by its signature below becomes a Guarantor under the
Guarantee Agreement with the same force and effect as if originally
named therein as a Guarantor, and the New Guarantor hereby (a)
agrees to all the terms and provisions of the Guarantee Agreement
applicable to it as a Guarantor thereunder and (b) represents and
warrants that the representations and warranties made by it as a
Guarantor thereunder are true and correct on and as of the date
hereof. Each reference to a "Guarantor" in the Guarantee Agreement
shall be deemed to include the New Guarantor. The Guarantee
Agreement is hereby incorporated herein by reference.
The New Guarantor represents and warrants to the Administrative
Agent and the other Credit Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms.
This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which, when taken
together, shall constitute but one contract. This Supplement shall
become effective when the Administrative Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Guarantor and the Administrative Agent.
Delivery of an executed counterpart of this Supplement by facsimile
transmission shall be as effective as delivery of a manually
executed counterpart of this Supplement.
Except as expressly supplemented hereby, the Guarantee Agreement
shall remain in full force and effect.
THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Guarantee Agreement shall
not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision hereof in a
particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties
hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
All communications and notices hereunder shall be in writing and
given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be
given to it at the address set forth under its signature below.
The New Guarantor agrees to reimburse the Administrative Agent for
its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, disbursements and other
charges of counsel for the Administrative Agent.IN WITNESS WHEREOF,
the New Guarantor and the Administrative Agent have duly executed
this Supplement to the Guarantee Agreement as of the day and year
first above written.

[Name of New Guarantor]

By:
Name:
Title:

Address:

Attention:
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____

THE BANK OF NEW YORK,

as Administrative Agent

By:
Name:
Title:

EXHIBIT E
FORM OF SECURITY AGREEMENT

SECURITY AGREEMENT, dated as of November __, 2001, among
LIFETIME HOAN CORPORATION, a Delaware corporation (the
"Borrower"), each of the Subsidiaries of the Borrower from
time to time party hereto (each such Subsidiary, individually,
a "Guarantor" and, collectively, the "Guarantors"; the
Guarantors and the Borrower are referred to herein
individually as a "Grantor" and collectively as the
"Grantors") and THE BANK OF NEW YORK, as Administrative Agent
for the Lenders from time to time party to the credit
agreement referred to below (in such capacity, the
"Administrative Agent").
Reference is made to the Credit Agreement, dated as of
November __, 2001 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), by and
among the Borrower, the Lenders from time to time party
thereto and the Administrative Agent.
The Lenders have agreed to make Loans to, and otherwise
extend credit on behalf of, the Borrower pursuant to, and upon
the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors has agreed to
guarantee, among other things, all the obligations of each
Loan Party under the Loan Documents. The obligations of the
Lenders to make Loans and otherwise extend credit are
conditioned upon, among other things, the execution and
delivery by the Grantors of an agreement in the form hereof to
secure the Obligations.
Accordingly, the Grantors and the Administrative Agent hereby
agree as follows:
Definitions
Unless the context otherwise requires, capitalized terms used
herein and not defined herein shall have the meanings assigned
to such terms in the Credit Agreement.
As used herein, the following terms shall have the following
meanings:
"Account Debtor": as defined in the NYUCC.
"Accounts": as defined in the NYUCC.
"Accounts Receivable": all Accounts and all right, title and
interest in any returned goods, together with all rights,
titles, securities and guarantees with respect thereto,
including any rights to stoppage in transit, replevin,
reclamation and resales, and all related security interests,
liens and pledges, whether voluntary or involuntary, in each
case whether now existing or owned or hereafter arising or
acquired.
"Chattel Paper": as defined in the NYUCC.
"Collateral": with respect to any Grantor, all personal
property of every kind and nature, wherever located, whether
now owned or hereafter acquired or arising, and all Proceeds
and products thereof, including, without limitation, all (i)
Accounts Receivable, (ii) Equipment, (iii) General
Intangibles, (iv) Inventory, (v) Instruments, (vi) Pledged
Debt, (vii) Pledged Equity, (viii) Documents, (ix) Chattel
Paper (whether tangible or electronic), (x) Deposit Accounts,
(xi) Letter of Credit Rights (whether or not the letter of
credit is evidenced in writing), (xii) Commercial Tort Claims,
(xiii) Intellectual Property, (xiv) Supporting Obligations,
(xv) any other contract rights or rights to the payment of
money, (xvi) insurance claims and proceeds, (xvii) tort claims
and (xviii) unless otherwise agreed upon in writing by such
Grantor and the Lender, other property owned or held by or on
behalf of such Grantor that may be delivered to and held by
the Lender pursuant to the terms hereof. Notwithstanding
anything to the contrary in any Loan Document, for purposes
hereof, the term "Collateral" shall not include any right
under any General Intangible if the granting of a security
interest therein or an assignment thereof would violate any
enforceable provision of such General Intangible.
"Commercial Tort Claims": as defined in the NYUCC.
"Copyright License": any written agreement, now or hereafter
in effect, granting any right to any third party under any
Copyright now or hereafter owned by any Grantor or which such
Grantor otherwise has the right to license, or granting any
right to such Grantor under any Copyright now or hereafter
owned by any third party, and all rights of such Grantor under
any such agreement.
"Copyrights": all of the following now owned or hereafter
acquired by any Grantor: (i) all copyright rights in any work
subject to the copyright laws of the United States or any
other country, whether as author, assignee, transferee or
otherwise, and (ii) all registrations and applications for
registration of any such copyright in the United States or any
other country, including registrations, recordings,
supplemental registrations and pending applications for
registration in the United States Copyright Office, including
those listed on Schedule 6 to the Perfection Certificate.
"Deposit Accounts": as defined in the NYUCC.
"Documents": as defined in the NYUCC.
"Equipment": as defined in the NYUCC, and shall include,
without limitation, all equipment, furniture and furnishings,
and all tangible personal property similar to any of the
foregoing, including tools, parts and supplies of every kind
and description, and all improvements, accessions or
appurtenances thereto, that are now or hereafter owned by any
Grantor.
"Equity Interests": with respect to (i) a corporation, the
capital stock thereof, (ii) a partnership, any partnership
interest therein, including all rights of a partner in such
partnership, whether arising under the partnership agreement
of such partnership or otherwise, (iii) a limited liability
company, any membership interest therein, including all rights
of a member of such limited liability company, whether arising
under the limited liability company agreement of such limited
liability company or otherwise, (iv) any other firm,
association, trust, business enterprise or other entity that
is similar to any other Person listed in clauses (i), (ii) and
(iii), and this clause (iv), of this definition, any equity
interest therein or any other interest therein that entitles
the holder thereof to share in the net assets, revenue,
income, earnings or losses thereof or to vote or otherwise
participate in any election of one or more members of the
managing body thereof and (vi) all warrants and options in
respect of any of the foregoing and all other securities that
are convertible or exchangeable therefor.
"General Intangibles": as defined in the NYUCC, and shall
include, without limitation, all corporate or other business
records, indemnification claims, contract rights (including
rights under leases, whether entered into as lessor or lessee,
interest rate protection agreements and other agreements),
Intellectual Property, goodwill, registrations, franchises,
tax refund claims, guarantee, claim, security interest or
other security held by or granted to any Grantor to secure
payment by an Account Debtor of any of the Accounts Receivable
or payment by the relevant obligor of any of the Pledged Debt.
"Intellectual Property": all intellectual and similar property
of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor, including inventions, designs,
Patents, Copyrights, Trademarks, Licenses, trade secrets,
confidential or proprietary technical and business
information, customer lists, know-how, show-how or other data
or information, software and databases and all embodiments or
fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with,
any of the foregoing.
"Inventory": as defined in the NYUCC, and shall include,
without limitation, all goods of any Grantor, whether now
owned or hereafter acquired, held for sale or lease, or
furnished or to be furnished by any Grantor under contracts of
service, or consumed in any Grantor's business, including raw
materials, intermediates, work in process, packaging
materials, finished goods, semi-finished inventory, scrap
inventory, manufacturing supplies and spare parts, and all
such goods that have been returned to or repossessed by or on
behalf of any Grantor.
"Letter of Credit Rights": as defined in the NYUCC.
"License": any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is
a party, including those listed on Schedule 6 to the
Perfection Certificate.
"NYUCC": the UCC as in effect from time to time in the State
of New York.
"Obligations": (i) the due and punctual payment of (x)
principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding)
on the Loans, the Bankers Acceptance Exposure or the Letter of
Credit Exposure, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or
otherwise, and (y) all other monetary obligations, including
fees, commissions, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such
proceeding), of the Borrower or any Guarantor to any Credit
Party under the Credit Agreement and the other Loan Documents,
or that are otherwise payable to any Credit Party under the
Credit Agreement and the other Loan Documents, (ii) the due
and punctual performance of all covenants, agreements,
obligations and liabilities of the Borrower or any Guarantor
under or pursuant to the Credit Agreement and the other Loan
Documents and (iii) unless otherwise agreed upon in writing by
the Required Lenders, all obligations of the Borrower,
monetary or otherwise, under each Hedging Agreement entered
into with any Lender (or an Affiliate thereof) as a
counterparty.
"Patent License": any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or
sell any invention on which a Patent, now or hereafter owned
by any Grantor or which any Grantor otherwise has the right to
license, is in existence, or granting to any Grantor any right
to make, use or sell any invention on which a Patent, now or
hereafter owned by any third party, is in existence, and all
rights of any Grantor under any such agreement.
"Patents": all of the following now owned or hereafter
acquired by any Grantor: (i) all letters patent of the United
States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United
States or any other country, including registrations,
recordings and pending applications in the United States
Patent and Trademark Office or any similar offices in any
other country, including those listed on Schedule 6 to the
Perfection Certificate, and (ii) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein,
including the right to make, use or sell the inventions
disclosed or claimed therein.
"Perfection Certificate" means a certificate substantially in
the form of Annex 1, completed and supplemented with the
schedules and attachments contemplated thereby, and duly
executed by a Vice President or Financial Officer of the
Borrower.
"Pledged Debt" means all right, title and interest of any
Grantor to the payment of any loan, advance or other debt of
every kind and nature (other than Accounts Receivable and
General Intangibles), whether due or to become due, whether or
not it has been earned by performance, and whether now or
hereafter acquired or arising in the future, other than
intercompany debt among the Guarantors incurred for cash
management purposes in the ordinary course of business.
"Pledged Equity" means, with respect to any Grantor, all
right, title and interest of such Grantor in any Equity
Interests (other than Equity Interests in the Prestige
Subsidiaries), whether now or hereafter acquired or arising in
the future.
"Pledged Securities" means the Pledged Debt, the Pledged
Equity and all notes, chattel paper, instruments,
certificates, files, records, ledger sheets and documents
covering, evidencing, representing or relating to any of the
foregoing, in each case whether now existing or owned or
hereafter arising or acquired.
"Proceeds": as defined in the NYUCC, and shall include,
without limitation, any consideration received from the sale,
exchange, license, lease or other disposition of any asset or
property that constitutes Collateral, any value received as a
consequence of the possession of Collateral and any payment
received from any insurer or other person or entity as a
result of the destruction, loss, theft, damage or other
involuntary conversion of whatever nature of any asset or
property that constitutes Collateral, including (i) any claim
of any Grantor against any third party for (and the right to
sue and recover for and the rights to damages or profits due
or accrued arising out of or in connection with) past, present
or future infringement or dilution of any Intellectual
Property now or hereafter owned by any Grantor, or licensed
under any license, (ii) subject to Section 6, all rights and
privileges with respect to, and all payments of principal or
interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in
respect of, in exchange for or upon the conversion of, any of
the Pledged Securities and (iii) any and all other amounts
from time to time paid or payable under or in connection with
the Collateral.
"Secured Parties": collectively, (i) the Lenders, (ii) the
Administrative Agent and (iii) and the successors and assigns
of each of the foregoing.
"Security Interest": as defined in Section 2(a).
"Supporting Obligations": as defined in the NYUCC.
"Trademark License": any written agreement, now or hereafter
in effect, granting to any third party any right to use any
Trademark now or hereafter owned by any Grantor or which any
Grantor otherwise has the right to license, or granting to any
Grantor any right to use any Trademark now or hereafter owned
by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks": all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks,
trade names, corporate names, company names, business names,
fictitious business names, trade styles, trade dress, logos,
other source or business identifiers, designs and general
intangibles of like nature, now existing or hereafter adopted
or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection
therewith, including registrations and registration
applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all
extensions or renewals thereof, including those listed on
Schedule 6 to the Perfection Certificate, (b) all goodwill
associated therewith or symbolized thereby and (c) all other
assets, rights and interests that uniquely reflect or embody
such goodwill.
"UCC": with respect to any jurisdiction, the Uniform
Commercial Code as from time to time in effect in such
jurisdiction.
The principles of construction specified in Section 1.02 of
the Credit Agreement shall be applicable to this Security
Agreement.
Grant of Security Interest; No Assumption of Liability
As security for the payment or performance, as applicable, in
full of the Obligations, each of the Grantors hereby bargains,
sells, conveys, assigns, sets over, pledges, hypothecates and
transfers to the Administrative Agent for the ratable benefit
of the Secured Parties, and hereby grants to the
Administrative Agent for the ratable benefit of the Secured
Parties, a security interest in, all of the right, title and
interest of such Grantor in, to and under the Collateral (the
"Security Interest"). Without limiting the foregoing, the
Administrative Agent is hereby authorized to file one or more
financing statements, continuation statements, recordation
filings or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security
Interest granted by each of the Grantors, without the
signature of any Grantor, and naming any Grantor or the
Grantors, as applicable, as debtors and the Administrative
Agent as secured party.
The Security Interest is granted as security only and shall
not subject the any Secured Party to, or in any way alter or
modify, any obligation or liability of any Grantor with
respect to or arising out of the Collateral.
Delivery of the Collateral
Each of the Grantors agrees promptly to deliver or cause
to be delivered to the Administrative Agent any and all
notes, chattel paper, instruments, certificates, files,
records, ledger sheets and documents covering, evidencing,
representing or relating to any of the Pledged Securities,
or any other amount that becomes payable under or in
connection with any Collateral, owned or held by or on
behalf of such Grantor, in each case accompanied by (i) in
the case of any notes, chattel paper, instruments or stock
certificates, stock powers duly executed in blank or other
instruments of transfer satisfactory to the Administrative
Agent and such other instruments and documents as the
Administrative Agent may reasonably request and (ii) in
all other cases, proper instruments of assignment duly
executed by such Grantor and such other instruments or
documents as the Administrative Agent may reasonably
request. Each Grantor will cause any Pledged Debt owed or
owing to such Grantor by any Person to be evidenced by a
duly executed promissory note that is pledged and
delivered to the Administrative Agent pursuant to the
terms hereof.
Representations and Warranties
Each of the Grantors, jointly with the others and
severally, represents and warrants to the Secured Parties
that:
Such Grantor has good and valid rights in and title to the
Collateral and has full power and authority to grant to the
Administrative Agent for the ratable benefit of the Secured
Parties the Security Interest in the Collateral pursuant
hereto and to execute, deliver and perform its obligations in
accordance with the terms of this Security Agreement, without
the consent or approval of any other person other than any
consent or approval which has been obtained.
The Perfection Certificate, to the extent it relates to such
Grantor or any of its Property, has been duly prepared,
completed and executed and the information set forth therein
is correct and complete.
The Security Interest constitutes (i) a legal and valid Lien
on and security interest in all of the Collateral securing the
payment and performance of the Obligations, (ii) subject to
(A) filing Uniform Commercial Code financing statements, or
other appropriate filings, recordings or registrations
containing a description of the Collateral owned or held by or
on behalf of such Grantor (including, without limitation, a
counterpart or copy of this Security Agreement) in each
applicable governmental, municipal or other office and (B) the
delivery to the Lender of any instruments or certificated
securities included in such Collateral, a perfected security
interest in such Collateral to the extent that a security
interest may be perfected by filing, recording or registering
a financing statement or analogous document, or by the
Administrative Agent's taking possession, in the United States
(or any political subdivision thereof) and its territories and
possessions pursuant to the UCC or other applicable law in
such jurisdictions and (iii) subject to the receipt and
recording of this Agreement or other appropriate instruments
or certificates with the United States Patent and Trademark
Office and the United States Copyright Office, as applicable,
a security interest that shall be perfected in all Collateral
consisting of Intellectual Property in which a security
interest may be perfected by a filing or recordation with the
United States Patent and Trademark Office or the United States
Copyright Office, as applicable.
The Security Interest is and shall be prior to any other Lien
on any of the Collateral owned or held by or on behalf of such
Grantor other than Liens expressly permitted pursuant to the
Loan Documents. The Collateral owned or held by or on behalf
of such Grantor is so owned or held by it free and clear of
any Lien, except for Liens expressly permitted pursuant to the
Loan Documents.
With respect to each Account Receivable: (i) no transaction
giving rise to such Account Receivable violated or will
violate any applicable federal, state or local law, rule or
ordinance, the violation of which could reasonably be expected
to have a Material Adverse Effect, (ii) except for Accounts
Receivable subject to Permitted Factoring Arrangements, each
such Account Receivable is not subject to terms prohibiting
the assignment thereof or requiring notice or consent to such
assignment, except for notices and consents that have been
obtained and (iii) each such Account Receivable represents a
bona fide transaction which requires no further act on such
Grantor's part to make such Account Receivable payable by the
account debtor with respect thereto, and, to the Grantor's
knowledge, such Account Receivable is not subject to any
offsets or deductions other than credits to customers in the
ordinary course of business and does not represent any
consignment sales, guaranteed sale, sale or return or other
similar understanding or any obligation of any Affiliate of
such Grantor.
With respect to all Inventory: (i) such Inventory is located
on the premises set forth in the Perfection Certificate, or is
Inventory in transit for sale in the ordinary course of
business, (ii) no such Inventory is subject to any Lien other
than Liens permitted by Section 7.02 of the Credit Agreement,
and (iii) except as permitted hereby or by the Credit
Agreement, no such Inventory is on consignment or is now
stored or shall be stored any time after the Effective Date
with a bailee, warehouseman or similar Person.
Covenants
Each of the Grantors shall provide the Administrative Agent
with not less than 15 Business Days prior written notice of
any change (i) in its legal name, (ii) in its jurisdiction of
organization or formation, (iii) in the location of its chief
executive office or principal place of business, (iv) in its
identity or legal or organizational structure or (v) in its
organization identification number or its Federal Taxpayer
Identification Number and shall execute and deliver to the
Administrative Agent such instruments, agreements and
documents as the Administrative Agent shall reasonably request
so that the Administrative Agent may make all filings under
the UCC or otherwise that are required in order for the
Administrative Agent to continue at all times following such
change to have a valid, legal and perfected first priority
security interest in all the Collateral (subject only to Liens
expressly permitted to be prior to the Security Interest
pursuant to the Loan Documents). Each Grantor shall promptly
notify the Administrative Agent if any material portion of the
Collateral owned or held by or on behalf of such Grantor is
damaged or destroyed.
Each of the Grantors shall maintain, at its own cost and
expense, such complete and accurate records with respect to
the Collateral owned or held by it or on its behalf as is
consistent with its current practices and in accordance with
such prudent and standard practices used in industries that
are the same as or similar to those in which it is engaged,
but in any event to include complete accounting records
indicating all payments and proceeds received with respect to
any part of such Collateral, and, at such time or times as the
Administrative Agent may reasonably request, promptly to
prepare and deliver to the Administrative Agent copies of such
records a duly certified by an officer of such Grantor.
Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant
to Section 6.01(a) of the Credit Agreement, the Borrower shall
deliver to the Administrative Agent a certificate executed by
an Authorized Signatory of the Borrower, (i) setting forth the
information required pursuant to Sections 1, 2(a), 4 and 5 of
the Perfection Certificate or confirming that there has been
no change in such information since the date of the Perfection
Certificate or the date of the most recent certificate
delivered pursuant to this paragraph and (ii) certifying that
the Borrower and the Guarantors are in compliance with all of
the terms of this Security Agreement.
Each of the Grantors shall, at its own cost and expense, take
any and all actions reasonably necessary to defend title to
the Collateral owned or held by it or on its behalf against
all persons and to defend the Security Interest of the
Administrative Agent in such Collateral and the priority
thereof against any Lien not expressly permitted pursuant to
the Loan Documents.
Each of the Grantors shall, at its own expense, execute,
acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as
the Administrative Agent may from time to time reasonably
request to preserve, protect and perfect the Security Interest
granted by it and the rights and remedies created hereby,
including the payment of any fees and taxes required in
connection with its execution and delivery of this Security
Agreement, the granting by it of the Security Interest and the
filing of any financing statements or other documents in
connection herewith or therewith.
The Administrative Agent and such persons as the
Administrative Agent may reasonably designate shall have the
right, at the cost and expense of the Grantors, and upon
reasonable prior notice, at reasonable times and during normal
business hours, to inspect all of its records (and to make
extracts and copies from such records), to discuss its affairs
with its officers and independent accountants and to verify
under reasonable procedures the validity, amount, quality,
quantity, value, condition and status of, or any other matter
relating to, the Collateral owned or held by it or on its
behalf, including, in the case of Accounts, Pledged Debt or
Collateral in the possession of any third person, by
contacting Account Debtors, obligors or the third person
possessing such Collateral for the purpose of making such a
verification.
Each of the Grantors shall remain liable to observe and
perform all the conditions and obligations to be observed and
performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms
and conditions thereof, and such Grantor shall, jointly with
the others and severally, indemnify and hold harmless the
Secured Parties from and against any and all liability for
such performance.
None of the Grantors shall make or permit to be made an
assignment, pledge or hypothecation of the Collateral owned or
held by it or on its behalf, or shall grant any other Lien in
respect of such Collateral, except as expressly permitted by
the Loan Documents. Except for the Security Interest, no
Grantor shall make or permit to be made any transfer of such
Collateral, and each Grantor shall remain at all times in
possession of such Collateral and shall remain the direct
owner, beneficially and of record, of the Pledged Equity
included in such Collateral, except that prior to the
occurrence and during the continuance of an Event of Default,
the Grantors may use and dispose of the Collateral in any
lawful manner not inconsistent with the provisions of this
Security Agreement, the Credit Agreement or any other Loan
Document, including the sale of Inventory or the disposition
of Equipment in the ordinary course of business. Without
limiting the generality of the foregoing, each Grantor shall
not permit any Inventory to be in the possession or control of
any warehouseman, bailee, agent or processor at any time
unless such warehouseman, bailee, agent or processor shall
have been notified of the Security Interest and shall have
agreed in writing to hold such Inventory subject to the
Security Interest and the instructions of the Administrative
Agent and to waive and release any Lien held by it with
respect to such Inventory, whether arising by operation of law
or otherwise.
None of the Grantors will, without the Administrative Agent's
prior written consent, grant any extension of the time of
payment of any Accounts Receivable or any of the Pledged Debt,
compromise, compound or settle the same for less than the full
amount thereof or allow any credit or discount whatsoever
thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary
course of business and consistent with its current practices.
The Grantors, at their own expense, shall maintain or cause to
be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accordance with Section 6.10 of
the Credit Agreement, which insurance shall be against all
risks. The Grantors shall not modify any such insurance or
reduce amounts payable thereunder without the consent of the
Administrative Agent. All policies covering such insurance
(i) shall contain a standard loss payable clause and shall
name the Administrative Agent for the ratable benefit of the
Secured Parties as sole loss payee in respect of each claim
relating to the Collateral and resulting in a payment
thereunder and (ii) shall be indorsed to provide, in respect
of the interests of the Administrative Agent, that (A) the
Administrative Agent shall be an additional insured, (B) 30
days' prior written notice of any cancellation thereof shall
be given to the Administrative Agent and (C) in the event that
any Grantor at any time or times shall fail to pay any premium
in whole or part relating thereto, the Administrative Agent
may, in its sole discretion, pay such premium. Each Grantor
irrevocably makes, constitutes and appoints the Administrative
Agent (and all officers, employees or agents designated by the
Administrative Agent) as such Grantor's true and lawful agent
(and attorney-in-fact) for the purpose, during the continuance
of an Event of Default, of making, settling and adjusting
claims in respect of Collateral under policies of insurance,
endorsing the name of such Grantor on any check, draft,
instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and
decisions with respect thereto. In the event that any Grantor
at any time or times shall fail to obtain or maintain any of
the policies of insurance required hereby or to pay any
premium in whole or part relating thereto, the Administrative
Agent may, without waiving or releasing any obligation or
liability of the Grantors hereunder or any Event of Default,
in its sole discretion, obtain and maintain such policies of
insurance and pay such premium and take any other actions with
respect thereto as the Administrative Agent deems advisable.
All sums disbursed by the Administrative Agent in connection
with this paragraph, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto,
shall be payable, upon demand, by the Grantors to the
Administrative Agent and shall be additional Obligations
secured hereby.
Each Grantor shall legend its Accounts Receivable, its Pledged
Debt and its books, records and documents evidencing or
pertaining thereto with an appropriate reference to the fact
that such Accounts Receivable have been assigned to the
Administrative Agent for the ratable benefit of the Secured
Parties and that the Administrative Agent has a security
interest therein for the ratable benefit of the Secured
Parties.
Each Grantor shall: (i) not (and shall cause each of its
licensees not to) do any act, or omit to do any act, whereby
any Patent that is material to the conduct of such Grantor's
business may become invalidated or dedicated to the public;
(ii) (and shall cause each of its licensees to) continue to
mark any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve
its maximum rights under applicable patent laws; (iii) for
each Trademark material to the conduct of such Grantor's
business, (A) maintain (and shall cause each of its licensees
to maintain) such Trademark in full force free from any claim
of abandonment or invalidity for non-use, (B) maintain (and
shall cause each of its licensees to maintain) the quality of
products and services offered under such Trademark, (C)
display (and shall cause each of its licensees to display)
such Trademark with notice of federal or foreign registration
to the extent necessary and sufficient to establish and
preserve its rights under applicable law and (D) not knowingly
use or knowingly permit the use of such Trademark in violation
of any third party valid and legal rights; (iv) for each work
covered by a Copyright material to the conduct of such
Grantor's business, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright
notice as necessary and sufficient to establish and preserve
its maximum rights under applicable copyright laws; (v) notify
the Administrative Agent promptly if it knows or has reason to
know that any Intellectual Property material to the conduct of
its business may become abandoned, lost or dedicated to the
public, or of any adverse determination or development
(including the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court
or similar office of any country) regarding such Grantor's
ownership of any Intellectual Property, its right to register
the same, or to keep and maintain the same; (vi) promptly
inform the Administrative Agent in the event that it shall,
either itself or through any agent, employee, licensee or
designee, file an application for any Intellectual Property
(or for the registration of any Trademark or copyright) with
the United States Patent and Trademark Office, United States
Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or
any political subdivision thereof, and, upon request of the
Required Lenders, execute and deliver any and all agreements,
instruments, documents and papers as the Administrative Agent
may request to evidence the Administrative Agent's security
interest in such Patent, Trademark or Copyright, and each
Grantor hereby appoints the Administrative Agent as its
attorney-in-fact to execute and file upon the occurrence and
during the continuance of an Event of Default such writings
for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power, being coupled with
an interest, is irrevocable; and (vii) take all necessary
steps that are consistent with the practice in any proceeding
before the United States Patent and Trademark Office, United
States Copyright Office or any office or agency in any
political subdivision of the United States or in any other
country or any political subdivision thereof, to maintain and
pursue each material application relating to the Patents,
Trademarks or Copyrights (and to obtain the relevant grant or
registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material
to the conduct of such Grantor's business, including timely
filings of applications for renewal, affidavits of use,
affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to
initiate opposition, interference and cancellation proceedings
against third parties. In the event that any Grantor has
reason to believe that any Collateral consisting of a Patent,
Trademark or Copyright material to the conduct of any
Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor
promptly shall notify the Administrative Agent and shall, if
consistent with good business judgment, promptly sue for
infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or
dilution, and take such other actions as are appropriate under
the circumstances to protect such Collateral. Upon and during
the continuance of an Event of Default, each Grantor shall use
its best efforts to obtain all requisite consents or approvals
by the licenser of each Copyright License, Patent License or
Trademark License to effect the assignment of all of such
Grantor's right, title and interest thereunder to the
Administrative Agent or its designee.
Certain Rights as to the Collateral; Attorney-In-Fact
So long as no Event of Default shall have occurred and be
continuing:
Each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this
Security Agreement and the other Loan Documents, provided, that
such Grantor shall not exercise or refrain from exercising any such
right without the prior written consent of the Administrative Agent
if such action or inaction would have a material adverse effect on
the value of the Collateral, or any part thereof, or the validity,
priority or perfection of the security interests granted hereby or
the remedies of the Secured Parties hereunder.
Each Grantor shall be entitled to receive and retain any and all
dividends, principal, interest and other distributions paid in
respect of the Collateral to the extent not prohibited by this
Security Agreement or the other Loan Documents, provided, that any
and all (A) dividends, principal, interest and other distributions
paid or payable other than in cash in respect of, and instruments
(other than checks in payment of cash dividends) and other Property
received, receivable or otherwise distributed in respect of, or in
exchange for, Collateral, (B) dividends and other distributions
paid or payable in cash in respect of any Collateral in connection
with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in-surplus,
and (C) cash paid, payable or otherwise distributed in redemption
of, or in exchange for, any Collateral, shall be, and shall
forthwith be delivered to the Administrative Agent to be held as,
Collateral and shall, if received by such Grantor, be received in
trust for the benefit of the Administrative Agent, be segregated
from the other Property of such Grantor, and be forthwith delivered
to the Administrative Agent as Collateral in the same form as so
received (with any necessary indorsement or assignment).
The Administrative Agent shall execute and deliver (or cause to be
executed and delivered) to the Grantors, at the Grantors' expense)
all such proxies and other instruments as the Grantors may
reasonably request for the purpose of enabling the Grantors to
exercise the voting and other rights which it is entitled to
exercise pursuant to clause (i) above and to receive the dividends,
principal or interest payments, or other distributions which it is
authorized to receive and retain pursuant to clause (ii) above.
Upon the occurrence and during the continuance of an Event of
Default:
All rights of each Grantor to (A) exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to Section 6(a)(i) shall, upon notice to such Grantor by
the Administrative Agent, cease and (B) receive the dividends,
principal and interest payments and other distributions which it
would otherwise be authorized to receive and retain pursuant to
Section 6(a)(ii) shall automatically cease, and all such rights
shall thereupon become vested in the Administrative Agent, which
shall thereupon have the right, but not the obligation, to exercise
such voting and other consensual rights and to receive and hold as
Collateral such dividends, principal or interest payments and
distributions.
All dividends, principal and interest payments and other
distributions which are received by any Grantor contrary to the
provisions of Section 6(b)(i) shall be received in trust for the
benefit of the Administrative Agent, shall be segregated from other
funds of such Grantor and shall be forthwith paid over to the
Administrative Agent as Collateral in the same form as so received
(with any necessary indorsement).
In the event that all or any part of the securities or
instruments constituting the Collateral are lost, destroyed or
wrongfully taken while such securities or instruments are in
the possession of the Administrative Agent, the Grantors shall
cause the delivery of new securities or instruments in place
of the lost, destroyed or wrongfully taken securities or
instruments upon request therefor by the Administrative Agent
without the necessity of any indemnity bond or other security
other than the Secured Parties' agreement or indemnity
therefor customary for security agreements similar to this
Security Agreement.
Each Grantor hereby irrevocably appoints the Administrative
Agent such Grantor's attorney-in-fact, with full authority in
the place and stead of such Grantor and in the name of such
Grantor or otherwise, from time to time at any time when an
Event of Default exists, in the Administrative Agent's
discretion, to take any action and to execute any instrument
which the Administrative Agent may deem necessary or advisable
to accomplish the purposes of this Security Agreement,
including, without limitation:
to ask for, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral, and to receive,
indorse, and collect any drafts or other chattel paper, instruments
and documents in connection therewith,
to file any claims or take any action or institute any proceedings
which the Administrative Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent or any of the other Secured
Parties with respect to any of the Collateral, and
to receive, indorse and collect all instruments made payable to
such Grantor representing any dividend, principal payment, interest
payment or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same. The powers
granted to the Administrative Agent under this Section constitute a
power coupled with an interest which shall be irrevocable by such
Grantor and shall survive until all of the Obligations have been
indefeasibly paid in full in cash.
If any Grantor fails to perform any agreement contained
herein, the Administrative Agent, ten days after notice to
such Grantor (except that no notice will be required upon and
during the continuance of an Event of Default), may itself
perform, or cause performance of, such agreement, and the
reasonable expenses of the Administrative Agent incurred in
connection therewith shall be payable by the Grantors under
Section 9.
The powers conferred on the Administrative Agent hereunder are
solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except
for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder,
the Administrative Agent shall have no duty as to any
Collateral. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Administrative
Agent accords its own property.
Remedies upon Default
Upon the occurrence and during the continuance of an Event of
Default, each of the Grantors shall deliver each item of
Collateral to the Administrative Agent on demand, and the
Administrative Agent shall have in any jurisdiction in which
enforcement hereof is sought, in addition to any other rights
and remedies, the rights and remedies of a secured party under
the NYUCC or the UCC of any jurisdiction in which the
Collateral is located, including, without limitation, the
right, with or without legal process (to the extent permitted
by law) and with or without prior notice or demand for
performance, to take possession of the Collateral and without
liability for trespass (to the extent permitted by law) to
enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral
(and for that purpose the Administrative Agent may, so far as
the Grantors can give authority therefor, enter upon any
premises on which the Collateral may be situated and remove
the Collateral therefrom) and, generally, to exercise any and
all rights afforded to a secured party under the UCC or other
applicable law. Without limiting the generality of the
foregoing, each of the Grantors agrees that the Administrative
Agent shall have the right, subject to the mandatory
requirements of applicable law, to sell or otherwise dispose
of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange,
for cash, upon credit or for future delivery as the Lender
shall deem appropriate. Each such purchaser at any such sale
shall hold the property sold absolutely, free from any claim
or right on the part of any Grantor, and each of the Grantors
hereby waives (to the extent permitted by law) all rights of
redemption, stay, valuation and appraisal which such Grantor
or now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted.
Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a
recognized market, the Administrative Agent shall give to the
Borrower at least five Business Days prior written notice of
the time and place of any public sale of Collateral or of the
time after which any private sale or any other intended
disposition is to be made. Each Grantor hereby acknowledges
that five Business Days prior written notice of such sale or
sales shall be reasonable notice. Each Grantor hereby waives
any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Secured Parties'
rights hereunder, including, without limitation, the right of
the Administrative Agent following an Event of Default to take
immediate possession of the Collateral and to exercise the
Secured Parties' rights with respect thereto.
Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as
the Administrative Agent may fix and state in the notice (if
any) of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Administrative Agent
may (in its sole and absolute discretion) determine. The
Administrative Agent shall not be obligated to make any sale
of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral
shall have been given. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and
place to which the same was so adjourned. In case any sale of
all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the
Administrative Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Secured Parties shall
not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may be
sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to
this Section, any Secured Party may bid for or purchase, free
from any right of redemption, stay, valuation or appraisal on
the part of any Grantor (all said rights being also hereby
waived and released), the Collateral or any part thereof
offered for sale and may make payment on account thereof by
using any claim then due and payable to such Secured Party
from any Grantor as a credit against the purchase price, and
such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without
further accountability to any Grantor therefor. For purposes
hereof, (i) a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof, (ii)
such Secured Party shall be free to carry out such sale
pursuant to such agreement and (iii) none of the Grantors
shall be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that
after such Secured Party shall have entered into such an
agreement all Events of Default shall have been remedied and
the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Secured
Parties may proceed by a suit or suits at law or in equity to
foreclose upon the Collateral and to sell the Collateral or
any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a
proceeding by a court-appointed receiver.
Any sale pursuant to the provisions of this Section 7 shall be
deemed to conform to commercially reasonable standards as
provided in Section 9-610 of the NYUCC or the UCC of any other
jurisdiction in which Collateral is located or any other
requirement of applicable law. Without limiting the
foregoing, each Grantor agrees and acknowledges that, to the
extent that applicable law imposes duties on the
Administrative Agent and the other Secured Parties to exercise
remedies in a commercially reasonable manner, it shall be
commercially reasonable for the Secured Parties to do any or
all of the following: (i) fail to incur expenses deemed
significant by the Secured Parties to prepare Collateral for
disposition or otherwise to complete raw materials or work in
process into finished goods or other finished products for
disposition; (ii) fail to obtain third party consents for
access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) fail to
exercise collection remedies against Account Debtors or other
persons obligated on Collateral or to remove Liens on any
Collateral, (iv) exercise collection remedies against Account
Debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection
specialists, (v) advertise dispositions of Collateral through
publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (vi) contact other
Persons, whether or not in the same business as the Grantors,
for expressions of interest in acquiring all or any portion of
the Collateral, (vii) hire one or more professional
auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature,
(viii) dispose of Collateral utilizing Internet sites that
provide for the auction of assets of the types included in the
Collateral or that have reasonable capability of doing so, or
that match buyers and sellers of assets, (ix) disclaim
dispositions of warranties, (x) purchase (or fail to purchase)
insurance or credit enhancements to insure the Secured Parties
against risk of loss, collection or disposition of Collateral
or to provide to the Secured Parties a guaranteed return from
the collection or disposition of Collateral, or (xi) to the
extent deemed appropriate by the Administrative Agent, obtain
the services of other brokers, investment bankers, consultants
and other professionals to assist the Administrative Agent in
the collection or disposition of any of the Collateral.
Nothing in this Section 7 shall be construed to grant any
rights to the Grantors or to impose any duties on the Secured
Parties that would not have been granted or imposed by this
Security Agreement or applicable law in the absence of this
Section 7 and the parties hereto acknowledge that the purpose
of this Section 7 is to provide non-exhaustive indications of
what actions or omissions by the Administrative Agent and the
other Secured Parties would be deemed commercially reasonable
in the exercise by the Secured Parties of remedies against the
Collateral and that other actions or omissions by the
Administrative Agent or any other Secured Party shall not be
deemed commercially unreasonable solely on account of not
being set forth in this Section 7.
For the purpose of enabling the Administrative Agent to
exercise rights and remedies under this Section, each Grantor
hereby grants to the Administrative Agent an irrevocable, non-
exclusive license (exercisable without payment of royalty or
other compensation to the Grantors) to use, license or sub-
license any of the Collateral consisting of Intellectual
Property now owned or hereafter acquired by such Grantor, and
wherever the same may be located, and including in such
license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout
thereof. The use of such license by the Administrative Agent
shall be exercised, at the option of the Administrative Agent,
upon the occurrence and during the continuation of an Event of
Default; provided that any license, sub-license or other
transaction entered into by the Administrative Agent in
accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.
Any royalties and other payments received by the
Administrative Agent shall be applied in accordance with
Section 8.
Application of Proceeds of Sale
The Administrative Agent shall apply the proceeds of any
collection or sale of the Collateral, as well as any
Collateral consisting of cash, first, to the payment of
all costs and expenses incurred by the Secured Parties in
connection with such collection or sale or otherwise in
connection with this Security Agreement, any other Loan
Document or any of the Obligations, including all court
costs and the reasonable fees and expenses of their
respective agents and legal counsel, the repayment of all
advances made by the Secured Parties hereunder or under
any other Loan Document on behalf of any Grantor and any
other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any
other Loan Document, second, to the payment in full of the
Obligations, and third, to the Grantors, their respective
successors or assigns, or as a court of competent
jurisdiction may otherwise direct. The Secured Parties
shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in
accordance with this Security Agreement. Upon any sale of
the Collateral by the Administrative Agent (including
pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of the purchase money by
the Administrative Agent or of the officer making the sale
shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or
purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to
the Administrative Agent or such officer or be answerable
in any way for the misapplication thereof.
Reimbursement of the Secured Parties
Each of the Grantors shall, jointly with the other Grantors
and severally, pay upon demand to the Administrative Agent the
amount of any and all reasonable expenses, including the
reasonable fees, other charges and disbursements of counsel
and of any experts or agents, that any Secured Party may incur
in connection with (i) the administration of this Security
Agreement relating to such Grantor or any of its property,
(ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the
Collateral owned or held by or on behalf of such Grantor,
(iii) the exercise, enforcement or protection of any of the
rights of the Secured Parties hereunder relating to such
Grantor or any of its property or (iv) the failure by such
Grantor to perform or observe any of the provisions hereof.
Without limitation of its indemnification obligations under
the other Loan Documents, each of the Grantors shall, jointly
with the other Grantors and severally, indemnify each Secured
Party and its directors, officers, employees, advisors,
agents, successors and assigns (each an "Indemnitees")
against, and hold each Indemnitee harmless from, any and all
losses, damages, liabilities and related expenses, including
reasonable counsel fees, other charges and disbursements,
incurred by any Indemnitee arising out of, in any way
connected with, or as a result of (i) the execution or
delivery by such Grantor of this Security Agreement or any
other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by such
Grantor of its obligations under the Loan Documents and the
other transactions contemplated thereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto,
provided that such indemnity shall not, as to any Indemnitee,
be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct
of such Indemnitee.
Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security
Documents. The provisions of this Section shall remain
operative and in full force and effect regardless of the
termination of this Security Agreement or any other Loan
Document, the consummation of the transactions contemplated
hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of
this Security Agreement or any other Loan Document or any
investigation made by or on behalf of the Lender. All amounts
due under this Section shall be payable on written demand
therefor and shall bear interest at the rate specified in
Section 3.01(d) of the Credit Agreement.
Waivers; Amendment
No failure or delay of the Secured Parties in exercising any
power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power.
The rights and remedies of the Secured Parties hereunder and
under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise
have. No waiver of any provision of this Security Agreement
or any other Loan Document or consent to any departure by any
Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section, and
then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No
notice or demand on any Grantor in any case shall entitle such
Grantor to any other or further notice or demand in similar or
other circumstances.
Neither this Security Agreement nor any provision hereof may
be waived, amended or modified except pursuant to a written
agreement entered into by, between or among the Administrative
Agent and the other parties hereto with respect to which such
waiver, amendment or modification is to apply.
Securities Laws; Registration Rights
In view of the position of the Grantors in relation to the
Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act
of 1933, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being
called the "Federal securities laws") with respect to any
disposition of the Pledged Securities permitted hereunder.
Each of the Grantors understands that compliance with the
Federal securities laws might very strictly limit the course
of conduct of the Secured Parties if the Secured Parties were
to attempt to dispose of all or any part of the Pledged
Securities, and might also limit the extent to which or the
manner in which any subsequent transferee of any Pledged
Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Secured
Parties in any attempt to dispose of all or part of the
Pledged Securities under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or
effect. Each of the Grantors recognizes that in light of such
restrictions and limitations, the Administrative Agent may,
with respect to any sale of the Pledged Securities, limit the
purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for
investment, and not with a view to the distribution or resale
thereof. Each of the Grantors acknowledges and agrees that in
light of such restrictions and limitations, the Administrative
Agent, in its sole and absolute discretion, (i) may proceed to
make such a sale whether or not a registration statement for
the purpose of registering such Pledged Securities, or any
part thereof, shall have been filed under the Federal
securities laws and (ii) may approach and negotiate with a
single potential purchaser to effect such sale. Each of the
Grantors acknowledges and agrees that any such sale might
result in prices and other terms less favorable to the seller
than if such sale were a public sale without such
restrictions. In the event of any such sale, the
Administrative Agent shall incur no responsibility or
liability for selling all or any part of the Pledged
Securities at a price that the Administrative Agent, in its
sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been
realized if the sale were deferred until after registration as
aforesaid or if more than a single purchaser were approached.
The provisions of this Section will apply notwithstanding the
existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price
at which the Administrative Agent sells.
Each of the Grantors agrees that, upon the occurrence and
during the continuance of an Event of Default, if for any
reason the Administrative Agent desires to sell any of the
Pledged Securities owned or held by or on behalf of such
Grantor at a public sale, it will, at any time and from time
to time, upon the written request of the Administrative Agent,
use its best efforts to take or to cause the issuer of such
Pledged Securities to take such action and prepare, distribute
or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Administrative Agent to
permit the public sale of such Pledged Securities. Each of
the Grantors further agrees, jointly with the other Grantors
and severally, to indemnify, defend and hold harmless the
Administrative Agent, the other Secured Parties, any
underwriter and their respective officers, directors,
affiliates and controlling persons from and against all loss,
liability, expenses, costs of counsel (including reasonable
fees and expenses of legal counsel), and claims (including the
costs of investigation) that they may incur, insofar as such
loss, liability, expense or claim, as applicable, relates to
such Grantor or any of its property, and arises out of or is
based upon any alleged untrue statement of a material fact
contained in any prospectus (or any amendment or supplement
thereto) or in any notification or offering circular, or
arises out of or is based upon any alleged omission to state a
material fact required to be stated therein or necessary to
make the statements in any thereof not misleading, except
insofar as the same may have been caused by any untrue
statement or omission based upon information furnished in
writing to such Grantor or the issuer of such Pledged
Securities, as applicable, by the Administrative Agent
expressly for use therein. Each of the Grantors further
agrees, upon such written request referred to above, to use
its best efforts to qualify, file or register, or cause the
issuer of such Pledged Securities to qualify, file or
register, any of the Pledged Securities owned or held by or on
behalf of such Grantor under the Blue Sky or other securities
laws of such states as may be requested by the Administrative
Agent and keep effective, or cause to be kept effective, all
such qualifications, filings or registrations. Each of the
Grantors will bear all costs and expenses of carrying out its
obligations under this Section. Each of the Grantors
acknowledges that there is no adequate remedy at law for
failure by it to comply with the provisions of this Section
and that such failure would not be adequately compensable in
damages, and therefore agrees that its agreements contained in
this Section may be specifically enforced.
Security Interest Absolute
All rights of the Administrative Agent hereunder, the
Security Interest and all obligations of each of the
Grantors hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability
of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any
other Loan Document or any other agreement or instrument
relating to any of the foregoing, (c) any exchange,
release or non-perfection of any Lien on any other
collateral, or any release or amendment or waiver of, or
consent under, or departure from, any guaranty, securing
or guaranteeing all or any of the Obligations or (d) any
other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor in
respect of the Obligations or in respect of this Security
Agreement or any other Loan Document other than the
indefeasible payment of the Obligations in full in cash.
Notices
All communications and notices hereunder shall be in
writing and given as provided in Section 10.01 of the
Credit Agreement. All communications and notices
hereunder to the Borrower shall be given to it at the
address for notices set forth in such Section, and all
communications and notices hereunder to any other Grantor
shall be given to it at the address for notices set forth
on Schedule I.
Binding Effect; Several Agreement; Assignments
Whenever in this Security Agreement any of the parties
hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of any
Grantor that are contained in this Security Agreement
shall bind and inure to the benefit of each party hereto
and its successors and assigns. This Security Agreement
shall become effective as to any Grantor when a
counterpart hereof executed on behalf of such Grantor
shall have been delivered to the Administrative Agent and
a counterpart hereof shall have been executed on behalf of
the Administrative Agent, and thereafter shall be binding
upon such Grantor, the Administrative Agent and the
Lenders and their respective successors and assigns, and
shall inure to the benefit of such Grantor, the
Administrative Agent and the Lenders and their respective
successors and assigns, except that none of the Grantors
shall have the right to assign its rights or obligations
hereunder or any interest herein or in the Collateral (and
any such attempted assignment shall be void), except as
expressly contemplated by this Security Agreement or the
other Loan Documents. This Security Agreement shall be
construed as a separate agreement with respect to each of
the Grantors and may be amended, modified, supplemented,
waived or released with respect to any Grantor without the
approval of any other Grantor and without affecting the
obligations of any other Grantor hereunder.
Survival of Agreement; Severability
All covenants, agreements, representations and warranties made
by the Grantors herein and in the certificates or other
instruments prepared or delivered in connection with or
pursuant to this Security Agreement or any other Loan Document
shall be considered to have been relied upon by the Secured
Parties and shall survive the execution and delivery of any
Loan Documents and the making of any Loan or other extension
of credit, regardless of any investigation made by the Secured
Parties or on their behalf and notwithstanding that any
Secured Party may have had notice or knowledge of any Default
or incorrect representation or warranty at the time any credit
is extended under the Credit Agreement, and shall continue in
full force and effect until this Security Agreement shall
terminate.
In the event any one or more of the provisions contained in
this Security Agreement or any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining
provisions contained herein or therein shall not in any way be
affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of
such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
GOVERNING LAW
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
Counterparts
This Security Agreement may be executed in two or more
counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute
but one contract (subject to Section 14), and shall become
effective as provided in Section 14. Delivery of an
executed counterpart of this Security Agreement by
facsimile transmission shall be as effective as delivery
of a manually executed counterpart of this Security
Agreement.
Headings
Section headings used herein are for convenience of
reference only, are not part of this Security Agreement
and are not to affect the construction of, or to be taken
into consideration in interpreting, this Security
Agreement.
Jurisdiction; Consent to Service of Process
Each party hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding
arising out of or relating to this Security Agreement or the
other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State
or, to the extent permitted by applicable law, in such federal
court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in
this Security Agreement shall affect any right that any party
hereto may otherwise have to bring any action or proceeding
relating to this Security Agreement or the other Loan
Documents in the courts of any jurisdiction.
Each of the parties hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Security
Agreement or the other Loan Documents in any court referred to
in paragraph (a) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
Each party to this Security Agreement irrevocably consents to
service of process in the manner provided for notices in
Section 13. Nothing in this Security Agreement will affect
the right of any party to this Security Agreement to serve
process in any other manner permitted by law.
WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS SECURITY AGREEMENT. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Additional Grantors
Upon execution and delivery after the date hereof by the
Administrative Agent and a Subsidiary of an instrument in
the form of Annex 2, such Subsidiary shall become a
Grantor hereunder with the same force and effect as if
originally named as a Grantor herein. The execution and
delivery of any such instrument shall not require the
consent of any Grantor hereunder. The rights and
obligations of each of the Grantors hereunder shall remain
in full force and effect notwithstanding the addition of
any new Grantor as a party to this Security Agreement.
Covenants of Administrative Agent and Lenders
The Administrative Agent shall provide to the Borrower copies
of each filed financing statement, continuation statement or
other document referred to in Section 2(a) promptly after
receipt of the same. At the direction of the Required Lenders
the Administrative Agent shall file this Agreement or any
other instrument, certificate or other document referred to in
Section 4(c)(iii) with the United States Patent and Trademark
Office or the United States Copyright Office.
The security interest granted to the Secured Parties hereunder
shall terminate when the Grantors shall have indefeasibly paid
and discharged all of the Obligations in full in cash. Upon
such indefeasible payment and discharge of the Obligations,
the Administrative Agent and the Lenders shall reassign,
release, or deliver to the Grantors all Collateral then held
by or at the direction of the Administrative Agent, and shall
execute and deliver to the Grantors (at the Grantors' sole
expense) such termination statements, satisfactions, releases,
reconveyances, or reassignments as the Grantors may reasonably
request to evidence such termination, including, without
limitation, such releases, reassignments, terminations or
other documents necessary or appropriate for recording with
the United States Patent and Trademark Office and the United
States Copyright Office terminating or reassigning the Secured
Parties' interest in the Collateral constituting Intellectual
Property.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
LIFETIME HOAN CORPORATION

By:
Name:
Title:

OUTLET RETAIL STORES, INC.

By:
Name:
Title:

ROSHCO, INC.

By:
Name:
Title:

M. KAMENSTEIN CORP.

By:
Name:
Title:

THE BANK OF NEW YORK, as
Administrative Agent

By:
Name:
Title:

SCHEDULE I TO SECURITY AGREEMENT

GRANTORS

Grantor Address for Notices

Lifetime Hoan Corporation

Outlet Retail Stores, Inc.

Roshco, Inc.

M. Kamenstein Corp.

ANNEX 1 TO SECURITY AGREEMENT

FORM OF PERFECTION CERTIFICATE

Reference is made to the Credit Agreement, dated as of
November __, 2001 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), between
LIFETIME HOAN CORPORATION, as Borrower, the Lenders from time
to time party thereto and THE BANK OF NEW YORK, as
Administrative Agent for the Lenders. Capitalized terms used
herein and not defined herein shall have the meanings assigned
to such terms in the Credit Agreement and the Security
Agreement (as defined in the Credit Agreement).
The undersigned, an Authorized Signatory of the Borrower,
hereby certifies to the Administrative Agent and the Lenders
as follows:
Organization; Names; Identification
The legal name of each of the Grantors, as such name
appears in its organizational documents, is as follows:
The jurisdiction of organization or formation of each of
the Grantors is set forth opposite its name below:
Grantor Jurisdiction of Organization or
Formation

Set forth below is each other legal name each of the
Grantors has had in the past five years, together with the
date of the relevant change:
Except as set forth in Schedule 1 hereto, none of the
Grantors has changed its identity or organizational
structure in any way within the past five years. Changes
in identity or organizational structure would include
mergers, consolidations and acquisitions, as well as any
change in the form, nature or jurisdiction of
organization. If any such change has occurred, include in
Schedule 1 hereto the information required by Sections 1
and 2 of this certificate as to each acquiree or
constituent party to a merger or consolidation.
The following is a list of all other names (including
trade names or similar appellations) used by each of the
Grantors or any of its divisions or other business units
in connection with the conduct of its business or the
ownership of its properties at any time during the past
five years:
Set forth below is the Federal Taxpayer Identification
Number of each of the Grantors:
Set forth below is the organizational identification
number of each of the Grantors, if any, issued by the
jurisdiction of such Grantor's organization:
Current Locations
The chief executive office of each of the Grantors is
located at the address set forth opposite its name below:
Grantor Mailing County State
Address

Set forth below opposite the name of each Grantor are all
locations where it maintains any books or records relating
to any Accounts Receivable or Pledged Debt (with each
location at which chattel paper, if any, is kept being
indicated by an "*"):
Grantor Mailing County State
Address

Set forth below opposite the name of each Grantor are all
the material places of its business not identified in
paragraph (a) or (b) above:
Grantor Mailing County State
Address

Set forth below opposite the name of each Grantor are all
the locations where it maintains any Collateral not
identified above:
Grantor Mailing County State
Address

Set forth below opposite the name of each of the Grantors
are the names and addresses of all persons other than such
Grantor that have possession of any of its Collateral:
Grantor Name of Other Mailing County State
Person Address

Unusual Transactions. All Accounts Receivable and Pledged Debt
have been originated by the Grantors and all Inventory has
been acquired by the Grantors in the ordinary course of
business.
Pledged Equity. Attached hereto as Schedule 4 is a true and
correct list of all of the Pledged Equity owned or held by or
on behalf of each of the Grantors, in each case setting forth
the name of the issuer of such Pledged Equity, the number of
any certificate evidencing such Pledged Equity, the registered
owner of such Equity Interest, the number and class of such
Pledged Equity and the percentage of the issued and
outstanding Equity Interests of such class represented by such
Pledged Equity. The Pledged Equity has been duly authorized
and validly issued and is fully paid and nonassessable.
Pledged Debt. Attached hereto as Schedule 5 is a true and
correct list of (a) all of the Pledged Debt owned by or on
behalf of each of the Grantors, in each case setting forth the
name of the party from whom such Pledged Debt is owed or
owing, the principal amount thereof, the date of incurrence
thereof and the maturity date, if any, with respect thereto
and (b) all unpaid intercompany transfers of goods sold and
delivered, or services rendered, by or to any Grantor. All
Pledged Debt owed or owing to each Grantor will be on and as
of the date hereof evidenced by one or more promissory notes
pledged to the Administrative Agent under the Security
Agreement.
Intellectual Property. Attached hereto as Schedule 6 is a
true and correct list of Intellectual Property owned by or on
behalf of each of the Grantors, in each case identifying each
Copyright, Copyright License, Patent, Patent License,
Trademark and Trademark License in sufficient detail and
setting forth with respect to each such Copyright, Copyright
License, Patent, Patent License, Trademark and Trademark
License, the registration number, the date of registration,
the jurisdiction of registration and the date of expiration
thereof.
IN WITNESS WHEREOF, the undersigned have duly
executed this certificate on this ____ day of November 2001.

LIFETIME HOAN CORPORATION

By:
Name:
Title:

SCHEDULE 1 TO PERFECTION CERTIFICATE

Change in Identity or Organizational Structure

SCHEDULE 4 TO PERFECTION CERTIFICATE

Pledged Equity

SCHEDULE 5 TO PERFECTION CERTIFICATE

Pledged Debt

SCHEDULE 6 TO PERFECTION CERTIFICATE

Intellectual Property

I. Copyrights

II. Copyright Licenses

III. Patents

IV. Patent Licenses

V. Trademarks

VI. Trademark Licenses

ANNEX 2 TO SECURITY AGREEMENT

FORM OF SUPPLEMENT

SUPPLEMENT NO. __, dated as of ___________ ___, 200_, to the
SECURITY AGREEMENT, dated as of November __, 2001 (as amended,
supplemented or otherwise modified from time to time, the
"Security Agreement"), among LIFETIME HOAN CORPORATION, a
Delaware corporation (the "Borrower"), the Subsidiaries of the
Borrower party thereto and THE BANK OF NEW YORK, as
Administrative Agent for the Lenders from time to time party
to the credit agreement referred to below (in such capacity,
the "Administrative Agent").
A. Reference is made to the Credit Agreement, dated as of
November __, 2001 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), by and
among the Borrower, the Lenders from time to time party
thereto and the Administrative Agent. Capitalized terms used
herein and not defined herein shall have the meanings assigned
to such terms in the Credit Agreement and the Security
Agreement.
B. The Grantors have entered into the Security Agreement in
order to induce the Lenders to make Loans and otherwise extend
credit on behalf of the Borrower. Section 21 of the Security
Agreement provides that additional Subsidiaries of the
Borrower may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary (the "New Grantor") is
executing this Supplement in accordance with the requirements
of the Credit Agreement to become a Grantor under the Security
Agreement in order to induce the Lenders to make additional
Loans and extensions of credit and as consideration for Loans
and extensions of credit previously made.
Accordingly, the Administrative Agent and the New Grantor
agree as follows:
Section 1. In accordance with Section 21 of the Security
Agreement, the New Grantor by its signature below becomes a
Grantor under the Security Agreement with the same force and
effect as if originally named therein as a Grantor, and the
New Grantor hereby agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor
thereunder. In furtherance of the foregoing, the New Grantor,
as security for the payment and performance in full of the
Obligations, does hereby create and grant to the
Administrative Agent for the ratable benefit of the Lenders a
security interest in and lien on all of the New Grantor's
right, title and interest in and to the Collateral (as defined
in the Security Agreement) of the New Grantor. Each reference
to a "Grantor" in the Security Agreement shall be deemed to
include the New Grantor. The Security Agreement is hereby
incorporated herein by reference.

The New Grantor represents and warrants to the
Administrative Agent that (a) this Supplement has been duly
authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms, (b) set forth on the Schedule
attached hereto is a true and complete schedule of all of the
information that would have been required to have been
delivered by or on behalf of the New Grantor pursuant to the
Security Agreement, the Schedules thereto and the Perfection
Certificate if the New Grantor had been originally named in
the Security Agreement and (c) the representations and
warranties made by it as a Grantor under the Security
Agreement are true and correct on and as of the date hereof
based upon the applicable information referred to in clause
(b) of this Section.

This Supplement may be executed in counterparts,
each of which shall constitute an original, but all of which,
when taken together, shall constitute but one contract. This
Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement
that, when taken together, bear the signatures of the New
Grantor and the Administrative Agent. Delivery of an executed
counterpart of this Supplement by facsimile transmission shall
be as effective as delivery of a manually executed counterpart
of this Supplement.

Except as expressly supplemented hereby, the
Security Agreement shall remain in full force and effect.

THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
and in the Security Agreement shall not in any way be affected
or impaired thereby (it being understood that the invalidity
of a particular provision hereof in a particular jurisdiction
shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.

All communications and notices hereunder shall be in
writing and given as provided in Section 13 of the Security
Agreement. All communications and notices hereunder to the
New Grantor shall be given to it at the address set forth in
the Schedule hereto.

The New Grantor agrees to reimburse the Secured
Parties for their reasonable out-of-pocket expenses in
connection with this Supplement, including the reasonable
fees, disbursements and other charges of counsel for the
Administrative Agent.

IN WITNESS WHEREOF, the New Grantor and the Administrative
Agent have duly executed this Supplement to the Security
Agreement as of the day and year first above written.
[Name of New Grantor]

By:
Name:
Title:

THE BANK OF NEW YORK, as
Administrative Agent

By:
Name:
Title:

SCHEDULE TO THE SUPPLEMENT